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Morningstar Launches New Variable Annuity Review Tool

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Morningstar, Inc. has launched a new web-based tool that allows financial professionals to easily research and evaluate variable annuity contracts.

Live today, the Morningstar Annuity Intelligence describes features in a variable annuity in simplified terms, says Kevin Loffredi, vice president, annuity solutions, software division, of Chicago-based Morningstar.

“The main purpose of the tool is to have a place for reps, and their compliance departments, to go to to have a clear understanding of how the annuities work,” Loffredi says. Information on an individual annuity contract can be accessed from one central page, he notes.

For example, the program details how benefits will be paid out if one spouse dies, thereby eliminating misunderstandings, Loffredi says.

The Morningstar Annuity Intelligencepermits side-by-side comparisons of two contracts, which can be useful from a compliance standpoint when comparing the fees and possible savings of going from one contract to another, Loffredi says. “That shows the clients, FINRA and the home office the benefits of making the transaction,” he says.

Among the features displayed are: step-up provisions; the impact of withdrawals on benefits; caps on the benefit base, if any; investment restrictions; and spousal continuation. The Annuity Intelligence program also contains suitability forms from the broker-dealers that are automatically populated with fees and rider costs. The program also features a lifetime income calculator, which displays the amount of guaranteed income an annuity benefit will provide for a client based on certain criteria, such as age and deferral years.

The program lists which annuity contracts can be sold in each state, a capability requested by Morningstar reps who want to know what they can actually sell in their jurisdiction, Loffredi says.

Information is gleaned from the annuity contract’s prospectus, which is then analyzed by Morningstar’s staff and “put in terms an advisor can use to suitability sell to their clients,” Loffredi explains. Features are updated regularly so advisors are getting the most timely and accurate data, he says.

Carriers are permitted to comment on the information provided on Annuity Intelligence. “We want accurate information, but we reserve the final word” on any changes, Loffredi says.

Currently, Morningstar has data on 1,950 annuity contracts and more than 100,000 annuity subaccounts. The new program combines two previous systems, Morningstar Annuity Analyzer and the Annuity Intelligence Report, which Morningstar acquired in 2010. Roughly 150,000 reps from more than 160 firms use the Morningstar system, according to Loffredi.

Beginning today, Morningstar clients will be moved over to the new program.

Although the program only highlights variable annuities, Loffredi says the program may be expanded in the future to include other types of annuities.

“We are currently looking at adding indexed annuities,” Loffredi says. “We do not have a lot of requests from broker-dealers related to that, but we do realize they are becoming popular and more mainstream.”


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