2015 is just about over, and with the New Year about to begin, there's no better time for a quick look back at fixed indexed annuity (FIA) changes, challenges and growth over the past 12 months—and ahead at what the industry can likely expect in 2016.
Jim Poolman, executive director of Indexed Annuity Leadership Council (IALC), weighed in on the current state of FIAs, and looks ahead to the coming year.
Q. Did the industry see an uptick in fixed indexed annuities acceptance and growth in 2015?
Jim Poolman: The industry grew significantly in 2015 as the FIA market continues to become a more mainstream product than it has been in the past. The FIA has become a go-to product for Baby Boomers, who are typically financially conservative by nature and looking to keep their money safe. However, they're also concerned that they'll outlive their assets and they're looking for a guaranteed income stream. That's why we're continuing to see sales of FIA products increase, because they can be designed with guaranteed income riders so folks know exactly what they're going to get, and this product ensures that they won't outlive their income. At the same time, Millennials are beginning to save for retirement. This group is generally distrustful of the financial markets. They have lived through the recession and perhaps seen parents and grandparents lose a significant portion of their retirement savings through the stock market when they were about to retire. Because FIAs ensure that invested principal is secure, this product is becoming more acceptable to younger folks like Millennials, as well as Gen X and Gen Y, as they plan for retirement.
Q. What are the challenges for FIAs going into 2016?
Poolman: In 2016, the pending Department of Labor (DOL) fiduciary rule could change the competitive landscape and distribution of the FIA product. Right now, it's an unknown threat. We expect the DOL rule to come out in the first quarter of 2016 and although we don't know exactly what that rule will look like, we do know that it will affect product distribution.
