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Jefferson National’s Low Cost Variable Annuity Big Part of Why Nationwide Bought Company


Nationwide Financial is planning to greatly expand their variable annuity business through the purchase of Jefferson National, a strong player in the variable annuity game. Investment News’ Christine Idzelis wrote about the acquisition in the article “Nationwide to buy Jefferson National.” This deal gives Nationwide access to Jefferson National’s 4,000 registered investment advisors and fee-based advisors.

It’s a move that Nationwide sees fitting because of the new fiduciary standards that must be met when selling commission-based annuity products. Instead of meeting government suitability requirements, advisors will now have to meet much stricter best interest guidelines when selling commission-based variable and fixed indexed annuities. Nationwide said that this move will help investors and advisors looking to expand fee-based business after the rule takes effect next year.

With a strong brokerage distribution channel already in place, Nationwide says that the expansion of their RIA channel will benefit both themselves and Jefferson National through a partnership that could lead to massive growth. Jefferson National will now be a wholly owned subsidiary of Nationwide. RIAs are already overseen by the SEC and their advice is held to best interests standards. They offer low-cost variable annuities that Nationwide is excited to start distributing. Nationwide typically works with the broker-dealer distribution channel, so this purchase will really expand their reach in the industry. Jefferson has been dominant in the RIA channel with their line of variable annuities.

The Monument Advisor is Jefferson National’s popular low-cost investment only variable annuity product. It does not have mortality or expense fees and it’s basic contract makes it one of the lowest cost VAs available. There is no surrender penalty, but the product still boasts a large amount of investment options to choose from. It’s been called a very user friendly variable annuity.

RIAs are a fast growing distribution channel because they are mostly fee-based and the new regulations from the DOL are pushing investment business to fee-based models. The broker-dealers that Nationwide usually works with are typically commission-based, a model that some insurers are trying to shift some of their business away from. Nationwide plans to maintain their presence with broker-dealers while increasing their relationship with RIAs and the fee-based channel. Nationwide is counting on Jefferson National’s Monument Advisor variable annuity to be a big part of their business after purchasing the company.

Written by Rachel Summit

Follow Rachel, aka Finance Mama, on Twitter and Google+


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