The increasing prevalence of fiduciary business models among financial advisors is proving to be a tailwind for commission-free annuities.
DPL Financial Partners, which provides commission-free annuities to 5,500 registered investment advisor firms, announced Tuesday that it had surpassed $2 billion in sales of no-load annuity products. The milestone comes 14 months after the firm hit $1 billion in annuity purchases, which took the firm more than three years to reach.
The acceleration in sales can be attributed to increased adoption of the products among longtime fee-only advisors as well as “breakaway” advisors leaving a broker-dealer to launch a fiduciary RIA, said DPL founder and CEO David Lau. Commissions by their nature create a conflict of interest for the broker and removing them helps the products fit into the fiduciary model, Lau said.
‘A huge market of advisors’
“We basically make annuities usable for an RIA of every fashion for the first time, and that’s a huge market of advisors,” Lau told InsuranceNewsNet.
While the Department of Labor’s latest fiduciary rule proposal hasn’t yet started to directly contribute to new sales for DPL, it has caught the attention of advisors at broker-dealers who are already considering a move to a fiduciary model, Lau added. The renewed push for a fiduciary rule is proving that the regulatory pressure won’t go away, so many advisors want to get ahead of the things by transferring now.
“We enable those brokers to operate in the fee model that they prefer and their clients prefer and that regulators prefer, and we’re starting to see more and more broker-dealers transfer their annuity business,” he said.
Fiduciary rule expected to have impact
Lau expects a fiduciary rule will eventually impact DPL’s sales, but for now the company is still trying to get the word out to the market about how RIAs can utilize commission-free annuities in their practice. There remain significant barriers to getting RIAs, who already operate as fiduciaries, to consider annuities, something many consider to be a bit of a dirty word.
“RIAs have not exactly been friendly towards annuities in the past,” Lau said. “It’s a lot of getting the word out that this isn’t your father’s Oldsmobile.”
DPL is also seeing increased sales from individual investors coming directly to the firm for value-driven retirement income products. Year-over-year sales more than tripled from inbound consumer inquiries, Lau said.
Ryan W. Neal has more than 14 years of experience as a reporter, including nine years covering the financial services industry. He formerly served as technology editor at Investment News.
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