Although brokers are not selling the new, slim variable annuities like insurers had hoped, more insurance companies are still entering the market with their versions. Darla Mercado of Investment News further explains in “Slimmer variable annuities attract thin following.” John Hancock’s AnnuityNote was one of the first slimmed-down products introduced. Pacific Life Insurance Company and ING are recent additions to the market of variable annuities with fewer investment choices and more basic benefits. The hope was that brokers and advisers would sell these products because it would lead to an increased number of sales, even though they receive a lower commission rate. But advisers haven’t shown much interest in the new variable annuities because of the lower commissions, lower prices, and fewer choices for investments.
Thomas B. Hamlin is the branch manager for Somerset Wealth Strategies, whose branch sold $150 million of variable annuities last year. He believes that advisers are wary of the new products because they worry that the limited options could hurt performance potential. Although advisers had been asking for such products in recent years, they aren’t selling the annuities now that they are here. “Sales are commission-driven,” according to Scott Demonte of Financial Research Corp. Interestingly, the advisers that sell traditional variable annuities may not be the target market for these revamped products. Many insurers want to interest advisers who typically would not sell annuities with these simplified variable annuities. We shall have to see where the road leads for these slimmed-down variable annuities.