RILAs at a Crossroads: Booming Sales, Looming Volatility, and the Strategic Path Forward

Here’s the million-dollar question: Are Registered Index-Linked Annuities (RILAs) a sustainable strategy—or just the latest product riding a bullish tailwind?

With sales up 21% year-over-year in Q1 2025 and total annual RILA production surpassing $65 billion, you’d be forgiven for thinking these structured annuities have cracked the code. They promise just enough growth potential to excite equity-minded retirees and just enough downside protection to calm their fears.

But here’s the problem: we’re not in the same market we were five years ago—or even last year.

Market volatility is back. The yield curve is flattening. Investors are getting skittish. And some of the sharpest minds in finance, including analysts at Morgan Stanley, are warning that RILAs may have hit their peak growth phase. If they’re right, advisors could be facing a product paradigm shift—again.

So let’s dig in.

What’s Fueling the Skepticism?

RILAs thrived in a very specific environment:

• A rising equity market (which made buffered upside appealing)

• Stable to rising interest rates (which helped support higher caps)

• A vacuum in VA innovation and regulatory clarity

But several cracks are forming:

1. Volatility Isn’t Hypothetical Anymore

RILAs often cap gains but offer only partial downside protection (e.g., –10% buffers). That was fine in calm waters. But in choppier markets? That 10% drawdown starts to feel a lot riskier—especially when clients don’t fully grasp the index mechanics or surrender schedules.

2. The Wealth Management Shift

Morgan Stanley points out a broader trend: clients and advisors are migrating from insurance-based solutions (like VAs and RILAs) toward fee-based wealth management platforms. Why? Greater liquidity, control, and a preference for transparent fees over opaque riders.

Insight: The same clients who once sought buffered growth in a RILA may now be more inclined to accept full market risk in a managed portfolio—especially with tax-aware drawdown tools becoming more sophisticated.

3. Rate Pressure Could Pinch Caps

If interest rates drop—and many forecast they will by late 2025—RILA cap rates will follow. Without meaningful upside potential, many clients will ask: “Why not just buy a CD or MYGA?”

The Data Behind the Doubt

• Q1 2025 RILA Sales: $17.5B (+21% YoY)

• 2024 Total Sales: $65.6B (record high, LIMRA)

• Growth vs. Variable Annuities: RILAs now consistently outsell traditional VAs

• Morgan Stanley’s Outlook: Shift toward wealth management could “flatten or reverse” RILA momentum within the next two years

Strategic Takeaways for Advisors

Let’s be clear: RILAs aren’t going away. But blind enthusiasm should now be replaced by critical positioning. Here’s how:

1. Use RILAs as Tools—Not Default Solutions

They’re great in certain conditions:

• For clients who don’t want full downside but also don’t need guaranteed income

• As part of a laddered annuity strategy

• In short-to-mid-term buckets in a time-segmented plan

Pro tip: Stress-test your RILA allocations against 2020-style market drops. Can your client tolerate it—even with the buffer?

2. Be Hyper-Clear About Index Crediting & Risk

Too many clients think they’re protected. Until they’re not. If you can’t explain the crediting method in 90 seconds, you’re not ready to sell it.

Pro tip: Create a plain-English one-pager on the RILA’s crediting method, caps, buffer, term length, and surrender schedule. Walk through a “bad scenario” example.

3. Stay Agile in Your Product Mix

If rates drop and RILA caps compress, don’t be afraid to pivot. Multi-Year Guaranteed Annuities (MYGAs), fixed indexed annuities (FIAs), or even SPIAs could offer better outcomes depending on the client’s goals.

Pro tip: Build a heatmap comparing your core annuity products by interest rate sensitivity, income potential, and liquidity. Update it quarterly.

The Ethical Imperative: Are We Selling the Sizzle or the Strategy?

When a product category like RILAs surges, it’s easy for the industry to chase momentum. But professionals don’t chase—they guide. And that means pausing to ask:

• Are we explaining risk clearly, especially in volatile environments?

• Are we leading with income and outcome-based planning—or just sales numbers?

• Are we comfortable switching course if the math changes?

Because at the end of the day, RILAs should be a means to an end, not a marketing bullet point.

Final Word: The Smart Advisor Doesn’t Predict—They Prepare

The RILA boom has been impressive. But what happens next depends less on the markets—and more on how well advisors understand, position, and pivot their use of these products.

So here’s your challenge:

Educate harder. Plan smarter. And when the winds shift—adjust the sails before your competitors do.