“The pendulum is swinging our way,” said a variable annuity executive here in a panel on innovation in retirement income products.
Media reports on VAs have moved from focusing on VA expenses and how to get out of VAs to talking about VAs as something that people might want to get into, said Rob Scheinerman, senior vice president, SunAmerica Retirement Markets, Los Angeles.
He attributed this not only to the changing landscape for retirement–IRAs, fraying safety nets, retirement demographics and risks–but also to changes in the VA products.
The products are shifting from focusing on asset accumulation to including asset protection and income solutions too, Scheinerman said. The VA has become a “unified package” of investment choices, liquidity options, legacy planning features and income guarantees, he explained, with multiple withdrawal and income options, and with more innovations on the way.
Christopher Grady, president and CEO-retirement income at Genworth, Richmond, Va., agreed that VAs have excellent features and benefits.
“But, with so many extraordinary features, why does the industry have only $1.3 trillion to $1.4 trillion in assets compared to the $12 trillion in mutual funds?” he asked.
“Mutual funds are outselling us by about 7 to 1,” said Grady. “Where is the disconnect? The challenge?”
He described the industry’s problem as a type of a “if we build it they will come” type of thinking.
“They haven’t come,” Grady said. “For the last 6 years, sales have been flat.”
He urged industry leaders to get back to basics. “Look at the retirement security space, not just the VA space,” he said. “Why not simplify the process and bring the value proposition” to the consumer?
This is what his own company is doing, Grady said, via thought leadership, product innovation, and simplification. Some of the details include education of government leaders “who don’t know our products” as well as of consumers and advisors. The company is also designing products that approach retirement “holistically,” he said, with the understanding the consumers can’t do it alone; they need help.”
The challenge for the industry, Grady concluded, is to “move to the consumer–with great products, marketing distribution and service.”
“If we have the best consumer value proposition but only $1.3 trillion in assets, we need to fill that gap.”
The panel included two executives whose firms are focusing on simplicity in different ways.
Ann M. Soucy, managing director-key accounts, Old Mutual, Atlanta, said her company entered the VA market a year ago, aiming its product at registered investment advisors and other fee-based advisors. “We made it simple and transparent, with zero M&E charges, zero surrender charges and zero commissions, and no 10-day free look; the owner can pickup and go,” she said.
The results: “We’re seeing new consumers come and, and also advisors who typically don’t recommend VAs,” Soucy said. “The average ticket is $240,000.”
Jane Mancini, CEO of 1-Pension LLC, a registered investment advisory firm based in Newton, Mass., said her firm does the risk profiling, asset allocation and money management on behalf of defined contribution plan participants and individual investors and retirees.
The results: “We’ve saved hundreds of thousands of dollars for some of them.”