LPL looks to goose VA sales

At a time when broker-dealers are experiencing waning variable annuity sales, LPL Financial LLC is adding to its arsenal by ramping up on sales tools. The publicly traded broker-dealer, which is hosting its national Focus 2012 conference this week in San Diego, introduced a new client-education video on variable annuities and how they operate. Teaming up with Prudential Financial Inc., LPL looked to “create the 'Got Milk?' ” campaign of annuities, according to Rob Pettman, LPL's senior vice president of advisory and brokerage consulting. The video walks clients through the concept of VAs and the challenges retirees face. It includes an animated video of how VAs work, and tells interested clients what steps they should take and what to discuss with their adviser. LPL chose Prudential because the carrier had already released a client walkthrough video about its Highest Daily living benefit, Mr. Pettman said. This latest effort would be purely educational and have no branding from the insurer. “The industry has a lot of great tools to educate about variable annuities, but many [advisers] are reluctant to use them because they point toward a specific product,” he said. “That can shift the dynamic of the conversation where the client feels like it's a pitch.” LPL also added to its income needs analysis tool, which shows advisers and clients guaranteed income sources and expenses in retirement. Advisers and clients can get a bird's-eye view of assets and might consider shifting some toward guaranteed products to fill in income shortfalls. The latest enhancement of the tool, also announced this week, lets advisers illustrate the payout clients would get from combining a VA with a withdrawal benefit and a deferred-income annuity — as well as the pros and cons of the two, according to Mr. Pettman. Variable annuities with withdrawal benefits give clients a greater opportunity for growth and access to their account value, but ultimately lead to a lower payout versus a deferred-income annuity or longevity insurance. LPL is rolling out its tools as other broker-dealers are seeing declining revenues from VA sales. Much of the decline stems from insurers' sharp pullbacks on product features. Executives at competing broker-dealers, including First Allied Securities Inc., report that first-half VA sales were off by about 15% from the year-earlier period. Recurring revenue from trail commissions have helped mitigate the lower sales, according to broker-dealer executives. LPL's filings with the Securities and Exchange Commission show that commission revenue from VA sales was $406.7 million in the first half, compared with $396.6 million in the same period in 2011. Second-quarter commission revenue grew to $202.7 million from $201.5 million in the year-earlier period. That slight growth in VA revenue is based on increased trail-based commissions, according to the SEC filing. Mr. Pettman wouldn't discuss LPL's VA sales numbers but said that adding capabilities to its annuity tools is expected to have a positive effect. “It reinforces the value the products can bring,” he said. “You make advisers effective, and you give them these capabilities. The goal is to drive sales.”