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A New Fixed Indexed Annuity Has RIAs in Mind

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DPL Financial Partners, an insurance network for RIAs, has partnered with Security Benefit Life Insurance Co. to launch a fixed index annuity that reflects input from DPL’s RIA members.

The annuity, called ClearLine, is commission-free, like all DPL products, and offers downside protection in exchange for limited upside gains. The minimum investment is $25,000.

The annuity comes in two flavors: one linked to the S&P 500 index; another to a low-volatility S&P 500. Investors in the annuity linked to the standard S&P 500 index receive 100% of the gains up to a 7.5% annual cap (7.75% for those with investments of more than $500,000). Investors in the low-volatility index product receive the same minus a 50-basis-point spread fee (30 basis points for those with more than $500,000 invested).

(Related: Ibbotson: Can Fixed Indexed Annuities Beat Bonds in Retirement Portfolios?)

An income rider is optional and can be added at any time for an additional 50 basis points. Payouts start at age 55, rising at a rate of 2% each year. There is no surrender fee after seven years.

“This is the first product we built from the ground up, based on feedback from membership,”  DPL Founder and CEO David Lau told ThinkAdvisor, adding that the firm has about 175 RIA firm members, about one-quarter with assets under management topping $1 billion.

“RIAs want simplicity … They aren’t traditionally users of these annuities,” said Lau, adding that they want fixed indexed annuities that are easy to understand.

“At its most basic, ClearLine is a fixed income replacement, with bond-like performance or better, and downside protection,” said Lau, noting that the product is also cheaper than many other fixed indexed annuities. It’s commission-free and cap rates on performance are “significantly higher with strong payout rates,” said Lau. “There is only a cash value and no phantom account values.”

Lau said the product is particularly useful for conservative clients nearing retirement who want an investment that is less risky than stocks, protects principal and provides lifetime income that retains the client’s purchasing power.

Security Benefit Life President Doug Wolff,  in a statement, called ClearLine a “powerful retirement savings and income solution designed for consumers who work with RIAs and fee-only advisors.”

A key risk of the new fixed indexed annuity, like all annuities, is the strength of the insurance company behind it. Security Benefit Life Insurance is rated A- by S&P and AM Best. Moody’s Investors Service withdrew its rating in 2008 after a downgrade to Baa3 from Baa1 with a negative outlook and has not rated the company since.

DPL announced in December that it would be offering a Security Benefit fixed annuity with a four-year rate guarantee period.

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