Amid a changing regulatory environment, Los Angeles-based American International Group (AIG) is moving into the fee-only annuity space.
The company unveiled on Thursday the Polaris Advisory Income Variable Annuity, its first fee-only annuity designed specifically for advisory platforms, to offer clients some level of risk protection within a vehicle that can still capture potential gains within the stock market.
AIG believes that the demand for advisor-friendly annuities will increase over time, said Bryan Pinsky, AIG senior vice president for individual retirement products, in a statement. The new offering “features lower-cost investment options without 12b-1 fees—consistent with what we understand advisors prefer for investment options offered through advisory programs.”
The Department of Labor's fiduciary rule, which becomes applicable on April 10, would make difficult, if not prohibit, the use of commission-based products within variable annuities. While some firms, like Louisville, Ky.-based Jefferson National, have previously offered fee-only products, others such as Jackson National and now AIG have started offering the products in the past year.
At launch, the Polaris variable annuity offers two income-protection features for a fee, one of which must be elected at the time of purchase.
The Polaris Income Plus Daily feature allows investors to lock in the annuity’s investment gains to their income base daily in order to grow their retirement income and allows investors annual withdrawal rates as high as 7 percent after age 65.
The Polaris Income Plus feature allows investors to annually step up the greater of the annuity’s investment gains or an annual income credit of up to 6 percent on each contract anniversary. If the investor has not taken any withdrawals by the 12th contract anniversary, the income base is guaranteed to be at least 200 percent of the purchase payments received in the first contract year.