Nationwide to buy Jefferson National

The acquisition will expand Nationwide's ability to sell financial products through Jefferson National's network of 4,000 RIAs and fee-based advisers

Sep 28, 2016 @ 10:46 am

By Christine Idzelis

Nationwide has agreed to buy Jefferson National, a distributor of variable annuities for clients of registered investment advisers.

The acquisition, which expands Nationwide's ability to sell financial products through Jefferson National's network of 4,000 RIAs and fee-based advisers, will work well under the Labor Department's new fiduciary rule, according to a company statement Wednesday. The rule lifts investment-advice standards for retirement accounts by requiring advisers to act in their clients' best interests as opposed to a less stringent suitability standard.

“Partnering with the Jefferson National team will enable Nationwide to expand our distribution footprint and meet the needs of investors and retirement savers who want to do business in a fee-based adviser environment after implementation of the DOL fiduciary standard,” Nationwide chief executive Steve Rasmussen said in the statement. “This will complement our strong brokerage distribution channel and allow customers to do business with us in the manner they prefer. This new partnership is mutually beneficial to both Nationwide and Jefferson National, providing opportunities for growth in ways we couldn't achieve individually.”

(More: The most up-to-date information on the DOL fiduciary rule)

Under terms of the agreement, Nationwide Life Insurance Company will purchase all of the stock of Jefferson National, which will become a wholly owned subsidiary of Nationwide. The deal gives Nationwide low-cost annuities that are sold by RIAs, a group of financial advisers that's overseen by the Securities and Exchange Commission and already held to a best-interests standard for any kind of investment advice.

“It's a huge addition because Jefferson is the dominant player in the market place,” said Kevin Loffredi, senior product manager of annuity solutions at Morningstar Inc. “It gives them a bigger audience. Their main audience is the broker-dealer community.”

Jefferson National 's so-called Monument Advisor is a flat-fee, investment-only variable annuity. While most annuities have mortality and expense fees, the low-cost product that Nationwide is picking up from Jefferson does not, according to Mr. Loffredi. “It's a very straight forward bare bones contract,” he said.

Eve Kaplan, founder of Kaplan Financial Advisors, an RIA firm in Berkeley Heights, N.J., doesn't sell annuities to her clients, but on the rare occasion when a client needs one, she'll reach out to providers to evaluate their offerings. She said Jefferson's Monument Advisor annuity is “definitely more attractive than the average annuity out there” and one she'd be willing to consider for her clients.

“It's very low cost, they have a lot of investment options and they don't have a surrender penalty,” she said. “They are much more user-friendly for the person buying them.”

It's a significant move by Nationwide to increase business with RIAs, a fast-growing segment of the wealth-management industry that typically charges fees based on assets or time spent with a client. Many see regulatory pressure accelerating a shift toward fee-based revenue and away from commissions-based models used by broker-dealers.

Ms. Kaplan said many RIAs aren't "particularly keen on many types of annuities," as they tend to have high fees and are expected to fall under increased regulatory scrutiny with the DOL rule.

“Clearly, the fee-based model is growing as a way to reach savers so we can help them prepare for and live in retirement,” Nationwide Financial President and Chief Operating Officer Kirt Walker said in the statement. "We're excited about this transaction because it will firmly establish Nationwide in the fee-based market while maintaining our strong presence in the brokerage channel.”

(More: DOL fiduciary rule will forever change the financial advice industry)


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