An­nu­ity Firms Shift Their Pitch

Whole­salers have taken a new ap­proach for plan­ners leery of sales calls, reg­u­la­tion and lit­i­ga­tion.

Financial Planning - - CONTENT - By To­bias Salinger

Whole­salers have taken a new ap­proach for reach­ing plan­ners who are leery of sales calls, reg­u­la­tion and lit­i­ga­tion.

THE FIDU­CIARY RULE AND THE WANE OF TRA­DI­TIONAL whole­sal­ing have prompted an­nu­ity is­suers to change their pitch to fi­nan­cial plan­ners, along with their prod­uct shelves. The firms are bet­ting the new ap­proach will ap­peal to ad­vi­sors wary of sales calls, reg­u­la­tion and lit­i­ga­tion.

Jack­son Na­tional Life In­surance has in­structed agents to strive for deep con­ver­sa­tions around in­vest­ment strat­egy, tech­nol­ogy and plan­ning, rather than just “push­ing their own prod­uct and bash­ing the com­pe­ti­tion,” says Jack­son Chief Dis­tri­bu­tion Of­fi­cer Greg Ci­cotte.

Sim­i­larly, Voya Fi­nan­cial hopes tech­nol­ogy and tai­lored ser­vices help it shift away from a past in which “we were re­ally kind of prod­uct push­ers,” says Chad Tope, Voya’s pres­i­dent of an­nu­ities and in­di­vid­ual life dis­tri­bu­tion.

Voya launched a data analytics pi­lot study­ing ad­vi­sors’ sales, pref­er­ences and in­ter­ests, with the tool slated for all ex­ter­nal whole­salers in the an­nu­ities unit in 2018.

Jack­son, which the LIMRA Se­cure Re­tire­ment In­sti­tute says is the No. 1 seller of an­nu­ities by rev­enue, re­cently in­tro­duced a new fee-only vari­able prod­uct with op­tional guar­an­teed liv­ing and death ben­e­fits.

Whole­salers know ad­vi­sors have be­come skep­ti­cal of their usual ap­proach.

More than 80% of whole­salers chose

“not re­cep­tive to tra­di­tional whole­sal­ing” as a chal­lenge of dis­tribut­ing to RIAS, the sec­ond most pop­u­lar an­swer af­ter time lim­i­ta­tions, ac­cord­ing to a sur­vey by Cerulli As­so­ci­ates.

For their part, ad­vi­sors from RIAS told the re­search firm they find only nine of

33 weekly con­tacts from whole­salers mean­ing­ful, on av­er­age.

Cold calls and sales pitches usu­ally turn ad­vi­sors off, says NAPFA Chair­man

Scott Beaudin of South Burling­ton, Ver­mont-based Path­way Fi­nan­cial Ad­vi­sors.

An­nu­ity sales have fallen this year to a 16-year low, but LIMRA in Oc­to­ber re­vised ex­pected sales up­ward for 2018 due to the Trump ad­min­is­tra­tion’s de­lay of the fidu­ciary rule. The rule and ac­com­pa­ny­ing un­cer­tainty re­gard­ing its im­ple­men­ta­tion have upended sales, with bro­ker-deal­ers bulk­ing up their com­pli­ance over­sight and com­mis­sions from the prod­ucts re­ceiv­ing en­hanced scru­tiny.

Fee-only ad­vi­sors’ ab­sten­tion from com­mis­sions does not spare them from sales pitches for highly tech­ni­cal prod­ucts of ques­tion­able value to their clients. How­ever, whole­salers can pro­vide help­ful ed­u­ca­tion to ad­vi­sors, and the feeonly vari­able prod­ucts carry ap­peal, Beaudin says.

“The cost struc­ture has come down so much, par­tic­u­larly with the re­moval of sur­ren­der fees and lower on­go­ing fees. Ad­vi­sors have to get rid of the old think­ing that an­nu­ities are all bad. That’s chang­ing,” he says.

Voya works pri­mar­ily through the in­de­pen­dent bro­ker-

dealer space for its dis­tri­bu­tion, ac­cord­ing to Tope. The firm counts about 400 IBDS as clients, in­clud­ing ma­jor firms like LPL Fi­nan­cial, Cetera Fi­nan­cial Group and Cam­bridge In­vest­ment Re­search, Tope says.

As­cend, Voya’s up­com­ing struc­tured prod­uct, pro­vides four lev­els of buf­fer pro­tec­tion from 5% to 30%, four in­dex in­vest­ment op­tions and three du­ra­tions from one to six years. The firm will of­fer tech tools to ad­vi­sors to help them match their clients with the best op­tions for them.

Data analytics will al­low Voya to as­sign what the firm calls a “propen­sity score” to ad­vi­sors, based on their sales track record, clicks on Voya’s web­site and their or­ders of re­search ma­te­ri­als, ac­cord­ing to Tope.

“I think the role of the ad­vi­sor is chal­leng­ing right now, to say the least. They’ve got a lot of things com­ing at them in un­der­stand­ing the prod­ucts that they have to sell, mak­ing sure that they’re fol­low­ing the reg­u­la­tions, and then, of course, this best in­ter­est of the cus­tomer state­ment,” Tope says.

Ci­cotte, of Jack­son, agrees that the fidu­ciary rule has al­tered an­nu­ity com­pa­nies’ shelves, with more ad­vi­sory prod­ucts in par­tic­u­lar hit­ting the mar­ket. Jack­son’s first feeonly vari­able an­nu­ity came out in Septem­ber 2016, and its third such prod­uct, Per­spec­tive Ad­vi­sory II, opened this Septem­ber.

The prod­uct, which has a core con­tract charge of 45 ba­sis points plus more for the liv­ing and death ben­e­fits, fea­tures no sur­ren­der pe­riod and low-cost in­sti­tu­tional sub­ac­counts with no 12b-1 fees.

“From a cost struc­ture stand­point, we feel that it’s go­ing to be very at­trac­tive to tra­di­tional fee-based ad­vi­sors,” Ci­cotte says, not­ing that Jack­son’s com­mis­sion-based vari­able an­nu­ities held lit­tle sway with the group.


LPL ad­vi­sor Sarah Carl­son of Spokane, Wash­ing­ton-based Ful­crum Fi­nan­cial Group has been of­fer­ing fee-only vari­able an­nu­ities for four or five years. Carl­son cau­tions that ad­vi­sors and their clients should keep the ex­tra in­ter­nal fees of the prod­ucts in mind, but their ben­e­fits have proven help­ful for older clients who haven’t saved enough, she says.

“For those peo­ple, the an­nu­ities have per­formed very well be­cause they would other­wise not have been able to take that risk in their port­fo­lio with­out the guar­an­tees,” Carl­son says.

“You re­ally have to be mo­ti­vated to help peo­ple be­cause it’s so dif­fi­cult to get is­sued. It’s be­cause those prod­ucts are so com­plex,” she says. “The in­surance com­pa­nies are con­stantly com­ing out with new prod­ucts, and it’s dif­fi­cult to ser­vice.”

The com­plex­ity among the var­i­ous kinds of an­nu­ities and the re­quired due dili­gence make ad­vi­sors worry about lit­i­ga­tion, Carl­son adds. From Jan­uary to Novem­ber 2017, 202 new FINRA ar­bi­tra­tion fil­ings have in­volved an­nu­ities, the fifth most com­monly cited type of se­cu­rity in client claims, ac­cord­ing to the reg­u­la­tor.

Fee-only ad­vi­sors’ ab­sten­tion from com­mis­sions does not spare them from sales pitches for highly tech­ni­cal prod­ucts of ques­tion­able value to their clients.

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