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More No-Load Annuities to Come


A big concern for annuity naysayers is the lack of liquidity with some annuity products.  While the money put into an annuity is actually good left there as insurance that you will have lifetime income, I appreciate the fact that some people just want access to their money no matter what.  In Stan Haithcock’s Marketwatch article, “Fee-killing no-load annuities are pro consumer,” he talks about the consumer benefits of no-load annuities and the new trend pointing towards more of these products.  A no-load annuity simply means that there are no surrender charges to take your money out should you feel the need to.  The majority of annuities sold are deferred annuities that have surrender charges attached.  If you are one of the people who prefers an annuity without surrender charges, innovation in the industry is headed that way.

Vanguard and Charles Schwab have worked hard to create financial products and investment choices that are low cost to consumers.  Jefferson National’s Mitch Caplan is working to bring this type of product to the realm of annuity products.  He has been one of the forces leading the way in innovation through the banking industry and online investing like E-Trade.  Now Mr. Caplan is working to move the annuity industry further into the future with a new no-load variable annuity through Jefferson National.  This new product offers close to 400 choices for your accounts and has no surrender charges from the moment you purchase your annuity.  Administrative fees are $20 regardless of account size or value.  Some people who buy this annuity take care of the investments themselves, while others prefer to hire a fee-only financial planner.

There are not a lot of options when it comes to no-load annuity choices.  But this new product from Jefferson National takes a variable annuity back to its original purpose, which was tax deferred growth at its purest level.  Currently, the majority of no-load variable annuities are funded from 1035 annuity exchanges, but it’s becoming more popular to buy these products as they are easier to manage without help.  Mr. Caplan believes that indexed annuities will be the next product in line for no-load options, which will be a big difference for that product line.

Simplicity with annuity products is a good thing.  It’s not something annuities are known for, but it helps consumers and advisors alike.  It also helps the entire industry run smoothly and garner a good reputation.  Guarantees and benefits will remain with annuities of course, but Mr. Haithcock thinks that insurance companies will find a way to offer these in a more cost effective way.  He predicts better ways to buy SPIAs, DIAs, and fixed annuities with income riders.  He also sees more variable annuities and indexed annuities that are no-load, while offering growth potential.  Advisors will remain very important in the annuity industry because most people aren’t interested in doing it all themselves.  But those who are should be able to find no-load annuities they can manage themselves much easier in the near future.  Simplicity is good all around.

Written by Rachel Summit

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