Annuities are one of the last product areas that the Internet has yet to tame.
As more than one expert pointed out to me, you can now comparison-shop online for just about every product and service, from cars to vacation spots.
So experts and analysts to whom I spoke all applauded the announcement made by
The Vanguard Group Inc. last Thursday introducing
Vanguard Annuity Access, a web-based service that enables individuals to compare income annuities from leading insurance companies and obtain customized quotes on a real-time basis. Developed in partnership with
Hueler Cos., it is powered by Hueler's
Income Solutions platform.
In a nutshell, the service is being offered as a way for Vanguard retirement plan participants to evaluate competitively priced, directly comparable fixed-annuity contracts from multiple insurance companies.
This allows Vanguard to maintain relationships with these consumers. As Vanguard noted in its press release, 80% of new retirees end up leaving their employer's plan within three years, typically for a rollover individual retirement account.
Vanguard has not reinvented the wheel with Annuity Access. A key differentiator be-tween the Vanguard implementation and the ways in which other companies and sites have approached comparison-shopping tools for insurance products is that there is no “pay to play” allowed on the Income Solutions platform.
“We are completely independent,” explained Kelli Hueler, chief executive of Hueler.
“A complete examination of the financial metrics behind the annuity goes into our comparisons,” she said. In addition to an institutionally priced product and contract structure that are appropriate for the individual, the system takes into account insurers' ratings and other data, as well as a company's ability to serve the individual, she said.
“Another key thing is the disclosure — full disclosure — of fees, and for us, that is a 2% transaction fee. Most programs just don't disclose that; [with Vanguard] it is right out front where it should be,” she said.
That fee, which is divided between Vanguard and Hueler, includes all the platform costs, the administrative costs of the program and the services provided to individuals, which includes guidance by certified financial planners.
It is this latter point that is really the sole concern of some analysts.
“This is a really complex area, one where the average person is going to need a lot of help,” said Sean Cunniff, research director at The Tower Group Inc., a research and advisory services firm that covers exclusively the financial services industry.
Mr. Cunniff, who was a broker and who now has his CFP certificate, emphasized that while Vanguard is offering one of the best such platforms he has seen, the question mark remains the human element.
“I had looked at the Hueler platform in the past, and they did a really good job putting it together from a technology perspective, but the real hurdle remains how Vanguard handles the advice problem,” he said.
He explained that there are a multitude of questions around in-puts and hypothetical situations that the tool itself can't address.
The Vanguard Financial Plan service provided by many retirement plan sponsors does provide individuals with free access to a CFP, but the Annuity Access tool represents an additional service.
Visit my blog entry (
InvestmentNews.com/technology) for a lot more on this story including additional insights from Kelli Hueler and input from analysts.
E-mail Davis D. Janowski at [email protected].
