BISA Magazine - Quarter 1, 2017 - 16

FEATURE STORY

distribution of the company's products.
The problem is that it is not always
clear what a client's "best interest"
means from a regulatory standpoint,
and DOL has not chosen to spell it
out. The department seems inclined
to let the courts decide what is
actually meant by that critical phrase,
he suggests.
In any event, Athene USA has no plans
to build a fee-based annuity, a course
that some other annuity underwriters
have taken (e.g., Jackson National, Pacific Life), Kvalheim added. There is no
demand for it from Athene's distributors; not a single bank that Athene representatives spoke with recently even
mentioned it, nor implied that, "We'd let
you on our platform-if only you had a
fee-based product," he recounts.

Why distribute through banks? "Why not?" answered CEO
Kvalheim, adding that banks and broker/dealers are doing
more and more fixed indexed annuity business these days.
Nevertheless, many larger banks
require a rating of at least an A from
their annuity suppliers, so Athene USA
will begin working with smaller and
regional banks. There are talks with
larger banks too, however, because Kvalheim anticipates a rating upgrade in
the not-distant future. "Our long-term
plan is to be everywhere"-banks large
and small, as well as non-bank-affiliated broker/dealers.
With regard to working with banks
directly, or through TPMs, Athene
will take a mixed approach, initially.
Indeed, Kvalheim is "agnostic" on the
issue of TPMs. If a bank says it wants
to use a TPM, Athene would say, "Fine,
who do you prefer." Athene would be
happy to work with that TPM. In the
long run, however, the company ex-

16
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pects to be working directly with most
banks. (He quickly adds that the company would be fair to its loyal TPMs; it
wouldn't just toss them aside.)
We asked Kvalheim about the possible
impact of the Department of Labor's
(DOL) fiduciary rule on the bank annuity business. (This magazine interview
took place on the day Rep. Joe Wilson,
R-S.C., introduced a bill in the House
to delay implementation of the DOL
rule by two years.) Kvalheim answered
that Athene had "no choice" but to act
as if the rule would be implemented
on April 10, 2017, as scheduled.
Moreover, "no one quarrels" with the
idea of acting in a client's best interest,
he says. "We've always had suitability
on steroids" when it comes to the

Kvalheim doesn't see the future as 100
percent fee-based, either; there will
always be a place for commissionbased products in his view. Athene
sells its FIAs to middle-market clients.
Fee-based clients are usually wealthier
("That's not who buys our products,"
Kvalheim says). The typical ticket for
the company's FIA is $100,000. A $1
million fixed-indexed annuity sale "is
unusual for us," he says.
That said, Kvalheim thought (in
January) there was a good chance that
implementation of the DOL fiduciary
duty rule would be delayed for two
years, and then take hold after some
modifications in 2019. (Andrew Puzder,
a critic of tighter regulation, had just
been nominated as labor secretary by
President-elect Donald Trump.) ▲

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Table of Contents for the Digital Edition of BISA Magazine - Quarter 1, 2017