“L” is for Liquidity. Most alternative investment VAs allow clients to exchange or transfer funds at any time, and some products do not even have penalties for early withdrawal of some portion of the funds. Managed futures platforms and hedge funds often limit withdrawals to quarterly or even annual windows, and such withdrawals come with substantial penalties.
“S” is for Spousal Protection. VAs are the only alternative investment platform that can offer a death benefit. Some alternative investment VA products can offer riders that provide additional protection for spouses such as a lump sum death benefit or the option of continuing on as contract owner at the full value of the death benefit with no current income tax consequence. In other words, alternative asset VAs can help surviving spouses maintain financial stability after the owner’s death.
The M.E.T.A.L.S. acronym is a great first step to enhance understanding of how alternative investment VAs compare to other alternative investment platforms.
At Nationwide Financial, we’ve found that the “T” is really resonating with the advisors we’re talking to right now because tax deferral is top of mind for many affluent investors. Advisors are starting to recognize that alternative asset class VAs can position a client’s portfolio against rising taxes like no other alternative investment platform.
Any advisor worth their “metals” should be prepared to help clients interested in alternative investments to evaluate the benefits of alternative investment VAs. With continued education about the benefits of this type of product, I’m confident that demand will continue to expand.
Eric Henderson, FSA, MAAA is senior vice president of life insurance and annuities for Nationwide Financial
Keep in mind that federal income tax laws are complex and subject to change. Neither Nationwide nor our representatives give legal or tax advice. Please consult an attorney or tax advisor for answers to specific questions.
A variable annuity is a long-term investment issued by an insurance company. You should consider the investment objectives, risks, features, charges and underlying investment options carefully before investing.