PHOENIX -- Jackson National Lifes Robert P. Saltzman is not in denial about the state of his industry.
Speaking here at the National Association for Variable Annuities annual marketing conference, the Lansing, Mich., companys president and chief executive officer said 2000 was a wakeup call for the sector, a year when robust revenues were offset by record redemption and exchange outflows.
For every hundred dollars spent to buy a variable annuity, $80 went out the door in the form of redemptions, he said in a speech Monday.
Inflow for the top 50 variable annuities in 2000 was $105 billion, but the groups net inflow was $34 billion, and net inflow for variable annuities overall was $27 billion, Mr. Saltzman said. On the outflow side, 40% of annuity sales -- double the 1996 level -- came from 1035 exchanges rather than from fresh assets.
Aggressive marketing of bonus annuities generated most of the exchanges, Mr. Saltzman said, noting that companies are running promotions year-round to maintain their sales levels.
They are also hiring more wholesalers to boost distribution, but never have so many wholesalers -- and the representatives they work with -- been so lacking in expertise, he said.
As recently as 10 years ago, wholesalers taught reps. Now, Mr. Saltzman said, they are less experienced than the advisers they are supposed to help. Indiscriminate hiring of wholesalers is going to have to end.
The people selling to consumers arent much better, he said: As of now, 200,000 reps sell financial products, and 50% of them were hired after 1990. Most of them havent even seen a cub, let alone a bear.
And he said that, while the Internet is a great place for consumers to go for information on investment products, information is not advice.
The individual investor is retiring younger, has higher exposure to equities, unreasonable expectations, and limited understanding of what theyre doing, he said.
Though some annuity sellers have tried to stem the tide of exchanges and redemptions with conservation programs, more has to be done if the variable annuity market is to stabilize, Mr. Saltzman said.
Simply providing information and advice doesnt work, he said. Distributors are going to have to help reps be more competent advisers, even with confused clients, and will have to help advisers be better at getting clients to act on the advice.