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Jackson’s Fee-Based Variable Annuity Forecasts the VA Market’s Future


It was no surprise that the Department of Labor enacted stringent rules on sellers of variable annuities within qualified plans in their new fiduciary rule. The new BICE guidelines require advisors and annuity distributors to ensure that any variable annuity sold is in the best interest of the person buying the product. There are many guidelines for annuity sellers to follow, something that will change the face of the variable annuity industry for the long haul. Investment News’ Greg Iacurci wrote about the changes being made at the top seller of variable annuities in the recent article, “Jackson National’s new variable annuity hints at annuities’ future post-DOL fiduciary rule.” Jackson National is probably going to pave the way for all of the other variable annuity sellers.

Most experts think that fee-based variable annuities are the future of this market. They expect a rapid decline in commission-based sales of variable annuities in qualified retirement plans like 401k’s and IRA’s. Fee-based annuities charge clients a level wrap fee on the assets under management. Jackson National’s introduction of the first fee-based variable annuity they have ever sold is a good indicator that this forecast will come true. The company is trying to avoid all of the new added legal and compliance costs associated with selling commission-based annuities.

Jackson National’s new product, called the Perspective Advisory, will be available starting on September 19. The company is hoping that this new product will help them retain their top variable annuity selling status. They sold $23 billion in annuities last year, including selling close to two times the variable annuities of the second seller, TIAA-CREF. The contract charges are low, the surrender period is only 3 years, and there are many choices of death benefit riders and living benefits with this new VA. The producer compensation is fee-based. Registered investment advisors have been using fee-based variable annuities because of their tax deferral and low contract costs for years. Living benefits are mostly associated with commission-based accounts, but they can be added at an additional cost to Jackson National’s new VA. This is unique to this product and could forecast a new trend in the fee-based variable annuity market. The Perspective Advisory offers many death benefit options, a full menu of living benefit choices, and low fees. The shorter surrender period offers liquidity that clients don’t normally get with variable annuities.

Most experts think that while Jackson National is the first to introduce their new fee-based annuity, many insurance companies will follow. It’s how they will manage complying with the DOL rule without dramatically hurting themselves, clients, and distributors. New variable annuity product development is likely to focus on fees and overall product cost. Jackson National’s new fee-based variable annuity is forecasting the future for the variable annuity market that must now comply with the DOL fiduciary rule.

Written by Rachel Summit

Follow Rachel, aka Finance Mama, on Twitter and Google+


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