Are Tax-Deferred VAs Tax Efficient? Yes, Says Jefferson National

"Often, an advisor will have a client that has an annuity they were sold by someone else," Skiles said. "They almost have to ignore it because the costs involved with a 1035 exchange make it prohibitive to move. There's nothing they can really do to help them."

Tax Advantages in a VA Wrapper

As for the JeffNat VA's tax advantages, this year is a good time for advisors to seek shelters for their clients as taxes across the board start to rise, Greenberg and Lau said. They compared their VA to a money management account and cited Cerulli research showing that rising taxes and ongoing volatility are driving higher demand for tactical management and alternative strategies.

Jefferson National Monument Advisor offers more than 70 alternative investment options among its 400 underlying funds along with model portfolios designed to achieve higher after-tax returns.

Barron's has named Jefferson National along with Symetra and Security Benefit as being quick to respond to higher tax rates by launching cheap, liquid and simple variable annuities. In an article written in May, Barron's writer Karen Hube quotes John Capets, an advisor and vice president at Harbor Capital Management in Charlotte, N.C., saying that he has started using the Jefferson National Monument Advisor Variable Annuity for his high-net-worth investors.

"The alternatives portfolio can generate a lot of short-term capital gains, but inside the tax-deferred annuity it has no impact," Capets told Barron's.

Former E*Trade CEO Mitch Caplan first understood the business potential for a firm that could exploit the inefficiencies of commission-driven variable annuities while he was working as an advisor at a private equity firm in 2009. A year later, he came across Jefferson National, based in Louisville, which had already redefined the VA in 2005 by stripping away its traditional and hard-to-understand living benefits, upfront loads and surrender charges.

By early 2012, Caplan led a management buyout of JeffNat in an $83 million deal so he could deploy an aggressive distribution strategy for RIAs and fee-based advisors. Joining him in the management shakeup were Greenberg, previously a first vice president of consumer banking at Merrill Lynch and then COO of Telebank, now E*Trade, and Lau, a principal and co-founder along with Greenberg of management consulting firm The Oysterhouse Group.

"We organized a company to offer low-cost variable annuities as a sustainable and disruptive business model," Lau said. "We're going to be one of the top-selling annuities this year."

Read Blogger Mike Patton on What I Learned From Investigating a Prospective Client's Annuity at ThinkAdvisor.