MetLife Inc. is making good on its plans to ratchet down sales of variable annuities and universal life insurance with secondary guarantees in the U.S. and dramatically reduce head count in its adviser force.
Over the past year, the company has axed 2,500 advisers from its career agency channel, leaving it with 5,000 advisers now. It is on track to save $150 million annually by the end of 2014, according to a presentation Eric Steigerwalt, head of its U.S. retail business, made to investors last week.
The low-interest-rate environment has forced most insurers to cut back on their sales of variable annuities and reduce the costs of their distribution networks. VA sales at MetLife dropped from $28 billion in 2011 to $18 billion last year, and the company plans to cut them to less than $11 billion in 2013.
The cuts to the adviser ranks don't include the approximately 850 advisers at Walnut Street Securities and Tower Square Securities, the two independent broker-dealers that MetLife agreed to sell to Cetera Financial Group Inc. in April. The two firms managed about $25 billion in assets between them. That transaction has not yet closed and does not affect MetLife's remaining two affiliated broker-dealers — MetLife Securities and New England Securities, said MetLife spokesman Christopher Breslin.
Mr. Steigerwalt gave a blunt explanation of the company's reasons for cutting a third of the advisers who sell insurance and investment products at the company. “We're not financing advisers who frankly were never going to make it in this business, and we're putting all of our resources into people who have demonstrated that they can do a great job for their clients and a great job for the company,” he said during his presentation.
Mr. Steigerwalt also indicated that the division was likely finished with the cuts and would “probably start growing” from here. He suggested the company would hire about 500 inexperienced advisers and maybe 200 experienced advisers this year as opposed to the 2,200 it hired two years ago. Mr. Steigerwalt was not available for further comment.
The cuts are a sign of the times, said Larry Papike, president of adviser and executive search firm Cross-Search Inc. “MetLife is doing what everybody else is doing in the independent broker space and culling brokers at the bottom and making sure the bigger advisers have resources to do better and bigger business,” he said. “They're looking at where the profit margin is coming from, and they're cutting the dead weight.”
Some of the advisers shown the door by MetLife might land elsewhere, but the odds are probably against them. “My guess is some of them might be attractive to other firms, but they're generally low-end advisers,” said Danny Sarch, president of recruiting firm Leitner Sarch Consultants Ltd. “The reason they were cut was they weren't productive.”
Bloomberg contributed to this report.