The increasingly paperless world of annuity sales is steadily taking shape, with the clearing arm of Fidelity Investments having gradually built the number of insurance carriers participating in its automated program to 20.
The clearing arm, National Financial Services LLC, launched its automated annuity program two years ago. Its carriers now include 16 of the 20 largest issuers of individual annuities. Lizanne Campbell, a senior vice president of National Financial, said that in most cases annuity sales through carriers added over the last few months, including Hartford Life Insurance Co., Lincoln Financial Group, and Massachusetts Mutual Life Insurance Co., now are processed in a matter of hours rather than days.
Steven Adams, director of operations for Huntington Investment Co., the brokerage unit of Huntington Bankshares in Columbus, Ohio, said the platform helps position the business for an expected wave of baby boomer retirees seeking annuities. "We gain speed in terms of getting things done and off to the carrier," he said.
Fidelity's platform, which is integrated into its broker workstation, automates commission payments, processing, and the aggregation of outside annuities into one account. One of the advantages of the platform, introduced two years ago, is that it forces brokers to fill out applications more thoroughly and accurately, Mr. Adams said.
"It does not let you move to the next question until the previous ones are in order," he said. "As a result, you're not sitting and dealing with 'not in good order' documentation all day long."
Ms. Campbell said the traditional "check and app" approach to processing an annuity sale involves paper applications and checks that are mailed to carriers.
Fidelity's program, which uses technology from EbixExchange, a division of Ebix Inc. in Herndon, Va., allows brokers to set up annuities online using an application that is pre-filled in the case of existing National Financial customers. The process is meant to keep brokers from ordering annuity features that are not available by giving a finite range of options.
Before adopting the program in September, Huntington customers waited days or sometimes weeks for a policy to be issued, Mr. Adams said. Now, for cash transactions, a policy might be issued the morning after a customer applies, he said.
Anticipating a wave of retiring baby boomers, Huntington has been focusing for the last couple of years on moving to a "trusted adviser" model for its sales reps — an effort that included finding retirement income products and services for clients, Mr. Adams said. "With the old system being so manual, we would not have been ready."
Multiple companies offer automated annuity processing, but Huntington chose National Financial in part because it already clears through the company, he said. "It was one of those things where we had economies of scale."
According to Ms. Campbell, National Financial does not charge brokers a premium for the service; instead it collects its revenue from the participating insurance carriers. As of Oct. 31 more than $20 billion of annuity assets had been processed and aggregated through the program.
National Financial, whose brokerage platform is used by 340 broker-dealers and other clients with more than 86,000 brokers, has added carriers according to the amount of business they do with those brokers. Hartford, which Fidelity added in December of last year, is a major distributor of annuities through banks.
Aggregation makes it easier to perform suitability analysis, because it can present all of a client's investments on a single brokerage statement. About 40 annuity providers participate in National Financial's aggregation offering through its posting service. Suitability is a key concern for annuity distributors. In September the Securities and Exchange Commission approved stringent rules covering the appropriateness of selling or exchanging deferred variable annuities for clients.
The large list of carriers to choose from presents a similar challenge to that of automated mutual fund platforms — having a multiplicity of choices. Huntington is doing most of its business with about eight carriers that it sees as efficient and having strong products, Mr. Adams said.
