BY

Phoenix, Ariz.

“When I was in the wirehouse, I was so anti-annuity, you wouldnt believe,” said Bert Cooper, now a rep at Associated Securities Corp. in Sun City, Ariz.

Not so today. Now, annuities factor into what Cooper calls his “cafeteria style” approach to retirement planning.

“My [wirehouse] training was all stocks and bonds,” he said during a panel on IRA rollovers here at the annual marketing conference of the National Association for Variable Annuities, Reston, Va.

Even today, Cooper said he still does not like traditional annuitization, though he will recommend it on occasion. The clients dont like it, he said, and “the kids and grandkids say, but what about me?

However, he is no longer anti-annuity. Clients, once they reach their 70s, want income, want it now, want guarantees and want to keep up with inflation.

The newer variable annuities have features that help with this, he said. In fact, he now includes VAs in his “cafeteria style planning” with clients, which entails using different products to build a clients retirement plan.

For example, Cooper said he might use a VA with a guaranteed return of premium, or a VA maturing in 15 to 16 years with underlying guarantees, and then annuitize, and a life policy to replace funds used to buy the VA.

People like floors, Cooper explained, stamping the floor of the platform to make the point.

“They like floors, and variable annuities have them–the guaranteed living benefits, guaranteed income benefits, and guaranteed withdrawal benefits.”

Regarding rollover IRAs, Cooper said he likes to do this via “slow conversions,” with the planning done alongside the tax advisor and with consideration of heirs, as well as the client.

Insurers control only about 12% of the IRA rollover market today, pointed out panel moderator Cynthia DiBiase Vogl, president and CEO of NFC Consulting Group, a Chicago affiliate of Talbot Financial Corp. By contrast, mutual fund companies control about 49% of the market and brokerage firms about 32%, she said.

But insurers should not despair, Vogl said, explaining people still need the things insurers provide, such as advice, appropriate products, income planning, asset protection and estate planning.

Looking ahead to the year 2030, about 76% of retiree income will be in a volatile state, said Drew Denning, citing figures from the Employee Benefit Research Institute and Cerulli Associates. “What can we do to mitigate that?” he asked.

At Principal Financial Group, the Des Moines, Iowa, company where Denning is a director in the retirement and investor services division, this question led to development of an IRA rollover program focused on 3 areas:

? Provide 401(k) clients with education and tools. One example is a brochure for employees within 15 years of retirement. This aims to shift the employees mindset from accumulation to payout, Denning said. Another example is a retirement income planning guide for employees within 2 years of retirement. This offers multiple funding options and a holistic approach, he said.

? Provide a stronger internal focus on retirees. For example, the company has “dedicated” 401(k) counselors for age 50 and up, as well as dedicated internal wholesalers, he said.

? Offer a full array of financial solutions. There is “no single product solution” for retirement income, stressed Denning.

At Merrill Lynch Insurance Group, the approach to annuities and using them for IRA rollovers started with recognizing that “for reps, annuities dont really fly,” said Christopher Grady, first vice president-distribution in the managed assets group.

But the firm also decided it “had to have a strategy to solve the clients [IRA rollover] problem, regardless of what is going on in the market.”

The outcome was a plan founded on 3 key elementsimproving the financial advisors experience (via electronic order entry and other streamlining measures), distribution structure (with key partners focused on the advisor and products from a variety of annuity carriers that offer living benefits and other popular features), and data mining (to help receptive advisors grow their annuity business).

Some advisors will never sell annuities, conceded Grady. “But some will.”

Annuity sales for Merrill Lynch grew to nearly $5 billion in 2003, he noted. Thats up from $1.7 billion in 1997.


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.