In the scramble for new business, too many advisors and broker/dealers are ignoring a giant asset right in their backyard: their portfolio of variable annuity (VA) contracts.

A successful advisor who made 20 to 30 VA sales over the past decade will have a portfolio of 150 to 300 contracts and could generate $20,000+ a year in additional income. Multiply that by 10x to 30x for a broker/dealer. Yet few advisors or broker/dealers are interested.

Why Not?

Here are three reasons.

  1. Mind Set

First and foremost, advisors’ (and their broker/dealers) have traditionally taken a “sell, set & forget” approach to variable annuities; they simply don’t view their VA portfolios as assets. Our research shows that 80%-plus of advisors take the entire commission ‘upfront’, with very few opting to take a trail. As a result, they have no incentive to manage their clients’ annuity portfolios. (As one advisor said to me, “Why should I? I’m not getting paid for it.”)

  1. Skill Set

Second, many advisors pride themselves on their sales abilities vs. their portfolio management/fund picking talents. To manage VA portfolios, they have to define their investment strategies, create model portfolios and assign their clients to these portfolios based on the client’s risk profile. Then every month or every quarter, they must analyze the performance of the various entities in the insurer’s mix of funds, select the best performing funds and re-balance their model portfolios! Phew! Most advisors would rather be out selling.

  1. Tool Set

Last but not least, until recently advisors lacked good tools to identify legitimate opportunities or manage clients’ VA portfolios efficiently. Jackson Perspective II, for example, has 124 sub-accounts split between seven groups — U.S. Equity, Sector Equity, Allocation, International Equity, Alternative, Taxable Bond and Money Market.

And that’s just one program from one insurer. A successful advisor will typically have placed clients in four to six different programs from three or four different insurers. Managing 70 to 80 client portfolios across this spectrum would require a week’s work every month/quarter. Without suitable tools to make the process more efficient, advisors simply can’t justify the time commitment.

What’s Changed?

Today, “sell, set and forget” is less and less viable. Regulators and compliance departments are zeroing in on variable annuities and requiring more oversight, more management.

At the same time advisors’ commissions are under pressure: VA sales are down almost 40% from their peak in 2011, while the current bull market is making passively managed funds more attractive, further pressuring fees and commissions.

The good news is that, first, new tools are making it much easier to manage clients’ VA portfolios on a regular basis, and that, second, managing these portfolios helps generate additional revenues at very little additional cost.

For example, beginning early 2017 my firm began working with a new tool we have developed called Tangram WealthBook. WealthBook has reduced the time required for managing variable annuity portfolios from more than days to five minutes.

Why Do It?

You get generate a better return on your time.

 Getting more business from an existing customer is much less expensive than finding new customers: You don’t have to spend time researching needs, establishing contact, building credibility, creating trust — all of which you have to do before anyone signs on the dotted line

Focusing on existing VA clients and their portfolios has three important benefits

1. It re-establishes and improves client relationships.

Clients you sold annuities to years ago are often pleasantly surprised when you reach out to them again.

2. It identifies new opportunities.

Using that door you have opened, you identify additional opportunities with that client. A client who purchased an annuity for retirement may or may not still need that income, for instance; he or she may need more income than planned initially. Such changes create opportunities to help clients — for example, by using a 1035 exchange to lower fees; increase the minimum income level; and improve their portfolio performance, you get the idea.

3. It creates new non-VA business.

Satisfied VA clients are more likely to trust their advisors with other parts of their portfolios. Typically, a variable annuity accounts for 20% to 30% of a client’s total portfolio. That’s wealth you could be managing

How To Do It

With the right tools and process, managing variable annuity portfolios isn’t difficult.

Here are three key steps:

  1. Organize your data and policies. Gather all variable annuity contracts and client information including objectives and risk profiles, together with up-to-date and historical annuity performance data for all the products you have sold . Set up investment policies and model portfolios and sort clients into model portfolios based on their risk profiles.
  2. Get in touch with your clients. Call every one of your clients to update their investment objectives and risk profiles. Warning Don’t be surprised if some of them won’t talk to you at first; after all, they probably haven’t heard from you in several years!
  3. Start managing client portfolios. Organize your clients into a model portfolio that fits with their objectives and risk profile. Double check the assignments: If a 75 year-old wants to be in an aggressive growth portfolio, talk some more and get it in writing! Make sure they understand what they’re doing and the risks they’re taking.

To do all of this, using a digital assistant is essential.

You might be able to manage half-a-dozen accounts in one insurer using Excel; for anything more the paperwork is overwhelming. A digital assistant, like ours, can put all of the performance data from multiple insurers in one easy-to-use format; pull in and organize client data; help create model portfolios; and provide a client app to notify clients about proposed changes and archive their responses.


Milind M. Lele is the founder and president of Tangram Solutions LLC, a fin-tech startup focused on variable annuities. Tangram runs the WealthBook VA management platform. From 1983 through 2012, Milind taught MBA-level courses in strategy and marketing at the University of Chicago’s Booth School of Business.