When Jefferson National launched its Monument Advisor variable annuity (VA) as a tax-advantaged investment product without lifetime guarantees back in 2006, company executives admit it took some time to educate RIAs and fee-based advisors about its benefits. The process seems to be working. Jefferson National projects it will reach $700 million in sales this year after selling $400 million in 2012.
“When we started, people said this is an interesting idea, will it ever get traction?” recalls Laurence P. Greenberg, below, Jefferson National president, in a recent visit to the offices of LifeHealthPro.com. “Is going to be a niche? Are RIAs going to adopt annuities even if it’s different? By hitting $700 million in sales this year, we’ve shown we have come of age and it isn’t just a niche product. It’s going to be one of the largest individual annuity products in the marketplace, including commission-based products. RIAs get it – get the benefit of tax deferral. Now with rising taxes and the increase in tax-inefficient funds like alternatives, it’s more important than ever.”
That isn’t to say the Monument Advisor product hasn’t undergone changes in the nearly eight years it’s been on the market. In addition to the normal churn of fund options that an advisor can pick from, Jefferson National now offers advisors the ability to choose from several model managers that focus on different strategies, such as retirement income or fixed income.
“So if an advisor doesn’t’ manage assets and wants to use a third party, we provide those on our platform,” says David Lau, left, COO of Jefferson National.
That’s because more RIAs are outsourcing investment strategies to third parties or using a third party for one specific strategy, such as fixed income, Greenberg notes.
“We spent a lot of time this year building out our third-party model manager capability,” Greenberg relates. “So when you come to us, it’s not just about funds [within the annuity], it’s about, ‘I want a third-party strategist to provide me a model where I can apportion some of the client’s money into a third-party strategy.’ ”
Selecting those third-party model managers should be easier for advisors when Jefferson National launches its new website later this year. As Greenberg states, the website will take a “nebulous concept” of investment strategies and put them at the fingertips of the advisor.
“It’s not built around, here’s a product, buy it,” he says. “It’s built around, how do I invest my client’s money? What are my investment strategies? How does this tax-deferred investment account, how does that become part of my practice and how do I use it? That’s really the trend of the industry moving annuities away from just being a fund to the growth of annuities that are used as investment management platforms.”
“With the new web launch we’ll be packaging those investment solutions for advisors,” Lau continues. “For example, if you are an advisor looking to generate retirement income we will package together the funds we have that are designed to generate retirement income. It provides the ability to add your third party manager to do retirement income if you want, or choose some of the models that we have from our model managers to do retirement income.”
The problem with guarantees