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Regulation and Compliance > Federal Regulation > DOL

Nationwide Says DOL Rule Behind Jefferson National Deal

By Janet Levaux

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It looks like the 4,000 RIAs and other advisors affiliated Jefferson National will soon become very familiar with the jingle “Nationwide is on your side.”

On Thursday, Nationwide said it struck a deal to buy the Louisville-based distributor of investment products, such as a flat-fee investment-only variable annuity. Jefferson National has about $4.7 billion in client assets. 

Terms of the deal were not made public; the firms expect to close early next year.

Unlike other insurers, such as AIG—which sold the Advisor Group of independent broker-dealers to Lightyear Capital and PSP Investments in May—Nationwide, based in Columbus, Ohio, thinks buying into an advisor-focused business will help it comply with the new Department of Labor fiduciary rules.

“Partnering with the Jefferson National team will enable Nationwide to expand our distribution footprint and meet the needs of investors and retirement savers who want to do business in a fee-based advisor environment after implementation of the DOL fiduciary standard,” said Nationwide CEO Steve Rasmussen in a statement.

Prior to the DOL changes, announced officially in April, many insurance firms—such as MetLife, Hartford, Genworth, ING and Pacific Life—decided to move out of their broker-related businesses over the past decade, mainly due to the regulatory costs and associated risks of owning broker-dealers. Nationwide’s approach, though, entails the purchase of a distributor and not a broker-dealer or BD network.

“This [deal] will complement our strong brokerage distribution channel and allow customers to do business with us in the manner they prefer. This new partnership is mutually beneficial to both Nationwide and Jefferson National, providing opportunities for growth in ways we couldn’t achieve individually,” Rasmussen explained.

As part of the agreement, Nationwide will buy all of the stock of Jefferson National, and Jefferson Nat will become a wholly owned subsidiary of Nationwide.

“Nationwide is a powerhouse in the insurance and financial-services industry, and we are thrilled by the incredible opportunity of our new agreement, built on a shared commitment to meet the needs of advisors and their clients with transparency, choice and greater value,” said Jefferson National CEO Mitchell H. Caplan in a statement.

“This partnership allows us to serve a growing number of RIAs, fee-based advisors and their clients with an expanded offering of innovative investing solutions built to fit the way RIAs and fee-based advisors run their practice,” Caplan explained.

VA Platform

According to Jeff Nat President Laurence Greenberg, investor clients pay a flat monthly fee of $20 and gain access to close to 400 institutional share classes—fixed-income vehicles, alternatives, passive and actively traded mutual funds, commodities and equities on the Monument Advisor platform.

With Jeff Nat’s Monument Advisor product, assuming the VA holds $240,000 in assets, a $20 monthly fee “would equate to 10 basis points—a big difference,” Greenberg said. “That much-reduced cost really allows consumer to get the full benefit of tax-deferred growth.”

While the company’s approach so far has focused on maximizing the benefits of tax-deferral, not guaranteed income, he said, its executives have “started to think about ways to reengineer Monument Advisor” in response to DOL.

“Jefferson National potentially could offer consumers cost-effective and simple guarantees within a qualified plan,” Greenberg explained. “This would appeal to consumers who are so risk-averse that they demand guarantees. But from an investment perspective, consumers are better off, we think, buying a no-guarantee product that can take maximum advantage of tax-deferred growth.”

Either way, clients are likely to work more with fee-based advisors going forward, and that should be good for the new partnership, according to Nationwide President & COO Kirt Walker.

“Clearly, the fee-based model is growing as a way to reach savers so we can help them prepare for and live in retirement,” he said, in a statement. “Combining forces with Jefferson National will accelerate Nationwide’s ability to establish a credible foothold in the fee-based market rather than trying to build this capability on our own…. We’re excited about this transaction because it will firmly establish Nationwide in the fee-based market while maintaining our strong presence in the brokerage channel.”

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