Expanding Your Business Through IOVAs and Fee-Based Annuities

This is a must-read post regarding new variable strategies. As your clients become introduced to two new VA products, they may find that old perceptions melt away, discovering new value in a cornerstone retirement planning product.

 

 

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Expanding Your Business Through IOVAs and Fee-Based Annuities

Expanding Your Business Through IOVAs and Fee-Based Annuities

After years of growing complexity and ever-more bells and whistles, the variable annuity (VA) is trending toward simplicity, and that may be one of the best developments to help you grow your business.

The Back to Basics Movement 

In response to regulatory changes that favor low-cost, low-commission annuity products, the industry has undergone a creative product explosion that may set the foundation for advisors to grow their client assets for years to come.  These new products, because of their relatively lower cost, maximize the value of the tax deferral benefit of an annuity and seek to generate tax alpha from a wider range of asset classes, including non-correlated assets, hybrid investments and liquid alternative investments.

The other advantages of these products are that the broader range of non-correlated assets can help investors protect the value of their retirement savings, while the managed volatility options can be an important tool for those on systematic withdrawal plans for retirement income.

Though many of these strategies may make sense for investors in today’s market climate, they are highly tax inefficient thanks to their short-term trading strategies. But, when placed inside a VA, that disadvantage evaporates and investors can more fully benefit from these nonconventional investment strategies.

The Investment Only Variable Annuity (IOVA)—The IOVA is a low-cost, accumulation-oriented VA product that may offer up to hundreds of investment selections across a wide range of asset classes and strategies. One way in which they are different from more typical VA products is that they include many investment options that may have previously been unavailable, such as hedge funds, managed volatility strategies, arbitrage funds, commodity-based funds and even guided portfolios.

The Fee-Based Variable Annuity—The fee-based VA offers no upfront commission, but pays the advisor a level, ongoing asset-based fee. This new product meets the challenge placed on advisors as to what represents a “reasonable” commission to regulators. These products come with a low- or no-surrender charge schedule.

A Public Rethink 

One of the obstacles faced by many advisors is the general skepticism of the public and financial media over VAs, with the primary criticism being their high costs, which diminishes the tax-deferred value of an annuity.

As your clients become introduced to these two new VA products, they may find that old perceptions melt away, discovering new value in a cornerstone retirement planning product.

See referenced disclosure (2) (3) (4) at http://blog.americanportfolios.com/disclosures/ 

About The Author

Keith Carravone

 

Director of Insurance Products 
631.439.4600, ext. 177 

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