An RIA Using Jefferson National VA's

[HVelocity]

I got contacted by Jefferson National in October. I was just a series 65 registered investment adviser at the time, not a licensed producer (In Pennsylvania). To simplify the discussion suppose I do not have an insurance license.

Can I advise clients to rollover into a Jefferson National flat fee VA and collect an advisory fee for advising on the investments within the annuity?

Is that selling a variable annuity? Which I know I can not do.

Next, if I have an insurance license but not a license to sell variable products - Would you consider it risky to advise on the rollover of funds into a VA? Clients might assume I'm selling them a VA.

I'm just curious to see what other people think. I'm a solo practitioner so I'm the chief compliance dude. I'm thinking this is just a matter of language and I'm just afraid of the term "variable annuity".

 

[hammerken]

Make sure its a VA that is specifically designed for the RIA community. Personally I would obtain an insurance license as well. While I was wholesaling I had several Raymond James RIAs who either had an insurance license as well or partnered with someone who did and they had unique fee structure and sharing arrangements. I currently have an RIA but I do not market nor suggest VAs to my clients.

 

[scagnt83]

I got contacted by Jefferson National in October. I was just a series 65 registered investment adviser at the time, not a licensed producer (In Pennsylvania). To simplify the discussion suppose I do not have an insurance license.

Can I advise clients to rollover into a Jefferson National flat fee VA and collect an advisory fee for advising on the investments within the annuity?

Is that selling a variable annuity? Which I know I can not do.

Next, if I have an insurance license but not a license to sell variable products - Would you consider it risky to advise on the rollover of funds into a VA? Clients might assume I'm selling them a VA.

I'm just curious to see what other people think. I'm a solo practitioner so I'm the chief compliance dude. I'm thinking this is just a matter of language and I'm just afraid of the term "variable annuity".

So are you saying that the VA would not be part of your AUM, and the client would directly pay you a fee to advise him of how to allocate with the Advisor who put him the product?

My first question would be why would you want to do this?
I guess you dont want to get your Insurance License.. but getting your insurance license should not be a big deal at all after your 65 exam.

Jefferson National specializes in VAs for RIAs. Which is why they contacted you.

If you do not place the client in the product who would? Would you not want this as AUM with your Custodian?

Are you saying that you want to advise the client to place money in this VA, and have them go through another Advisor to get the VA, and then you advise on which investments to select?

If so this is a terrible idea for the client. You would be directing them to have double the fees needed.

Check with your State DOI on if you need the license or not. You most likely do. Or just ask Jefferson National.

If you are recommending the product, your Custodian should hold it imo. Then you take the chosen fee (they are not set up to pay commissions), which your Custodian will deduct for you as normal.

If you need to get your Life Insurance License so what? After your 65 it should be nothing. If you like the product get licensed to properly work with it.

Also, I would compare the product to Jackson National's RIA VA. It is probably the best on the market imo. But to be fair im not that familiar with Jefferson like I am Jackson.
But you owe it to your client to compare products and find the best fit. Jefferson isnt the only player.

 

[RonRoberts]

So are you saying that the VA would not be part of your AUM, and the client would directly pay you a fee to advise him of how to allocate with the Advisor who put him the product?

My first question would be why would you want to do this?
I guess you dont want to get your Insurance License.. but getting your insurance license should not be a big deal at all after your 65 exam.

Jefferson National specializes in VAs for RIAs. Which is why they contacted you.

If you do not place the client in the product who would? Would you not want this as AUM with your Custodian?

Are you saying that you want to advise the client to place money in this VA, and have them go through another Advisor to get the VA, and then you advise on which investments to select?

If so this is a terrible idea for the client. You would be directing them to have double the fees needed.

Check with your State DOI on if you need the license or not. You most likely do. Or just ask Jefferson National.

If you are recommending the product, your Custodian should hold it imo. Then you take the chosen fee (they are not set up to pay commissions), which your Custodian will deduct for you as normal.

If you need to get your Life Insurance License so what? After your 65 it should be nothing. If you like the product get licensed to properly work with it.

Also, I would compare the product to Jackson National's RIA VA. It is probably the best on the market imo. But to be fair im not that familiar with Jefferson like I am Jackson.
But you owe it to your client to compare products and find the best fit. Jefferson isnt the only player.

What makes the Jackson RIA VA the best on the market in your opinion? Have you compared it to the Prudential VA?

 

[scagnt83]

What makes the Jackson RIA VA the best on the market in your opinion? Have you compared it to the Prudential VA?

Last time I checked the Jackson Product had better sub-accounts than Pru.

If your using an Income Rider, they do not force you into Bonds like Pru does when you decide to take income.

Also, last time I checked, they had higher guarantees with their riders. But of course that changes. However, I would be willing to bet they still have better sub-accounts. And I know that Pru still forces you into bonds. If I remember correctly it was around 50%.

Both are good products though.

 

[RonRoberts]

Last time I checked the Jackson Product had better sub-accounts than Pru.

If your using an Income Rider, they do not force you into Bonds like Pru does when you decide to take income.

Also, last time I checked, they had higher guarantees with their riders. But of course that changes. However, I would be willing to bet they still have better sub-accounts. And I know that Pru still forces you into bonds. If I remember correctly it was around 50%.

Both are good products though.

I agree with regard to the income account and forcing you in to bonds. I may be too conservative for some but I am so concerned about recommending a VA that the only way I would is if client was willing to choose the income rider just because I like guarantees.

I do plan on doing more training on VA's this year in order to become more comfortable with them because I know they are a fit for some over a fixed product.

 

[scagnt83]

I agree with regard to the income account and forcing you in to bonds. I may be too conservative for some but I am so concerned about recommending a VA that the only way I would is if client was willing to choose the income rider just because I like guarantees.

I do plan on doing more training on VA's this year in order to become more comfortable with them because I know they are a fit for some over a fixed product.

I just dont like the high fees, especially when you add on the Rider.
When you are looking at 3% or 4% in total fees, the sub-account is going to be reduced to around the same as an IA.

Also, the Income Riders on IAs have higher guarantees and better features (such as LTC doubling) than the VAs do.

So if the VA after fees is close to the IA, and the IA has higher guarantees, it just usually makes sense to go with the IA imo.

Example:
I think Pru and Jackson are down to around 5% or 6% for roll-up credits.

Compare that to Great American who offers two Income Riders, 8% and 10% roll-ups. And they pay 5% at age 65 (if I remember right)


With Pru, you will pay at least 2.5% to 3% with the rider and M&E, possibly even 3.5% or 4% depending on which Riders are chosen. And that is not including the investment expenses.
So for sake of argument lets just call it 3.5% total.

If you average 8%, you are really Net 4.5%.

GA currently has a 4.25% cap. After a 1% charge on the Rider it is 3.25%.

So the question you have to ask yourself/the client, is:
Is a 1% difference on your Base Account worth a 4% difference on the guarantees?

Also, last I checked, GA (and others) have higher payout %s than Pru & Jackson.


So it really just depends on what the main goal is, Guarantees or Market Growth.

But if it's market growth you want, why not put a portion in an IA to lock in guarantees, and then the rest in a low fee managed account? That makes a lot more sense imo. But of course every situation is different.

Also, the RIA VAs often have lower fee structures. So that can change things a bit too sometimes.

 

[hammerken]

The Jackson and Jefferson ones are both superior to Pru in my opinion.

Your IA argument is why I don't suggest VAs to my clients. I will advise on Equity, Bond , and MF portfolios but don't work in the VA arena any longer.

 

[HVelocity]

Thanks for your analysis questions. I will contact the insurance dept and the securities commission to ask about it.

I have an insurance license for life and fixed annuities, but from what /I understand you need a series 6 license to sell variable products which requires a BD sponsor. I'm not interested in that.

I'm also concerned about the appearance of selling VA's. I'm probably over thinking it.

No commission = no sale; fee = investment advise given.
1) I advise investment into a va (a type of managed portfolio) and advise on the selection of the assets inside.
2) Also working with Jefferson National is like "partnering" with someone with a 6 license. I do that with my money manager (who does custody, discretion, and fiduciary with qualified plans).
3) I will explain that in my ADV 2.
Thanks
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Also thanks for mentioning the competing programs. I'm new to VA's (obviously). I need to do due diligence and compare products.

Any other programs that offer VA's specifically through RIA's? Top 10?

 

[scagnt83]

Thanks for your analysis questions. I will contact the insurance dept and the securities commission to ask about it.

I have an insurance license for life and fixed annuities, but from what /I understand you need a series 6 license to sell variable products which requires a BD sponsor. I'm not interested in that.

I'm also concerned about the appearance of selling VA's. I'm probably over thinking it.

No commission = no sale; fee = investment advise given.
1) I advise investment into a va (a type of managed portfolio) and advise on the selection of the assets inside.
2) Also working with Jefferson National is like "partnering" with someone with a 6 license. I do that with my money manager (who does custody, discretion, and fiduciary with qualified plans).
3) I will explain that in my ADV 2.
Thanks
- - - - - - - - - - - - - - - - - -
Also thanks for mentioning the competing programs. I'm new to VA's (obviously). I need to do due diligence and compare products.

Any other programs that offer VA's specifically through RIA's? Top 10?

You are good to go as long as you use the RIA approved VAs.
They do not pay commissions like normal VAs.
They allow you to deduct your normal fee that you would charge against assets managed.

So you would not "technically" be "selling" them a VA. You would be charging your normal fee to advise them to place their money in the VA, and to manage that VA.

A Series 6 allows you to sell commissionable investment products. Basically MFs and the traditional non ria VAs.

Since RIAs who are fee only wanted to be able to place their clients in VAs. Companies rolled out the RIA VAs that allow you to deduct your normal fee, and not pay commissions.
So as long as you go through the normal disclosures, your appearance will be the same.



I would say that Jackson National, Pru, & Jefferson National are the top three. But keep in mind im not up to date on the VA world like I used to be.

MetLife and Lincoln also have good VA products. Lincoln has a nice rider for NQ money. But I dont know if they have RIA products, you would have to contact them and find out.


So why are you interested in the VA? Is it the riders? Or is it the money management aspect?

What is Jeffersons M&E on a 6 or 10 year product?
What fee would you be charging?