Annuity Modernization

Are Your Clients’ Older Annuities Still Serving Their Needs?

If clients have annuities or other insurance products lingering in their portfolios, it’s important to make sure they're still serving the intended purpose.

Clients' Goals Can Change

It's possible your clients may be paying for features in their older annuities or insurance products that they no longer need—and that can place a significant drag on performance. Today's advisory annuities have different fee structures than traditional annuities and are often more cost-conscious. However, reducing expenses and investment costs are not the only reasons to consider modernizing your clients' annuities. There's also the opportunity to increase growth potential through tax deferral and help clients take advantage of more relevant product features. It's important to carefully compare all the costs, features, and restrictions of the older annuity against the modern annuity to help decide if the process will benefit your clients.

 

Modernizing clients' older annuities also places those assets under your advisory umbrella, if they’re not already. This provides a holistic view of this money on your desktop and allows you and your clients to actively manage those assets with their new goals in mind.

 

Watch this video to see how to evaluate the need for modernizing your clients’ older annuities.

Annuity Modernization in Action: A Case Study

Kevin and Kathy purchased a traditional variable annuity in 2010 while they were still working and concerned about having enough money for retirement. The couple is thrilled with the way their investment accounts have grown, and their financial plan reflects a high probability of success on all fronts. Today, Kathy is enjoying retirement and Kevin has decided to work only a few more years.

 

Could they benefit from modernizing their existing annuity into an advisory annuity?

Through a reassessment of their current retirement needs, their advisor discovers that the couple no longer needs some of the features they are paying for in their variable annuity. The advisor evaluates their older annuity against Pacific Advisory Variable Annuity to see if they can reduce overall costs and provide a solution that more closely aligns with Kevin and Kathy's current needs.

 
  Current Traditional Variable Annuity Pacific Advisory Variable Annuity 
Initial Purchase Payment $150,000 Nonqualified $310,000
Withdrawal Charges Out of surrender No surrender charges
Total VA Cost
 3.50% (Contract Charges: 1.30%; Income Benefit: 1.10%; Average Fund Expense: 1.10%) 1.00% (Contract Charges: 0.45%; Average Fund Expense: 0.53%)
Current Contract Value $310,000 N/A
Advisory Fee 0% 1.00%
 

This hypothetical example is for illustrative purposes only. 

 

 

Conclusion

In this scenario, modernizing the couple’s current annuity for one that doesn't include the now unneeded income benefit and lowers their costs is a savvy decision.

Total contract costs for Pacific Advisory Variable Annuity are approximately 1.50% less than their current annuity.

Fee difference on $310,000 over a 10-year time frame could equate to saving Kevin and Kathy over $65,000 in contract fees.

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