During the Insured Retirement Institute’s recent Annual Vision conference, Wells Fargo Advisors said that they are looking to develop a new annuity product that no one has seen before. Investment News’ Greg Iacurci wrote about this annuity in “Wells Fargo mulls development of immediate variable annuity.” They’re planning to work with insurance companies on an immediate variable annuity product. This type of annuity would work similarly to an immediate fixed annuity, but would have one major difference.
With immediate fixed annuities, you receive an immediate income stream after paying a lump sum of money to an insurance company. This income is guaranteed and often lasts over your entire lifetime. While immediate variable annuities would still pay out a guaranteed income stream, the amount of guaranteed income would be higher if the markets increase. If the markets are up and your income increases, you will never receive less than that income level. Even if markets decline, your stepped-up income level stays the same.
The product was discussed by Wells Fargo’s senior vice president and director of annuities, Bernie Gacona. He said that this product category is not currently available in the annuity world. He didn’t offer further details because he said their immediate variable annuity is just in the development stages. It sounds like this immediate variable annuity would be part variable and part indexed annuity, but with the immediate element that is very different from the deferred products currently on the market. From a traditional variable annuity, this new product takes the step-up feature available with some living benefit riders. It also protects your income from declining just like indexed annuity products offer principal protection when markets decline.
Morningstar, Inc. said that this type of product doesn’t sound too different from current variable annuities with living benefit riders where you can start taking out your withdrawals right away rather than deferring your income. Wells Fargo has yet to introduce a solid product to insurers for development and said that this immediate variable annuity is not a top priority. They are focusing their energy right now on complying with the DOL’s fiduciary rule that takes effect next April. Gacona expects their immediate variable annuity to be available sometime in 2018. Wells Fargo is working to make their entire line of variable annuity products simpler to help meet fiduciary rule guidelines and ensure that clients understand what they are buying.
Simplified variable annuity products are going to be in demand after the DOL rule takes effect. Wells Fargo’s idea for an immediate variable annuity product that offers the potential of greater income when markets increase that is also protected during declines could be available in the next few years.
Written by Rachel Summit