Family Office

Raymond James mandates cheaper variable annuities

Thomas Coyle August 11, 2006

Raymond James mandates cheaper variable annuities

So far nine of the broker-dealer's 18 V.A. manufacturers have come through. Half of the 18 insurance firms providing variable annuities through financial advisors affiliated with Raymond James Financial met the investment-product retailer's 31 July deadline to begin offering new and less costly annuity products.

Early in May Raymond James said it would require the restructuring of variable annuities offered through financial advisors at its broker-dealer subsidiaries, Raymond James Financial Services, an independent brokerage, and Raymond James & Associates, a full-service platform. The requirements don't seem to touch Raymond James Limited, Raymond James' Canadian unit.

Unprecedented

Specifically Raymond James told its annuity carriers to come up with lower policy fees, consistent commissions and simpler overall annuity offerings.

The new requirements follow an in-house study of the investment characteristics of variable annuities. Raymond James says it took "into account criticism that they had become too costly and so complex that purchasers find them difficult to understand."

In what it calls "an unprecedented move for the financial services industry," Raymond James says it will take lower commissions "in order to allow its insurance partners to reduce client costs." But Raymond James adds that its new specifications for variable annuities "will simplify the product while still retaining typical standard and optional benefits."

Mark Mackey, president and CEO of the National Association for Variable Annuities, says Raymond James deserves "to be commended for taking a very pro-consumer approach to the sale of variable annuity products."

The companies that met Raymond James deadline were Genworth, Integrity Life, Jackson National, John Hancock, Nationwide, Ohio National, Pruco/American Skandia, Protective Life and Transamerica Life.

The nine other carriers -- Raymond James doesn't name them -- have until the end of September, after which "the firm's 4,800 financial advisors will no longer offer variable annuities that do not meet the new fee and commission requirements," according to Scott Stolz, head of annuity and insurance distribution for Raymond James.

"Not surprisingly, it is no small task to coordinate a launch date with 18 different insurance companies, so we are happy that nine are ready now," adds Stolz. "By the end of September, we expect to add four more carriers; the remaining five will follow."

St. Petersburg, Fla.-based Raymond James foresees a short-term drop in annuity revenue as a result of its new policies, but expects to see greater client retention over time.

The 4,800 or so Raymond James brokers Stolz mentions work from 2,200 offices in the U.S., Canada and overseas, distributing $169 billion in client assets, $32 billion of which are managed by in-house subsidiaries.--FWR

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