In a world where Netflix and Amazon have raised the bar for ease, convenience and choice, while keeping costs low and creating greater value, shouldn’t the financial services industry be doing the same?
More investors are demanding unbiased advice. More advisors are making the move to the independent fee-based and fee-only approach. Both are embracing products that are transparent and simple to use. At the intersection of these important trends, the annuity industry is starting to change.
More companies are cutting costs and cutting out commissions to attract RIAs and fee-based advisors. We know that RIAs and fee-based advisors require far more than this to truly fit the way they work. Their needs include fewer asset-based fees, less complexity, greater flexibility, along with integration capabilities, direct data feeds and self-service tools that today’s tech-savvy advisors demand—and their tech-savvy clients have come to expect. A new generation of annuities must be built.
Built to Fit The Way You Work
There are pioneers who can provide the total package for RIAs and fee-based advisors—fee-based annuities that are built from the ground up to align with their fiduciary standard, fit the way they work and meet their clients’ needs. They offer simplicity, greater transparency and more choice. They leverage technology to transform how advisors and investors manage their annuities.
For example, best of breed fee-based VAs are now compatible with leading data aggregation services. The most innovative have even “built the pipes” to provide direct data feeds straight into independent advisors’ portfolio management systems and workstations. The net result—VAs that can be managed side-by-side with clients’ other assets, taxable alongside tax-deferred, for more holistic financial planning.
These fee-based VAs are also aligned with the trend of greater self-service. In fact, at Nationwide Advisory Solutions, with our fee-based VA we consistently see that roughly two-thirds of advisors and their clients are performing their own transactions, such as trading and rebalancing the assets inside their VAs. It’s not just about ease and convenience—it’s also one more way to keep costs low and pass greater value back to the advisor and their client.
With this new generation of user-friendly fee-based annuities, RIAs and fee-based advisors are now armed with a powerful financial planning tool that can meet a range of client needs—no matter where they are within the different stages of the financial lifecycle, from accumulation to income to legacy planning. New fee-based annuities can help RIAs and fee-based advisors do more to give these three types of clients what they desperately need.
Protect High Earners from Tax Impacts
The accumulation phase of the financial lifecycle is so important for investors looking to prepare for and live out a more secure and satisfying retirement. But high-earning clients can quickly max out their 401(k) plans, with contribution limits of only $18,500 in 2018 (or $24,500 for those over age 50).
For high-earning clients looking to minimize the impact of taxes on their portfolio, and maximize accumulation for retirement, a simplified, fee-based Investment-Only Variable Annuity (IOVA) may help solve the challenge, with low or flat fees, greater liquidity, and a broad diversity of fund choices, to take full advantage of the compounding power of tax deferral.
Help Risk-Averse Clients Accumulate More
More risk-averse clients, particularly those in their late 50s and early 60s who are approaching or entering retirement, want to protect financial assets for the long haul. But from a tax perspective, the shift into more conservative investment options can be a double-edged sword. Fixed income and dividend yielding stocks, while more stable and predictable, also face a much higher ordinary income tax burden. Likewise, allocating to liquid alternatives and managed volatility options may potentially protect the downside for these clients—but these funds may also come with higher tax implications.