Registered investment advisers partnering with TD Ameritrade will be able to offer clients access to cheaper variable annuities.
In the next few weeks, the brokerage will roll out its program to RIAs, according to Matt Sadowsky, director of annuities and partnerships at TD Ameritrade Holding Corp. The announcement was first made at the firm’s annual conference in Orlando, Fla., last week.
Adding variable annuities to its offerings will allow TD to compete against the likes of Charles Schwab & Co. Inc,
Fidelity Investments and
The Vanguard Group Inc., all of which provide cheap annuities. But some said the firm is getting into the field a little too late.
“It’s great that they’re offering annuities, and it’s a competitive measure,” said Tamiko Toland, managing director, retirement income consulting, at Strategic Insight. “I also think that they’re a little bit late to the game.”
Variable annuity providers going on to the platform include Transamerica Life Insurance Co. and Great-West Life & Annuity Insurance Co.
TD is also close to finalizing an agreement with Massachusetts Mutual Life Insurance Co. to make single-premium immediate annuities available on the platform, Mr. Sadowsky said.
On the variable annuity side, TD is aiming to add products that are roughly 100 basis points cheaper than the average base cost of a VA contract, which can run at about 140 basis points. Generally, the all-in cost for a VA can be upward of 300 basis points.
“With all the market volatility over the last several years, the demand has increased for guarantees,” Mr. Sadowsky said. “And as more advisers focus on the distribution phase of clients’ lives, we empower them with tools to help the client take control and create that pension plan — and provide it at a lower price point.”
The carriers themselves, however, are still placing restrictions on investments that are tied to the guarantees they’re offering. That’s a theme that’s held for many VA providers as they attempt to shield themselves from excessive market volatility and low interest rates that make hedging costly and expensive.
Indeed, the Great-West product has only one subaccount that clients can invest in if they want the guarantees. Clients seeking Transamerica’s living benefit can select from an array of only 10 to 15 subaccounts, Mr. Sadowsky said.
The Great-West living benefit allows clients to lock in strong market performance annually, while the Transamerica product does this on a monthly basis. The Transamerica VA feature also includes a 5% roll-up — the annual rate at which the client’s benefit base for withdrawals increases.
Naturally, RIAs selling these VAs through TD’s platform won’t be receiving sales commissions. Neither will a team of licensed annuity specialists at TD who will help with the selling.
Being able to offer these products to clients will also give RIAs an advantage when they get clients who already own annuities purchased through traditional commissioned channels, as the RIAs can make an exchange into one of the TD products where appropriate, Mr. Sadowsky said. TD’s sales team would then become the agent of record on the VA.
“It severs the relationship with the old adviser that much further, and it’s one less hook the old adviser might have in an existing client,” he added.
Ultimately, TD hopes to sell directly to retail customers through a centralized call center.
