RGR_THE INSURANCE LETTER Penton Media August 18, 2009 If you want to view this on the web go to: http://enews.penton.com/enews/registeredrep/v/737 FEATURE STORY --New Product Pays Guaranteed Income On Managed Accounts By Alan Lavine Do you have clients who want guaranteed income, but are reluctant to sign onto an annuity that pledges underlying assets to an insurance company? New hybrid products, known as "Stand Alone Living Benefits (SALBs)" combine an annuity with a managed investment portfolio. So a guaranteed lifetime withdrawal benefit may be extended to a fee-based advisors' managed exchange traded funds and mutual fund portfolios. "Fee-based advisors are warming up rapidly (to SALBs)," says Eric Henderson, national sales manager with Nationwide Financial, Columbus, Ohio. Phoenix Companies, Nationwide Financial, Allstate Life Insurance Co. and Genworth Financial, are among those insurers offering SALBs. Another six firms have similar products in registration, according to a report by Strategic Insight, a New York-based research firm. Charles Roame, principal with Tiburon Strategic Advisors in California, sees enormous potential for this kind of insurance among fee-based advisors. There are more than 18,000 fee-based advisors who manage more than $2 trillion in assets. Here's how a SALB works: If and when a client's account value dwindles to zero as a result of systematic retirement withdrawals, the insurance kicks in. So, regardless of market performance, the investor continues to get the 5 percent annual income for life. Clients also can arrange for income to continue for a spouse. Typically, the products require that an investor be at least 65 years-old to initially access the guaranteed income stream. Account values may be stepped up during the investment phase based on the annuity contract's provisions. Overall, the insurance fee for the SALB ranges from 85 to 260 basis points, depending upon how much is invested in stocks. While this is on par with variable annuity living benefit charges, SALB clients realize savings on mortality and expense fees and mutual fund investment management fees. As with variable annuities, SALBs have limits on how much investors can allocate to stocks. For example, Genworth's "Life Harbor" SALB lets investors put as much as 70 percent in stocks. By contrast, Nationwide's "Retirement Income Solutions" limits stock allocation to 50 percent of assets. Tamiko Toland, author of a report by New York-based Strategic Insight, entitled "Guaranteed Retirement Income Beyond Annuities," says that the guarantee is an insurance policy. It is offered as a contingent deferred annuity or certificate that is registered with the Securities and Exchange Commission. Toland estimates more than $700 billion in assets in managed accounts and mutual funds could be eligible for the stand alone living benefit. "What sets the SALB apart from other existing products is its novel approach to providing guaranteed retirement income on investment assets outside of annuities," she says. "The SALB provides new product development and distribution opportunities." Phoenix Companies, Hartford, developed the first of these products in March 2008 with Lockwood Capital Management, a Malvern, PA-based registered investment advisor, affiliated with Pershing LLC, New York. Phoenix research indicates many high-net-worth consumers and advisors liked the features of variable annuities with living benefit guarantees. But they were put off by their complexity, cost and the lack of control over the assets. The underlying products, fees and investment minimums vary by firm. Read the full story here (http://registeredrep.com/newsletters/insuranceletter/new_product_guaranteed_income_managed_accounts_0818/) To view the full article go to: http://registeredrep.com/newsletters/insuranceletter/new_product_guaranteed_income_managed_accounts_0818/ Advertisement ---------------------------------------- http://clk.atdmt.com/DEN/go/151506692/direct/01/ ---------------------------------------- Most Popular Stories ---------------------------------------- *The Jewish Clause: Putting conditions on an inheritance into a will. (http://registeredrep.com/newsletters/wealthmanagement/estate_planning_inheritance_lifestyle_jewish0317/) *No Retention Bonuses For Wachovia Reps; Wachovia Securities To Be Renamed (http://registeredrep.com/advisorland/career/wachovia_securities_retention_bonus0220) *Should I Stay or Should I go? 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