Pru's pared-down VA has some advisers grumbling

Prudential has once again pulled back on the living benefits in one of its most popular variable annuities. Yesterday, the carrier announced the release of its Highest Daily Lifetime Income and Spousal Highest Daily Lifetime Income living benefits, replacing the Highest Daily Lifetime 6 Plus. In this latest iteration of the insurer's living benefit, lifetime income is based on 5% compounded growth on the annuities highest daily account value. That's down from 6% in the previous product. And while the new product does boost the protected value of the VA by 200%, a client must wait 12 years to make withdrawals. Previously, annuity holders only had to wait 10 years before taking money out. Despite the reduction in benefits, the insurer still expects to maintain its leadership position among the three largest VA sellers. “I think we still have — and many advisers tell us — a compelling and leading value proposition with these product changes,” said Bruce Ferris, executive vice president of sales and distribution at Prudential Annuities, the domestic annuity arm of Prudential Financial Inc. “We concede nothing and we're going to make sure we earn their business,” he added. But there have been grumblings among advisers about recent changes to the wildly popular living benefit. In August 2009, Prudential replaced its Highest Daily Lifetime 7 Plus with the Highest Daily Lifetime 6 Plus version. That product trimmed back the benefits of the 7 Plus product. Mr. Ferris says low interest rates were behind the decision to pare back the benefits. “These are long-term liabilities and obligations to the advisers and clients,” he added. “It's our belief and commitment that we want to be a long-term player in this business and this is what responsible leaders do.” Nevertheless, some advisers are less than thrilled about Pru's reining in of living benefits. In fact, some said they rushed in their last applications for the old product to beat the deadline. “You used to be able to get a 600% [growth on protected value] with HD 7,” said Jim Saulnier, an adviser at an eponymous firm. “I always recommended these annuities with the withdrawal benefit for the great growth that Prudential offered on the benefit base,” Mr Saulnier said. “And that's what they've dramatically cut down.” For his part, Mr. Ferris said he was “a bit surprised” to hear that some advisers didn't take the announcement very well. He indicated that the advisers he had spoken with were “relieved” that the highest daily feature itself was still available. “I acknowledge that there are some advisers who aren't happy,” Mr. Ferris said. “I think the advisers we have deep relationships with — that relationship isn't just based on a product, but a process and our desire to be their best resource for practice management and business development.” That may be tough to sell to Mr. Saulnier. “I'm going to be hard pressed to utilize this annuity,” he said.