Halbert Hargrove's four-annuity plan exposes annuity fee gap

Halbert Hargrove built a client's retirement income plan around four annuities that sat outside the advisory fee schedule — unbilled, as the coverage describes them, meaning the guaranteed-income layer never appeared as a billable line item in the client's fee arrangement. That small case captures a larger shift in the RIA channel: advisers are moving guaranteed income into portfolios before they are moving it onto the fee bill. The RIA channel may be expanding the annuity market without re-pricing it.

Fee-based products account for about 1% of annuity premiums, according to a 2025 LIMRA study, leaving roughly 99% of premiums flowing through other compensation structures — the most straightforward reading being that the residual is dominated by the traditional commissioned annuity sale. So when an advisory firm puts four annuities into an income plan without billing for them, it is not adopting a fee-based annuity wrapper; it is reaching for the product the insurance industry distributes through commissioned channels.

Insurers have noticed the RIA channel's interest from the other side, naming it their likeliest growth market — a statement about where distribution executives expect their next dollar of annuity premium to come from. But that share qualifies the expectation: if RIA adoption is happening through unbilled products, then the growth insurers are anticipating is growth in the RIA channel's use of commission-bearing contracts, not a surge in fee-based annuity assets.

For a client, an unbilled annuity means the guarantee is funded by the insurance contract, not by an incremental advisory fee. The unbilled annuity is a compensation structure, not a disclosure failure; the advisory fee and the product's internal charges sit on different ledgers, and the client may pay both, but only the advisory fee appears in the advisory invoice. That separation is what a fee-based annuity would address, because the product would contribute to the fee calculation instead of sitting alongside it.

The unbilled position also means the advisory firm's own revenue model is split: the client pays a fee for advice on the portfolio, while the annuity premium may carry its own commission or spread. The coverage does not detail Halbert Hargrove's compensation, but the term unbilled itself indicates that the annuity's economics were not folded into the fee — the gap that share measures. A fee-based annuity would have collapsed the two compensation streams into one; an unbilled annuity leaves them separate.

The longevity math explains the rising pressure: Dunham's paper models a $1 million portfolio across a 40-year retirement at a 4 percent net return and finds it runs out in year 34, leaving six years unfunded before the horizon ends. The gap comes from the length of the horizon, not from a crash in any single year; Dunham argues plans have not priced a 40- to 50-year horizon, and advisers have to solve for those extra years somewhere.

Halbert Hargrove's four-annuity plan is one way to cover that gap, though the coverage does not say whether the annuities replaced part of the portfolio or sat alongside it. What it establishes is that the guaranteed-income layer was unbilled, and that placement matters because it tells the market which product structure an RIA actually used. If fee-based annuities were the natural home for this need, that share would be higher.

Transamerica's pooled-plan milestone shows the employer channel moving in its own direction: the firm marks 25 years of pooled plans with assets at $34.2 billion, up more than 60% in five years. Its research arm finds 48% of employers without a plan would consider joining one — a readiness measure, not an enrollment count — meaning almost half of uncovered employers are open to pooled structures. The $34.2 billion shows pooled plans have become a real accumulation vehicle, not a pilot program.

The 60% five-year growth in Transamerica's pooled assets is a steep accumulation curve, compounded by a 48% consideration rate among uncovered employers — if even a fraction of that 48% converts, the pooled-plan base has headroom beyond $34.2 billion. That growth gives the employer channel a scale that individual advisers cannot match, but it does not automatically solve for the income years Dunham identifies.

That share reflects the economics of the RIA annuity conversation, not merely a product development lag. A fee-based annuity would let the adviser earn a recurring fee on the guarantee, but it would also require the insurer to strip out the commission and repackage the product for ongoing advice. That figure suggests that repackaging has not become the default for RIAs; if it had, a plan built on four annuities could have been built on four fee-based contracts and the income layer would have appeared in the fee schedule.

Insurers calling the RIA channel their likeliest growth market should, in theory, accelerate that repackaging, since distribution executives know where the next advisers are. But the Halbert Hargrove case shows the channel can grow without the fee-based product: the advisory firm used unbilled annuities, and the insurers get their premium either way. The question is whether the RIA channel's growth will change the product's pricing structure or simply widen the commission-based distribution base under an advisory brand.

For plan sponsors, the Dunham horizon problem also points toward guaranteed income inside defined contribution plans, but that path has its own friction: Transamerica's pooled-plan assets are large and growing, yet the coverage does not say whether those plans include annuity income options. That employer interest is about joining a pooled plan, not about in-plan annuities, so the retirement system has two distribution problems — individual RIAs are adding guarantees outside the fee wrap, and employer plans are accumulating assets without necessarily converting them to income.

The Transamerica and Dunham data point to the same sequence: assets are aggregating in pooled plans, but the individual advisory case is solving income with annuities that sit outside the fee, meaning the retirement system is moving toward guaranteed income on two separate tracks. The employer track has scale and employer demand; the individual track has product urgency and an unbilled compensation structure. The two have not merged into a fee-based in-plan or in-advisory annuity default.

That dual gap makes the Halbert Hargrove plan more than a boutique anecdote: it shows the RIA channel is adopting guaranteed income through the only annuity structure that is widely available — the commission-based product. The fee-based wrapper exists, but at 1% of premium it is not the product advisers are using in the field. If insurers want the RIA channel to become a fee-based annuity market, they will have to move that share; until then, the growth they expect will likely look like four unbilled annuities in a client income plan. The test is whether the next such plan uses one.