ETF Options in Variable Annuities Gaining Popularity

ETFs - the new kids on the block - have really made a head way into the financial market as SMAs, hedge funds, mutual funds and 401(k) plans each offer them. Now, it looks as though the rookie funds are making their debut into variable annuities as well, according to The Wall Street Journal.

"We see it as a growing trend...there is room for multiple people to start these" with annuities, said Joseph Linhares, managing director within iShares group at BGI.

The number of insurers that sell annuities with ETF options is increasing. Jackson National Life Insurance Co. is considering adding an ETF option to variable annuities.

"I would be very surprised if other companies did not embrace this...if this isn't a widespread down the roads," said Phil Deangelo, president of advisory services for Passante Associates.

Integrity Life Insurance reported that the responses to the ETF offer have been good. "We've been out of the gate for the better part of 18 months. We are seeing advisors embracing this type of strategy using ETFs," said Mike Furgiuele, Integrity's president of marketing.

By using ETFs, the over all costs are lower than most variable annuities, according to Barry Meyers, Integrity's vice president of business development.

Some experts, however, argue that putting an ETF in a variable annuity makes no sense.

Richard Ferri, president of Portfolio Solutions says that he agrees that these products are making head way into the market, be he does not understand the point. "To me it is much more of a marketing pitch than practicality."