December 2014, BOSTON. Asset managers cite sales dominance by a few select insurers as their greatest challenge for growing their variable annuity subadvisory business, according to new research from global analytics firm Cerulli Associates.
"After the financial crisis, several insurers exited the variable annuity marketplace as low interest rates caused their hedging costs and reserve requirements to soar," states Chris Nadai, senior analyst at Cerulli. "The net result has been a concentration of marketshare among the top tiers of the variable annuity industry."
"Annuity industry subadvisory dynamics have changed; there are very few large strategic allocations. This evolution requires investing more in joint sales efforts and product development to win business," Nadai explains.
The fourth quarter issue of The Cerulli Edge – Retirement Edition examines investment-only retirement sectors. It focuses on the variable annuity subadvisory market and the defined contribution investment only industry.
"Smaller subadvisory firms need to approach analysts at broker/dealers, recordkeepers, or insurers," Nadai continues. "Success requires examining company profiles more carefully and identifying where they can make an entry given their limited resources to establish new relationships. Ideally, they will find companies with a strong centralized research team that recognizes unique funds."
Cerulli recommends that subadvisors evolve their relationship to being more like strategic partners with insurers. This evolution requires investing in joint sales efforts and product development to win the business.