Wells Fargo mulls development of immediate variable annuity

Wells Fargo mulls development of immediate variable annuity
The supposedly new annuity type, as opposed to an immediate fixed annuity, would lock in a higher income in the event of a strong stock market.
NOV 02, 2016
Wells Fargo Advisors is considering working in tandem with insurers on development of what it says is a new type of annuity, an immediate variable annuity. With an immediate fixed annuity, a consumer gives a lump sum to an insurance company in return for an immediate, guaranteed income stream lasting a number of years, say $10,000 per year. The idea behind an immediate variable annuity, though, would be to provide that guaranteed income stream, but guarantee a higher income if the market were to perform well, according to Bernie Gacona, senior vice president and director of annuities at Wells Fargo. The income would never dip below the most recent stepped-up amount, even if the market performed poorly. So, for example, that $10,000-per-year income could step up to $12,000 per year in the case of a strong stock market, and would then remain at $12,000. “It doesn't exist on the market today,” Mr. Gacona said Monday on the sidelines of the Insured Retirement Institute's annual Vision conference in Colorado Springs, Colo. (More: Insurers cite broker-dealer annuity requirements as 'big issue' under DOL fiduciary rule) Mr. Gacona declined more specifics on the product because Wells Fargo is “in the very early stages of this.” The product seems to contain elements of both variable and indexed annuities and turn it into an immediate, rather than deferred, income stream. For example, with variable annuities, strong market performance can lead to a “step up” in income on a living-benefit rider, and the contract holder receives a higher future income as a result. And indexed-annuity investors can't lose principal as a result of poor market performance (although they can from contract fees and expenses). Kevin Loffredi, senior product manager of annuity solutions at Morningstar Inc., said the Wells product sounds similar to existing variable annuities with living-benefit riders that allow investors to begin taking withdrawals immediately rather than years down the road. Wells Fargo plans to bring the idea to insurers for potential development, but hasn't yet approached any with the concept, Mr. Gacona said. The product “isn't necessarily a priority” given most of the firm's energy is at present going toward complying with the Labor Department's fiduciary rule, the implementation date of which begins in April 2017, according to Mr. Gacona. He envisions such an immediate variable annuity being available for advisers in 2018. (More: Selling annuities under the DOL fiduciary rule is a whole new ballgame) On Monday, Mr. Gacona also described how Wells Fargo is considering simplifying its variable annuity lineup, with an eye toward less complexity in the structure of its offering. Such a project, also to be completed likely sometime in 2018, could better enable clients to understand the product they purchase, and could help avoid future litigation under the Labor Department's fiduciary regulation, Mr. Gacona said.

Latest News

Carson Group adds $405M Northwestern Mutual team in Atlanta
Carson Group adds $405M Northwestern Mutual team in Atlanta

Yari Capital's move to Carson continues a run of additions for the $62 billion firm, days after it hired a veteran recruiter from Osaic.

Wealth Enhancement inks 'coming home' deal with Oklahoma RIA
Wealth Enhancement inks 'coming home' deal with Oklahoma RIA

Servo Wealth Management's $210 million book brings the Minneapolis consolidator's total client assets further past $160 billion.

Omaha-based RIA Stevens Capital Partners nears $1B, buys Dallas CPA firm
Omaha-based RIA Stevens Capital Partners nears $1B, buys Dallas CPA firm

The deal to acquire a 300-client tax firm sets up much-needed succession for its 80-year-old founder, while joining a widening trend of tax service integration among RIAs.

Most Americans oblivious to Social Security’s projected demise
Most Americans oblivious to Social Security’s projected demise

New Nationwide Retirement Institute survey reveals eight in ten Americans agree Social Security needs fixing and how.

NewEdge advisors reshape client work with AI in weeks after Anthropic rollout
NewEdge advisors reshape client work with AI in weeks after Anthropic rollout

Advisor-led adoption has been rapid for tasks from translating annuity contracts into plain English to speedy webinar prep.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income