BISA Magazine - Quarter 1, 2017 - 20

A Growing Sector
According to Cerulli Associates, a research and consulting firm,
interest in fee-based variable annuity (VA) products has been
"slowly growing" within the industry over the past few years
because most insurers and distributors believe they will be needed
to comply with DOL's fiduciary duty rule.
"Adoption of the fee-based model has been mostly overlooked by
the industry," said Donnie Ethier, associate director at
Cerulli. "However, what was once considered an opportunity
is now a necessity."
In September 2016, Jackson National Life (Denver), the nation's
largest manufacturer of variable annuities, introduced its first-ever
fee-based variable annuity product, Perspective Advisory.
"Jackson has seen increased interest in the fee-based space," Bill
Burrow, national sales director, investment only & advisory variable
annuities, Jackson National Life Distributors, told us in mid-January.
"Following ongoing conversations with our broker/dealer partners,
we think the legal and compliance costs of managing a commission-based platform under the DOL fiduciary rules will result in
even more demand for fee-based variable annuity products," added
Burrow.
More recently, on Jan. 23, 2017, Jackson released Elite Access
(EA) Advisory, its first fee-based investment only variable
annuity. The product has a contract charge of $10 per month, with
no mortality, expense and administration charge. It has a relatively
short surrender-charge period: A three-year
withdrawal charge schedule of 2 percent, 2 percent,
1 percent, and 0 percent thereafter.

Adoption of
the fee-based
model has
been mostly
overlooked by
the industry.
- Donnie Ethier, Cerulli

20
www.bisanet.org

The product was developed prior to the release of the fiduciary
rules, said Burrow, adding that the "real trend is that under the
fiduciary standard, advisors will be more compelled to talk to their
clients about opportunities to receive guaranteed income for life."
Asked how fee-based annuities may be impacted by the new
Trump administration (with a possible rollback of DOL), Burrow answered, "While we can't comment on possible changes
that may be enacted by the Trump Administration in the coming
months, Jackson remains on track to comply with the current DOL
guidelines by the April 10, 2017 applicability date."
The Pacific Odyssey product (cited in the main article) has a
mortality and expense and administrative charge of 0.3 percent
annually, and no withdrawal charges. That is, there are no front-end
loads or back-end withdrawal charges, allowing clients full access
to their account values anytime in the form of partial or lump-sum
withdrawals.
Warren Posner, LPL Financial senior vice president of product
management, said, "While LPL Financial continues to focus on
brokerage variable annuity solutions, and believes they are and will
continue to be an important and relevant solution to meet retirement planning needs in a post-DOL environment, we are excited
to expand our existing fee-based variable annuity lineup with the
competitive features offered by the Pacific Odyssey product to
meet a growing interest and demand in that space."
Not all are jumping on this wagon, however. Fee-based annuities
don't appear to be part of Athene USA's product development
plans. "There has been a lot of talk of fee-based products in
connection with the DOL Rule, but we have not seen demand for
it," Athene USA CEO Grant Kvalheim said.

For some client firms (e.g., broker/dealers), this could be "eye-opening," he
concedes, but in the real world, insurance underwriters need some "protection against customers disintermediating early." As for the consumer (i.e., the
end customer), "they will understand
that these are long-term investment
vehicles and will understand why and
how that product is set up this way,"
LaVoice adds.
What does this mean for sales reps?
They may have to evolve. Indeed,
fee-based annuities might offer an
opportunity for banks "to get to a
different financial advisor than they
have today, a fee-based (only) advisor,"
says LaVoice. (Of course, on the other

side, advisors may simply leave the
industry, or retire, if fee-based products
become predominant.)
It is the Symetra EVP's view that most
firms will offer both versions: feebased and commission-based annuities.
Asked if that doesn't make things too
complicated in the real world-given
potentially different compliance regimes
and other factors-he answers, "It is a
challenge, but I feel we can do both."
Indeed, half of the indexed annuities
sold in the bank channel could be feebased five years hence, opines LaVoice,
and in the variable annuity world, the
fee-based share could be higher-
perhaps 60 percent-he speculates. ▲


http://www.bisanet.org

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

Table of Contents
BISA Magazine - Quarter 1, 2017 - Cover1
BISA Magazine - Quarter 1, 2017 - Cover2
BISA Magazine - Quarter 1, 2017 - Table of Contents
BISA Magazine - Quarter 1, 2017 - 2
BISA Magazine - Quarter 1, 2017 - 3
BISA Magazine - Quarter 1, 2017 - 4
BISA Magazine - Quarter 1, 2017 - 5
BISA Magazine - Quarter 1, 2017 - 6
BISA Magazine - Quarter 1, 2017 - 7
BISA Magazine - Quarter 1, 2017 - 8
BISA Magazine - Quarter 1, 2017 - 9
BISA Magazine - Quarter 1, 2017 - 10
BISA Magazine - Quarter 1, 2017 - 11
BISA Magazine - Quarter 1, 2017 - 12
BISA Magazine - Quarter 1, 2017 - 13
BISA Magazine - Quarter 1, 2017 - 14
BISA Magazine - Quarter 1, 2017 - 15
BISA Magazine - Quarter 1, 2017 - 16
BISA Magazine - Quarter 1, 2017 - 17
BISA Magazine - Quarter 1, 2017 - 18
BISA Magazine - Quarter 1, 2017 - 19
BISA Magazine - Quarter 1, 2017 - 20
BISA Magazine - Quarter 1, 2017 - 21
BISA Magazine - Quarter 1, 2017 - 22
BISA Magazine - Quarter 1, 2017 - 23
BISA Magazine - Quarter 1, 2017 - 24
BISA Magazine - Quarter 1, 2017 - 25
BISA Magazine - Quarter 1, 2017 - 26
BISA Magazine - Quarter 1, 2017 - 27
BISA Magazine - Quarter 1, 2017 - 28
BISA Magazine - Quarter 1, 2017 - 29
BISA Magazine - Quarter 1, 2017 - 30
BISA Magazine - Quarter 1, 2017 - 31
BISA Magazine - Quarter 1, 2017 - 32
BISA Magazine - Quarter 1, 2017 - Cover3
BISA Magazine - Quarter 1, 2017 - Cover4
https://www.nxtbook.com/nxtbooks/bisa/2017q4
https://www.nxtbook.com/nxtbooks/bisa/2017q3
https://www.nxtbook.com/nxtbooks/bisa/2017q2
https://www.nxtbook.com/nxtbooks/bisa/2017q1
https://www.nxtbook.com/nxtbooks/bisa/2016q4
https://www.nxtbook.com/nxtbooks/bisa/2016q3
https://www.nxtbook.com/nxtbooks/bisa/2016q2
https://www.nxtbook.com/nxtbooks/bisa/2016q1
https://www.nxtbook.com/nxtbooks/bisa/2015q4
https://www.nxtbook.com/nxtbooks/bisa/2015q3
https://www.nxtbook.com/nxtbooks/bisa/2015q2
https://www.nxtbook.com/nxtbooks/bisa/2015q1
https://www.nxtbook.com/nxtbooks/bisa/2014q4
https://www.nxtbook.com/nxtbooks/bisa/2014q3
https://www.nxtbook.com/nxtbooks/bisa/2014q2
https://www.nxtbook.com/nxtbooks/bisa/2014q1
https://www.nxtbookmedia.com