The press will probably continue to point out cost issues related to variable insurance products but will avoid talking about what clients do, emotionally, with their money, predicted James Price here at the annual marketing conference of the National Association for Variable Annuities, Reston, Va.
Even so, the variable insurance industry is in “the best possible position” for growth, said the executive vice president and director of investment and marketing solutions for UBS Financial Services Inc., New York. This is because the industry has the capability of capturing greater control of client assets in a holistic way, Price contended.
Regarding variable annuities, criticism will likely continue concerning the products longer breakeven points (since the last tax reform) in comparison to mutual funds, their exposure to market downturns and other issues, he allowed.
But VAs have many features that help reduce the emotional pressure on clients and keep them focused, Price continued. These include asset allocation, auto rebalancing, tax-free transfer capabilities, guaranteed living and death benefits, and guarantees of principal.
“I think our product will continue to grow,” he said. In fact, “If you dont have variable products in your practice today, its not a wealth management practice.”
Prices speech brought a strong round of applause, reflecting a feisty mood evident throughout the meeting.
The conference was held just a week after news had broken about a Securities and Exchange Commission inquiry into possible market timing problems at some VA insurers. The news reports, plus previous articles questioning VA fee structure, performance and disclosure issues, spurred speakers to defend the VA and variable product industry.
The negative articles about VAs have overlooked all the benefits and guarantees of VAs, said NAVAs chair, Jane Mancini, who is executive vice president of sales and marketing at Rydex Investments, Rockville, Md.
Tax deferral, for example, is a “very powerful tool.” The industry needs to start shifting the focus, she contended. “We need to shift it from what is unfair to what is accurate.”
The industry, Mancini said, remains dedicated to supporting accurate and complete disclosure, and to accepting only investment dollars that are appropriate. As for dealing with the articles in the press, that “will only make us better and more comfortable with what we have to offer,” she predicted.
There are some things the variable industry should do differently, conceded Clifford Jack, executive vice president and chief distribution officer for Jackson National Life, Lansing, Mich.
The VA business does face a number of challenges, he pointed out. These include managing during volatile capital markets and uncertain regulatory environments, addressing corporate governance issues, and meeting ROI objectives. But “I dont think weve done a good job of building the market…or meeting the needs of our clients.”
He said his own company is responding to the issues by “looking at everything with the customer in mindwhat we call customer centricity.” For example, the company defined its various customersadvisors clients, advisors/brokers, shareholders, and intermediaries (such as broker-dealers)–and then developed a plan to satisfy the needs of each.
“Sometimes the needs of one group are different from the needs of another group. So, it is a balancing act,” Jack allowed. But the process is helping eliminate silos in the organization, and it also fosters growth of the market, he said.
Ben Stein, the actor, comedian and economist, took the podium in his role as current chairperson for the National Retirement Planning Coalition, a Redding Conn., group that seeks to educate consumers and financial professionals on financial planning issues.
He, too, defended the VA, describing in terms of what it does for the retired person. A VA means “getting a good nights sleep,” he said.
“It is going to a doctor of your choice, the freedom to do nothing at alla sweet life, doing nothingto live the way you want to live, not worrying about how long you can stay in your house.”
Stein positioned the VA as a financial product that creates peace of mind for policyholders. “Do you want peace of mind or fear?” he asked. “What you sell is peace of mind, and I applaud you.”
The effect on VAs, of the negative articles that have been coming out, “is so tiny, its negligible,” he said. “What you are doing is nobleyou sell people peace of mind. Dont let them stop you.”
Reproduced from National Underwriter Edition, April 2, 2004. Copyright 2004 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.