Transamerica VA targets fee-based advisers

The insurer added a new low-cost variable annuity product without living benefits

Transamerica rolled out a low-cost variable annuity Monday that’s designed for fee-based advisers.

The VA does not have guaranteed income options, but it arrives at a time when many people are worried about retirement.

“We recognize that many Americans are focused on financial security right now,” Joe Boan, senior managing director of wholesale distribution and marketing of individual solutions at Transamerica, said in a statement. “VAs can be an excellent vehicle for helping to create future retirement security, as a complement to or substitute for other retirement savings accounts.”

The product, Transamerica Advisory Annuity, has total fees that are 70% lower than other VAs, on average, according to an announcement from the insurer. The product is not being sold in New York State, which has more stringent regulations than other states; insurers generally have different contracts for products in New York.

Demand from fee-based advisers has increased for relatively basic VAs that are designed to provide the benefits of tax deferral, Tamiko Toland, head of annuity research at Cannex, said in an email.

“This is a highly targeted market both in terms of the distribution and the product value proposition,” Toland said. “There’s a much more vibrant business in this type of thing with the growth of Monument Advisor, which is now part of Nationwide.”

Most VA providers have taken steps to break into the fee-based adviser market, offering products that can be sold directly to investors, who hand over allocation decisions to their advisers, Toland noted. With that model, advisers can guide investors into the products without having to obtain insurance licenses, she said.

“You can pretty much name any insurance company and they’ve at least dabbled in it, if not sincerely put together a product and team; it took a long time to crack that nut,” she said.

The launch comes about two months after Transamerica indicated it had received a private-letter ruling from the Internal Revenue Service to allow its contract holders to pay annuity fees out of account assets, with fewer tax complications, according to a report by ThinkAdvisor.

The new VA, which includes 26 investment options, is not sold with living benefits, but it does offer two death benefits.

“The Transamerica Advisory Annuity allows customers to choose between two tax-advantaged legacy options to help take care of loved ones upon death,” Boan said in a statement. Those options, a policy-value death benefit and a return-of-premium death benefit, have fees of 27 basis points and 47 bps, respectively, according to the firm.

The underlying investments include 18 portfolios managed by Vanguard and eight managed by Dimensional Fund Advisors.

The announcement from Transamerica “is intriguing,” Sheryl Moore, head of Moore Market Intelligence, said in an email. “It almost looks like they are going to have an internal sales team, within their home office, assisting consumers with their purchase of this product.”

The VA is not designed for independent agent distribution, Boan said in the statement.

Investment expenses range from 12 bps to 66 bps, and contracts carry an annual service charge of $25, according to the product’s prospectus.