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A Shift Toward Level Compensation for Commission Products Is Likely to Shape the Future Product Landscape
While the regulators in Washington, DC, continue to kick the can down the road, there’s no doubt that the DOL fiduciary rule is prompting changes in advisors’ practices. As previously reported, advisors are moving further toward fee-based compensation, and predominantly fee-based advisors and RIAs are the only advisor segments that are growing.
Recent research with variable annuity (VA) producers further supports the trend of changing compensation models. Nearly half (44%) of VA producers agree that their firm is encouraging a level compensation structure that does not vary with the particular investment recommended. This proportion climbs to more than half in the National and Bank channels (56% and 57%, respectively). As a result, advisors expect to allocate fewer new dollars to VAs going forward, with one-third of advisors looking instead to the best interest contract exemption for commission products.
As VAs often serve as a top source in advisors’ retirement income planning, this expected shift away from variable annuities is leaving a gap and creating an opportunity for new solutions. In fact, generating income in retirement tops advisors’ list of desired thought leadership topics, further highlighting advisors’ need for innovative investment products and strategies that fit within shifting compensation models. While insurance companies are most likely to be top-of-mind for retirement income products, asset managers have an opportunity to attract dollars moving away from annuity products by demonstrating their distinct retirement income product benefits and highlighting potential advantages over annuity offerings.
For more information on the Variable Annuity Brandscape™, review an overview of the report.