Lincoln Financial Group has launched the industry’s first ETF-only variable annuity designed to help fee-based advisors address their clients’ retirement income challenges. Developed in collaboration with BlackRock, the Lincoln Core Income annuity features an investment selection comprised entirely of iShares ETFs and guarantees lifetime income equal to 4% of the initial deposit that increases annually by a 2% cost of living adjustment.
The ETF-only variable annuity from Lincoln in partnership with BlackRock iShares offers a lifetime income of 4% with added inflation protection.
“Lincoln Core Income demonstrates Lincoln’s commitment to product innovation and providing fee-based advisors with guaranteed lifetime income solutions that are specifically built to meet their needs,” said Will Fuller, president of Annuity Solutions at Lincoln Financial Distributors and Lincoln Financial Network. “This solution captures the opportunity in fee-based advice and the momentum of ETFs – allowing advisors to help their clients secure retirement income through a guaranteed lifetime income strategy that increases each year.”
“We’re seeing a tremendous shift take place in the advisory space, as more advisors transition to fee-based models,” added Salim Ramji, head of BlackRock’s US Wealth Advisory business. “These advisors are looking for simple, transparent solutions that provide their clients with income. Through our collaboration with Lincoln, fee-based advisors can now offer their clients an ETF-based annuity option to help meet lifetime income goals in retirement.”
According to Cerulli, an asset management research firm, the growth of passive investing is outstripping active management growth among advisors. Industry participants expect this trend to continue, with advisors estimating that more than a third of their client portfolios will be in passive allocations within the next two years. Data from Morningstar illustrates the growth of passive management: ETF assets have grown from just $228bn in 2004 to $2.53tn at the end of 2016.
“Incorporating standalone ETFs into variable annuities is an innovative development; the low expense ratios of ETFs may offer an advantage compared to the cost of other options available, and offer both advisor and consumer value,” said Bing Waldert, head of US Research at Cerulli.
Variable annuities are designed for retirement and offer lifetime income, tax-deferred growth and death benefit protection for loved ones. “Retirement savers face significant challenges in today’s environment, given demographic trends and the fraying of traditional government and corporate safety nets. Today, annuities can help savers create predictable lifetime income in retirement,” added Fuller. “Fee-based annuities present a significant long-term growth opportunity and we expect this product to help capture the shift toward passive investing – providing fee-based and registered investment advisors with a solution that can help their clients address income needs in retirement.”