208 - Improving the #AnnuityUX in 2024 With David Hanzlik

That Annuity Show

“208 - Improving the #AnnuityUX in 2024 With David Hanzlik" Summary In this episode, Paul Tyler, Ramsey Smith, and Dave Hanzlik discuss the annuity industry and the changes that occurred in 2023. They talk about the rebranding of TruStage, the growth in annuity sales driven by the rate environment, and the success of fixed annuities and fixed indexed annuities. They also explore the potential for growth in niche markets, such as deferred income annuities, and the role of registered index-linked annuities (RILAs) in the industry. The conversation highlights the importance of making annuity sales easier for advisors and the potential impact of AI in the industry. The episode concludes with final thoughts and tips for annuity sales professionals. Takeaways The annuity industry experienced significant changes in 2023, including rebranding and growth in sales driven by the rate environment. Fixed annuities and fixed indexed annuities performed well in 2023, with advisors recognizing the value of the guarantees they provide. There is potential for growth in niche markets, such as deferred income annuities and registered index-linked annuities (RILAs). Making annuity sales easier for advisors and improving the ease of use of annuity products should be a focus for the industry. AI has the potential to play a role in improving operational processes and making the industry more efficient. Chapters 00:00 Introduction and Welcome 00:30 Recapping the Holiday Season 01:44 Changes and Rebranding in 2023 03:24 Annuity Sales in 2023 07:27 Growth in Niche Markets 08:08 Renewed Interest in Annuities 09:37 Behavioral Finance and Market Ups and Downs 11:08 Deferred Income Annuities and Income Solutions 12:04 The Role of RILAs in the Annuity Market 13:41 White Space in the Annuity Business 16:33 Expanding the Target Audience for RILAs 20:01 Making Annuity Sales Easier for Advisors 22:29 New Year's Resolutions for the Industry 25:15 The Role of AI in the Industry 27:06 Retire Tech Innovation Event 28:29 Final Thoughts and Advice 30:32 Closing Remarks Paul Tyler (00:01) Hi, this is Paul Tyler and welcome to another episode of That Annuity Show. Ramsey, good morning. Ramsey Smith (00:08) Good morning to you. Great to be here as always. Good morning to you. Paul Tyler (00:11) It is, and we've got a great guest, a returning guest, Mr. Dave Hanzlik Vice President, Annuity and Retirement Solutions at TruStage, formerly known as CUNA Mutual Group. Dave, welcome back. Dave Hanzlik (00:25) Hey, thanks guys. It's great to be back. How was your holiday? Paul Tyler (00:30) You know, it was too short, too short. And I'm paying for it now, paying for it now as we get ready for our upcoming sales conference here that I'm looking forward to. Ramsey, yours. Dave Hanzlik (00:34) Yeah. Ramsey Smith (00:44) Good holiday. We actually spent some time in New York, which is sort of our historic home, which is fantastic. During the Christmas season, it was so, so busy. Frankly, it's great to see what looks like a really great strong recovery for the city over the course of the last year or so. So it's just great to see that kind of energy in the city. So it was fantastic. And other than that, college applications. So busy. Paul Tyler (01:09) I don't know. Judging from the sketches on your wall, I don't think you're quite there, Dave. Dave Hanzlik (01:14) No, not yet, although these are several years old. So, yeah, yeah. Paul Tyler (01:18) Okay. Yeah. Hey, well, listen, we actually had a chance to catch up in person at the Limerick Annual Conference, which was great. But, Liz, it's hard at the beginning of the year not to look back and then look forward. You know, looking back to 2023, it was a big year in the annuity industry and also, you know, a big year for your company. Do you want to talk about the changes and the new name, maybe? Dave Hanzlik (01:44) Yeah, yeah. I mean, 2023, as you mentioned. true stage. We went to market and changed our name and brand in 2023. If anyone has done this before that's listening, they know this is a lot of work and wonderful, wonderful dedication from a bunch of talented folks. But it's really about for us, you know, we had a family of brands and we recognize that we want to over time really connect. Paul Tyler (02:05) Oh yes. Dave Hanzlik (02:21) across all the life stages of our customers, the financial services solutions that we can bring in. A huge part of that is our annuity and retirement solutions that help people as they're getting to and living through retirement. So I'm very excited about it and happy that we're through the first phase of it. Brand changes, there's always some things that trail for some period of time, but we think it's going to be a great thing for our annuity business. true stage business in general. Ramsey Smith (02:56) Fantastic. So look, we're coming off to Paul's point, a great year in annuities. A lot of that's been driven by the rate profile. And so curious to hear your thoughts, you know, one on sort of what segments you saw doing well and why you think they did well in 2023. And then we can sort of shift gears 2024, what that's like, what that's probably going to look like based on what could be. higher rates for longer or maybe things sort of pull back a little bit. So tell us a little bit about 2023 for starters. Dave Hanzlik (03:30) Yeah. And, you know, Paul, you and I saw a lot of this when we were together at the annual meeting. First of all, as we entered into 2023, we're coming off a historic year for the annuity business in general, over 300 billion of sales in 2022. And we're probably going to end up 2023 over 350 billion of sales. So another 20 plus percent year over year growth number. You know, yeah, Ramsey. and Paul, we heard this, the rate environment is a big, big mover of this. And I think it's, you know, a couple of things we've seen, like one is it's helped, you know, recapture the imagination of advisors recognizing, you know, where annuities can help their clients. And in particular, we've seen the fixed annuity space, the MYGA multi-year guarantee annuity space has done extremely well. And fixed index news did really well. And those are, I think a lot of that was driven by interest rates and advisors identifying that this was the value proposition was really hard to ignore for their customers. We also see the, what I saw in 2023 was a continuation though of growth and a number of other categories as well. The registered index links annuity space and another year that is over 10% growth. and probably going to reach 50 billion of sales in 2023. So although it was around rates, I think what we were seeing is just advisors understanding and recognizing that the value of the guarantees that annuities can provide and really bringing it more to their customer base and taking advantage of how the rates and guarantees were showing up. vis-a-vis what we'd seen in the past decade plus of the low rate environment. Paul Tyler (05:31) Yeah, it was hard not to have a conversation at LIMRA about rates. And, you know, it was a blessing, it was a curse. I mean, the blessing in that you could sell, you know, the products are able to, we're able to show bigger rates, bigger interest rates, higher cap rates. You know, challenges, it was the speed at which it increased. I think a lot of companies had challenges, you know, repricing those MiGAs. I mean, David, we, you know, we would... go out thinking we were going to be number one and number two. And by the time the rates hit, we were like in fourth place. It was, it was a crazy, crazy year. And then when the business did come in, did you have enough people in place, uh, to actually process the business? And, and, uh, I think, uh, we as a collectively, as a whole in the industry, I think we did a pretty good job, but I know that, you know, there were, there were service issues along the way. Dave Hanzlik (06:05) Right, right, right. Yeah, I think one of the, yes, there was a blessing and curse, you know, helping a lot more people using annuities, but stressing the operational administration framework of the industry. So, but I also think that's going to be a positive as you move forward in 2024 and beyond. I think as an industry, we were recognizing that there are some ways of looking at technology, data and... the service models that could be advanced to take on spikes in business, more business. And it's just sometimes a crisis forces involvement and advancement. So I think that's something that we're going to see as a major. And she's continuing to get better at service and administration and processing of business. Ramsey Smith (07:27) So one of the things you and I talked about a bit, Dave, independently was some other areas that have seen growth that have been sort of smaller markets. So we had talked about Diaz in particular. Is that, and again, it will unlikely ever to be as big a market as FIAs or RILAs, et cetera, but there is a market. Is that an area that you think will continue to see growth and attention? I can say that certainly, I've received inbound calls on them in a way that I hadn't in the past. So I'm curious if you're seeing any of that in your business sort of profile and if you think that might be part of the future as well. Dave Hanzlik (08:08) Yeah, I do think, you know, Ramsey, as we move into 2024, there's, you know, there's advisors and clients are going to take a renewed interest and look at annuities in general, not just my guys or fixed index annuities. They recognize like, well, there's value here and that the higher rate environment has kind of been an impetus for looking at. So for example, deferred income annuities. I think, I think you and I talked, I think part of it was like, hey, look, because of the rate environment, there's could just, this could actually just help people identify that there's, there's a deal here. And you know, there's something that we haven't been able to tap into for a few years because how low rates have been. I think just generally though, like income has been something that in 2022 and 2023, a lot of people weren't focusing on. And, but I think as the latter parts of 2023, we started to see more interest in it from an industry perspective. And I think you can continue to see that. And if you look at industry data, it hasn't really gone away. It's just the accumulation side has just exploded. And the need's still there. I'd also be curious, Ramsey, and it kind of was adjacent to our discussion, was part of it is... Ramsey Smith (09:24) 100% Yeah. Dave Hanzlik (09:37) a number of discussions, plenty of these discussions in 2023 where people are like, well, rates are so great. This is the time we should, there's a deal here. And so, you know, and part of, for me, part of it's like, well, that this is part of what annuities are supposed to help people with, which is help them like not get swayed by ups and downs in markets. So Ramsey Smith (10:04) Mm-hmm. Dave Hanzlik (10:05) there is a little bit of a lot watching behavioral finance play out where people like rates look so good. Now I'm going to jump into this, you know, universe. So that is something I think as we move into 2024, you know, again, looking at like, how are people looking at plans, their long-term plans, and, you know, I think a crisis can help people kind of re-examine what their long-term goals are. You know, someone feels like they could be all in equities and then, you know, markets drop 30%. Maybe they really can't be. But I think that's something that will be a really interesting topic and item to kind of navigate in 2024 is kind of get back to – and partly I think rates are going to level out a bit here. And as they do, now are people going to kind of start looking about what is the financial plans that we're putting in place for our clients? what are the solutions that can make sense? And income, I think, is one of them. Ramsey Smith (11:08) Yeah, no, absolutely. I mean, it was an interesting discussion I had with this client, ultra high net worth individual. And so liquidity was not an issue. It was really a matter of, so the issue of a deferred income annuities, you essentially have a loss of control of the assets you allocate to it. And so liquidity wasn't an issue for this client. It was very much this idea of creating some sort of counterpoint, some diversification into a portfolio that otherwise was risk loving, is probably not the way I'd put it, but risk comfortable. It was a very sophisticated investor. And so that's why I thought it was interesting. And to your point, like pricing levels were very attractive, both because of rates and because of appetites relative to longevity risk, you know, at that moment in time. And so I think it worked out well for all parties involved. Dave Hanzlik (12:04) Yeah, I think, you know, when you look at income today, the industry has, you know, learned a lot of lessons during the Great Recession and, you know, now has deferred income annuity is a great tool, right, Ramsey, for those that don't need the liquidity. But I think the pricing and the creativity around solutions, whether they be in the variable annuity space, the redshift, and the annuity space. fixed the next news was in the fixed annuity space, which are almost very close. There's fixed annuities with income options that are very close to deferred income annuity except with liquidity, right? So I think there's a lot of great options out there. And I think the industry has done a really good job of setting up the solutions that can be appealing to customers, as well as, you know, we've got... we have the risk return, risk management piece down really well. Paul Tyler (13:08) And Dave, I guess, where do you see the biggest white space in the business? I mean, there are ones where if you look at the reports, you say, okay, well, how do we increase penetration in the RA channel? Ramsey, your topic, how do we get more annuity sales in the workplace? The numbers are low, the opportunity is big, but it's also the barriers are really high. I mean, if you sort of think of your CEO of the industry. Where would you say we should be putting our bets here over the next few years? Ramsey Smith (13:39) That's a great question. Dave Hanzlik (13:41) Yeah, I mean, I think those two topics as well as if you think about the topics of, you know, income and retirement plans and the solution that, you know, what's consistent in all of them is the complexity of trying to, you know, have a technology stack and operational stack that can fit within how those marketplaces work. because they weren't created to accommodate the kind of guarantee solutions. And so I think that's the big challenge to, I think all three of those are really interesting opportunities. But if you're asking me like, okay, Dave, like next few years, where do you think the white space is? I mean, this is no surprise given kind of what our company focuses on. I still think registered index link annuities is a... wonderful solution because it captures the, you know, addresses the need. Everyone, you know, people are using news because they want downside protection. And then with RILAs, they have the upside potential that they need. And now it's had a lot of discussions and there were discussions at the Limmer meeting, Paul, like, well, you know, because of where rates are, does this mean like RILAs aren't as important? And you still saw... double-digit growth in RILAs in 2023. And when I talk to my counterparts and other companies, everyone has a RILA or is looking at it, you know, because I think it's just a really creative solution that can kind of bridge a gap of, you know, because people need to continue to grow their asset base, right, but they also, guarantees are a wonderful way of kind of helping them navigate risk and, you know. of control their behavior risk as well as stabilize the portfolio. And even like, it goes back to Ramsey when you're talking about your higher net worth client that was like part of using like a deferred income annuity, it stabilizes part of their portfolio that allows you and them to work on taking risk in a fashion that makes more sense for their needs. And so, Ramsey Smith (16:02) Mm-hmm. Dave Hanzlik (16:13) A lot of, so I really think RILAs are, they'll continue to see them become a bigger and bigger slice of the NUIDI product. Ramsey Smith (16:21) Can I just sort of extend that a little bit? Just curious, and I have a follow-up comment. So RILAs are interesting. RILAs are registered. So a different, potentially different type of advisor has to sell it, right? And so I guess my question is like, so is there beyond just the fact that it has practical implications for the customers, does it open up a new target audience? Has it opened up a new target audience for you in terms of advisors that you are or could work with? Dave Hanzlik (16:33) Right. Yeah, we've seen it in two fashions, Ramsey. One is, we found that with, you know, it is registered. So, but, you know, some advisors that are registered tend to work with, you know, tend to work with fixed annuities more, fixed index. They tend to work, you know, we found that this has kind of helped them open up, you know, a better way of getting after upside potential with their customers. Ramsey Smith (17:08) Yeah. Dave Hanzlik (17:19) with a customer base that tends to be more conservative that they say, oh they want to manage accounts or they want to be in mutual funds, but then as soon as there's a market correction they want to run back into CDs and fixed annuities. So this has been able to help those advisors and have a more logical solution to help their customer base. The other place is, and this is I think, is folks that advisors that just really weren't using annuities, right? Because they're very comfortable with efficient frontier optimization. And this is something we have many conversations with. We're like, how do you do this? Conversations where we had to kind of like, how does the, how do you, are you sure this makes, you know, advisors are really, maybe have your background, Ramsey, that they really understand how it how insurance companies construct these solutions. I think it could be something that could help us with the RIA space, traditionally a space that's more focused on just not using guaranteed solutions as much. So those are the two places we've seen as our company, where we've seen some build bridge out into some new space that we weren't seeing before. Ramsey Smith (18:29) Yeah. So part of the reason I bring it up is I recently was asked by a family member, a friend actually, to take a look at a portfolio that somebody who was retired had and it was run by sort of a name brand advisor shop or a wirehouse type. And I looked at the asset allocation and 10% of it was allocated into what they called alternatives. But essentially they were structured notes. I looked at the structured notes and it's like... these structured notes have the same risk profile that a RILA would have. They were really, you know, twin with what are, other than the fact they were written on a bank's paper, as opposed to written on the paper of an insurance company. So I think that sort of the aha moment for me was that, like, there's already use of very similar products already in there. Sometimes they're based on sort of central asset allocations. Some, you know, maybe they're, made at the company level and the advisors just sort of take what the investment they're supposed to do but it's my way of saying that like there are there are places where things that are close enough to Rila's already exist and are being allocated that might be a business opportunity for you and for others in the space. Dave Hanzlik (20:00) Right, right. Paul Tyler (20:01) Interesting. Well, you know, we've had Joe Jordan on a couple of times. I worked with Joe back at MetLife way back when, and Ramsey, well, he always said was, how do you get somebody to do something new as you make it look like something they already do? So, and I think these products that we put out, as much as we think and talk about consumer value, it's, whoever the independent agent, the registered rep, the independent financial advisor, kind of be, they have to, the product has to be one that they feel comfortable selling it probably as close to the process they've already done. Ramsey, I'm presuming you had probably a relatively easy discussion saying, look, you already own these bank structured notes. Look at this product over here. It's kind of similar and maybe it's a little more efficient. Ramsey Smith (20:48) Yeah, so I was evaluating, I wasn't selling this. I was just trying to help them understand what they had. But I think it's that balance between pattern recognition, like the advisor understands it well enough, but your offering as TruStage is unique enough that they understand that it's different than the other things that they recognize enough that it's in their comfort zone. And that's the balance that you... Paul Tyler (20:52) Yeah. Dave Hanzlik (21:15) Yeah, I really like this question. It does remind me of one of the things that as an industry we really need to continue to focus on, whether it be in new spaces that we have under-penetrated like RIAs or just our current spaces, our current broker-dealer partnerships, how do we continue to make it as easy as possible for the advisor and client to use our solutions because it's a highly regulated... industry. There's a lot of complexity of just trying to pull sources of funds and all that. And that continues to be, you know, and it's always a topic at our industry conference. There's multiple topics on this and it's something that we continue to focus in on in terms of our investments and the industry in general. And that's one of those things that I, you know, I continue to encourage my peers to like, where are we finding ways of Ramsey Smith (21:46) Sure. Yeah. Dave Hanzlik (22:10) collectively trying to make this better for those that we're working with. It's not about, we're trying to just help make this solution more widely available, more easily usable in the different fashions that clients are getting served around their financial and retirement needs. Ramsey Smith (22:22) Yeah. Paul Tyler (22:29) So what would you put? It's January. We're still pretty close to the first New Year's resolutions for our insurance industry to do exactly that. They make it easier for advisors to explain these things and communicate the value. Dave Hanzlik (22:45) Can you say that again, Paul? Sorry. Paul Tyler (22:46) Well, what would you, you know, if you had a new year's resolution list for the industry, you know, what would make the top of the list there to make it easier to sell products to clients? Dave Hanzlik (22:59) Yeah, I think it would really be a focus in on working with the distribution partners. you know, how the solutions are, you know, seen and evaluated. And it kind of goes back to think what you, you know, Paul, you and Ramsey were kind of talking about before, like the pattern recognition and I was really working hard on with our partners, how this is similar to where this is similar to things that they're comfortable with and how do we kind of fit them within that technology and operational and process stack and say, Hey, like it's, it's not the same as what you have. It has some. advantages, you know, that provided, you know, allow it to be, you know, another arrow in the quiver. So I think the focus on like education of, you know, how this is similar and then how do we make it as easy as possible to kind of fit it within the process. Because I think that's oftentimes what we see in terms of what we get in some pretty specific discussions with our distribution partners. It's like... lot of it's like they like this when they understand this solution they like it and then it's just like well there's all sorts of things that we all these roadblocks to make it harder you can make it hard for an advisor to potentially use it and it's not to say like a news or that much there's so much more hard harder to use there's always like some like mutual funds management there's always things that can kind of get in the way of using them for a variety of reasons but that's what I would focus in on Ramsey Smith (24:25) Mm-hmm. Agreed. Well, I think when you sort of peel back the onion on virtually any financial product, even, and I say this sometimes, that even index funds are, I think, are more complicated than people think. It really ultimately comes down to sort of comfort and familiarity. I think that ultimately is what makes the world move, make this world move. Yeah. Paul Tyler (24:44) Okay. All right, so I got a double click on this here, Dave. So, you know, I was there at LIMRA on this platform, this panel talked about Ramsey Smith (25:10) Uh oh. Paul Tyler (25:15) AI, general, genera of AI. Boy, great for pattern recognition, great for, is that, what kind of role is that gonna play in 2024 in our industry, do you think? Dave Hanzlik (25:15) Yeah. Well, I think every single company in the industry is looking at it and trying to figure out, because I think we've all seen the applications of it. Hey, look, it'll write a term paper in 10 seconds. It'll take a... create a 40 slide PowerPoint for you in 10 seconds. So, us and our peers are all looking at where are some places that it can be used. But it's one of those things that there's a host of other issues that you have to navigate, because all of our companies are handling very sensitive information. And so, part of what we need to do is make sure we're... We have it in the right spots and really understand and test through it. But I think for us again, in 2024, I think the industry, it will be more around how can we make operational processes more efficient and then, you know, and then just kind of watching like, okay, are there other places we can extend it and how can we fit that within appropriately within privacy, security, regulatory frameworks? Because again, This is really, there's definitely sensitive stuff here that we all deal with, and rightfully so. How about you, Paul? What do you think? Paul Tyler (27:06) Oh, I'm bullish on it. In fact, don't get me started. No, I, listen, you know, I, everything you say I'm living, living the dream with our internal groups, but we've got some interesting sort of pilots, uh, in the works here. Ramsey knows some of them. Um, I do think we're going to have a great event Ramsey, if you want to talk about it in April, April 8th out in Las Vegas, talking about retire tech innovation in retirement, David, hope we can get you out there and your team. Um, Ramsey Smith (27:08) You're going to get him started. Don't get him started. We won't have time. Dave Hanzlik (27:10) Hahaha! Paul Tyler (27:34) send you some information on it, but this would be the third event that we've held. Ramsey, I think, yeah, you've been... let's see... Ramsey Smith (27:41) This will be two out of three. So the first one was in Hartford a couple years ago and I was traveling so unfortunately I couldn't make it. You guys sent me a nice message. You sent me a short video letting me know I was missed. So I definitely appreciated that. And then the last one was earlier, I want to say earlier this year, no it was last year. It was March of last year, sponsored by Capgemini. You guys put together a great space with them. That was fantastic. And now we're going on to the big stage. We're going to Las Vegas. So you know. Dave Hanzlik (27:44) Mm-hmm. Paul Tyler (27:52) Ha ha ha. Ramsey Smith (28:10) must be doing something right. That's fantastic. Glad to be part of it. Paul Tyler (28:12) Yeah. So it was great to have you on here. I don't know, any parting thoughts, advice for people actively selling annuities and having these conversations with clients on a daily basis? Dave Hanzlik (28:29) Yeah, you know, maybe we kind of touched on this before, but two things. One is like, do you think, you know, we should always navigate through recency bias? Like, it's been a high-rate environment, but you know, like, I think a lot of the opportunities are around, you know, with annuities in particular, it's like, hey, like, there's some great innovation that's happened and continuing to kind of explore how it can help from an income perspective, accumulation perspective. That's one layer. It's just continue to challenge like, you know, what solutions you're using and how that fits in with the longer term plan that you're working with your clients. And then the second one is I think this theme that we're kind of getting after like, you know, and one that we'll continue to work on and focus on is like, how are we trying to make the process of working with our industry as simple as possible and how are we like looking at tools like AI to kind of make this. These solutions and the partners we're working with make it as efficient as possible to help serve clients. Those are the two things that we'll continue to zero in and focus on. We're coming off, again, probably it'll be a historic year. I think that lays a great foundation to continue to help people with these solutions and things we can do as an industry. Paul Tyler (29:56) All right, this was great. Ramsey, any final thoughts, questions? Ramsey Smith (29:59) Oh, that's, I look, I just want to, I agree with Dave, ease of use. Ease of use is a growth, is a growth area for our industry. And I say that from somebody that touches the industry in many, many ways, distribution, my risk management from my former life as a board member. I think ease of use is, uh, ease of use is, is really going to be a, uh, an important and valuable growth area for, not just for the clients, but also for. You know, the, all of us that work in the industry, I think it will be. Paul Tyler (30:07) Hahaha! Ramsey Smith (30:29) think it will be universally beneficial. Paul Tyler (30:32) Annuity UX. What do you think about that, Ramsey? Is that a hashtag? Dave, you like that? 2024, hashtag Annuity UX. All right, Dave, hey, thanks so much. Look forward to having you back. And well, listen, we'd love to catch up with you later in the year. Ramsey, thanks. And thanks to all our listeners. Join us again next week for another great episode of That Annuity Show. Ramsey Smith (30:36) Sure, yes. Dave Hanzlik (30:39) It's great, Paul. You're the Chief Parking Officer, so... Ramsey Smith (30:40) Yeah. Here we go. Yeah. and Sure. __ Paul D. Tyler | CMO [e-mail] https://nfg.com M: 914-356-2138