Fixed-Rate and Indexed Annuities Build Loyalty Via Reliability

Jan 21, 2020 Share This 

Fixed-Rate and Index AnnuitiesIn less than three weeks, the annual Oscars® will be presented for the best films of last year. 

In addition to the standard lineup of “Best Cinematography,” “Best Director,” etc., is an annual recognition called the “Lifetime Achievement Award,” which celebrates motion picture career achievements not covered by other categories or which may have been overlooked in years past.

If the investing world gave out similar awards, the Lifetime Achievement Award may likely go to fixed-rate and index annuities. These hard workers may not be flashy or the latest “talk of the town” with savvy investors, but they’ve been reliable for decades.

A Brief History

During the 1980s and 1990s, as financial institutions introduced investment services offerings, fixed-rate and index annuities were big winners, bringing in a majority of the investment revenue for credit unions and banks and providing five-star commissions to advisors.1

As recently as the turn of the century, fixed-rate annuities generated between 25 to 40% of investment services revenue. That number jumps to 50% (in most years) when including variable products. More profitable than registered products, fixed-rate and index annuities meant a wide profit margin.2

However, by the mid-2000s, a focus on commissions was being replaced by a fee-based structure on assets under management. Fixed-rate and index annuities were seen as a “one and done” transaction product; that is, the assets were locked up until the surrender charge period expired.2

As the bank insurance and securities world developed, annuities received less and less love. Like the film world (and especially Hollywood), the latest and most shiny stars began to grab the attention of strategists, many pushing for more of a securities orientation.

The Power of Relationships

The trend away from “transaction for commissions” and toward “fee-based products” was not only driven by the allure of recurring revenue, it positioned the advisor as an ever-present guide. When the client and advisor can, together, choose a money manager, review performance, and build a portfolio, a more trusted relationship can develop, which helps retain clients and lead to a larger wallet share.2

Switching to advisory products, according to some financial institutions, was the way to create deep relationships with clients. While they did provide a guaranteed income stream, costly and confusing fixed-rate and index annuities were suddenly seen as “has beens” and inefficient at saving for retirement. 

Looking at the bigger picture, investment services in general don’t receive a firm’s strategy attention and resource allocation because they provide only small direct profit contributions. Yet, the right services promoted the right way can add to loyalty.

In fact, when an institution sells a fixed-rate or index annuity to a client, their loyalty is increased more than selling that client an advisory product.1


So, as a base, 39% of all U.S. households would NOT switch to a different primary financial institution. When an advisory account at that institution is established, that number rises to 54%. Yet, when a fixed-rate or index annuity is purchased, the customer loyalty jumps to 64%.1 

With that kind of performance, why are annuities so overlooked?

Existing Banking Relationship + Investment Relationship = Real Value

Yes, advisory accounts are a relationship-building product, but not as much as fixed-rate and index annuities, which seem to be especially attractive to U.S. households who appreciate guaranteed investments and are also tax-averse.

Plus, many baby boomers — expected to live long lives — are behind in their savings rate and don’t have income from pension plans. Annuities can fill this need for lifetime income and therefore can be important during today’s retirement savings crisis. 

A strategy of selling investment products to existing clients can help an institution increase its banking products’ profitability. Why? Because the investment relationship increases customer loyalty and therefore maintains those banking relationships longer which brings more value than adding an additional banking relationship for only a short period of time.

More than many other investment products, fixed-rate and index annuities seem to create greater loyalty to the institution. It’s time for banks and credit unions to fully explore their opportunity in investment services.

Let’s honor the exceptional career achievements of fixed-rate and index annuities…and they’re far from riding off into the sunset!

Take your clients to the next level with our infographic, Bring the Power & Potential of Annuities to Your Clients, which explores the practicalities of annuities, how they can be positioned as investment options and what advisors can do to include annuities in your offerings. Simply click the link below to access your copy.

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Written by: Elle Switzer, Director, Annuity Product Management, FSA, MAAA

Elle is the Director of Annuity Product Management at CUNA Mutual Group. In this role, she drives the identification, design, and development of new annuity product solutions and enhancements. She also supports the annuity sales team with in-depth analysis surrounding how CUNA Mutual’s products compare to competitors’ offerings. Since joining CUNA Mutual Group in 2011, Elle has been instrumental in launching the Zone, Future Income, Horizon, and Zone Income annuities.



1Bank Insurance & Securities Association, Annuities Get No Respect: New Study Confronts Misconception, June 12, 2019

2Kehrer Bielan Research & Consulting, Fixed Rate and Index Annuities Get No Respect, April 2019


Topics: Retirement Planning, News & Press