Surprise! Fee-based VAs gaining traction — at least among B-Ds

Commonwealth and five broker-dealers sign on to sell Allianz's variable annuity; apes LPL Financial's earlier move
JUL 11, 2011
Despite initial skepticism that the fee-based variable annuity wouldn't take off, a handful of broker-dealers have signed up to offer Allianz Life Insurance Co. of North America's version of the product. Commonwealth Financial Network, Royal Alliance Associates Inc., SagePoint Financial Inc., FSC Securities Corp., Cambridge Investment Research Inc. and Valmark Securities Inc. have all agreed to sell the insurer's Retirement Pro fee-based variable annuity. The firms' decision to add the product to their platforms seems to suggest some warming up to the concept of the fee-based VA, particularly after LPL Financial broadened its fee-based VA offerings in January to accommodate not only the Allianz product but annuities from The Lincoln National Life Insurance Co., Sun Life Financial Inc. and Axa Equitable Life Insurance Co. “You had the largest independent broker-dealer fully integrate this on their platform,” said Robert DeChellis, president and chief executive of Allianz Life Financial Services LLC. “I think LPL from a distributor standpoint legitimized it; they have a mix of commission and fee-based business." Advisor Group's decision to add the Allianz fee-based VA occurred only after LPL's decision to expand its platform, but there had been adviser demand for the products, said Kevin Keefe, senior vice president of product development and research at Advisor Group. Prior to adding Allianz, the firms offered two types of fee-based VAs, he said. “This is a small but growing piece of the variable annuity pie,” Mr. Keefe said. “This still fits in the category of innovative. In general, more reps of all shapes and sizes are looking at the fee-based space again; it aligns very well at the adviser and client level.” As recently as a few months ago, executives at other firms were skeptical as to whether the fee-based VA would take off. Historically, the reception had been lukewarm among brokers. For instance, Commonwealth Financial Network sold $7 million of fee-based VAs last year, making up less than 1% of the broker-dealer's $800 million in total VA sales. Adding more fee-based annuities didn't require a lot of legwork for Commonwealth. But it remains to be seen whether the availability of more fee-based VA selections will help drum up sales said Ethan Young, annuity research manager at the broker-dealer. A month ago, the firm added fee-based VAs from Nationwide Life Insurance Co. and will add Sun Life's version of the product in the next few weeks. “As the providers came with more versions of fee-based variable annuities, it made sense to let our advisers join the competition,” Mr. Young said. “We have a robust platform, but to date there's no increase in activity.”

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