Variable annuities seem to be loved by financial advisors everywhere — except in the RIA world. According to a survey of 1,569 financial advisors by Cambridge, Mass.-based Cogent Research, 26 percent of RIAs use variable annuities in 2010 compared with 90 percent of independent b/d reps. Wirehouse, regional and bank reps are also hooked on Vas with 78, 85 and 83 percent of advisors in those channels using the product, respectively.

Meredith Lloyd Rice, senior project director at Cogent Research, and co-author of the report, says the lack of love between RIAs and Vas is a two-way street. Simply put, RIAs don't like selling the product because most come with a commission they can't receive, and variable annuity manufacturers haven't developed enough RIA-friendly annuities that eliminate the upfront sales charge. That said, Jefferson National offers a number of fee-only Vas, as do Fidelity, Ameritas Insurance, Pacific Life, MetLife, Prudential and Nationwide Financial.

The fee-only VA market picked up in 2009. That year, 32 percent of RIAs used the product for clients and dedicated 6 percent of their assets under management to it. That's up from 27 percent of RIAs allocating just 1 percent of their books of business to Vas in 2007. ”We think maybe RIAs were seeking something new for clients — some kind of guaranteed income,” says Rice.

But this year, with the economy having stabilized somewhat, RIAs' annuity appetites have dropped. In 2010, just 26 percent of RIAs are using Vas, and they're allocating 2 percent of assets. Cogent projects that will drop to 1 percent in the near future.