ING Group Inc. calls it the Simplicity Variable Annuity and one expert calls it an overdue offering that stands to be popular with banks overwhelmed by more complex annuities.
The Atlanta unit of the Dutch insurance and banking company ING Group NV did extensive focus group research both within and outside of the bank channel in developing the product, said Ann Cutts, a senior vice president and head of business development for ING’s retail annuities business group.
Financial advisers in the bank channel said one in four of their clients might be appropriate for the Simplicity Variable annuity, the research found.
“Advisers want a variable annuity without all the bells and whistles and complexities associated with many annuity products,” Ms. Cutts said.
She said that “because of its transparency,” the ING Simplicity Variable Annuity is “very appropriate for a bank platform.”
Kenneth Kehrer, the president of consulting firm Kenneth Kehrer Associates in Princeton, N.J., agreed. “It’s going to be more difficult” for salespeople in bank branches “to master something with all kinds of bells and whistles attached to it.”
The product, unveiled Aug. 31, offers investors and advisers four preallocated fund of funds options from which to choose. The funds have built-in diversification and upside potential tailored to the investor’s risk tolerance.
The annuity has both a living benefit and a death benefit built into it, so customers do not need to decide which is most appropriate for them, Ms. Cutts said. Both benefits guarantee a 1.5% interest rate each year regardless of the underlying investments’ performance. The annuity also offers a streamlined prospectus with a single-page application.
Ms. Cutts said many variable annuities offer consumers such a wide variety of benefits and investment options that investors and financial advisers alike can find it dizzying.
Most financial services providers have added more features to their variable annuities in recent years; ING is among the first to offer a cut-and-dried product, Mr. Kehrer said.
Nationwide Financial Services of Columbus, Ohio, has a similar product, the Best of America ElitePro Classic. It has a built-in death benefit, minimum income guarantee, and underlying Gartmore asset-allocation funds.
Mr. Kehrer said the Simplicity product could help ING sign up more banks as customers.
“There have been questions raised about how much people actually understand these things,” he said. “You call two different people on the sales desk and sometimes you get two different answers.”
Since qualified financial advisers are hard to recruit, more banks rely on branch salespeople to sell annuities and other investment products, Mr. Kehrer said. But they generally focus on banking products, he said.
As Ms. Cutts said, “There’s a whole segment of financial advisers that are not writing annuities because of their complexity.”
The annuity’s interest rates are comparable with the yields available through certificates of deposit and similar fixed-income products, Ms. Cutts said. In July, average one-year CD rates reached 2.82% after a steady climb that began in May 2004, according to the Kehrer-Jackson National RateWatch survey.
