We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (16,526)
  • Industry Conferences (3)
  • Industry Job Openings (38)
  • Negative Media (138)
  • Positive Media (73)
  • Sheryl's Articles (617)
  • Sheryl's Blogs (175)
  • Wink's Articles (241)
  • Wink's Blogs (255)
  • Wink's Press Releases (93)
  • Blog Archives

  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • May 2008
  • February 2008
  • August 2006
  • Not without criticism, TD Ameritrade opens an 'insurance agency' for RIAs that want to provide annuities

    September 30, 2012 by Kelly O'Mara

    Schwab says it will also use more annuities to meet the swelling demand for retirement income but Jefferson National’s CEO questions the custodians’ focus on traditional annuities

    Friday 9.28.12 by Kelly O’Mara

    Brooke’s Note: The whole country was outraged when what looked like an interception by the Green Bay Packers at the end of the Monday Night Football game this week was called a touchdown by the Seattle Seahawks. Guess what? The insult to our intelligence happened for the same reason that TD Ameritrade is going into the business of hawking annuities through RIAs. The smart referees who would never have made that call are home on their couch, on strike, because the NFL has told them it plans to convert their pension plan from a defined benefit plan to a 401(k) plan. In other words, these NFL refs are holding on for dear life to one of the last few vestiges of guaranteed income in American society. Now TD Ameritrade is seeing 8,000 Baby Boomers turn 65 every day who it believes, some way, somehow, would like to procure a slice of guaranteed income. And annuities appear to be the only game in town. But one annuity veteran questions whether TD is reading the market right or not.

    TD Ameritrade is finally jumping on the annuity bandwagon, announcing yesterday that it was rolling out a nationwide program to offer variable, fixed and deferred-income annuities to RIAs through The Insurance Agency of TD Ameritrade LLC. While other major custodians, such as Schwab and Fidelity, have for years offered annuity products, which advisers mainly used to exchange existing or old annuities that clients already had for lower-cost versions, TD has historically referred RIAs with annuity needs to independent sources.

    Now, however, TD is hoping to cash in on a business that is booming. With a growing number of clients closing in on retirement and taxes expected to increase, the demand for annuities isn’t going away — despite what some advisors may hope. See: Jefferson National passes the $1 billion mark selling annuities to the advisors who ‘hate’ them most.

    “There’s more and more of a need,” says Matt Judge, director of wealth management for TD Ameritrade Institutional. “We thought the time was ripe.”

    advertisement

    No guarantees

    But, Laurence Greenberg, president of Jefferson National Life Insurance Co., says that too many “advisor-friendly” annuities, such as Schwab’s, simply cut the commission and lower some fees instead of really providing advisors with an annuity product that addresses their needs.

    “It has to be really part of the business, not on the side,” he says. “It fits into how they manage mutual funds.”

    A true RIA annuity, and what Greenberg believes will be the boom in the business, won’t necessarily look like the traditional annuities that TD, Schwab and Fidelity are offering. Annuities traditionally are products sold to clients for a lump sum that guarantee a set monthly income stream, typically with a lower rate of return than the client might see otherwise. Fixed annuities differ from variable products in that they pay out at a set rate whereas variable annuities are tied to the markets, typically through a set of underlying mutual funds.

    However, new annuity products provide tax deferment on the returns, but don’t necessarily pay out a set guarantee. Lots of providers are still too focused on the guarantee, says Greenberg, but “that’s wrong” for RIAs.

    Tax deferral is something that an increasing number of clients and RIAs are looking for, because taxes are expected to increase and because many RIAs had to use tax-inefficient strategies, such as alternatives, to weather the economic downturn, says Greenberg.

    At the same time, most RIAs don’t necessarily need an income guarantee, because they see it as their job to manage the portfolio. RIAs have also traditionally criticized annuity products because of the large commissions paid off the top and the exit fees clients must pay if they choose to leave the contract early. See: The ABCs of doing due diligence on fixed income annuities.

    “RIAs understand tax deferral, but they hate annuities,” says Greenberg. “The focus has to be on tax deferral.”

    That tax deferral has to be combined with a wide choice of funds and a tech platform that integrates with what an RIA uses, says Greenberg. A recent report by Cerulli Associates Inc. argues that this RIA-focused annuity niche is coming into its own and will see significant growth in the next few years.

    Jefferson National has what it believes is that product, Monument Advisor, a no-load, no asset fee variable annuity focused on tax-deferral. But, others don’t.

    “There’s never been an annuity that meets the needs of the RIA,” says Greenberg.

    What TD is offering

    And that goes for the new slate of TD offerings.

    TD will be offering variable annuities from Great-West and Transamerica, fixed annuities from MassMutual and New York Life and deferred-income annuities from New York Life. The company has not yet made the decision about whether it will also offer insurance products, says Judge.

    While some advisors are interested in purchasing new annuities, the vast majority of products being sold by TD so far are simply roll-overs from existing annuities. Many clients come to advisors with annuities they’ve already bought, which frequently carry high exit fees. Without the option of leaving those annuities, most advisors choose to roll their clients into another, lower-fee version in what is known as a 1035 exchange.

    “The best thing is to get them into a low-cost version,” says Judge. “The majority of business to date is 1035 exchanges.”

    Those lower-fee options, which can still cost up to 75 basis points in some cases, are exactly the supposedly RIA-friendly annuities that Greenberg said weren’t so RIA-friendly after all.

    Security blanket

    While there is no custody fee, TD is the insurance agency of record on any of the annuities sold on that platform. Thus a portion of the disclosed fee on the product goes to TD.

    “Like everything else, we look to make a fair profit on the products we provide,” says Judge.

    RIAs can either build their own fee into the annuity directly, charge a financial planning fee that would account for dealing with the long-term planning of an annuity or work on some kind of retainer fee, says Judge. Some RIAs who have assets under custody with TD, for example, can and do purchase annuities directly from carriers such as Jefferson National,.

    Earlier this year, The Hartford Financial Services Group Inc. withdrew from the annuity business in an effort to boost shareholder returns and raise profits — something annuities simply can’t provide in this market with their guaranteed payouts to clients and poor rates of return. In doing so, Hartford followed Sun Life Financial Inc., which in December announced it was exiting the U.S. market for annuities and life insurance, and John Hancock Financial Services Inc., which cut back drastically on distribution of its annuities last November. See: Is Hartford Financial’s market exit a death knell for the annuity crowd or just more Hartford haplessness?.

    “[Insurers] just have a hard time having all that capital tied up,” Antonio Ferreira, managing director of Cogent Research LLC, said at the time. “In many ways, it’s a tough time for the annuity business.”

    But, TD opted to enter the business primarily because at the same time that profits are dropping for many traditional annuity companies, who are being forced to cut guarantees, demand is on the rise from an aging client base looking for security in retirement.

    “Demand reached a head recently,” says Judge.

    Low-hanging fruit

    Additionally, TD was simply watching money slip away as advisors looked to roll over clients’ existing annuities in 1035 exchanges. Most of the business it has seen so far has been in those exchanges, says Judge. “We’ve been happy with the results to date.”

    Schwab and Fidelity have been doing 1035 exchanges for years, since converting existing products is relatively low-hanging fruit. They both also offer advisors the option of purchasing new annuities through their platforms — something that may expand as more RIAs look towards annuities for tax deferment. See: With tax deferral at a rising premium, DFA forms a deal with an annuity company focused on RIAs.

    “We have long offered an array of third-party annuities to advisors and retail investors,” says Alison Wertheim, vice president of public relations at Charles Schwab & Co. “And as the demand for retirement income grows among investors at large, you can expect our commitment to meet this need will expand as well.”

    Shelter from the storm

    Annuities came under fire again this year after a California insurance agent was sentenced to jail for selling an 83-year-old woman, who turned out to have dementia, an indexed annuity. See: How Glenn Neasham lost his house, was forced to go on food stamps and faces jail time after selling a senior an indexed annuity.

    But, demand for the products has stayed steady and Judge says it has been on the rise with the aging demographics of investors. LIMRA numbers suggest fairly consistent annuity sales over the last 10 years with $240 billion sold in 2011, down from a high of $265 billion in 2008, but up from a low of $218 billion in 2003.

    In entering the market, TD is simply the latest to capitalize on that demand — even if it might be jumping onto the wrong version of the train, without the focus on the truly RIA-friendly tax deferrals.

    “A perfect storm is brewing,” says Pete Mangan, president and CEO of Shareholders Service Group LLC, a custodian that recently signed on to provide the Monument Advisor annuity product from Jefferson National to its 1,000 advisors. “They’re looking for ways to shelter income, shelter assets from taxes.” See: Charles Goldman will give a speech and Shareholders Service Group will make noise in the marketplace.

    It’s just taking a little work to convince RIAs that an annuity is the way to do that.

    “It’s been several years of showing RIAs the word ‘annuity’ isn’t a bad word,” says Greenberg.

    Originally Posted at RiaBiz on September 28, 2012 by Kelly O'Mara.

    Categories: Industry Articles
    currency