Lincoln Financial Group is looking to banks for initial distribution of a variable annuity that gives investors more access to their money, and it has struck a deal with the San Francisco banking company Wells Fargo & Co. to start the process.
The product, called Wells Fargo New Directions, is the first major offering to use Lincolns new Income4Life program, which differs from other variable annuities in that it gives investors a lump sum of money to draw on in addition to the recurring revenue, said Bill Boscow, chief marketing officer at Lincoln Annuities, a subsidiary of Lincoln Financial.
The goal is to give investors much more access to their money during their retirement in case of a catastrophic event or other need, Boscow said. Lincoln is also planning to use the Income4Life plan which it is trying to patent in other banks or brokers annuity platforms, he said.
The distribution deal, announced Tuesday, is aimed at helping Wells, and eventually other banking companies, to retain customers retirement assets, Boscow said. This is particularly crucial since retirement rollovers are widely seen as one of the industrys fastest-growing areas and one that mutual fund giants like Fidelity Investments are targeting, he said.
Wells Fargo New Directions will be sold through the Wells Fargo Private Client Services group and Lincolns broker-dealer group, said Lorry Stensrud, CEO of Lincoln Annuities. It is made up of three variable annuities with different payment structures, and it has 40 variable and 10 fixed investment options, including Wells Fargo Funds and American Funds, Boscow said.
Wells will target its private client customers who have at least $50,000 to invest, Stensrud said. Most are likely to be 10 to 15 years from retirement age, he said.
Lincoln supplies other distribution and wholesaling support, as well as the insurance component, Boscow said. He declined to make any sales projection but said that Wells has sold about $50 million through a pilot version of the program launched in July.
Boscow said that Lincoln has a patent pending on its Income4Life program, which gives investors more flexibility than with ordinary variable annuities. Other annuities pay investors an income stream that is either fixed or is tied to the stock market. Lincolns Income4Life also offers regular income but lets investors withdraw money, for example, in case a large expense comes up during retirement, according to Boscow.
This structure effectively lets the investor, or his adviser, retain control of the assets, Boscow said.
"The two most common objections to variable annuities among investors is the possibility of outliving your income or enduring a catastrophic expense," Boscow said. Income4Life, which will also be a feature of other Lincoln annuity deals, gives investors both regular payments and the option of withdrawing lump sums, he said.
Kenneth Kehrer, president of the Princeton, N.J., consulting firm Kenneth Kehrer Associates, said that Lincolns product addresses an issue that has hampered growth in so-called payout annuities, the fact that people lose control of their money once they buy the investment.
Other fund and insurance companies have attempted similar solutions, but Mr. Kehrer said he is not familiar with them in detail.
The distribution agreement is an extension of deals that Wells and Lincoln have for products such as fixed annuities, mortgages, and retirement programs, Mr. Boscow said.