Raft of new annuity products has broker-dealers scrambling to train reps

As new annuities gain in popularity, broker-dealers are getting reps up to speed on using them as part of a comprehensive retirement income plan

Feb 22, 2015 @ 12:01 am

By Darla Mercado

A raft of new offerings and changing needs for retirement income are spurring broker-dealers to tweak their product training seminars for advisers.

It wasn't that long ago that variable annuities were a favorite among representatives. Clients could capture surging stock markets and use guaranteed living benefit features to lock in high income-benefit bases.

Unfortunately for reps and clients, the 2008 recession made life insurers rethink their offerings and move toward products that pose less long-term risk to their balance sheets.

Enter the investment-only variable annuity, the indexed annuity and the deferred-income annuity.

As other types of annuities gravitate to the fore, product gatekeepers at broker-dealers are getting reps up to speed on using them as part of a comprehensive retirement income solution.

“We were focused on life insurance planning concepts and the retirement planning process last year,” said Zachary Parker, first vice president of income and distribution products at Securities America Inc. “This year, it's annuities.”

At Securities America, Mr. Parker is expanding NextPhase, a retirement strategy program that pairs guaranteed income and bucketing approaches. The company has a team of consultants who educate advisers on case design and provide support, and Mr. Parker hosts an annual presentation at its NextPhase conference.

Annuities will be a focal point this year, as advisers will be assessing deferred-income and single-premium immediate annuities, indexed annuities and variable annuities to craft those strategies. For example, a 60-year-old client seeking income in 10 years might be weighing any number of products. The recommendation will ultimately depend on the attributes of the annuity and the client's goals.


“More people are comparing indexed annuities to variable annuities and ... it might provide higher income when you're waiting to take it,” Mr. Parker said. “Go with the VA if you're more bullish on the market. If you're bearish, go with the indexed annuity because you get a higher guarantee level.”

Raymond James Financial Inc. has been hosting annuity training workshops for reps over the last seven years, with different themes. This time the emphasis is on the fixed-income portion of a client's 60/40 portfolio: Where does that 40% go? How do you generate sufficient income in an environment of low interest rates?

“The annuity serves the purpose of providing the most cash flow per dollar invested,” said Scott Stolz, senior vice president of Private Client Group investment products at Raymond James Insurance Group. “Part of what you get back is a return of principal, and that helps the equation. We encourage advisers to solve the income need with as few assets as possible so you have more flexibility on how to invest the rest.”

One idea circulating at Raymond James is that of using two annuities at once to meet income needs at two different points in retirement. A client might have an indexed annuity with a living benefit and income slated to begin at 65, and a deferred-income annuity to act as a second bucket when the client is older.

“It's a version of the bucketing theory — you have different buckets with their own purpose,” Mr. Stolz said.

Judson Forner, director of investment marketing at ValMark Securities Inc., has been running sales-related calls with advisers to familiarize them with complementary products they're less familiar with: managed volatility, tax deferral and investment-only options in variable annuities, as well as deferred-income annuities — which are generating some interest.

“We still have a lot of people kicking the tires on DIAs and qualified longevity annuity contracts because of the momentum they're getting in the news, but we haven't seen it translate” to a lot of business, Mr. Forner said.

Some of ValMark's training has expanded into death benefits for annuities and legacy planning, particularly in cases where clients cannot get life insurance.

“There are cases where life insurance won't work for one reason or another — maybe the client is uninsurable,” Mr. Forner said. “The idea is to at least offer them some alternative benefit for legacy needs.”

Meanwhile, annuity workshops at LPL Financial examine product trends, policy changes and regulatory updates.

The firm partnered with Lincoln National Corp. in May 2013 to release Annuity Visualizer, a tool branded for LPL's reps. It lets advisers model a VA with a living benefit and show how an income stream would look based on a roll-up rate and distribution amount, according to Robert Pettman, LPL's senior vice president of investment product and business management.

“It illustrates the income stream, but we're not saying to choose this [particular] rider,” Mr. Pettman said. “That's the thing — focus on the process and not the specific product.”

Other topics covered with advisers include discussing scenarios where it makes sense to use an array of annuity products, and whether one product might work better than another in a given case.

“If anything, this is about managing change,” Mr. Pettman said. “The main thing is keeping people up to speed with the velocity of product development in this space.”


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