After a three-day weekend, financial advisers re-turned to the office last Tuesday to learn they had mere days to prepare for VA product changes from Jackson National Life Insurance Co.
Jackson, the largest provider of variable annuities to independent broker-dealers, last Tuesday filed contract changes with the Securities and Exchange Commission for its Perspective II, Perspective L Series, Perspective Advisors II, Perspective Rewards and the Retirement Latitudes VAs.
Effective today, Jackson will drop the joint option for its LifeGuard Freedom 6 Net and LifeGuard Freedom Flex. That change will apply to both new VA sales and existing contract holders who haven't yet elected the option.
Also as of today, the company will pull its Perspective Advisors II and Perspective Rewards VA contracts, nixing sales to new purchasers.
Jackson also is pulling the optional contract enhancement features for new-product sales. This pays a portion, ranging from 2% to 5%, of a client's variable annuity premium.
The economy is one driver behind the changes, according to company spokeswoman Lori Stafford-Thomas.
“The changes demonstrate our commitment to conservative product pricing and an approach to risk management that helps deliver the best value for consumers,” she wrote in an e-mail.
But some representatives, who had until last Friday to act on Jackson's changes, weren't thrilled by the short notice.
“If Jackson is an adviser's niche, then I can't imagine they're not going to feel that this is a slap,” said Rose Greene, owner of Rose Greene Financial Services, and a branch manager with
LPL Financial LLC.
She has had a years-long relationship with Jackson and found out about the changes just last Tuesday.
When asked about the narrow timeframe, Ms. Stafford-Thomas wrote: “Jackson will continue to provide all of its customers with the award-winning customer service they have come to expect from the company.”
To be sure, Jackson isn't alone in going down this path. Other insurers have been drastically reducing the amount of advance notice that they give to advisers.
Prudential Financial Inc., for instance, sent a letter to advisers dated Aug. 24 that it would suspend contributions into some of its vintage variable annuities. The company gave advisers until Aug. 31 to file paperwork for contributions coming from tax-free 1035 ex-changes or individual retirement account rollovers.
Cash contributions were due Sept. 14.
"FIRE SALES'
Generally, when insurers an-nounce a product change, advisers generate “fire sales” by trying to close as many VA contracts as they can before the cutoff date.
But insurers already burdened by unprofitable VA contracts are limiting the amount of time reps have to react, thus limiting their further exposure.
Reps, who are accustomed to having up to three weeks' warning on changes to variable annuities, said that it takes more than just a few days to wrap up VA business.
Potential buyers need time to have a conversation with the adviser and mull their decision, said Carrie Streets, president and senior financial consultant at Crest Financial Strategies, which also is affiliated with LPL.
Surprise notification on impending product changes also dents advisers' relationships with insurers. Jackson has been a favorite among advisers because it gave them access to up to 95 investment options.
“There's a relationship dynamic with wholesalers where advisers expect to be the first call,” Ms. Streets said. “It's offensive when the change comes and you didn't get the call.”
Annoyances aside, some advisers see the move as one that ultimately will protect Jackson and the existing contract holders.
“You're going to disappoint some people, but is it worth it for the [company's] safety, absolutely,” said Thomas B. Hamlin, founder of Somerset Wealth Strategies Inc., an independent company that offers securities through
Raymond James Financial Services Inc.
He likened the situation to a boat that has a capacity of 30, but 75 passengers want to board.
“They are full. They are pulling away from the port, and it doesn't matter that people thought the boat would leave at noon and it's 11:55,” Mr. Hamlin said.
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