Fee-Based Annuity Sales Are Heating Up: FIDx Exec

The percentage of FIDx business coming from commission-based transactions is likely to rise because some of the broker-dealers coming on board want to put commission-based sales and fee-based transactions on the same platform, Bowers said.

But he predicted that insurer and broker-dealer interest in fee-based annuities will grow rapidly, partly because companies have now created the needed infrastructure, and partly because a higher percentage of the clients coming in through registered investment advisors are adding fresh cash to the annuity market, not simply replacing old annuities with new ones.

Teasing information from FIDx systems about which transactions involve replacements and which involve new money is difficult, but "we've just seen hyper growth this year," Bowers said.

The 23 insurers that sell annuities through FIDx also report seeing strong fee-based annuity asset growth, Bowers added.

In addition to being more likely than commission-based sales representatives to add new client cash to the annuity market, RIAs tend to have clients who make bigger initial premium payments: Bowers said the current average is about $150,000 for annuities purchased through commission-based reps and about $300,000 for clients working with RIAs.