'Slap' to reps as Jackson National cuts VA features on short notice

Changes filed with the SEC on Oct. 9 will kick in Oct. 15; 'It's offensive'

Oct 10, 2012 @ 2:33 pm

By Darla Mercado

Jackson National, annuities
+ Zoom

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.”

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Jun 27

Webcast

Emerging Market Debt: 5 Forces at Work

When it comes to emerging market debt, there are a series of forces that help you drive better results for your clients. In today's continually changing market environment, it is critical to know the forces at play to help keep your investment... Learn more

Accepted for 1 CE Credit from the CFP Board. Approved by IMCA for 1 CIMA®/CIMC®/CPWA® CE credit. Approved for 1 CFA Credit.

Featured video

INTV

State Street's Brie Williams: The story behind the 'Fearless Girl' statue

The idea started with the creation of a statue to coincide with International Women's Day, and the results surpassed expectations, according to Brie Williams, head of practice management at State Street Global Advisors.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Interns will take on several roles at advisory firms this summer

College students are helping with client prep, firm visioning and long-term projects, among other duties.

10 funds with largest 3-year outflows

Even well-managed funds that have beaten the S&P 500’s 10.1% average annual gain have watched investors flee.

Wirehouse training programs are back

At one time, major brokerage houses ran large, expensive training programs for thousands of young brokers, and now it looks as if they are about to return to that model.

New military pension rules need financial advisers to step up and serve

Matching defined contribution plan expected to see more money, more need for sound advice.

Brian Block's $4 million bonus was tied to a key metric at ARCP

Prosecution rests case in fraud trial against CFO of American Realty Capital Properties.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print