Axa Financial Inc. is trying to revitalize its retirement plan business with a group variable annuity it hopes will stand apart by offering fiduciary services and simplified educational literature for plan sponsors and advisers.
The New York insurance company arm of the Paris-based Axa Group said it has seen growing demand in recent years for products that help sponsors manage their fiduciary responsibilities. However, Lincoln Financial, a major competitor in the retirement plan business, may be keeping pace with an alliance to provide fiduciary services, and a unit of American International Group Inc. also is monitoring the situation.
In recent years, plan sponsors have been clamoring for products with a fiduciary focus, said Alex Nelson, a senior vice president and the director of defined contribution at Axa Financial. The Department of Labor recently said it will intensify scrutiny of fiduciary performance in retirement plans with less than $5 million of assets.
Axa's new group variable annuity will help sponsors address fiduciary concerns by making the Axa Equitable Life subsidiary a co-fiduciary for the proprietary investment options offered under the annuity, Mr. Nelson said. The investments are subadvised by companies including Fidelity Investments and Janus.
The Retirement Strategies product features an overview of the Employee Retirement Income Security Act of 1974 and its implications for plan sponsor liability, Mr. Nelson said.
"There is a broad spectrum of liability, and often the plan sponsor has a dim understanding of that," he said. In developing the educational and prospecting materials that Retirement Strategies features, Axa consulted a panel of advisers to glean their concerns, he added.
Retirement Strategies is targeted to small to midsize retirement plans, with less than $5 million of assets. Axa is initially selling the product through its adviser network but will begin selling it through banks and third-party administrators in the first quarter.
Lincoln Financial Distributors, the Philadelphia insurance and financial services company, says it is planning an alliance with a third-party registered investment adviser to act as co-fiduciary for its group variable annuity offering, Lincoln Director.
The insurer hopes to seal the partnership and make fiduciary services available by yearend, said Dave Ahrendt, a vice president at Lincoln Financial Distributors.
The company is one of the larger players in the group variable annuity market, with $6 billion of assets in nearly 15,000 plans under management. Lincoln Director, which includes investment options from companies including Fidelity and American Funds, is marketed via a network of third-party administrators and banks.
AIG Valic, another significant player in the annuity market, generally does not act as a co-fiduciary for the investment options included in its group variable annuity offerings, said Rich Lindsay, an executive vice president at the company in Houston, but it can take on a fiduciary role when the sponsor requests it.
Though there has been more interest in and discussion about midsize and large plan sponsors' fiduciary responsibilities in recent years, he said, AIG has not yet seen a corresponding change in buying habits. However, regulators' intensified focus on fiduciary concerns may ultimately stimulate demand for products that address such concerns, he said.
Axa's Retirement Strategies also helps sponsors manage their fiduciary responsibilities with clear-cut educational materials to help participants assess financial goals and risk profiles, Mr. Nelson said.
On the participant side, "people need to understand who they are and where they are in the investment continuum," he said. Typically, however, retirement plan participants do not have the time or inclination to educate themselves about investing, he added.
"In the old days, [educational materials] were chock-a-block full of caveats and warnings," Mr. Nelson said. "The average guy going to work has no clue what any of that means … . [Participants] need simple terms to understand what they don't know."
