Family Office
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
.