Insurer turns focus to tax deferral, alt investments and fee-based advisers
Jackson National Life Insurance Co., seller of popular variable annuities, is stepping into the living-benefits-free zone with its latest product.
The insurer's new Elite Access variable annuity is a departure from its current roster of products because it doesn't offer living benefits. Jackson instead is positioning the VA as a tax deferral tool, as well as a way for advisers to tap alternative investments and work them into their clients' strategies.
“We think that going forward, the retail market has to mimic the institutional market, which saw positive returns through the volatility of the past five years or so,” said Clifford Jack, executive vice president and head of retail at Jackson. “We want to bring the institutional investment story to the retail client.”
This time, Jackson's new VA has an array of 40 different investment options, giving clients the choice between going with individual investments — which include traditional stock and bond funds from the likes of T. Rowe Price Group Inc. and Pacific Investment Management Co. LLC — and a dozen alternative funds from firms such as BlackRock Inc. and The Goldman Sachs Group Inc.
Clients can also opt for a choice of three investment portfolios, including tactical management, risk management and “guidance portfolios” which combine alternative investments, stocks and bonds with the use of tactical or risk management strategies.
Widening its marketing efforts to include fee-based and fee-only advisers, as well as traditional commission-based reps, Jackson National sees Elite Access chiefly as a diversifier for clients — hence the focus on alternatives.
Using a variable annuity also allows clients to have tactical management strategies without suffering the tax consequences of frequent trading, Mr. Jack said. Of course, there's the added benefit of deferred taxes on growth because it's a VA. Clients can change their investments and allocations up to 15 times a year.
The addition of alternative investments made it impossible to offer living benefits in the product, Mr. Jack said.
“When it comes to offering a living benefit, you have to be able to hedge it. This product isn't hedgeable because there aren't hedges for the underlying instruments,” Mr. Jack said.
The all-in cost of Elite Access is 2.25% to 2.5%, depending on whether clients choose a fully liquid option — which is costlier — or a five-year surrender period.
But will advisers, who have long been touting VA living benefits, go for it? That will depend largely on whether those advisers appreciate the access to alternatives and if Jackson can help them grasp the new positioning through wholesaling and training.
Having the resources to get advisers up to speed on the new product could very well make a difference.
“Basically, it comes down to the fact that the wholesalers know these advisers and are doing a lot of prep work,” said Tamiko Toland, managing director of retirement income consulting at Strategic Insight. “I see a lot of thoughtfulness in what they're doing and that makes it more likely to be successful.”
Tyler Denholm, director of investment research at ValMark Securities, recently attended a training session for Elite Access and said his firm would likely offer it as a means of adding alternative assets to a portfolio using a core money management strategy including passive investments, such as ETFs and indexed mutual funds. It would allow small clients to have access to alternatives that otherwise would be available only to more affluent investors, Mr. Denholm said.
The new VA seemed more suited for advisers who were geared toward money management as opposed to those who worked mostly with insurance, he said. “If you're not an adviser who typically sells investments — say you mostly sell life insurance and other products — it could be hard to switch to an investment strategy story,” Mr. Denholm said.
