How annuities support a holistic approach to fee-based accounts

Clients and financial professionals have their own reasons for why they might choose a fee-based approach to investment services. For financial professionals, they can prioritize asset growth over sales transactions, allowing them to focus on helping clients grow their investments. Meanwhile, clients may see a fee-based relationship as less likely to be influenced by sales commissions.

In the past, some financial professionals steered clear of incorporating annuities into fee-based financial planning and investment accounts because of:

  • The complexity of annuity product structures
  • Commission-based sales compensation
  • Historically higher fees than investments without insurance guarantees
  • Limitations in terms of investment options for clients
  • How well annuity products fit with their clients’ investment goals
  • Licensing requirements, since annuities are insurance products

But times have changed, and the annuity landscape has changed with it. Innovative developments in annuity products allow financial professionals to offer the benefits of annuities within fee-based portfolios.

How a fee-based approach may encourage holistic financial planning & investments

Offering a fee-based approach may be a win-win for both you and your clients. That said, it might take time and sensitivity to transition from transaction-based commissions to fee-based financial planning and investment services. When communicated clearly and with proper justification that demonstrates the potential benefits to your clients, there’s a greater likelihood they’ll accept the change. 

The difference between commission-based versus fee-based transactions can pay off in ways that transcend dollars and cents. Consider the following:

  • Some fee structures, such as fixed, hourly or asset-based fees, may have broader appeal for a wider range of clients, and that can make it possible to help more diverse investors grow their wealth
  • Some clients may engage more deeply in conversations about investment options when they know the product is decoupled from a potential commission payout
  • Clients can increasingly access a plethora of investment advice and recommendations online, creating potential confusion; they may place a greater value on leveraging the personalized services and advice offered by a financial professional and be willing to pay for it
  • As clients move through different lifecycle phases from accumulation to spending, fee structures can help accommodate changes in a financial professional’s overall client asset pool 

All in all, there are plenty of good reasons a fee-based approach can help you and your clients thrive. And annuity products can be an important part of strengthening client relationships by meeting their individual needs and demonstrating value.

How different annuity types may fit into fee-based portfolios

Fixed index annuities, variable annuities and registered index-linked annuities may all prove useful strategies, depending on a client’s individual risk tolerance and desire to participate in the market. And nearly every type of annuity is now available in a version designed specifically for use by fee-based financial professionals and their clients. Here are a few examples of how these annuity products may help meet specific client needs:

Fixed annuities with guaranteed lifetime withdrawal benefits

The protection of a fixed index annuity with a guaranteed lifetime withdrawal benefit (GLWB) can offer clients a way to achieve more guaranteed income through up and down markets than they might achieve with an unprotected market-based investment portfolio. 


Assumptions about “safe” withdrawal rates are often based on more aggressive investment approaches. As clients move closer to retirement, they may not have an appetite for the risk involved to sustain a 4% withdrawal rate.

A fixed indexed annuity with a GLWB can create an income stream with a lower overall investment. And because they know they’ll have a guaranteed income stream from a part of their overall assets, risk-averse investors may feel more comfortable investing other portions of their wealth in higher risk (and higher potential) opportunities.

Even without GLWBs, fixed indexed annuities may help clients avoid interest rate risk, making them a potentially appealing alternative for bond investments.

Variable annuities with risk protection may help clients diversify and grow investments

Variable index-linked annuities may offer clients even greater growth potential than fixed annuities, and a sense of engagement with their investments. They can personalize their level of guaranteed loss protection in exchange for a growth cap for an empowering investment experience. 

Investing part of a portfolio in a variable annuity with a GLWB may help financial professionals encourage clients to stay invested and ride out volatility with confidence, to make the most of market participation while limiting principal loss. 

Investors can designate their personal range of upside potential and downside protection within their own comfort zone. They can choose from a mix of equity, fixed income and specialty funds to fit their risk tolerance and investment interests.

Registered index-linked annuities combine growth potential and guaranteed income

Market volatility and low rates of return discourage many risk-averse clients from investing. Registered index-linked annuities (RILAs) may offer a “happy medium” with greater upside potential than fixed index annuities and guaranteed loss protection on a portion of the annuity account balance.

RILAs enable clients to designate allocations between a secure account with a 0% floor and a growth account, which can have a higher growth cap and a floor as low as -10%. This way, a portion of the client’s dollars are protected against severe market downturns, and another portion can experience limited losses with room to grow when the market is up. Fee-based RILAs typically have higher cap rates than commissionable products and come without surrender charges.

In addition, unlike variable annuities, RILAs aren’t actually invested in the market. Rather, gains or losses are linked to a specific market’s performance and locked in based on annual changes in the index from one contract anniversary to the next. Interest and guarantees are based on the client’s contract with the insurance company’s claims-paying ability.

Wide-ranging annuity products meet diverse client needs

Using a fee-based approach may help you be less product-focused and more likely to zero in on clients’ individual risk tolerances and desires for growth potential — and the range of annuity products designed for use in fee-based accounts puts a client-centric approach within closer reach than ever. 

It is now possible for fees to be deducted from annuities without reducing guaranteed income benefits, helping you deliver and demonstrate integrated ease to clients in a holistic financial planning relationship.

Learn more about TruStage’s range of fixed annuities, variable annuities, and registered index-linked annuities, including options designed for use by fee-based professionals. Contact the TruStage Annuities sales desk at 1.877.345.GROW (4769), option 1, or find your designated team to talk through how to implement a fee-based strategy.

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