“Big data is one of those catch phrases I’m sick of hearing,” the CEO of a broker-dealer recently remarked. “The problem isn’t big data itself; it’s the difficulty with getting at it. The information is there. The industry simply has to do a better job extracting and applying it.”

Few areas illustrate the opportunity better than annuities and, specifically, the opportunity managing big data related to annuities affords the broker-dealer channel. In 2015, for example, sales of all types of fixed annuities increased significantly, with fixed indexed annuities leading the way.

 

Record Annuity Sales

“Sales of fixed indexed annuities in the third quarter of 2015 recorded their best quarter of all time, totaling $14.4 billion,” the Insured Retirement Institute (IRI) recently reported, citing data compiled by Beacon Research. “This was a 14.5 percent increase from second-quarter sales of $12.6 billion, and a 23.3 percent increase from $11.7 billion in sales in the third quarter of 2014.”

Part of the reason is the annuity saturation of traditional insurance distribution channels. With little room for further growth, annuities are moving from insurance agents exclusively to other distribution channels, and independent broker-dealers are taking the lead.

So how do firms use the opportunity of big data to exploit this growth even further? As usual, it’s about getting the right technology.

 

Where to Begin

The right technology begins with an automated order-entry annuity platform. This helps broker-dealers manage existing annuity positions, which can run in the tens of thousands and change frequently. Automated annuity platforms can also help ensure that compliance and suitability standards are upheld during the initial sales process to reduce not-in-good-order rates (NIGO) and shorten processing time.

Audits are a major source of stress for broker-dealer firms. Having and demonstrating a culture of compliance is increasingly important in the current regulatory environment and it will be even more important with the proposed Department of Labor fiduciary ruling. The quick and easy retrieval of annuity sales information upon request does much to smooth an inspection. By retrieving the annuity blotter for a specified time period, broker-dealers can oversee upcoming surrender dates to watch for excessive insurance exchange business. They can also monitor sales concentrations among carriers.