Nick Strain, senior wealth advisor and chair of the wealth advisory committee at Halbert Hargrove, spent over a year assembling a retirement income plan for one client using four separate annuity contracts. The firm charged no advisory fee on any of them. That trade-off illustrates the persistent friction between annuities and the fee-only RIA model.
Annuities offer something a traditional portfolio of stocks and bonds cannot: a contractual guarantee. "Providing guaranteed income provides a lot more safety than traditional diversified mutual fund or ETF portfolio, where there's no guarantees," Strain said in a recent interview. "Guaranteed income does put clients at ease."
Where annuities fit for RIA clients
At Halbert Hargrove, Strain sees two common entry points for annuity conversations. The first is a new client who arrives holding an old annuity and has forgotten why they bought it. Cashing out can trigger a large tax bill, so he often uses a 1035 exchange – a tax-free transfer from one annuity contract to another. The exchange can capture a higher payout rate or move the client from a variable contract into an indexed product with a floor.
The second scenario involves conservative clients nearing retirement with large positions in cash, CDs or Treasuries and little appetite for more stock market risk. "You want to stay conservative, but maybe being in Treasuries or cash, high-yield cash for a long period of time might not be the best long-term solution for you," he said.
Over the past five years, Strain said, an increasing number of clients have joined the firm with existing annuities. As interest grows, he believes advisors have a responsibility to incorporate annuities into clients' financial plans rather than letting them get recommendations elsewhere. "I'd rather be part of the conversation than find out what happened six months later and not be happy with whatever was recommended," he said.
The operational cost of fee-only annuity advice
For a fee-only fiduciary that takes no commissions, the obstacles start with knowledge. "The challenge for a firm like us or other fiduciary firms is to have the expertise and experience of annuities because annuities can be pretty complex and they're forever changing," Strain explained.
Infrastructure is another hurdle. Annuities require their own paperwork outside standard custodian workflows. Firms must decide whether to build expertise in-house or rely on a third-party insurance platform. "For our normal custodians where we have to rebalance accounts, we can do hundreds of clients in a morning. And for insurance, if we're going to try to rebalance or make investment changes, it's typically one-off, one at a time," Strain said.
Client education adds another layer. Advisors must walk clients through several decisions: whether to annuitize or defer, which riders to choose, investment options, caps, fees and surrender schedules. "The fees are a big one, just because the fees [on annuities] are much greater than typical either stock or bond mutual funds or ETFs," he said.
Registered index-linked annuities (RILAs) need their own portfolio conversation, because an income floor doesn't necessarily protect the underlying investment value. "With registered indexed annuities, if you're investing in, say, an S&P equivalent, the investment value can go down," Strain said.
Despite the hurdles, the broader annuity market is booming. Industry sales hit a record $464.1 billion last year, according to LIMRA. Yet only about 1% of total annuity premiums currently come from fee-based products, which has hindered adoption among RIA firms that operate on a fee basis. Insurers expect that to change: in Goldman Sachs Asset Management's 2025 Annuity Industry Survey, 45% of respondents named the RIA channel as the one likely to see the most growth over the next three years.
Strain's wish list for carriers and insurtech platforms includes tools that walk clients through different options based on their financial goals; stronger back-office support for paperwork and ongoing monitoring; tighter integration with portfolio management, planning and CRM systems; and shorter surrender fee schedules, which currently can run as long as seven years.
