Variable annuities haven’t traditionally been popular among the wealthiest investors. Most of the products are aimed at retail investors worried about running out of money in retirement. But private placement variable annuities (PPVAs) are receiving closer attention from advisors who serve high-net-worth and ultra-high-net-worth clients.

“The level of interest among intermediaries has never been higher,” says Michael Gordon, president and CEO of Lombard International, a leading provider of PPVAs. The Philadelphia-headquartered firm partners with advisors of high-net-worth individuals and institutions.

The PPVA market—open to qualified purchasers/accredited investors—is estimated to range from $12 billion to $15 billion in assets, says Gordon, though he notes there isn’t a single source of data. Tax advantages are the main attraction. PPVAs are only taxed when the money is withdrawn, and some features allow balances to pass to charities tax-free.

Gordon expects the investment community’s growing focus on fee transparency, lower fees and fee-based products—as well as the demand for more choice in investment options—to drive additional traffic to PPVAs. “Private placement is very much designed for our times,” he says.

PPVAs generally don’t have up-front loads or hidden fees. Instead, the fees tend to be asset-based, spelled out and institutionally priced, says Gordon. PPVAs are permitted to invest in non-registered funds, including hedge funds, private equity and private debt. “Every type of investment you can think about doing outside you can do inside,” he says, “as long as it’s structured properly.”

Fee transparency and the Department of Labor’s fiduciary standard of care are “not just an idiosyncrasy of the current moment, but probably a longer term trend that I think is going to continue for years to come,” says Gordon. “Advisors are going to face some challenges and also opportunities in terms of how they adjust their practice to the new world,” he says, “and we think private placement products will be an important part of that.”

Delegate Advisors, an independent wealth advisory firm with offices in Chapel Hill, N.C., and San Francisco, is a proponent of private placement insurance products, says Bob Borden, the firm’s chief executive officer and chief investment officer. “We are actively pursuing such strategies, but I would stop short of saying we have placed them with our clients yet,” he says. “I expect that to change shortly.”

Borden, who sits on the board of annuity company Athene Holding Ltd. and was formerly CEO and chief investment officer of the South Carolina Retirement System Investment Commission, realizes PPVAs won’t be the right fit for all advisors and wealthy clients.

“There’s a good deal of interest up front, but once you really peel the onion, there’s a lot of people who say it’s a little difficult for me to get comfortable with,” he says. Private placement also takes a lot more work in sourcing and due diligence, he adds.

Delegate occasionally uses regular variable annuities when a patriarch or matriarch wants to set aside money for children or grandchildren without leaving “the burden of investment acumen or financial discipline to them,” says Borden. “It’s a way to take the investment headache and investment risk off their shoulders and provide steady income.”