Annuity Monitor Statement Analysis

Transcription

1 420 Lexington Avenue New York, NY December 2011 Annuity Monitor Statement Analysis Introduction Account statements have traditionally been the most important means of communication between a client and his or her financial firm. For annuity clients, quarterly statements offer a detailed view of the overall performance of their annuity accounts, providing important details such as total withdrawals, premium payments, subaccount and total policy values. In many ways, the annuity account statement represents the metaphorical bill of health and should provide clients with key information and performance data for their annuity holdings. Since the majority of investors do not actively manage their annuity accounts, quarterly statements are especially important to keep clients updated on their account activity. Considering the financial turbulence of 2008 through 2010, annuity clients obviously want to keep a close eye on their annuity activity, so it is important for firms to provide them with an effective statement that is highly transparent, easy to read and filled with detailed performance indicators. Table of Contents ANNUITY MONITOR STATEMENT ANALYSIS... 1 ABOUT ANNUITY MONITOR... 2 THE CORPORATE INSIGHT AUDIT METHODOLOGY... 3 KEY SUMMARY FINDINGS... 8 PREVIOUS ANNUITY MONITOR BEST PRACTICE REPORTS This white paper is a summary of a larger research paper that we have made available to the IRI membership. To download your copy of the 2011 Annuity Monitor Statement Analysis, please visit: This paper leverages findings from Corporate Insight s comprehensive Annuity Monitor Statement Analysis, published in May Our framework for this report focuses on the quarterly account statements mailed to clients by Annuity Monitor firms in either the first or fourth quarter of 2010 (the most up-to-date statements as of March 2011). Paper documents from 17 firms were reviewed. We considered the design, layout and contract information of each statement we reviewed. Corporate Insight, Inc., December 2011.

2 About Annuity Monitor Annuity Monitor offers clients the ability to effectively monitor the competitive annuity market space and develop bestin-class marketing and servicing strategies. By opening and funding accounts at 19 of the industry s major annuity providers, we are able to provide a clear and unbiased view of the retail investor experience. These are actual client accounts, not test accounts opened in conjunction with firm participation. We also have access to the websites used by investment professionals to sell annuity products through our relationships with actual advisors. In this way, our clients are able to gain a broad understanding of how their competitors maintain a relationship with investors as well as advisors. Annuity Monitor helps clients: Keep an eye on competitors product development efforts. Consistently monitor the changes to competitor sites and new marketing strategies employed by these firms. Gain access to investor sites and collateral materials including statements, newsletters, marketing materials, applications, disclosure documents, etc. Gain access to advisor sites and materials, including educational items and sales literature. Learn best practices in a multitude of marketing and customer service components, such as statement design, website capabilities, newsletters, marketing brochures, etc. Six key deliverables are the foundation of the Annuity Monitor service: Bi-Weekly Updates Delivered every two weeks, our Updates keep clients informed about the latest public, private client and advisor website changes that have occurred within our coverage group. Capabilities Benchmarking Matrix Updated quarterly, this resource provides an in-depth account of online features and functionality for each firm s public, private and advisor sites. Website Movies Clients looking for a visual account of the password-protected client and advisor sites will benefit from this series of site movies that show our analysts navigating through each website we track. Since these are not merely static screenshots, Annuity Monitor clients will experience a free-flowing virtual tour of each website labeled by the action being performed (e.g., Login, Transactions). Corporateinsight.com Subscribers gain access to the Annuity Monitor portion of our website, which offers a complete archive of all of our research and reports. Access to our research is corporate wide. Collateral Materials Scanned images (PDF) of all collateral material we receive are included in the monthly best practice reports. Additionally, clients can access these account and promotional materials at any time from Corporateinsight.com. Monthly Best Practice Report The final component of the Annuity Monitor service is the comprehensive monthly report, a detailed analysis of a particular feature of the annuity sales and servicing process. These reports review each firm in respect to the topic, benchmark strengths and weaknesses and provide a series of recommendations to help firms improve their offerings. Topics cover both online and offline materials as well as issues facing both investors and investment professionals. In addition, our analyst team is very receptive to client input and subscribers have every opportunity to drive the topics that are covered by providing suggestions. Page 2

3 The Corporate Insight Audit Methodology Our clear understanding of the industry s best practices forms the basis of our comprehensive Statement Website Audit benchmarking service. Launched in 2004, the Audit has become a powerful tool for firms that want to see where their key competitive strengths and weaknesses lie, and understand ways in which they can improve their client statements. The Annuity Monitor Audit was created through a multi-stage process, described below: Defining the Framework First, we determined the content that should be included in the analysis, establishing categories and sub-categories relating to different aspects of firms statements. Establish Grading Criteria Instead of providing a basic Yes/No list of capabilities, each firm was assigned a grade for every attribute upon which it was analyzed. Our four-point grading scale Poor, Fair, Good and Excellent is based on our experience in the online financial services field and our knowledge of best practices in this area. To remove as much subjectivity as possible from the grading process, we developed a clear list of criteria establishing the parameters for each grade. In instances where firms fell between two grades, we rounded grades down unless compelling evidence merited otherwise. Detailed Statement Analysis Our analysts performed a detailed evaluation of the Annuity Monitor firms paper statement offerings, grading each attribute. Categories were assigned different importance weightings to reflect our assessment of their importance to clients. Statement layout, contract and performance data were the most heavily weighed criteria in our reviews. When considering contract information, we emphasized transparency, looking for clear explanations of contract information. The availability of pertinent contract values, fees information and detailed contract performance data were essential in our reviews. When evaluating the layout, readability, along with the organization and presentation of contract information content, were most important. The documents appearance was also factored into the final grade, with a focus on design, color and paper quality. The following represents a sampling of the defined attribute criteria used to evaluate the annuity statements: Attribute Poor Fair Good Excellent Design Presentation Use of appropriate font size & format Font is difficult to read (smaller than 10 point) 10 point or larger for all body text (11 pt for certain typefaces), minimal use of italics and CAPS. PLUS Bold or italic font style used to delineate sections PLUS Mix of appropriate font sizes to delineate sections Appropriate number of fonts and styles 4 or more typefaces used 3 typefaces used N/A No more than 2 typefaces used for body of document. Plain language Who wrote this anyway? Headers and general terms are clear All language except legal disclosures All language, including disclosures, is clear and free of jargon Page 3

4 Attribute Poor Fair Good Excellent Consistency with corporate identity Design, colors, logo and typeface are inconsistent with other materials received from the company N/A Uses same corporate colors, logo, typefaces as other materials received from company PLUS Design/color scheme matches the company's website Consistent typographical grid/layout Different alignments are mixed within sections N/A N/A Information is aligned (in tables where appropriate) and does not mix centered information, left or right justified information in close proximity. Graphics Graphics are confusing and/or unnecessary No graphics are used Graphics are clear, relevant and make the document easier to understand PLUS Graphics are displayed on the account summary page Paper Size Letter (L), Legal (LL), Other (O Legal/Other N/A N/A Letter Paper Format Portrait/Not Hole-Punched Portrait/Hole- Punched Landscape/Not Hole-Punched Landscape/Hole- Punched Flexibility Customization by product features selected Empty sections for features not selected Footnotes or glossary entries for features not selected Presentation is limited to product features selected Headings, language and content tailored to combination of products selected Customizable by Client? Statements are not customizable Clients can customize statement layout Clients can customize statement content Both statement layout and content are customizable Ability to Retain/Omit Certain Sections? No N/A N/A Yes Ability to Alter Order of Sections on statement No N/A N/A Yes Ability to Alter Sort Order of section data (by date vs. transaction type) Content No N/A N/A Yes Broker/ Firm Info Contact Information The firm s mailing address, website, toll-free contact info and financial advisor name/contact info if it is a full-service firm are not available One piece of information is available 2 pieces of information are available All relevant contact information is available Address Broker (FA), Firm (F) or Both (B) No address Firm FA B Page 4

5 Attribute Poor Fair Good Excellent Summary Information Investor Profile No investment objective or risk tolerance displayed N/A Investment objective OR risk tolerance level displayed Both investment objective & risk tolerance level displayed Current/Previous Period Value Presentation Numeric, Graphic, or Both Current/Previous Period Comparison Includes Net Change $$, %,or Both None Numeric Graphic B None N/A $$ or % B Financial Market Indicators No N/A N/A Yes Messaging Types of messaging supported Disclosure messages only Disclosure and generic feature messages such as go paperless Messaging for disclosure, navigation, account features and appropriate cross-sell All messaging types: relevant, personalized; Items requiring attention box Message presentation Scattered Any page other than 1st page N/A Messaging presented at point of need and messaging types clearly distinguishable (alert vs. crosssell vs pointer) Disclosures Long and unreadable Long but at least readable Not too long, readable Plain language, clear and concise Generic (G) or Customized (C) Messaging, or Both (B) Firm does not print messages on statements Generic messages are printed on the statements N/A Customized, relevant messages, based on client demographics, account type or other factors, are printed on monthly statements Other E-Delivery Format Paper / Electronic / Both Users can only access documents online Paper statements are available, but users cannot access statements online Both online and paper statements are available simultaneously, but users must pay for paper statements Users have access to both electronic and paper documents, free of charge Perk(s) for Choosing E-Statements (e.g., Fee Waivers, etc.)? Penalties/Fees N/A Nothing Extra incentives/offers Page 5

6 Statement Sent Via (E) or Site (S) E N/A N/A S Statement Availability s No N/A N/A Yes Are Newsletters (N), Stuffers (S) or Regulatory Items (R) Also Available Online with E-Statements? No inserts N/A Only regulatory inserts All inserts included Environmentally Conscious Single Sided (SS) / Back to Back (BB) Single Sided N/A N/A Back to Back Client Address on Separate Page (S) or Part of Statement (P) Separate Page N/A N/A Part of Statement Paper Not recycled or old-growth free, coated Not recycled, not coated Recycled, not coated Recycled paper printed with environmentally friendly inks Envelope Glossy window envelope N/A N/A No window envelopes Statement Linking All statements mailed separately N/A Multiple account statements can be sent in a single envelope ONLY if the client is an account owner Multiple account statements can be sent in a single envelope for all accounts at the same address Page 6

7 The following Annuity Monitor firms were included in the statement analysis: To discuss our statement analysis and customized Website Audit service, which includes scores for your statement and the statements of your competitors, and additional insight into industry best practices, please contact Robert Burlin at x.115. Page 7

8 Key Summary Findings The majority of quarterly statements supplied by the Annuity Monitor firms utilize a similar format and provide a strong level of key contract data in an organized format. As a result, many firms scored in a similar (high) grade range; more than half the firms covered in this report received a grade of B or higher, with no firms receiving a failing grade. While this bodes well for the firms covered in this report, in general, statements can still be improved, as only a few firms earned an A. Those firms that did score in the A range could still incorporate small changes to improve their overall standing. They could produce statements on better quality paper and add color, include personal rate or return information, improve spacing and font size, etc. While there were a number of firms that scored in the B range, eight firms (47%) scored in the C range, leaving much room for improvement. Basic Contract Information and Illustrations Are Commonly Offered It goes without saying that basic information should be included on a client s annuity statement for every firm. While there were one or two exceptions, nearly every firm in this report provided basic information such as contract number, issue date, product name and beginning, ending and total contract values on their annuity statements. In addition, a good number of firms, 82.4%, offered payment/contributions, withdrawal/surrender and net performance returns. These key values are often some of the first to be viewed by the annuity client, and firms do a good job of posting this information on the first statement page. Quarterly Statement Sample In addition to the posting of basic client information, slightly over three-quarters (76.5) of the firms covered in this report utilized a pie chart or other graphical illustration to highlight the asset allocation and subaccount composition of the annuity accounts. The inclusion of a graph not only serves to provide the client with an easily viewable depiction of their underlying investments, but it bolsters the appearance of the statement as a whole. Page 8

9 Fee Information (and Other Charges) Are Often Not Included in Quarterly Statements Transparency should be of paramount importance for all of our financial institutions, but unfortunately, few annuity firms disclose fees and charges on their clients quarterly statements. A dismal 24% of the firms covered in this report post total contract fees/charges on their statements. Fewer than half of the firms post surrender values, and only three out of 17 firms offer surrender charge values. Surrender and Fee Information Sample 1 Surrender and Fee Information Sample 2 Firms Come up Short on Personal Rate of Return Information Only four firms provide Personal(ized) Rate of Return information on their client statements. While personal Rate of Return information is a key representative of overall performance, it is only offered by 24% of firms covered in this report. In our opinion, this performance data should be prominently presented on all annuity account statements. Annuity Statements are Well Organized, But Not Particularly Attractive We were impressed with the highly organized manner in which firms format their annuity statements. Every firm covered in this report utilizes bolded section headings to categorize the various statement components. Several firms also used a bold font to highlight pertinent account values, such as the total contract value, net gain/loss and beginning/ending contract values over the quarter. Spacing and font size was also not an issue for many of the firms covered in this report, enhancing the readability of the document. While the straightforward organization of statements was not necessarily an issue for many firms, aesthetic qualities can use improvement. Few firms, a mere 18%, provide a colorful and engaging annuity statement. Firms should effectively utilize color to bolster the aesthetic appeal of their quarterly annuity statements. Page 9

10 Quarterly Statement Sample Performance Data Offers Solid Look into the State of the Annuity Contract Overall, the Annuity Monitor firms provided a good selection of performance data and pertinent contract values. Beginning and ending contract values were provided by 94% of firms and contract net performance was included on 82% of statements we reviewed. Total payments and withdrawals were also readily available, posted by 82% of firms. The performance data was also offered over multiple timeframes by most firms, with 76% offering three or more time periods. Current quarter and since account inception were the most popular, followed by year to date. Sample Investment Performance Overall, the quarterly annuity statements provided by Annuity Monitor firms are well organized and informative. There were no failing grades for any firm covered in this report, and more than half of the firms received a grade of B or better. Basic contract information was offered by the majority of firms; 88.2% provide contract number and contract type, and 82.4% provide payments/contributions, withdrawals/surrenders and net performance return information. The leaders in this report did a good job of offering detailed performance data. Unfortunately, less than a quarter of the firms provided personal rate of return values. With clients aptly watching their finances in a turbulent economy, the deliverance of an informative and easily readable statement is of paramount importance for financial institutions. Page 10

11 If your firm would like to be included in our analysis, or to obtain a copy of Corporate Insight s Annuity Monitor Statement Report, please contact Robert Burlin at x.115. Page 11

12 Previous Annuity Monitor Best Practice Reports The following is a list of Annuity Monitor monthly reports we have published over the past year: Advisor Literature: Online Ordering Systems This month s report looks at the literature order systems featured on the Annuity Monitor firms advisor websites. Nine firms were reviewed, with literature order interface layout, depth of orderable materials and checkout process serving as the key focal points. August 2011, 45 pages Private Site Transaction History An extensive and well-designed private site transaction history database allows investors to keep a diligent record of their transactions online. Offering this archive improves the overall private site user experience, and also benefits the firm by decreasing chances that clients will need to call Customer Service for transactionrelated information. This report looks at the private site transaction histories offered by 17 Annuity Monitor firms. Accessibility after login, usability, layout and transaction detail were the key criteria used in our review. July 2011, 53 pages Annuity and Retirement Video Resources: Multimedia Presentations for Public Users and Advisors This report focuses on the video resources offered to prospective investors and financial representatives on Annuity Monitor firms public and advisor sites. With such an emphasis placed on financial education and an influx of new annuity products and riders so far this year, it is important that firms utilize rich multimedia to promote new products, services and sales campaigns. June 2011, 40 pages Page 12

13 Public Advisor Contact Resources: Starting the Conversation with Financial Representatives This report focuses on the resources firms provide on the public site for prospective investors to contact a financial professional. The report specifically covers financial professional contact forms, financial professional locators and branch locators.. May 2011, 51 pages Quarterly Statement Analysis: Assessing the Delivery of Contract Information For annuity clients, quarterly statements offer a detailed view of the overall performance of their annuity accounts, providing important details such as total withdrawals, premium payments, subaccount and total policy values. In many ways, the annuity account statement represents the metaphorical bill of health and should provide clients with key information and performance data for their annuity holdings. This report reviews the quarterly account statements sent to clients by Annuity Monitor firms. Appearance, layout and content were the key criteria considered in our assessments. April 2011, 65 pages Client Transaction Capabilities: Private Site Execution This report examines the transaction capabilities offered to annuity clients on the private site. Accessibility upon login, usability of the interface and the selection of transaction capabilities available online were the focal points of our review.. March 2011, 73 pages Page 13