Jackson Insurance Reps Can Now Sell Bank CDs, Too

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Jackson Federal Bank, a subsidiary of Jackson National Life Insurance Company, Lansing, Mich., is marketing two types of bank certificates of deposit through its financial representative distribution channels as well as its banking channels.

One CD, MarketPath, links its return to the performance of the S&P 500 for five-, seven- or nine-year terms. Its structure is similar to that of JNLs equity index annuity.

The other CD, SurePath, is a traditional fixed-interest CD, available in time periods of six months, one year, 18 months, two years, and three years.

Minimum investment for both products is $5,000. MarketPath is currently available only for Individual Retirement Account funds. SurePath is available for both IRA and non-IRA funds.

“Were distributing these CDs through JNLs insurance agent, broker-dealer, and institutional marketing group channels as well as JNBs 14 bank branches in Southern California,” says Sean Blowers, vice president-thrift products for Jackson National Life Distributors, a marketing arm of JNL and JFB.

Why offer CDs–a bank product–through insurance and other non-banking reps?

“Before we did this, when insurance clients expressed interest in owning CDs, our insurance reps couldnt help them” directly, says Blowers.

That worked against asset-gathering goals, as well as put the reps at a competitive disadvantage, he contends.

Now, the CDs expand the reps product menus, observes Blowers. And because of that, the reps can offer more products and services to clients than previously, he adds, noting that this is one of the advantages made possible by the Gramm-Leach-Bliley Act of 1999, which broke down the walls between insurers, banks, and securities firms.

JNL bought the California bank–then called the First Federal Savings & Loan Association of San Bernadino–in 1998, in preparation for the coming world of financial convergence that GLB soon made possible. It later renamed the bank and broadened its distribution to include the non-banking channels listed above.

The new CDs rolled out in late December, with nation-wide distribution via the financial rep sales channels. In the first three months of 2001, they pulled in over $19 million in deposits, primarily in the fixed product.

The state of the economy has helped fuel resurgent interest in banking products, says Bowers.

“After last years devastating financial performance, people increasingly have expressed preference for products that offer safety, security, guarantees of principal, lower or no volatility, FDIC insurance, comfort, and familiarity.”

He refers to recent Federal Reserve data showing that deposits to CDs rose by 249% in January 2001 compared to January 2000, and deposits to savings accounts rose by a whopping 1,154% in the same month-to-month comparison. (See chart.)

“Furthermore, a recent survey of adults, conducted by The Gallup Organization from Nov. 20, 2000 to Dec. 23, 2000, found that over half of the people who make household financial decisions took FDIC insurance into account when considering recent investments.”

Studies like that spurred Jacksons interest in making FDIC-insured CDs available through its financial reps.

The company decided to offer an equity-linked CD along with a fixed-interest CD as an option for clients who want “the stability of a conventional CD with the ability to earn a potentially higher rate of return,” says JFB President and CEO D. Tad Lowrey.

In this product, he says, people can “receive a rate of return linked to the S&P Index, without putting their retirement money at risk.”

It works like this: If the S&P goes up by the end of the CD period, the CD will credit interest according to a percentage of growth in the index. But if the S&P has not risen, or if it has even dropped, by the end of the CD period, Jackson guarantees the owner will get the initial principal back. (Note: If the owner cashes out before maturity, the cash-outs may be subject to penalty.)

The amount of interest credited is based on an “index participation rate.” Like participation rates in many equity index annuities, this rate is declared at issue and guaranteed not to change for the CD term. On May 10, 2001, the participation rate was 70% for the five-year CD, 75% for the 7-year CD, and 80% for the 9-year CD.

JNB measures growth in the S&P by comparing the S&P value at CD issue to the S&P value at maturity (i.e., S&P values averaged over the last 52 weeks).

Currently, nearly 2,000 financial reps have signed up to sell the JNL CDs. To do so, they must pass JNLs information screens and background checks and also pass Jacksons own certification course (self-study or seminar).

Ten states require distributors to have a Series 7 license to be able to sell the MarketPath CD. Two other states require a Series 6 or Series 7 license to sell both MarketPath and SurePath, “because they are viewed more like brokered CDs in those states,” notes Blowers.

State insurance agent licenses do not impose any special requirements related to CD distribution, however, Bowers says.

Agents who write directly with Jackson receive “referral fees” for the MarketPath CD. These pay 3% on the five-year CD, 4% on the seven-year CD, and 5% on the nine-year CD.


Reproduced from National Underwriter Life & Health/Financial Services Edition, June 4, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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