Insurance companies often face an uphill battle when trying to convince independent advisors that variable annuity products have earned a place in clients’ portfolios.

Jefferson National, which markets the Monument Advisor variable annuity as the industry’s first flat-fee product of its kind, is hoping to get a boost from a recent partnership with Pershing LLC, which serves the broker-dealer channel and Pershing Advisor Solutions, which serves registered investment advisors (RIAs). The custodian will include the Monument Advisor product on its NetX360 technology platform for fee-based advisors, including registered investment advisors, Jefferson National announced last Thursday.

For advisors whose clients use the Monument Advisor product, the partnership will allow advisors using NetX360 to consolidate clients’ variable annuity contract data within their clients’ brokerage accounts. That integration will allow the advisors to get access to variable annuity data updated in real time on their workstation. The information will also be reported on clients’ brokerage account statements.

The partnership seems to be a big win for both sides. Jefferson National stands to gain wider distribution of its variable annuity product to the more than 100,000 advisors using the NetX360 platform. The product has already had a strong start. Morningstar VARDS Data ranked the Monument Advisor as the top RIA-sold variable annuity for three consecutive years from 2007 to 2009, which gives Pershing another lure for advisors who are already comfortable using variable annuities. Jefferson National product charges $20 a month regardless of the investment amount, compared with the typical fee of 135 basis points charged. If one considers that a typical client holds a balance of $200,000 in his or her variable annuity account, the flat fee comes out to about 12 basis points a year, Lau said.

“Integrating data from the industry’s first VA with a flat-insurance fee on the NetX360 platform helps fee-based advisors to streamline their practice and better serve their clients,” said Mark Tibergien, chief executive officer of Pershing Advisor Solutions. A spokeswoman for Pershing Advisor Solutions said the platform has a 96% adoption rate among affiliated advisors in both channels, representing more than 100,000 investment professionals.

“On the Pershing platform, advisors can get that consolidated view, and look at clients’ portfolio on a tax basis, not just the asset basis,” said David Lau, chief operating officer of Jefferson National. “With tax rates expected to rise, it is a hot button for clients and advisors. They want to get out in front of the tax issue, particularly high-net-worth clients.”

There is one drawback. NetX360 will not rebalance of the clients’ insurance and brokerage assets automatically, according to David Lau, chief operating officer of Jefferson National. Advisors and financial planners can compensate for that, and give a client a holistic view of her or her situation. Typically, a financial advisor might create a 60%/40% stock-bond asset mix within regular taxable account, as well as within a variable annuity account. Bonds generally perform better with a tax deferral, so the platform allows advisors to look at the accounts in the same view.  They might choose to keep all the bonds in the tax-deferred accounts and keep all equities in taxable account, Lau said.

Jefferson National maintains distribution partnerships with several other custodial firms, including Charles Schwab [SCHW] and TD Ameritrade, Lau said. The Pershing agreement, however, is the first that embeds the product onto the custodian’s platform.

“We think there is a lot of value in the Pershing platform,” Lau said. “They are looking to serve the needs of advisors like we are.”

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access