Annuity sales are up, even as some experts question whether certain products make sense for clients in a low-interest rate environment.

In the second quarter, industry-wide annuity sales reached the highest level in three years, with fixed annuities reaching peak sales for the last five years, according to data compiled by the Insured Retirement Institute.

Annuity sales overall rose to $59.9 billion in the second quarter, a 6.8% increase from $56.1 billion in the previous quarter and a 9.9% increase from $54.5 billion in the year-ago quarter, according to Beacon Research and Morningstar data.


But is this trend a positive one for clients?

“No one should be buying fixed annuities because they’re not competitive right now,” says Kellan Finley, managing director of Insurance Decisions, a consulting firm founded by an RIA firm.

But, Finley says, many older clients are indeed looking to annuities because in a low-rate environment, other options like CDs are not providing the returns they once did. “One thing we’ve seen for older clients who are used to being in fixed products is that they reached a point where they are underwhelmed and impatient,” she adds.

Finley also argues that the majority of clients who request information about annuities are ones who already have an annuity. “We’ve seen a lot of situations with clients reaching the end of their guarantees,” she says. “Their option is to stick with this with a low rate.”

Older clients who are seeking tax-deferred growth and have already maxed out their retirement accounts represent another group that may be interested in annuities, Finley says.


Despite the increase in annuity sales overall, variable annuity sales were down year-over-year.

Variable annuity sales reached $35.6 billion in the second quarter, a 6.2% increase from $33.5 billion from the previous quarter, but a 4.6% decline from $37.3 billion for the same period of 2013, according to Morningstar data.

This fluctuation could be due to changes occurring on the supply side, says John McCarthy, product manager for annuity solutions at Morningstar. “There are shifts in the supply that are affecting the sales,” he says. “Prudential and MetLife have made strategic decisions to adjust their sales.”

Read more:

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access