During periods of market and economic volatility, market participants understandably grow concerned about fluctuations in the value of their portfolios. For those near or in retirement, the stakes are even higher, with many of these investors anxious about their nest egg, its ability to generate income and the oversized impact withdrawals will have on a shrinking account balance.
Some consider annuities and life settlements, both insurance-related vehicles, as options to help investors close the retirement resources gap in uncertain times, while others say they are complex, expensive and illiquid. Regardless of one’s opinion, these vehicles are popular. Life settlements are sales of a life insurance policy for a lump-sum payment that is less than the full death benefit, but greater than the policy’s cash surrender value.
LIMRA said 2024’s annuity sales were $434.1 billion, a 13% year-over-year increase.
According to the Life Insurance Settlement Association, life settlement consumers received more than $842 million from the sale of life insurance policies in 2023.
We caught up with three industry leaders to learn more about these vehicles and their uses:
- Kevin Kennedy, Senior Vice President and Chief Sales & Marketing Officer of Consumer Markets at Pacific Life, a financial solutions provider headquartered in Newport Beach, California
- Harrison Sidhu, First Vice President of Investment Products and Research at Cambridge Investment Research, an internally controlled and operated financial solutions firm serving independent financial professionals and their clients
- Jason Mendelsohn, Co-Founder and President of Ashar Group, an Orlando, Florida-based life settlement brokerage firm that helps advisors appraise, negotiate and monetize their clients’ life insurance and annuity assets
Our questions and their responses follow.
WSR: Pacific Life just launched its new Registered Index-Linked Annuity (RILA) in December of last year. How are RILAs different from other annuity solutions, and what are the types of client goals RILAs can most effectively support? Can you share any best practices in how financial advisors can choose the best RILA solution for their clients?
Kennedy: RILAs empower clients to take advantage of returns linked to an equity index, while delivering a degree of downside protection that many consumers seek. These products help curb the emotional investing we tend to see, especially in volatile markets, by offering protection features that allow more focus on long-term financial strategies.
That’s likely why RILAs are one of the fastest-growing segments of the annuity market. In 2024, sales exceeded $65 billion, a nearly 40% increase from 2023, according to LIMRA. By launching our RILA, we’ve rounded out our comprehensive annuity suite.
Once an advisor determines that a RILA is appropriate, it’s critical they work with their client to choose the available features that best fit their risk tolerance, growth goals and time horizon. It’s also important to work with a provider with a solid reputation, strong ratings and exceptional service.
Differentiating ourselves in a sea of RILAs was a key focus. We curated a mix of what we think are the most compelling RILA features found in the marketplace and then introduced our own unique combination of crediting strategies, a fresh twist on protected income, and other features currently not found elsewhere. We’ve seen a lot of success with it already.
WSR: What are the best practices for financial professionals to integrate annuity solutions into a holistic, planning-based client experience? How does Cambridge help financial advisors deliver that kind of experience?
Sidhu: Annuities are an important part of a diversified portfolio, particularly for retirees who need to replace the lifetime guaranteed income previously provided to many employees through pension plans. The last few years have seen both the traditional 60/40 allocation as well as the negative correlation between stocks and bonds tested. In this environment, financial advisors seeking to serve clients with a low risk tolerance may find annuities as useful tools.
While we’ve always had a diverse and robust annuities offering, we understand that an array of choices can also be overwhelming, especially with complex products. It’s critical that firms help advisors navigate the space. Our tech stack creates efficiencies around researching and integrating these products into a portfolio, while our client solutions team provides annuity case study design.
Advisors can also tap into our relationships with multiple independent marketing organizations (IMOs) to leverage their expertise. Our team can offer guidance to address everything from tax planning to individual product selection.
As an independent financial solutions firm, we’re willing and able to offer a full range of products that resonate with our advisors and help them drive better outcomes for clients.
WSR: Given the continued aging out of the boomer population and rising costs of living, are you seeing more interest in your solutions among financial advisors serving boomers interested in receiving liquidity via a life settlement transaction for an existing policy? How does Ashar Group approach this?
Mendelsohn: Since 2003, Ashar Group has collaborated with financial advisors and their clients to assess the value of existing life insurance policies in the life settlement marketplace. As a nationally licensed life settlement broker with a fiduciary duty to the seller, we work to secure the highest possible offer.
Many clients monetize policies due to shifting financial priorities, using the proceeds to fund retirement, care for aging loved ones and invest in other products to enhance financial security. Financial advisors rely on Ashar Group to determine the fair market value for unneeded policies. We assess potential value through a brief medical questionnaire — no exam required — and use our secure auction platform to create competition among institutional buyers while ensuring client data privacy.
Proceeds from life settlements can be redeployed into various financial products, including fixed and variable annuities. While advisors and clients make these decisions together, we often hear that this “found money” significantly impacts financial planning. Clients also express appreciation for advisors introducing life settlements as a solution, strengthening their professional relationship.
Janeesa Hollingshead, Contributing Editor at Wealth Solutions Report, can be reached at editor@wealthsolutionsreport.com.
