Fiduciary Standard Impacts
The new DOL fiduciary standard for IRA accounts will have a dramatic impact on insurance companies that issue traditional variable annuities. It is anticipated that the high-fees and commissions associated with these products will need to change and the primary incentive to sell such products (commissions) will no longer drive sales. The general consensus is that insurance companies will need to develop new low-cost solutions that are fiduciary and consumer friendly where the actual benefits of the offering will drive sales and not the compensation paid.
As the following chart from Morningstar shows, life insurance companies are most likely to be negatively impacted by the DOL Fiduciary Rule, and likely looking to create alternative offerings.
With more advisors becoming RIAs post-DOL fiduciary standard, there will be many more RIAs with a fiduciary obligation to make sure their advice is in the client’s best interest. To meet this standard, a client’s longevity risk needs to be assessed and low-cost, consumer friendly guaranteed income solutions should be considered in managing retirement assets.
Guaranteed Income Wrap
A Guaranteed Income Wrap is a new “contemporized” annuity solution that provides an attractive solution for advisors operating under the fiduciary standard. When an investor guarantees their lifetime income by wrapping their retirement assets with a Guaranteed Income Wrap, then:
• An income stream is guaranteed for life.
• Assets remain under the investment control of their advisor.
• The Guaranteed Income Wrap is tax benign and the retirement assets keep the eligibility for the preferential tax rates and tax loss harvesting that apply to the investment account.
• Liquidity is maintained and policy can be canceled at anytime without penalty.
• Portability of the assets is maintained between custodians.
• Greater equity exposure can be kept throughout retirement while the retiree has complete peace of mind.
• Sequence of return risk and longevity risk are eliminated.
• Costs are kept low and transparent.
• Our Advisor Solutions Desk and technology make purchase of a policy straightforward.
Aria and RetireOne have solved the technology and operational challenges and have key distribution partnered. We can scale adoption enabling Guaranteed Income Wraps to become the premier retirement income solution.
Advantages for Insurers:
• Plug and play technology interface
• Immediate access to multi trillion-dollar RIA/fiduciary/robo marketplace
• No commissions
• Emphasis on low-cost passive/index investments
• Simple product design
• “Vanilla” income guarantee