10 Ideas For Reshaping VAs

6. Permit quarterly lock-in on GMWB account value. ING's new LifePay living benefit lets the annuity owner lock in increases in the account value once every quarter before withdrawals begin; then, after income starts, the owner can "reset" the guaranteed income amount annually.

7. Offer auto step-ups. AIG/SunAmerica and John Hancock, Boston, say their GMWB step-ups (lock-ins of market gains) occur automatically. Some step-ups require owners to take action to elect the stepped up value, notes AIG's Scheinerman, "but we are uncomfortable with the possibility that you could miss the step-up if you failed to call."

8. Redesign advisor compensation. For VA annuitization and variable immediate annuities to develop, producers will need to receive trailer compensation on the money under management, maintains Scott M. Schumacher, associate vice president-product management, Nationwide Financial, Columbus, Ohio. "It's got to come," he says. Maybe there will be some sort of commuted value on the trailers, he suggests, so brokers could receive, say, 2% up-front and then 25 basis point trailers. "We need to find ways to pay the advisor for the income planning," agrees Denning of Principal. But trailers, if based on account value, will keep going down as the client continues to draw down assets, he points out. So, the new designs may allow the agent to take the compensation either up-front or over time (in which case it will be in declining amounts), he says.

9. Push education. Advisor and client education is essential to furthering the use of VAs for income planning, say virtually all VA executives. Some firms are making this a priority. For instance, AXA Equitable requires advisors to pass a 90-miniute certification course before they can sell its Retirement Income for Life product, says Robert Goldenberg, vice president-annuity marketing and product development, New York City. "If the product is upgraded, they will have to be recertified, too," he says. The company also has developed a nonprofit website–www.variableannuityfacts.org–to provide public education on VAs, including the income aspects. Meanwhile, Phoenix is offering its advisors a presentation on its living benefits suite. It discusses the features, where they fit, case studies and so on, says Paris.

10. Factor in health care costs. The use of nursing home riders and increased liquidity are tied together, says Greg B. Salsbury, executive vice president, Jackson National Life Distributors, Denver. They reflect the growing concern about funding health care costs in retirement. Subaccounts that allow for health care indices might therefore be of interest to advisors.