After a three-day weekend, advisers returned to the office yesterday to learn they had mere days to prepare for variable annuity product changes from Jackson National Life Insurance Co.
Jackson, the largest provider of variable annuities to the independent broker-dealer set, yesterday filed contract changes with the Securities and Exchange Commission for its Perspective II, Perspective L Series, Perspective Advisors II, Perspective Rewards and the Retirement Latitudes VAs.
Effective Oct. 15 — next Monday — Jackson will drop the joint option for its LifeGuard Freedom 6 Net and LifeGuard Freedom Flex. That change will apply to both new VA sales and existing-contract holders who haven't yet elected the option. As of that same day, the company also will pull its Perspective Advisors II and Perspective Rewards VA contracts, nixing sales to new purchasers. Jackson is also pulling the optional contract enhancement features for new-product sales. These features credit an increase to the premium payment a client makes to a VA, ranging from 2% to 5%.
Jackson cited today's economy as a driver behind its changes, according to company spokeswoman Lori Stafford-Thomas. “The changes demonstrate our commitment to conservative product pricing and an approach to risk management that helps deliver the best value for consumers,” she wrote in an e-mail.
But some reps, who have until Oct. 12 to act on Jackson's changes, were not thrilled by the short notice. “If Jackson is an adviser's niche, then I can't imagine they're not going to feel that this is a slap,” said Rose Greene, owner of Rose Greene Financial Services and a branch manager with LPL Financial LLC. She has had a years-long relationship with Jackson and found out about the changes just yesterday.
When asked about the narrow time frame , Ms. Stafford-Thomas wrote that "Jackson will continue to provide all of its customers with the award-winning customer service they have come to expect from the company."
To be sure, the carrier is not alone in going down this path. Other insurers have been drastically reducing the amount of advance notice they give to advisers. Prudential Financial Inc., for instance, sent a letter to advisers dated Aug. 24 that it would suspend contributions into some of its vintage VAs. Prudential gave advisers until Aug. 31 to file paperwork for contributions coming from tax-free 1035 exchanges or individual retirement account rollovers. Cash contributions were due Sept. 14.
Generally, when insurers announce a product change, advisers generate "fire sales" by trying to close as much VA business as they can before the cut-off date. This leads to a steep increase in premiums within a short period for the carrier. By giving reps less time to react, however, insurers limit the inflow of money and curb their VA exposure.
But representatives, who are accustomed to having up to three weeks' warning on changes to variable annuities, said it takes more than just a few days to wrap up VA business. Potential buyers need time to have a conversation with the adviser and mull their decision, said Carrie Streets, president and senior financial consultant at Crest Financial Strategies, which also is affiliated with LPL.
Surprise notification on impending product changes — particularly those with a short time frame — also dents advisers' relationships with insurers. Jackson has been a favorite among advisers because it gave them access to as many as 95 investment options when many competitors limited their choices.
“There's a relationship dynamic with wholesalers where advisers expect to be the first call,” Ms. Streets said. “It's offensive when the change comes and you didn't get the call.”