Variable Annuities and Indies
I’m in the infancy of looking at leaving my wirehouse. The primary reason is the huge haircut they take on VA’s, which makes up a decent part of my business. 8% turns into 4.5%, which then hits the grid. Seems like robbery to me.Anyhow, the question. What do independants typically get on a variable annuity ticket? I'm sure it varies by product, but any ballpark info would be appreciated.
Bottom line on VAs is that you can pretty much customize your payout when you’re Indy.Ice, rumor has it that ING is exiting the VA business.
[quote=aeromaks]indy bd or ria?lol, RIA = 0. well... we do take our asset based fee.[/quote] You bring up an interesting point that I had another question on. I've heard of "hybrid" RIA models, which would allow one to still do insurance business. Is something like that straightforward, or am I opening a can of worms (and entirely different discussion thread) with that?
What i have heard from my B/D is that ING is planning to roll out new VA and Index Annuity products at the end of the year, which will replace what they offer now, that severely curtail the risks they are taking with the guarantee offers. Not sure what that means exactly, but thats what i am getting.Seems to me the big problem with ING right now is you put your client into an annuity and then in 6 months it is backed by a new company when the bank separates from the Insurance co. So you have to explain all this to the client. Sort of like when GE let go of Genworth. ING rating was downgraded today, from what i have heard.
Just so we are clear, there are indy firms (the larger ones) who haircut VAs and other products. Just please do your homework and don’t jump to them b/c they are the biggest. Remember, you are wanting to LEAVE a wirehouse.
[quote=looking@indy][quote=aeromaks]indy bd or ria?lol, RIA = 0. well... we do take our asset based fee.[/quote] You bring up an interesting point that I had another question on. I've heard of "hybrid" RIA models, which would allow one to still do insurance business. Is something like that straightforward, or am I opening a can of worms (and entirely different discussion thread) with that?
yes. There are such. you are dually apointed. tradepmr has one. and so do a few others. basicly, there is a still a minimum requirement to the amount of business you have to run through the broker dealer. And va's are not a big product for them.
Most fee platforms firms (Schwab , Fidleity etc.) will require 25mm and some now at least 50mm in assets in fee based accounts. Most firms may offer you 100% less ticket charges, tech , less misc fees. If you do a lot of funds schwab does not and can not legally payout 12b1s-they keep them. They also make money on the basis points on their fee platform, marketing dollars, ticket charges, money markets, etc. Run all your offers in dollars not percentages with a hypothetical business model. If most of your business is fee based then you may be able to find an “RIA friendly” BD to process commissions. RIA compliance can be handled by a consultant for less than 12k a year but still takes some time from business and subjects you to regulatory audits (not fun). Be careful of the nickles and dimes. Big firms like LPL or RJ sound good but can be beaurocratic and you work for them. If you have anything you do that does not fit their model it may be difficult to get exceptions (BTW I am an ex compliance director) and they are still big firms. I do have friends there that do like it but they are 100-300mm plus. I am biased to small BDs. Find small BD with a top clearing firm which which may be more important than the BD. As a guideline a BD fee platform now a days should cost about 10bps with no ticket charges regardless of security type, if you trade yourself. You may also keep 12b1s. As a general rule if you do have 50mm/500k gross then a Schwab platform may make sense if you are not heavy in 12b1s. Then find a small BD happy to process VA, mutual funds, private placements etc. for the remaining 50-100k gross. Otherwise find a small BD with a good fee platform and give up haircut, take 12b1 (I dont, I use mostly ETFs) and dont worry about the compliance or the lost time. I used to run a BD and recruit for the owners and have transitioned all size FAs. BTW I can handle 20mm fee based in 30 households and another 50k in commissioned based solutions for those clients (Avg 850k/household), not worry much, net around 200k and spend time with family. I do it through a small BD and yes work from my house. Most of my clients actually admire me for working the way I do and many work from their homes too(and I have lost a couple prospects). Oh and most are accredited investors and 2 small endowments. I prefer few headaches and free time even though clients know I am available 24/7. Some people may laugh at my model and AUM and some may like it however YOU HAVE THE CHOICE TO MODEL YOUR BUSINESS THE WAY YOU FEEL BEST as long as you dont hurt your clients. There is no one best firm or way to do business, just run your #s and see what is the best fit. I obviously had nothing better to do but write a long winded message tonight…sorry
[quote=looking@indy]Any idea on the amount of business necessary for the hybrid, anyone?[/quote]
TradePMR/Sterne Agee requires 100k in commission based stuff.
AIG reps i spoke with wanted at least 80k in commission stuff. they dont care how much in fee based.
I get a 100% payout on VA tickets if it’s additional premium, and a 100% payout less a $75 set-up charge for a new policy.
I had a client add $150,000 to his existing ING VA two weeks ago, my payout is $9,000. No haircuts.
[quote=Omar]Bottom line on VAs is that you can pretty much customize your payout when you’re Indy.Ice, rumor has it that ING is exiting the VA business.[/quote] Wonder who is buying it. Last spring when ING went to yearly ratchets only, I pretty much wrote them off. The chances of your client getting a step-up on a yearly ratchet is 5% or less, not good odds. It's almost like they don't want to be in the business, kinda like Pac Life was a couple years ago..........
Thanks to aeromaks for mentioning the Hybrid Advisor Program offered by Trade-PMR/Sterne, Agee & Leach. He is correct, Sterne requires a $100,000 commission GDC minimum in order to qualify. It allows the Advisor to be dually registered and offer both commission and fee products/services. Payout on the commission front on avg is between 80 - 90% and 100% payout on RIA Business and 0 admin fees.
Trade-PMR has also built a Hybrid Program with other "RIA Friendly B/Ds" as well some of which have a lower GDC requirement depending on the firm.
It will be interesting to see if the Investor Protection Act passes in its current form (highly doubtful I feel) and if the amendment that prohibits commission-based business passes. I'm sure the annuity companies that are not currently offering fee-based VAs now are probably planning on jumping on the bandwagon in terms of product development.
Last I heard New York Life is rolling out a fee-based VA but I don't have anymore details.
Does anyone happen to know if Pru has a VA that is fee-based and available to an indy RIA?
As you get deeper into selecting a broker/dealer, why don't you ask them to see their contract with your top annuity companies? I don't think too many indepndent bd's are taking haircuts on VA's. My broker/dealer is Cantella and I have confirmed with them that what I get paid is 90% of what they receive on variable annuities.
The statement as written is patently false. I'm guessing he meant something else.
Jackson is back to annual ratchets also; why do you say chance is <5% to get a step up when using annual ratchets?