Solving The Annuity Problem For Acquirers And Sellers
No matter what you call them—“consolidators,” “aggregators,” or the newly popular “mega RIAs”—today’s large wealth management firms pursuing acquisitions, roll-ups and tuck-ins all share a common goal: identify underdeveloped businesses, integrate them efficiently and optimize operations to unlock long-term value and growth.
A frequent hurdle in these transactions is the presence of legacy annuity books. While these assets can be meaningful, historically they’ve been viewed as problematic for dealmakers. Some acquirers avoid firms or teams with annuities altogether. Others have gone as far as launching internal broker-dealers simply to house these assets. Meanwhile, many advisors assume they need to leave their annuity books behind—or risk being passed over—which raises the prospect of their clients being poached by their former broker-dealer.
There is good news, however: Legacy annuity books no longer need to be deal-breakers. Today, products and technology have caught up with the needs and expectations of large, fast-growing RIA firms and breakaway teams, making annuities a desirable asset that can even sweeten a deal.
Modern Solutions For Legacy Annuities
New strategies now allow firms to unlock the full value of legacy commissioned annuity books—creating wins for clients, advisors and acquirers alike. These assets can be efficiently migrated into a fee-based or hybrid model through two primary approaches:
• 1035 exchanges: Move older, high-commission annuity contracts into low-cost, commission-free products—providing clients with a better product while preserving the client relationship and creating AUM for the advisor.
• Agent-of-record (AOR) changes: When a 1035 exchange isn’t appropriate, policies can be efficiently transferred from the seller’s broker-dealer to the acquirer or their designated agent and then be reassessed for improvement as they come out of surrender.
