After an extended period of failing to get results out of buyout offers on its variable annuities, Ohio National has decided to stop paying trailing commissions on some variable annuities. Going one step further, the firm will also stop the data feed to advisors, leaving clients to fend for themselves.
We checked with several broker-dealers on the matter and heard some contradictory feedback. One mid-size broker-dealer commented that its reps would continue to receive trails and data feed, so no change; another mid-size firm, though, said it would not get trails but could continue to service the Ohio National products.
Besides the inconsistencies, many broker-dealers will be out of the loop on both trails and data feeds. Group VAs and life insurance were excluded from any restrictions.
Ohio National is not going to make any change on trails or servicing ability for its own advisors at Ohio National Equity — essentially making those advisors captive — for fear of losing VA trails and the ability to service those products if they were to leave for another firm.
Insurance companies have been on a slippery slope in terms of advisor relations, starting with MetLife back in September 2017. At that time, MetLife cut compensation on fixed and variable annuities trails sold by former advisors who moved to broker-dealers other than the firm they sold to, Mass Mutual Life Insurance Company.
MetLife cut trails to 27% of current levels; if advisors were receiving a 1% trail, they would now get only 27 basis points. This cut in trails also applied to any MetLife advisor that left Mass Mutual, which like Ohio National, makes advisors captive to the broker-dealer if they have sizable MetLife annuity products.
Ohio National has gone one step further than MetLife by not only getting rid of the trail all together, but also by cutting off the data feed so the advisor will be unable to service the variable annuity product.
MetLife’s motive was to punish those advisors who did not go along with the sale of MetLife representatives to Mass Mutual. However, Ohio National is making this move out of financial hardship, as it pockets the trails to offset losses on its VA product.