Insurance companies often face an uphill battle to convince independent advisers that variable annuities have earned a place in clients' portfolios.
Jefferson National, which markets the Monument Advisor variable annuity as the industry's first flat-fee product of its kind, says it is hoping to get a boost from a recent partnership with Pershing LLC in the broker-dealer channel and Pershing Advisor Solutions, which serves registered investment advisers, or RIAs.
The custodian is to include the Monument Advisor product on its NetX360 technology platform for fee-based advisers, including registered investment advisers, Jefferson National announced last Thursday.
The partnership will let advisers whose clients use the Monument Advisor product and the NetX360 platform consolidate clients' variable annuity contract data within their brokerage accounts.
That integration would give advisers access to updated variable annuity data in real time on their workstations. The information also is to be reported on clients' brokerage account statements.
The partnership appears as a big victory for both sides.
Jefferson National stands to gain wider distribution of its variable annuity to the more than 100,000 advisers using the NetX360 platform.
The product has already had a strong start.
Morningstar VARDS Data ranked Monument Advisor as the top RIA-sold variable annuity for three consecutive years, 2007 through 2009, giving Pershing another lure for advisers who are already comfortable using variable annuities.
The Jefferson National product charges $20 a month regardless of the investment amount, compared with the typical fee of 135 basis points. If one considers that a typical client holds a balance of $200,000 in his or her variable annuity account, the flat fee comes out to about 12 basis points a year, said David Lau, the chief operating officer at Jefferson National.
"Integrating data from the industry's first VA with a flat-insurance fee on the NetX360 platform helps fee-based advisers streamline their practice and better serve their clients," said Mark Tibergien, the chief executive officer of Pershing Advisor Solutions. A spokeswoman for the adviser solutions unit said the platform has a 96% adoption rate among affiliated advisers in both channels, or more than 100,000 investment professionals.
"On the Pershing platform, advisers can get that consolidated view, and look at clients' portfolio on a tax basis, not just the asset basis," Lau said.
"With tax rates expected to rise, it is a hot button for clients and advisers," he said. "They want to get out in front of the tax issue, particularly high-net-worth clients."
The platform has one drawback. NetX360 does not automatically rebalance the clients' insurance and brokerage assets, according to Lau.
Advisers and financial planners can compensate for that, however, and give clients an overall view of their situations.
Typically, a financial adviser might create a 60%-40% stock-bond asset mix within a regular taxable account, as well as within a variable annuity account. Bonds generally perform better with a tax deferral, so the platform allows advisers to look at the accounts in the same view.
They might choose to keep all the bonds in tax-deferred accounts and keep all equities in the taxable accounts, Lau said.
Jefferson National maintains distribution partnerships with several other custodial firms, including Charles Schwab and TD Ameritrade, Lau said.
The Pershing agreement, however, is the first that embeds the product on the custodian's platform.
