Allianz Life Insurance Co. of North America has joined
Wells Fargo Advisors' revamped indexed annuity platform, which now features simplified products and lower commissions.
Allianz will bring its Essential Income 7 indexed annuity and Essential Income Benefit feature, to
Wells Fargo's platform, starting on Monday.
Just a month ago,
Wells Fargo announced it would set new specifications for the indexed annuities its reps sell. For instance, commissions must be limited to 4%, minimum cap rates are set at 3% and surrender periods are limited to eight years, according to Bernie Gacona, director of annuities at Wells Fargo's retail retirement unit.
Limitations have also been placed on product designs for indexed annuities sold through Wells Fargo. Insurers are restricted to using two indexes and two crediting strategies — monthly averaging and point-to-point. Monthly averaging strategies average the monthly peaks and troughs of an index, while point-to-point calculates the index's performance at two points in time.
Indeed, there are some key differences between the product Allianz created for Wells Fargo and the version that's available elsewhere. For starters, Essential Income 7 is based on Allianz's broker-dealer and wirehouse-specific Core Income 7 indexed annuity, which was
launched last year. Allianz made further tweaks so the product would fit on Wells Fargo's platform, noted Dan Krueger, assistant vice president of product innovation at Allianz.
“We leveraged the design [of Core Income 7], which was focused around simplicity and less moving parts, carried it over to Wells Fargo and made some modifications to meet those requirements,” said Mr. Krueger.
“We tried to keep it as close as possible,” he added, referring to the two product designs.
Notably, Wells Fargo doesn't permit spreads — the amount the carrier deducts from the percentage of change in an index to determine the amount of interest to credit the account — in indexed annuities. Core Income 7 uses a spread when calculating interest based on the movement of the
Barclays U.S. Dynamic Balance Index currently available exclusively through Allianz. Essential Income 7 instead uses a cap, according to Mr. Krueger.
Perhaps the biggest difference between Essential Income 7 and Core Income 7 is the use of fee levers. The Wells Fargo product has fee levers that are in effect during the surrender period. Allianz can use these fee levers to adjust fees taken from the client's account in the event economic conditions keep the carrier from being able to support the 3% minimum cap. That fee would come from the client's account value, but would not affect the income base, said Mr. Krueger. After the seven-year surrender period is up, the fee reverts back to where it was when the client initially purchased the contract.
The maximum fee assessed via the lever is 2.5%, and the minimum would be the fee that the policy was issued at. Right now, the fee is 0.85%, according to Mr. Krueger.
AIG, Great American Life Insurance Co., Nationwide Life Insurance Co., Pacific Life Insurance Co. and Symetra Life Insurance Co. joined Wells Fargo's revamped platform last month, according to Wells Fargo spokeswoman Leslie Ingberg.
