A broker with LPL Financial has filed a class-action lawsuit against Ohio National Life Insurance Co. and two affiliates for the allegedly unlawful termination of trail commissions on certain variable annuity policies.
Ohio National stunned the insurance and brokerage industries in September when it announced it was terminating its selling agreements with broker-dealers and ceasing the payment of trail compensation to brokers who'd sold variable annuities with a guaranteed minimum income benefit rider. The move, which many advisers called unprecedented, affected the vast majority of brokerage firms.
The LPL broker, Lance Browning of Whitehouse, Texas, claims Ohio National is "unlawfully trying to change the rules after the game has already started," according to the lawsuit, filed Tuesday in U.S. District Court for the Southern District of Ohio.
Mr. Browning, who has been an LPL broker since 2012, also claims that Ohio National's decision won't reduce fees for investors, but that instead the insurer will "pocket" the trail commissions that otherwise would have gone to advisers, leading to its "unjust enrichment," according to the complaint.
Mr. Browning is set to lose around $89,000 a year — a "significant" part of his business — when Ohio National's new policy takes effect in mid-December, according to the lawsuit, Lance Browning v. The Ohio National Life Insurance Co. et al.
Mr. Browning has sold more than 100 annuities for which he is owed trail commissions, according to the filing, which claims his compensation will be cut even if he continues to provide advice and recommendations to his clients.
He seeks to represent a class of several thousand brokers who stand to have their compensation for the sale of an Ohio National variable annuity with a GMIB terminated.
One of Mr. Browning's attorneys, Dennis Concilla of the firm Carlile Patchen & Murphy, said the lawsuit seeks to enforce Ohio National's contract with broker-dealers, which he believes "clearly states" trailing commission will be paid for the life of the variable annuity.
Spokespeople for Ohio National didn't return a request for comment by press time.
The insurer announced in early September that it was exiting the annuity business and ceasing to underwrite new policies.
Ohio National has $24.9 billion of individual annuity assets on its books, 95% of which are variable annuity assets, according to its most recent annual report to policyholders. Last month, following its announcement that it was terminating advisers' trailing commissions, it offered a new round of variable annuity buyouts to customers.