In an unusual move, Holden Group has called on bankers to be the architects of a new annuity.
The Los Angeles company put together a panel of six bankers from across the country to create a product specifically for branch customers.
Holden was tipping its hat to banks' growing clout as distributors of these tax-deferred investment products.
"All the participants were glad they were interested in our perspeptive," said Kathy Szolusha, a panel member and marketing manager at Signet Financial Services, the securities and insurance arm of Signet Banking Corp., Richmond, Va.
|A Product of Consensus'
The panel's annuity, Bankers' Choice, "is very much a product of consensus," she said.
The product had a limited rollout two years ago, but Holden is now making the annuity a central part of the company's stepped-up push into the bank market.
Bankers' Choice is a fixed annuity whose investment contracts are underwritten by Security First Life Insurance Co., a unit of Holden.
The annuity reflects its bank roots by closely mirroring a certificate of deposit.
Customers who want to pull out of Bankers' Choice pay a surrender charge equal to the last six months' interest. The fee resembles an early-withdrawal penalty on a CD more than a traditional annuity surrender charge.
Annuity customers typically pay a percentage of the assets in their contracts, said Michael McCoy, the senior vice president who heads Holden's bank program. The fee generally starts at 7% or more in the first year and dips by one point annually.
A customer who invests $10,000 in a Bankers' Choice annuity paying 5% would face a penalty of around $250 if cashing out in the third year.
A customer in a standard annuity would face about $600 in fees, Mr. McCoy said.
He acknowledged that surrender charges for standard annuities usually disappear after the seventh or eighth year, while the Banker's Choice charges remain in effect.
But he said the potential of high fees in the first several years is a disincentive to many bank customers. "They want to know the money is there, without too much pain, if they need it."