How to Explain RILAs Better

What You Need to Know

RILAs can offer an adjustable level of protection against market risk.
One part of the conversation has to be fees.
Another is where the products fit in the portfolio.

In the previous two articles in this series, I gave an overview of what registered index-linked annuities, or RILAs, are and the benefits that they can bring to a client’s retirement portfolio. In this final article of the series, I will share some tips to help financial professionals drive more effective client conversations about RILAs.

For financial professionals, RILAs offer an opportunity to help some clients meet their goals for retirement. According to LIMRA, in the fourth quarter of 2023, sales of RILAs surpassed those of traditional variable annuities for the first time. In addition, LIMRA has forecast RILA sales to likely increase to $52 billion in 2024 and as high as $57 billion in 2025.

Given that some clients might not be familiar with this growing product category, financial professionals play a pivotal role in helping clients understand the potential value of adding a RILA to their retirement portfolio.

To help financial professionals discuss RILAs with clients, Brighthouse Financial has conducted research to determine which language resonates with clients when talking about these products.

When speaking to clients about RILAs, it’s important to always present a fair, balanced, and complete explanation of the products, including any potential downsides. Below are some of our findings.

Please note that this article is for general informational purposes only and should not be construed as legal, tax, accounting, investment, or fiduciary advice. Clients should confer with their tax, legal, and accounting professionals in addition to consulting with a financial professional.

1. Use familiar words.

While many consumers have become increasingly aware of annuities and are more willing to consider them for a portion of their retirement portfolios, some may still have concerns that the products are too complex.

To help address any client reservations about RILAs being overly complicated, financial professionals can use terminology that is familiar to clients.

For example, if a client already knows about index investing, that might make it easier to explain to them the index-tracking feature of RILAs. On the other hand, if a client is not familiar with index investing, a financial professional can point out the potential benefits of investing in a product comprising stocks in an entire segment of the market instead of picking individual stocks within that segment.

By using concepts that clients are already familiar with, financial professionals may be able to better assist clients in strengthening their understanding of, and confidence in, RILAs.

2. Be clear about fees.

Our research suggests that consumers appreciate it when financial professionals are upfront about any fees associated with RILAs.

RILAs typically have no base contract fees, with the possible exception of any riders or addition of certain options.

3. Frame RILAs as a diversifier.

One approach that financial professionals can take when explaining to clients the value of RILAs is to highlight how the products can play an important role in part of their portfolio.

Using a phrase like “a portion of your portfolio,” for example, can help convey to clients how RILAs can be an added portfolio diversifier, not a replacement, to their assets. By having RILAs described as being part of an overall diversification strategy, clients may be more receptive to the products.

Similarly, when discussing RILAs that offer a lifetime income rider, financial professionals may find such conversations are more successful if they emphasize that a RILA can serve as part of a portfolio. “As you near retirement, it’s important to be thinking about allocating a portion of your portfolio to income,” is an example of what that language should sound like.

Thanks for reading the articles in this series, and I hope financial professionals find the information provided beneficial as they work with clients to help them meet their financial goals for retirement.

Happy Annuity Awareness Month, and thank you to all financial professionals for what you do for your clients every day.