At least three big fixed indexed annuity marketers now own their own broker-dealers.
The IMOs are Covenant Reliance Producers LLC, Nashville, Tenn.; Brokers International Ltd., Panora, Iowa; and Asset Marketing Systems Insurance Services LLC, San Diego, Calif., says Jack Marrion, president of Advantage Compendium Ltd., St. Louis.
The new structures have come in the wake of regulatory moves to redirect regulation of fixed indexed annuities from the state to the federal level (via Notice to Members 05-50 of the Financial Industry Regulatory Authority and not-yet-implemented Rule 151A of the Securities and Exchange Commission.)
Traditionally, insurance marketing organizations (IMOs) and similar firms have provided insurance agents and advisors with access to products, marketing, training and other sale services in accord with state insurance laws. But the Notice 05-50 changed that. Issued in August 2005, the notice directed B-Ds to supervise sales of indexed annuities as securities, thus upending parts of the IMO sales process.
IMOs have responded in different ways. Several have set themselves up as an office of supervisory jurisdiction (OSJ), meaning they are effectively a B-D branch office, says Marrion. Others have become registered investment advisory (RIA) firms.
But a few have gone a step further, creating or buying their own B-D, he says.
Asset Marketing formed Madison Avenue Securities, Inc. in May 2005. Brokers International formed Brokers International Financial Services LLC in November 2005. Covenant Reliance bought Center Street Securities, Inc. in spring 2009.
"We saw the writing on the wall, when Notice 05-50 came out," says Matthew Rettick, Covenant Reliance president of its move to B-D.
"We realized it was not enough anymore to educate agents, help with insurance licensing, provide products and otherwise support them as insurance advisors." To sell FIAs, he says, insurance agents would now need to get Series 65 licensed, he continues, "so they could be investment company representatives and talk about securities with clients as well as insurance."
That realization led to a restructuring of the IMO that stretched over three years.
In August 2006, Rettick joined with partner Dean Zayed to create Brookstone Capital Management, LLC, a fee-based registered investment advisor that provides Series 65 licensing assistance, compliance and various money management services.
In spring 2009 came the purchase of the Center Street B-D, from J.R. Thacker, who remains with the firm.
