Chicago-based mutual fund research company Morningstar Inc. has released a new Web tool that analyzes variable annuities, allowing financial advisors and other professionals to compare aspects of the annuity contracts side by side, in plain English.
The tool, called Morningstar Annuity Intelligence, was released today and will merge two previous Morningstar applications, the Annuity Analyzer and the Annuity Intelligence Report, into one offering.
Morningstar acquired the Annuity Intelligence Report tool in 2010 from Advanced Sales and Marketing Corp. The report is an online database and interface that examines the way variable annuities contracts and their benefits work, says Kevin Loffredi, vice president of insurance solutions for Morningstar, who came over to Morningstar with the rest of the Advanced Sales staff after the acquisition of Annuity Intelligence Report.
"One of the things we covered at Advanced Sales and Marketing Corporation," says Loffredi, "that no one really did, was how to title [variable annuities]. It seems like a pretty easy process, but every contract, every carrier, has a different way of operating how that plays out.
"If I have the annuity and my wife is on there, we are both on as owner and joint owner, and if I name my kids as primary beneficiaries on some contracts, if I were to die, it would not go to my wife, it would go to my kids."
Loffredi says the consequences of such a mistitled annuity can be horrific, and he says a lot of reps don't understand how they work.
The new tool offers a report on different variable annuities, a profile that breaks out each product's expenses, its surrender schedule and the titling, which shows you what goes to whom when the owner dies. The profile goes on to list benefit details, with a plain English description of benefits, including guaranteed withdrawals, step-up provisions, the impact of withdrawals and required minimum distributions.
Since each contract has its own set of rules, the new interface also allows you to filter out a set of variable annuities -- to find a supermarket of profiles on the right hand side of the page.
"You can filter at the contract level and the benefit level," says Loffredi.
"At the benefit level you can filter by features -- does it continue for a spouse, for example and whether it's RMD friendly" -- in other words, whether you'll be penalized by the annuity contract for taking out the amount required by the IRA.
You can also filter by step-ups, looking at the increased benefits you might get if you are willing to wait, say five years, for the payouts to begin.