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Volatility Managed with New Variable Annuity Tactics

Many big name insurance companies are changing their strategies for managing volatility, according to Investment News’s Darla Mercado.  Unfortunately, the financial advisors with which they work don’t have a good understanding of the new strategies or exactly why they are being used.  In the article, “New VA strategies confusing to advisors,” Mercado says that many advisors are complaining that they don’t know enough about these new variable annuity strategies to use them, let alone explain them to their clients.  Advisors would also like to be sure that they are not only for the insurance companies’ benefit but in the best interest of their clients as well.

Variable annuity managers have started using more bonds and futures contracts than equities to guard against volatility.  AXA Equitable, Ohio National, Prudential and Transamerica have already been using these new volatility managing strategies.  Lincoln has just started offering such a variable annuity and MetLife will be adding three new funds to their variable annuity offerings soon.  Advisors are most confused by the fact that each insurer is using their new strategies differently and these strategies are very different from mutual fund sub-accounts.

Despite the fact that advisors are complaining about confusion, most insurance companies have been offering educational tools to prepare advisors and inform them after changes have been made.  Over 3,500 advisors were treated to lunches and dinners by MetLife in order to train them through videos and presentations.  They spent a year and a half training on the new funds and how they work.  Lincoln has been using online presentations, videos, and person to person training for their staff, broker-dealers, and advisors.  But because of the complexity of most futures contracts, many advisors are doing a lot of their own research in order to understand these new variable annuity strategies.  Insurers and advisors really need to keep an open line of communication to best deal with these changing and evolving strategies.

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