Former E-Trade CEO leads management buyout of Jefferson National

Caplan oversees $83 million acquisition of flat-fee VA seller; targets RIAs

Jan 17, 2012 @ 1:48 pm

By Darla Mercado

Jefferson National, creator of the flat-fee variable annuity, hopes to step up its distribution among fee-based advisers following a management buyout.

Financial Partners Fund, a unit of Citi Capital Advisors, The Stephens Group LLC and Goldman Sachs Asset Management alumnus Eric Schwartz led an $83 million MBO of Jefferson National Financial Corp. Mitchell H. Caplan, chief executive of the carrier — and former chief executive of E-Trade Financial Corporation — led the executive team behind the transaction.

Mr. Schwartz, who has agreed to be a non-executive chairman of Jefferson National, is not the same Eric Schwartz who oversees Cambridge Investment Research Inc., a broker-dealer for fee-based registered reps.

The proceeds of the transaction are expected to fuel even greater expansion into the realm of RIAs and fee-based financial advisers, Mr. Caplan said. The insurer's Monument Advisor variable annuity comes with a flat insurance fee of $20 per month and has no living benefits attached to it.

The year “2011 was a sales record for us, and we want to do the same from 2012 through 2016,” Mr. Caplan said. “We want to grow the number of advisers with whom we do business, deepen the relationship and continue to sell more of our Monument Advisor.”

Jefferson National is among the long-tenured players in the fee-only variable annuity space, with a total of 1,500 RIAs and fee-based advisers selling its products. The company's footprint in the overall industry is tiny, however, despite a record $280 million in new VA sales last year.

By comparison, MetLife Inc., the biggest seller of variable annuities, estimates its 2011 sales to be in the high $20 billion range, according to a December investor conference call.

While other insurers have seen that same growth potential in the fee-based and RIA channels and have decided to issue VAs with no living benefits, Mr. Caplan insisted that the way it does business sets it aside from competitors and permits it to keep costs down. For instance, the insurer has no wholesalers, instead using direct marketing to reach out to advisers.

“We don't need people to go from location to location to build relationships, since those advisers don't want lunches and golf games,” he said. “They want education and information.”


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