Advisors Waiting to See How Bolt-On Annuity Income Spigots Work

David Anderson, the CEO of Merit Life Insurance has a tough job: Persuading advisors and their clients that letting retirement savers attach an annuity spigot to just about any sensible, diversified asset portfolio will work.

Merit Life is a Shelton, Connecticut-based company with backing from the investment firm 777 Partners, just 14 employees in its corporate offices in Charlotte, North Carolina, and an opportunity to help create the small — but closely watched — market for “contingent deferred annuities.”

A CDC contract is a product that can attach the benefits guarantees, income-generation tools and other features of any ordinary annuity to just about any eligible investment portfolio.

Anderson has been in his post since October. Before that, he was the chief operating officer at National Guardian Life. He also has been a senior vice president at Thrivent, the CEO of TIAA-CREF Life Insurance and a faculty member at Queens University, in Charlotte, North Carolina.

Here are seven things Anderson said about Merit Life and the CDA market in a recent interview.

1. Merit Life wants to offer a variety of products, not just contingent deferred annuities.

“We’re here to build a business,” Anderson said. “We don’t want to be a one-trick pony.”

New products the company develops could be different types of CDA contracts, but they could also be other types of income-planning products, he said.

2. The company’s Banyan CDA contract has been available for sale since June 2021.

Anderson described the sales as being “modest,” but he added that, in some ways, low early Banyan sales are helpful.

“It allows us to make sure the processes and systems we have in place are working,” he said.

Modern CDA contracts have been on the market in the United States for more than a decade, but Anderson said that he believes industrywide CDA sales are also still relatively low.

3. The Banyan CDA has regulatory approvals in 33 states, the Virgin Islands and the District of Columbia.

Some regulators want Merit Life to address specific concerns, and others want to see how the product performs elsewhere before letting the company issue it in their states, Anderson said.

4. Advisors and their clients are also cautious.

For now, Merit Life is aiming mainly at fee-based financial advisors, not traditional insurance agents.

Anderson believes interest in the CDA concept is strong. ”No one says this is a bad idea,” he said.