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Different Channels Need Different Brand Strategies

By Jim Connolly

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New York

Multiple distribution channels need different branding strategies because of different buying preferences among consumers, said a speaker at the annual meeting of the National Association of Variable Annuities here.

The discussion was one of several that addressed reaching out to advisors and understanding the nuances among them in order to accomplish this goal.

During the discussion on distribution channels, Hugh McHaffie, a senior vice president with MetLife, Long Island City, said an effective way to reach advisors can be to brand a product by distribution channels. Multiple distribution channels can mitigate risk for a company, he added.

Some of the differences among distribution channels that McHaffie cited are: average contract size, persistency, share class structure reflecting needs, and yields and liquidity on fixed accounts.

Pricing factors, according to McHaffie, also differ by distribution channel. And while factors such as distribution expenses are similar between the career and independent system, he said that for the career system, average deposits are lower and persistency, higher.

There are significant differences between the 2 distribution channels in areas such as share class, rider protection and fixed account utilization, he added.

McHaffie offered experience culled from MetLifes career and independent networks as examples of these differences. For career agents share class election was: 68% B shares, 26% bonus shares, 5% L shares, and, 1% C shares. Independent producers responses broke out differently: 29% B shares, 36% bonus shares, 26% L shares, 7% C shares, and 2% A shares.

Protection rider election between the 2 MetLife distribution channels also differed, he continued, with 28% of clients of MetLifes career agents selecting a guaranteed minimum income benefit (GMIB) rider; 29%, an enhanced dollar cost averaging (EDCA) rider; and, 7%, an earnings protection benefit (EPB) rider. For its independent agency force, 85% of clients elected a GMIB rider; 21%, an EDCA; and, 8%, an EDB rider.

There also are differences in the fixed account elections that clients in the career and independent channels selected. In the career channel, 63% chose a variable option, while 37% chose a fixed option. But, in the independent channel, 99% of clients selected a variable option, and 1% a fixed option.

In terms of death benefit election, 76% of career agent clients selected a standard option; 14%, a yearly step-up; and, 10%, compounding. For clients of independent producers, 40% opted for a standard death benefit feature; 36%, a yearly step-up; and, 24%, compounding.

The importance of the producer and the need to make the job of the producer easier was raised in a presentation made by Mark Casady, president and CEO of Linsco/Private Ledger, an independent broker-dealer.

Casady said the advisor can be served by deploying service, technology and research. LPL adheres to an Advisors Creed, he added, which states: The advisor is our client. We wouldnt exist in the home office without them.

When LPL was fined by regulators for a violation involving A-shares, he said the firm took a multimillion-dollar action to reimburse advisor clients as well as to pay the fine that was imposed. Casady said the problem was caused by not doing a good enough job in administering A-share breakpoints.

Reproduced from National Underwriter Edition, October 14, 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.