Voya restricts variable-annuity sales under regulatory pressure

The firm's affiliated brokers may no longer sell certain types of L share annuities, must provide third-party pricing disclosures

Jun 23, 2015 @ 1:11 pm

By Trevor Hunnicutt

The brokerage firm Voya Financial Advisors revamped its variable-annuity sales policies on Monday, restricting the sale of a popular investment option for retirement planning amid increasing pressure from regulators concerned about the products' suitability for investors.

As of Monday, Voya's 2,200 registered representatives are no longer allowed to sell a type of variable-annuity contract known as an “L share” if the annuity contract includes riders, according to an internal document obtained by InvestmentNews.

“We feel strongly that it is in the best interests of our advisers and their clients to make this change to Voya Financial Advisors' suitability policy,” said Tina Hurley, head of product for retail wealth management at Voya Financial, in a statement. “We've eliminated L-share sales with riders in order to best serve the retirement readiness and long-term planning needs of our customers.”

L-shares typically charge higher ongoing fees in exchange for a shorter-than-normal period of time before clients can withdraw their premium payments or exchange their contracts without paying a surrender charge. They also can come with a rich compensation stream for broker-dealers and their affiliated financial advisers.


Riders, which come at an extra cost, are added to annuity contracts to blunt the market risk in the product's underlying investments, typically mutual funds. They offer additional features, such as death benefits that protect income or withdrawals if the beneficiary lives longer than expected.

But Voya said it received “guidance” from the Financial Industry Regulatory Authority Inc. “that L-share variable annuities with riders are presumptively unsuitable. They have also expressed concern about the suitability of L-share variable annuities for clients with an expressed long-term time horizon.”

Nancy Condon, a spokeswoman for the industry-funded regulatory agency, declined to comment.

Regulatory agencies that supervise broker-dealers, including the Securities and Exchange Commission, have in recent months highlighted L-share sales in their examinations of financial advice firms.

Last July, the head of the broker-dealer examination program at the SEC, Kevin W. Goodman, said regulators are looking at whether investors are aware of the fees they pay for the share class and whether their sale is suitable. “We want to make sure these share classes aren't being chosen or marketed based on the higher commissions they generate,” Mr. Goodman said in an interview at the time.


Voya's broker-dealer — a division of the New York-based insurer, investment manager and retirement-services group formerly known as ING U.S. Inc. — also added new requirements for the sale of class L shares without riders.

The firm said those annuity contracts must be accompanied by a third-party cost analysis report, signed by the client, that clearly compares the dollar cost of that L-share with a comparable B-share offered by the same firm. That requirement will take effect July 13, according to the document, which is dated June 22.

“We based our decision on our review and evaluation of the tranaction activity in L-Share class annuities, guidance provided by Finra and similar positions taken by other broker-dealers,” the document said.


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