: Expanding the Pie Daniel Gangemi Managing Director Market Research and Analysis There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as investment advice. For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
An Idea The best way to create real growth in the VA industry is to find new producers.
VA Assets Have Grown Since 2002 Assets of VAs 2000 2005 ($ in Billions) $801 $714 $583 $809 $932 $1,008 2000 2001 2002 2003 2004 2005 Source: VARDS, SIMFUND VA
Market Appreciation, Not New Money Has Been the Driver Percentage of Asset Growth Due to New Flows into VAs ($ in Billions) 21% Source: VARDS, SIMFUND VA 10% 8% 2002/2003 2003/2004 2004/2005
Survey Results
Method Web survey conducted in Q1 2006 15 days of total field time Total of 44 questions 1,000 surveys with mutual fund and SMA producers 77% have AUM of $100 million or more Follow-up interviews with 300 advisors Conducted from February to April 2006 100 each in the wirehouse, bank and planner channels 285 hours of in-depth interviews 95% confidence level, MOE +/-3% Source: Research 2006
What Advisors Focus on In Their Practice
Focus of Business Practice Points to Big Opportunity 95% 95% Source: Research 2006 Retirement Planning Income Planning
Product Usage in the Past 12 Months Mutual Funds 95% Stocks/Bonds 85% 529 71% SMA 52% Source: Research 2006
Advisors Interest in Training on 77% The gap in number of advisors interested in these two areas speaks directly to positioning and emphasis during an advisor meeting 19% 16% Income Planning Insurance Products Extremely/Very Familiar with VA and other Insurance Products Source: Research 2006
Interest in What VA s Can Provide is High 39% When VA and Insurance Were Not Used in Description 26% 21% 14% Very interested in discussing with a knowledgeable professional Strong degree of interest Moderate degree of interest Just not interested Note: VA and Insurance were not used to describe the product. The description focused on guaranteed income. Source: Research 2006
Interest is Driven in Part by Client Age Client Age Profile 34% 72% are nearing or in retirement 12% 16% 21% 17% 0% 18 to 25 26 to 45 46 to 55 56 to 65 66 to 75 75+ Source: Research 2006
and Client s Primary Savings Goals 77% 21% 2% Finance Retirement Live Comfortably Today Pay for Education Source: Research 2006
So Why Don t Some Advisors Sell Annuities?
Primary Reasons for Decision to Not Sell VA s 57% GMWB GMIB GMAB GWBL GMDB 54% 50% 46% Too Much Jargon; Hard to Understand Too Feature Heavy; No Clear Benefit Fees too High Never Asks What Advisor Needs Note: % s on this slide are based on qualitative responses. Responses were put into groups based on similarity of themes covered on qualitative discussions. Many discussions contained multiple reasons for decision not to sell annuities. The purpose of this slide is to create a sense of prioritization as it relates to the advisor decision process. Source: Research 2006
Why Don t Some Advisors Sell Annuities? Too much jargon Our practice is built on simplifying the issues for our clients, so you can imagine how we felt when we met with some of those insurance company sales people that seemed to speak in a different language they know so much about the features of their products but were never able to simplify the discussion so we could sell the VA s with any degree of confidence it was hard work trying to break everything down to something my clients would understand Wholesalers should realize that they know more about their products then we will ever want to know there are a few basic questions that we will have to answer for clients, so they should help us there and forget the rest of the sales pitch that focuses on the features of the annuity the language was always a little intimidating we got tired of feeling dumb after a while we stopped inviting the VA guys back Source: Research 2006
Why Don t Some Advisors Sell Annuities? Too many features Insurance companies should try to build a product that is simple and less top heavy with features the guaranteed income is the best part of that product but it is the last thing that anyone ever talked about its been a while since I spoke to an insurance company wholesaler, but I honestly don t remember that they ever talked about income it was always some other new feature that I didn t see any value with There are so many features, each with a different cost, and each was described using words that I didn t understand you shouldn t have to be an insurance expert to sell those things I think that is the problem with annuities they require that you learn so many new insurance terms that will probably confuse the client it should all be a little easier and simple simplify the language so anyone can understand it Source: Research 2006
Why Don t Some Advisors Sell Annuities? Fees too high The cost of the annuities was always a sore spot for me I could never understand why they cost so much given that I only really wanted them for one reason the potential for guaranteed income I haven t met one VA wholesaler that couldn t resist the opportunity to mention every last feature in the product for most of that stuff its like who cares? Source: Research 2006
Why Don t Some Advisors Sell Annuities? Never ask what advisor needs I can remember that we used to see VA wholesalers once in a while, but we were always blown away at how much they knew about insurance, and how little they knew about us they never had the smarts to ask us what mattered to us, so they just talked about the features of their annuities and bored us to death we didn t understand most of what they said anyway it was like oil and water You want to win our loyalty then you better put in the time and get to know us show us that you are interested in us and then let us ask about your products most insurance company wholesalers never let us get a word in edge wise they just jump right into their pitch and lose us in about a minute Source: Research 2006
Primary Reasons for Decision to Not Sell VA s 57% GMWB GMIB GMAB GWBL GMDB 54% 50% These are interrelated 46% Too Much Jargon; Hard to Understand Too Feature Heavy; No Clear Benefit Fees too High Never Asks What Advisor Needs Note: % s on this slide are based on qualitative responses. Responses were put into groups based on similarity of themes covered on qualitative discussions. Many discussions contained multiple reasons for decision not to sell annuities. The purpose of this slide is to create a sense of prioritization as it relates to the advisor decision process. Source: Research 2006
What Matters Most to These Advisors?
Touch Points that Matter Most 92% 91% 70% 59% Field Wholesaler Internal Wholesaler Source: Research 2006 TA CSR Printed Communictions 7% 5% 0% 800#/VRU Web Site Informational Email
Most Recent Visit from VA Wholesaler 27% 22% 15% 18% 11% 7% Can't Recall 5 Years Ago Source: Research 2006 4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago
Advisor Expectations of a VA Wholesaler Extremely Important/Important That Wholesaler is Trusted Business Partner/Needs Based Seller 88% Source: Research 2006 Extremely/Very Important
How To Re-Engage Non VA Sellers
Driver of First Face to Face Meeting with a Wholesaler 68% Meaningful Phone Conversation Source: Research 2006 15% Advisor Firm Suggested Meeting 7% Recommended by a Colleague 6% Recommended by Branch Manager 4% Wholesaler Invited You to a Group Meeting
Accepting the Call of a Wholesaler in their own words a new wholesaler that can catch my attention by saying something that I just wouldn t expect to hear from a wholesaler, something relevant to my clients and to me something that I will care about at that time an idea that connects with the real needs of my clients and can position me to seize an opportunity that I may not have thought of I had one wholesaler call me on my birthday she offered to come in and help me with putting my clients into groups that needed to establish a regular source of income in the next 1,3,5 years so I could approach them and begin the discussion tomorrow that was unique and very real to me Source: Research 2006
What Keeps the Wholesaler Relationship Vibrant/Important 84% 81% 81% 72% 72% 70% Listens Well Source: Research 2006 Understands Advisor Needs Problem Solver Never Pushes Product Available Responsive to Specific Needs
Keeping the Relationship Vibrant in their own words it is so rare to find a wholesaler that really listens well someone who isn t waiting for me to stop talking so they can blurt out their rehearsed pitch I find it difficult at times to find someone who is genuinely interested in knowing what needs I have.when a wholesaler shows that they are looking for a long term partnership and can offer time and insight that another wholesaler can t offer, well that s the wholesaler that I want to work with a wholesaler that shows me they are interested in this business for years and decades is a wholesaler that will get a lot of my business over that time. I can t afford to work with people who are only interested in the hot idea of the month Source: Research 2006
Observations
Observations Language is a major hurdle Focus on features rather than the benefits is a major turn-off The fundamental benefit of VAs Guaranteed Income is very interesting to them and they would like to learn more about Finding the way in is the challenge too much emphasis on product features lessens opportunity for success Source: Research 2006
Observations Focus on the needs of the advisor The best topic to address is guaranteed income Avoid insurance and feature related jargon Fees may become less of an issue if other areas are addressed Source: Research 2006
Appendix: Advisor Profile
Advisor Profile Channel Affiliation % of Non-VA Sellers 35% 30% 22% 12% National Wirehouse Source: Research 2006 Independent Planner Bank Regional Broker 1% RIA
Advisor Profile AUM % of Non-VA Sellers 31% 23% 19% 11% 9% 7% Below $100 Million $100 to $149 Source: Research 2006 $150 to $249 $250 to $499 $500 to $999 $1 Billion +
Education Level % of Non-VA Sellers 71% 23% 0% High School Grad (No College) Source: Research 2006 Some College College Grad (No Post Grad) 5% Post Grad (Masters, MBA, Etc) 1% Phd
Licenses & Designations % of Non-VA Sellers 80% 22% 5% 3% CIMA CFA CFP Other (Series, 6, 7, etc) Source: Research 2006
Tenure as an Advisor % of Non-VA Sellers 26% 28% 20% 7% 8% 11% 1-3 Years 4-6 Years 7-10 Years 11-15 Years 16-20 Years 21 Years or More Source: Research 2006 For financial representative use only. Not for inspection by, distribution or quotation to, the general public.