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ANNUITIES in the 21st ANNUITIES in the 21st CENTURYCENTURY
Changing Annuities Distribution Business
Model
Traditional “Captive” Traditional “Captive” Distribution ModelDistribution Model
Sales are by “captive” agents selling insurer’s proprietary products
Generally used by insurers who don’t sell products through 3rd party insurance agents or registered representatives
2
Traditional/Captive Sales Force Traditional/Captive Sales Force Business ModelBusiness Model
Insurer affiliated agency or broker/dealer
Licensed insurance agent/Registered representative
• Solicits Business• Submits Applications to Insurer
Insurer• Contracts with, supervises and compensates agent• Screens applications for good order requirements
• Performs suitability review
Captive Sales Force Captive Sales Force VariationsVariations Captive agents may sometimes sell
other companies’ products– may have non-exclusivity agreement
with insurer– may be permitted to sell other
insurers’ products that primary insurer doesn’t offer
Some insurers sell through both captive and 3rd party agents
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““New” Independent Distribution New” Independent Distribution ModelModel
Insurers may offer annuities through multiple licensed agent selling firms
Selling firms may offer multiple insurers’ annuities
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New Business ModelNew Business Model
6
Hartford
Wirehouse B/D
Bank B/DIndependent
B/DRegional B/D
Insurance Affiliated B/D
AXALincoln
NationalPrudential
Nationwide
Met Life
Edward JonesA.G. Edwards
Raymond James & AssocWaddell & Reed
Legg MasonJeffries
Stiffel Nicholas
Merrill LynchWachovia Securities
Morgan StanleySalomon Smith Barney
UBS
Pruco SecuritiesNY LIFE SecuritiesAllstate Financial
AXA Advisors
Linsco Private LedgerAmeriprise Fin. AdvsSecurities America
NFPFirst Global Capital
Commonwealth FinancialCadaret Grant
BanksPNC Bank
Wachovia BankWells Fargo
Bank of America
Third Party MarketersIFMG Distributors
Pacific LifeAmeripris
eJohn
Hancock
Transamerica
AegonGenworthING
Examples of Independent Examples of Independent Firms: Wirehouse Firms: Wirehouse Broker/DealersBroker/Dealers
Merrill Lynch Wachovia Securities Morgan Stanley Salomon Smith Barney UBS
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Examples of Independent Examples of Independent Firms: Regional Firms: Regional Broker/DealersBroker/Dealers
Edward Jones A.G. Edwards Raymond James & Assoc. Waddell & Reed Legg Mason Jeffries Stiffel Nicholas
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Examples of Independent Examples of Independent Firms: Independent Firms: Independent Broker/DealersBroker/Dealers
Linsco Private Ledger AMEX Financial Advisors Securities America NFP First Global Capital Commonwealth Financial Cadaret Gran
9
Examples of Independent Examples of Independent Firms: BanksFirms: Banks
PNC Bank Wells Fargo Bank of America Chase bank U.S. Bank
10
Examples of Independent Firms: Examples of Independent Firms: Independent Marketing Independent Marketing OrganizationsOrganizations
IFMG Distributors Safe Harbor Creative Marketing Brokers International, Ltd.
11
Broker/Dealer Business ModelBroker/Dealer Business ModelInsurer
• Contracts with and compensates Broker Dealer• Delegates & Monitors Suitability Supervision
Broker Dealer• Either licensed ins. agency or has established affiliated ins agency
• Contracts with, compensates and supervises agent• Reviews applications for good order requirements
• Performs suitability review – in some cases, only for variable annuities• Submits applications to Insurer
Licensed Insurance Agent/Registered Representative
• Solicits Business• Submits applications to Broker Dealer
Bank (Non-Broker Dealer) Bank (Non-Broker Dealer) Business ModelBusiness Model
Insurer• Contracts with & compensates bank insurance agency
• Delegates & Monitors Suitability and Supervision
Bank Insurance Agency• Contracts with, compensates & supervises agents• Reviews applications for good order requirements
• Performs suitability review• Submits applications to Insurer
Licensed Insurance Agent/Registered Representative• Solicits Business
• Submits applications to Agency
IMO Business Model #1IMO Business Model #1
Independent Marketing Organization
• Provides access to group of agents• Performs Product Marketing• Communicates with agents
Insurer• Contracts with and compensates both IMO and Agent
• Screens applications for good order requirements• Performs suitability reviews and supervises agent
Licensed insurance agent
• Solicits Business• Submits Applications to
Insurer
IMO Business Model #2IMO Business Model #2
Licensed insurance agent
• Solicits Business• Submits Applications to
Insurer
Insurer• Contracts with & compensates both IMO & Agent• Screens applications for good order requirements• Performs suitability reviews & supervises agent
Managing General Agent• Contracts with agents• Compensates agents
• Provides agents with sales support
Independent Marketing Organization
• Provides access to group of agents• Performs Product Marketing• Communicates with agents