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FSI Endorses STP Initiative

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The Financial Services Institute has endorsed NAVA Inc.’s new straight-through processing initiative for selling annuities.

Insurers and distributors that belong to NAVA, Reston, Va., developed the STP initiative, which includes 24 standards for managing new variable, fixed and indexed annuity business electronically.

The Securities Industry and Financial Markets Association, New York, and the American Council of Life Insurers, Washington, already have endorsed the standards. Now, with the FSI endorsement, the standards will extend into the independent B-D community, NAVA says.

The FSI, Atlanta, was formed in 2004 as a stand-alone spin-off from the Financial Planning Association, Denver. The group represents 110 independent broker-dealers and 7,800 registered reps.

FSI members account for about 36% of U.S. annuity sales, according to David Bellaire, FSI general counsel.

FSI member B-Ds do not have to implement the NAVA STP standards, Bellaire says, but he predicts they will because of the efficiencies and competitive advantages they will gain.

The STP standards apply to areas such as suitability, electronic forms, privacy and records management. They make electronic annuity processing uniform, efficient and accurate, Bellaire says.

For advisors, the new standards will bring several benefits, Bellaire contends. “First, independent registered reps will get a very efficient, cost-effective way of processing compliant annuity transactions. They can enter data and documents from the field that go electronically straight to their B-D’s office, for suitability review and document entry and then onto the insurance company, also electronically.”

Turnaround time should be faster as a result, Bellaire predicts.

“In addition, the advisor won’t have to try to remember which data to enter where, depending on state and insurance company involved,” Bellaire says. “That’s because the standards make all of the data entry areas uniform, so the confusion goes away.”

Also, advisors will no longer have to enter the same data repeatedly on different pages. “That means they can focus more on clearly discussing the product being purchased,” Bellaire says.

“STP standards don’t make the products uniform,” Bellaire says. “They just make the paperwork, processing and compliance uniform. The products retain their unique features and provisions.”

For B-Ds, access to increased processing speed will become very important if the NASD adopts its proposed Rule 2821, Bellaire adds. That rule would require the B-D principal to approve variable annuity transactions within 7 days of the client’s signature. “Faster electronic processing will facilitate more timely reviews,” he says.

Under the standards, the customer must first consent to doing business electronically, says Michael DeGeorge, general counsel of NAVA. If they don’t consent, business will be paper-based. If they do consent, everything from application to contract issue will be electronic.

Post-contract statements and servicing will come later, DeGeorge says.

The system should facilitate transactions between advisor and client, DeGeorge predicts. “It is not intended for direct sales.”

NAVA already has presented the standards to 16 states. Two states–Kansas and Virginia–have sent NAVA written confirmation that the standards will be viewed as being in compliance with state standards.

“Legally, we don’t need written state confirmations to implement the standards, but the confirmations are valuable because they help build the comfort level of our members as they move toward implementation,” DeGeorge says.


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