Nationwide Releases FIAs With Joint Option
Nationwide, which rocketed into a Top Three spot in the sales of fixed indexed annuities (FIAs) in the fourth quarter of last year, has launched a pair of FIAs with a “joint option” feature.
The joint option feature allows the annuity’s death benefit to be paid to either surviving spouse, no matter who dies first. This means that the annuity benefits are tied to the annuitant instead of to the owner.
Qualified annuities can have only one account owner so a death benefit will only be paid to the named beneficiary.
Under the joint option, however, a qualified account owner can be named annuitant and the spouse named a co-annuitant. Both then can be named as beneficiary.
“In an IRA situation, the death benefit will pay out on either person's death - the owner or the spouse,” said Eric Henderson, senior vice president of life and annuity with Nationwide.
The joint option is available only if both spouses are 85 or younger, one spouse is named annuitant and the other named co-annuitant. Only the spouses can be named as primary beneficiaries, the company said.
Henderson said the joint option offers a feature that is more “annuitant-driven,” than “owner-driven.”
Nationwide Summit and Peak Targeted at Banks, Wirehouses
The joint option is available on Nationwide’s Summit and Nationwide’s Peak fixed indexed annuities, both of which belong to the same family of FIAs designed to be sold by banks and wirehouses, Henderson said.
The products, which both have seven-year surrender charges,also can be sold through independent broker/dealers, he added.
Peak and Summit FIAs retain caps on the amount credit to the indexed portion of the annuity, which is common in the indexed annuity world.
They stand in contrast to Nationwide’s New Heights family of FIAs. New Heights FIAs, of which there are four, have no caps but allocate a certain percentage of funds among the indexed and the fixed part of the annuity.
Launched two years ago, New Heights are geared to be sold through insurance marketing organizations (IMOs) and broker/dealers.
Nationwide was the No. 6 seller of FIAs last year with $2.4 billion in FIA sales, according to Wink’s Sales & Market Report.
Summit annuity buyers can choose among the S&P 500 and the proprietary J.P. Morgan Mozaic index.
Peak annuity buyers can choose among the S&P 500 and the MSCI EAFE index designed to measure the equity market performance of developed markets outside the U.S. and Canada.
While the joint option of these FIAs may appeal to a married couple, another interesting feature of the Nationwide Summit and Peak products is that there’s no maximum issue age listed for the owner.
A 100-year-old buyer could, in theory, purchase a Summit or Peak contract so long as the contract is deemed suitable — though it is unlikely that such a contract would be deemed suitable for someone that old, Henderson said.
Still, “older people are getting more choices with the Nationwide product and that’s a good thing,” said Sheryl J. Moore, president and CEO of Moore’s Market Intelligence and publisher of Wink’s Sales & Market Report, which tracks FIA sales.
A Question of Suitability
Henderson said the release of the two new annuities, coming little more than a month after regulators placed new restrictions on the sale of FIAs, had nothing to do with the Department of Labor’s fiduciary rule released April 6.
The rule is designed to cut down on conflicts of interest. It requires any financial transaction involving a retirement account to meet a fiduciary standard.
High-commission variable and fixed indexed annuities remain allowable if they are sold under the DOL’s Best Interest Contract Exemption.
The maximum issue age for an annuitant under Nationwide’s new Summit and Peak FIAs is 90 years old, but the life expectancy for a 90-year-old man is four years, on average. A 90-year-old may live to 100 or even 110, but it’s not very likely.
“A 90-year-old male has a four-year life expectancy and the surrender schedule is seven years, a seven-year surrender schedule with a four-year life expectancy — I’m not sure that suitable,” said Chris Chen, a fee-only certified financial planner and wealth advisor in Waltham, Mass.
The owner and the annuitant frequently are one and the same person. So it’s entirely possible to have a situation in which Nationwide’s new FIAs are just for a 95-year-old or 100-year-old buyer, Chen said.
But with financial advisors now in “DOL fiduciary mode,” particularly with regard to FIAs, any advisor is going to review the contracts even more closely than before, he added.
With the DOL moving to retirement accounts, “anyone selling an annuity needs to be extra cautious about who they are selling them to and when they can annuitize,” said Ryan Fuchs, a fee-only certified financial planner with Ifrah Financial Services in Frisco, Texas.
“I think you can certainly show that an FIA is 'suitable' for older clients, but it may be difficult in many if not most cases to argue that an annuity with any sort of surrender period, is ‘suitable’ for someone who is 100, or even in their 80s or 90s,” he said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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