February 17, 2011

LPL Financial Launches Fee-Based VA Platform for All Its Advisors

FBVA initiative will give LPL affiliated reps and RIAs ability to view, manage assets

LPL Financial announced Thursday a new platform, available to all its independent contractor-representatives, reps who are employees of the banks and credit unions who work through LPL, and hybrid and RIA-only advisors, called the Fee-Based Variable Annuity (FBVA) Platform, that provides access to lower-cost variable annuities from five VA manufacturers.

The products will be available on LPL’s Strategic Asset Management and Strategic Wealth platforms used by reps who use the LPL corporate RIA, and hybrids and RIAs, respectively.

Four of the five manufacturers have made existing VAs available on the fee-based platform, while the fifth—Allianz—has created a VA specifically for the new program, said LPL’s John Moninger (left) in an interview on Thursday with AdvisorOne.

Moninger, executive VP for LPL and head of its Advisory and Brokerage Solutions unit, said LPL first conducted “extensive due diligence” on the universe of VA manufacturers, and chose five who were willing to make “a commitment for education” to LPL’s advisors, many of whom may not have been extensive users of VAs in the past. Moninger said LPL also asked for a “commitment to marketing VAs differently,” taking into account fee-based advisors’ consultative rather than product-driven approach to clients, and sought from them a further “commitment to partnering with us on integration with data.”

LPL required, on behalf of its fee-based advisors, “fully integrated account opening and reporting” so that clients could see what they were buying and what they were paying for the VAs: “They needed to be on board for that,” Moninger said.

The VAs will also be less expensive than off-the-shelf annuities from those manufacturers—mortality and expense (M&E) fees on the VAs “have to be 65 bps or lower,” noted Moninger, with “no surrender charges on the back end.” As is standard practice, there would be additional costs for any riders to the VAs, which Moninger said were also chosen to complement each other, “each has

their own unique identity in the marketplace,” providing LPL reps and advisors with a “good cross section” of options.

The five providers on the FBVA platform are:

  • Allianz Life Insurance Co. of North America and Allianz Life Insurance Co. of New York
  • AXA Equitable Life Insurance Co.
  • Lincoln National Life Insurance Co., and Lincoln Life & Annuity Co. of New York
  • Prudential Annuities companies
  • Sun Life Financial

Moninger said the strategy around the new platform was driven by demand from advisors, with LPL noticing that after the 2008-2009 crisis “advisors who once walked away from VAs were now showing up,” and showing interest in these protected, lifetime income vehicles. Add to that the first wave of boomers reaching traditional retirement age this year, and LPL decided, says Moninger, that “we have to give the fee based advisor the tools to be successful,” in providing retirement income solutions.

Part of LPL’s due diligence was, said Moninger, to “see what didn’t work in the past,” and correct for those deficiencies, while giving advisors “control over these assets on a discretionary basis,” providing transparency on data—“We made sure that flowed through,” allowing for integrated statements on performance and management of the subaccounts, all while providing model guidance for those subaccounts from LPL’s own research team. The intent, Moninger said, was to “to improve our client experience, and also help advisors run their practices more efficiently.”

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