The New Fee-Based Variable Annuity

After a period of time where variable annuity products that were fee-based had a bad reputation, some of the biggest annuity companies are revamping the products.  Reuters Linda Stern discusses this new trend in her article “Analysis: New fee-only annuities aim to move upscale.”  More advisors are changing to fee-only practices now and insurance companies are making new products to attract them.  Retirement security has become more important than ever before during the past few years causing investors to change their willingness to pay more for better guarantees, like those offered with annuities.  More affluent investors tend to use fee-only advisors and they really appreciate the tax-deferral that comes with a variable annuity.

No-load, or fee-only, variable annuities are a very small portion of the total variable annuity market, but they are increasing yearly.  This year’s sales are expected to be 22% higher than sales in 2010.  Some of the big name companies introducing new fee-only variable annuity products include Allianz Life, AXA Equitable, Prudential, Lincoln National, and Sun Life.  In addition to the appeal of deferring taxes on all growth in the variable annuity, death benefits are another popular option for investors in these products.  Even fee-only variable annuities where you don’t pay commission are not right for everyone.  Depending on the mutual funds the annuities are tied to, your fees could be as much as commission on a basic variable annuity.  As with many annuities, getting past the preconceived notion the name carries can be the biggest hurdle for those who don’t understand all the benefits that come with a variable annuity.

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