The combination of high rates and an uncertain economic outlook have resulted in record sales for annuities. In the first three quarters of the year, total annuity sales were up 21% compared to last year for a total of $270.6 billion according to LIMRA’s US Individual Annuity Sales Survey. To compare, there was a total of $255 billion in sales in 2021 which was the last year of the ZIRP era.

In Q3, sales were up 11%, reaching $89.4 billion. LIMRA is forecasting another record year of sales for 2023, exceeding 2022’s record sales of $313 billion. Within the category, fixed indexed annuities continue to dominate, accounting for $23.3 billion in sales in Q3, a 9% gain from last year. YTD, these annuity products have accounted for 26.5% of total annuity sales.

Single premium immediate annuities and deferred income annuity sales saw the biggest increases at 20% and 88% compared to last year’s Q3, respectively. LIMRA is bullish on income annuities which tend to rise with interest rates. According to the group, “Income annuities will hit record levels in 2023, with sales in this category expected to exceed $16 billion for the year.”

Finsum: Annuity sales are hitting new records. Most of this can be attributed to the rising rate environment and risk-aversion among many investors.

This month has seen two major takeovers in the energy sector as Exxon bought Pioneer Natural Resources for $59.5 billion, while Chevron announced that it would buy Hess for $53 billion. Exxon significantly boosted its North American energy production and reserves with the acquisition, and Chevron added a mix of domestic and international assets. Many are speculating that these moves will trigger more M&A activity in the space.

This follows a slight slowing of M&A among oil E&P companies in Q3 as there were 25 deals worth $14 billion. To compare, there was $24 billion of M&A activity in Q2 of this year and $16 billion in Q3 of last year. 

Of course, these deals are dwarfed by the size of Exxon and Chevron deals. According to a report by Enervus, "As anticipated, the pace of consolidation slowed for private E&Ps as the cream of the crop in terms of scale and quality has largely, but not entirely, been bought out. The next logical step in consolidation is more tie-ups between public producers."

Enervus anticipates more dealmaking among smaller companies in the sector especially in the shale patch. Additionally, larger independents could target smaller and midsized mergers with some candidates including Devon Energy, Marathon Oil, Chesapeake Energy, and Southwestern Energy. 

Finsum: There were two mega-deals in the energy sector this month. Here’s why this could trigger a wave of M&A in the sector.

Plan advisors and DC recordkeepers are keenly aware of the opportunity presented by the massive movement of dollars from 401(k) plans into rollover accounts. Research firm Cerulli estimates that over $400 billion were rolled into IRAs (from 401(k) plans) with the assistance of advisors in 2021 alone.

This flow of funds is expected to continue, and advisors see it as a way to grow their wealth management businesses. While the opportunity is enormous, a key data point offers a clue to capitalizing on the trend. Cerulli’s report revealed that “of advisor-intermediated rollover assets, 86% take place through an existing advisor.”

Associate Director, Shawn O’Brien emphasized the importance of relationship-building efforts. “For wealth managers looking to capture rollovers from DC plans, this data underscores the importance of establishing and nurturing relationships with participants earlier in their careers, years before potential rollover events.”

While the implication of this research is clear, not all advisors are set up to engage with every participant. More frequently, advisors are seeking “coopetition” with recordkeepers whereby participants needing rollover assistance are segmented; plan advisors helping a select group of participants – often those with larger account balances – and the recordkeepers serving the remaining participants.

This collaborative approach ensures that each participant receives the optimal solution, transforming the dynamic between advisor and recordkeeper from competitors to partners.

Finsum: Partnering with 401(k) recordkeepers to capture rollovers helps plan advisors capitalize on this huge wealth management opportunity.

Stocks whose prices trail their implied intrinsic value are often seen as attractive investments primarily due to their undervaluation. But a recent article by Vanguard suggests another reason value stocks may be worth considering now. Historically, value stocks have outperformed their “growth” counterparts in times of economic recovery.

The report quotes Kevin DiCiurcio, CFA, head of the Vanguard Capital Markets Model® research team, as he makes the case. “So, if you believe that the Federal Reserve may have engineered a soft landing—that we’re going to sidestep a recession and that the economy’s next move is an acceleration—the case for value is strengthened.”

According to their research published in August, 2023, Vanguard estimated that value stocks were priced more than 51% below their fair value prediction. They stated, “It’s well-known... that asset prices can stray meaningfully from perceived fair values for extended periods. However, as we explained in (previous research), deviations from fair value and future relative returns share an inverse and statistically significant relationship over five- and 10-year periods.”

This observation adds one more reason value stocks are worth a look. In addition to favorable valuations and historically consistent dividends, the possibility that value stocks may shine during the coming economic recovery many anticipate, is another factor to consider. Whether held directly, within a passive allocation, or as part of a Separately Managed Account, now is a perfect time to revisit the case for value stocks in your client’s portfolios.

Finsum: Vanguard's research highlights value stock historical outperformance during economic recoveries.

In a recent J.D. Power study on financial advisor satisfaction, findings reveal advisors are facing challenges in effectively managing their practice tasks. The study highlights that "nearly one-third (28%) of financial advisors say they do not have enough time to spend with clients."

Further, the report states that "Advisors falling into this category spend an average of 41% more time each month than their peers on non-value-added tasks, such as compliance and administrative duties."

Broker-dealers and custodians are constantly exploring ways to reduce these administrative burdens in hopes of retaining existing advisors and recruiting new ones. However, the study underscores another essential factor driving advisor satisfaction: culture.

One significant takeaway from the report is the motivation behind advisors' loyalty to their firms. Among employee advisors, the predominant reasons they gave for their long-term commitment are "a strong culture and company leadership."

Culture can mean different things to different people, but most agree it's about purpose, values, how we communicate, and our work environment. Given how these factors play a significant role in our daily happiness, it's no wonder why advisors regarded culture so highly in the report.

Finsum: A study from J.D. Power highlights challenges faced by financial advisors, emphasizing the importance of culture in advisor retention and satisfaction.