DOL Regs & Ohio National's Possible RIA Only Product?

[scagnt83]

Statement from Ohio National's President:

Hersch: I don’t see indexed products among your insurance and annuity portfolios. Why’s that?

Huffman: Historically, we haven’t manufactured these products, but we have noted a growing demand for them in recent years and so we’re developing them. As to the recently finalized fiduciary rule, we’re also developing a no-commission product that producers can wrap a fee around.

http://www.lifehealthpro.com/2016/0...g-mutual-insur?page_all=1&slreturn=1464450357

Very interesting that they plan to classify it as a "Wrap Fee". That is a VERY specific term!

IF he used that term correctly, that means it will be a RIA only product.

If he used that term as a generic term for a flat Trail based commission, then that is no different than what many of the major IA carriers already offer.


But to speculate even more about that statement... IF it is indeed a RIA only product.... that COULD mean that ON has formed the opinion that this ruling will force Qualified IA sales to be performed by IARs only.... ????!!!!????

 

[DHK]

I'm going to guess that they didn't know WHAT would happen with DOL regs.

http://ohionationalconvention.com/Public/1290.pdf

Convention Qualification Requirements Modifications:
Due to the regulatory changes from the Department of Labor, Ohio National may be required to modify 2018 Convention qualification requirements. Qualification requirements will remain as indicated in this document unless otherwise noted. Ohio National will communicate any changes to convention qualifications as soon as possible. We thank you for your patience on this matter, and thank you for your continued business!

I believe they're being overly cautious in regards to the proposed ruling AND possibly thinking about how they position their products as an alternative to traditional retirement plans.

 

[scagnt83]

I believe they're being overly cautious in regards to the proposed ruling AND possibly thinking about how they position their products as an alternative to traditional retirement plans.

Probably so. Another thought is maybe they are expecting an increase in IARs and want to position a product that will be friendly to distribute in the B/D & RIA channels.

 

[DHK]

I would guess they'd design a UL, and/or an IUL, around the similar idea of Met Life's PAUL, a fee-based UL primarily for the RIA channel.

MetLife | Premier Accumulator UL

http://paul.metlife.com/paul/pdf/PAUL-ClientBrochure.pdf

 

[DWPCL]

I would guess they'd design a UL, and/or an IUL, around the similar idea of Met Life's PAUL, a fee-based UL primarily for the RIA channel.

MetLife | Premier Accumulator UL

http://paul.metlife.com/paul/pdf/PAUL-ClientBrochure.pdf

That product would be sweet on an IUL or VUL platform.

 

[Tahoe Ray]

That product would be sweet on an IUL or VUL platform.

I'm pretty sure that already exists through Midland.

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Statement from Ohio National's President:

http://www.lifehealthpro.com/2016/05/26/ohio-national-breaking-the-mold-among-mutual-insur?page_all=1&slreturn=1464450357

Very interesting that they plan to classify it as a "Wrap Fee". That is a VERY specific term!

IF he used that term correctly, that means it will be a RIA only product.

If he used that term as a generic term for a flat Trail based commission, then that is no different than what many of the major IA carriers already offer.

But to speculate even more about that statement... IF it is indeed a RIA only product.... that COULD mean that ON has formed the opinion that this ruling will force Qualified IA sales to be performed by IARs only.... ????!!!!????

I can't imagine that he used the term incorrectly. "Wrap fee" is certainly specific and wouldn't be misused by a company exec with a prepared statement.

How would you wrap an FIA? Most of the fees generated by the RIA market come from some perceived value; "I manage assets better than you do".

An FIA can't lose money, only has upside, and all of the terms are dictated by the carrier.

That is a tough justification on how you're "earning" your fee.

Until annuities really become an asset class, I can't see how this would work.

 

[scagnt83]

I'm pretty sure that already exists through Midland.

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I can't imagine that he used the term incorrectly. "Wrap fee" is certainly specific and wouldn't be misused by a company exec with a prepared statement.

How would you wrap an FIA? Most of the fees generated by the RIA market come from some perceived value; "I manage assets better than you do".

An FIA can't lose money, only has upside, and all of the terms are dictated by the carrier.

That is a tough justification on how you're "earning" your fee.

Until annuities really become an asset class, I can't see how this would work.

Midland offers Trail comp. But it is not a Wrap Fee that runs through a RIA. It is Commission direct to the Insurance Agent.


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The same "earning your Fee" argument could be made for VAs too, could it not? I realize there are funds to pick from... but not a lot, and they have already been "vetted" by other market professionals as being good funds.


But then again... what is the agent doing to earn that 1% Trail? It would be the same as the IAR who earns a 1% Wrap Fee. You are providing your expertise about the annuity market and how an annuity can compliment the rest of their portfolio.

I do understand what your saying though. The mindset on that side of the fence is different.

I think that argument is much more valid when using a TPAM/TAMP.

 

[Tahoe Ray]

Midland offers Trail comp. But it is not a Wrap Fee that runs through a RIA. It is Commission direct to the Insurance Agent.

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The same "earning your Fee" argument could be made for VAs too, could it not? I realize there are funds to pick from... but not a lot, and they have already been "vetted" by other market professionals as being good funds.

But then again... what is the agent doing to earn that 1% Trail? It would be the same as the IAR who earns a 1% Wrap Fee. You are providing your expertise about the annuity market and how an annuity can compliment the rest of their portfolio.

I do understand what your saying though. The mindset on that side of the fence is different.

I think that argument is much more valid when using a TPAM/TAMP.

Got it on Midland. So like Met....

I don't think that you can make that point with a VA. It requires investment selection (models, LG vs small, international vs domestic, asset allocation, etc.) that is just still much more extensive than on the FIA side.

For me it comes down to this: who is paying the direct compensation? On an FIA w/ trails, it is the carrier. On a wrap, it is the client.

When it comes directly from the client, there is an inherent necessity to "earn" that fee through ongoing management. That does really not occur in an FIA. The carrier is doing most of the heavy lifting.

I get your point on the expertise and if part of an overall portfolio, I could concede that it might make sense but let me ask you this: if a carrier launched a no surrender FIA with wrap only option, how much could you/would you charge if that was the only investment that a client had with you?

It would be tough to justify very much imho.

Interesting discussion.

 

[scagnt83]

Got it on Midland. So like Met....

I don't think that you can make that point with a VA. It requires investment selection (models, LG vs small, international vs domestic, asset allocation, etc.) that is just still much more extensive than on the FIA side.

For me it comes down to this: who is paying the direct compensation? On an FIA w/ trails, it is the carrier. On a wrap, it is the client.

When it comes directly from the client, there is an inherent necessity to "earn" that fee through ongoing management. That does really not occur in an FIA. The carrier is doing most of the heavy lifting.

I get your point on the expertise and if part of an overall portfolio, I could concede that it might make sense but let me ask you this: if a carrier launched a no surrender FIA with wrap only option, how much could you/would you charge if that was the only investment that a client had with you?

It would be tough to justify very much imho.

Interesting discussion.

VAs are more intensive than FIAs... but I would not call them "intensive" from a general securities standpoint. You are dealing with Asset Allocation but the funds to pick from have already been chosen & vetted by other Advisors. The value of asset allocation (as we have discussed) is getting less and less with technology these days. A client could pay $10/m and have a computer allocate their VA for them... but that is probably a whole different discussion... LOL.


But you are right, a no surrender FIA would be real hard to charge a 1% Wrap on and justify it to the client (or to myself). Especially if it was the only investment they had with me.

But let me throw this back at you... if that FIA is part of an overall portfolio that I AM MANAGING, then would it not be fair to charge the same on the FIA as the rest of the portfolio? You wouldnt charge a variable Fee within the same portfolio from product to product... so why would this product within the portfolio be any different? COULD it be any different from a compliance standpoint?? I guess it would depend on your ADVII and how you word it.


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And how can the CARRIER justify a Wrap Fee without offering higher Caps or Participation to offset the direct loss?

Sure, it is something to "just have in the toolbox" for an IAR... but if an IAR is supposed to do the "best thing" for the client, then how can the IAR justify selling a sub-par FIA??? Seems like a catch-22 for all sides involved unless the FIA has higher Caps than the competition.

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And you are correct, this is a very interesting discussion. No telling how it will all play out.

 

[Tahoe Ray]

But let me throw this back at you... if that FIA is part of an overall portfolio that I AM MANAGING, then would it not be fair to charge the same on the FIA as the rest of the portfolio? You wouldnt charge a variable Fee within the same portfolio from product to product... so why would this product within the portfolio be any different? COULD it be any different from a compliance standpoint?.

And this is my sticking point. In my opinion, you are 100% accurate.

BUT, until fixed annuities can be viewed as an asset class as opposed to a "product", that justification will be very difficult.