Displaying items by tag: advisors

Annuity sales are expected to remain strong in the coming year on the heels of another record breaking year of sales in 2023. Whether 2024 sees another record year of sales ultimately depends on the economy and interest rates. Notably, the Life Insurance Marketing and Research Association (LIMRA) sees these favorable economic trends, such as volatility in financial markets and uncertainty about the economy and Fed policy, continuing. 

LIMRA notes that rates are likely to continue declining, which could also lead to a surge of sales as buyers may be eager to lock in rates at these levels. If financial markets continue to move higher, demand for products with lower risk like fixed indexed annuities and fixed-rate deferred annuities may decline while demand for registered indexed-linked annuities will climb. 

2023 was rare as nearly all categories saw growth. The highest rates in decades propelled sales of fixed annuities, while uncertainty around the economy and monetary policy drove growth for annuities offering downside protection. 

If the Fed does start to cut rates as anticipated, LIMRA projects that sales growth will eventually be impacted especially for more rate-sensitive products. In total, it forecasts sales between $311 billion and $331 billion depending on the trajectory of interest rates. 

Finsum: Annuity sales are forecast to remain strong in 2024. However, sales could slow when the Fed does actually start cutting rates as this would impact returns. 

Building an effective lead generation strategy is essential for advisors who are serious about growth. According to Angela Osborne, the COO of Bluespring Wealth Partners, advisors should focus on generating referrals from existing clients and working on leads that are already in the pipeline. Failure to do so runs the risk of becoming a ‘melting iceberg’ which is a firm with no growth strategy that loses clients and assets through time and attrition.

She recommends being clear with prospects about the value being offered in addition to what differentiates you from competitors. And this branding should be consistent across all the mediums where you want to share your message. Additionally, the message should resonate with your ideal client. 

In terms of optimizing lead generation, she recommends having a digital marketing strategy. Advisors should also refine their messaging to quickly and clearly articulate why clients should choose them over their competitors. Once a lead is acquired, it must be nurtured which takes time in order to build an authentic relationship. 

The final step is to actually convert a lead into a client. Many advisors fail at this final step. She recommends identifying who in the company does this well and have them mentor others at the firm. 

Finsum: Without an effective lead generation strategy, RIAs are bound to become ‘melting icebergs’ as they lose clients and assets through time and attrition. 

Annuity sales hit a new record high in 2023 at $360 billion which exceeded last year’s record of $311 billion. Experts attributed this to a combination of anxiety about stocks and the economy paired with the high interest rates in decades. 

Typically, annuity sales spike during periods of economic uncertainty. However, sales had been muted over the last decade due to the prevalence of ultra-low interest rates. This is evidenced by 2008 being the last year that annuity sales exceeded $250 billion prior to 2022. 

Currently, the majority of annuity sales are fixed-rate deferred annuities which pay an average of 4.5%. Prior to the Fed’s tightening campaign, this annuity paid 1.5%. In contrast, sales of single premium indexed annuities and deferred indexed annuities were much lower. 

These annuities are the simplest as the buyer hands over a lump sum in exchange for an income stream that lasts through their life. They are also the most effective in terms of hedging longevity risk for clients. However, there is a tradeoff in terms of liquidity and being unable to access the money once it’s put into the annuity. In contrast, fixed-rate deferred annuities do have more liquidity and offer higher rates but come with higher costs.

Finsum: Annuity sales hit a new record high in 2023 due to fears of a recession and inflation in addition to high interest rates. 

Direct indexing is seeing a surge in popularity as it appeals to many investors due to its tax benefits and customization abilities while still offering low costs and diversification. Hearts & Wallets conducted a focus group in 3 cities across the US with investors to get their thoughts on the emerging strategy.

Direct indexing is essentially a variant of traditional index investing through low-cost ETFs or mutual funds. However, the major difference is that investors replicate the index within a separately managed account. This means that they own the actual constituents of the index which means that there are additional opportunities for tax-loss harvesting and personalization.

The focus groups were overall very favorable to the concept and more so than in previous years. Respondents seemed to be most attracted to its potential tax savings. In contrast, many were less enthused about customization given that it added a layer of complexity and seemed time-consuming. A small minority did appreciate the option of being able to avoid companies they don’t like.

Another interesting finding from the focus group is that it’s appealing to investors with less assets as well as high net-worth investors specifically for its tax savings. According to the firm, two-thirds is in taxable accounts, and this continues to grow at a faster pace than money in nontaxable accounts. Thus, advisors are likely to have the most success by stressing this benefit of the strategy. 

Finsum: Hearts & Wallet conducted a focus group of investors in 3 cities about direct indexing. It revealed that investors were most receptive to the strategy’s tax benefits. 

Entering 2024, active fixed income investors are grappling with a unique mix of risks and opportunities given recent developments in inflation, yields, and rates. Insight Investment collected thoughts from BNY Mellon’s fixed income portfolio managers to get their thoughts on the coming year. 

Adam Whiteley, the portfolio manager of the BNY Mellon Global Credit Fund, sees a continuation of 2023 trends in credit markets in 2024. He believes developed economies will avoid a recession. However, the major focus is on determining where markets are in the credit cycle. This will have implications for identifying risks and the best sectors within the fixed income universe.

The portfolio managers of the BNY Mellon Global Short-Dated High Yield Bond Fund have a positive bias for high-yield and short-duration debt. Yet, they believe that investors will have to take credit analysis and cash flow modeling more seriously, given they expect a slight increase in the default rate. Overall, they still see the high-yield debt market as being stable and strong despite these risks due to better credit quality and strong balance sheets.

In terms of emerging market (EM) debt, the firm has a cautious outlook in the near-term despite more upside for EMs. The biggest variable is likely to be developed market and economic performance. EM corporates tend to have strong balance sheets so are well positioned for any slowdown. 

Finsum: BNY’s active fixed income managers shared their thoughts and outlook for 2024. Overall, they see some risks in the coming year, but the overall market remains in a good place.