Over my many years as a technology columnist, there’s one area of financial services I’ve shied away from: the insurance side of the business. There’s good reason for that. I prefer to write stories about new, innovative firms, or established firms making significant upgrades to their existing technology. I don’t often come across a lot of true innovation in the insurance world.

On top of complaining about the technology in general in the insurance sector, independent RIAs complain particularly about the difficulty of getting electronic feeds from some firms. These RIAs want the ability to manage funds in deferred annuity subaccounts with the same ease they can manage their assets held with major custodians. But that level of flexibility is the exception, not the rule.

I am rarely approached by insurance firms about their technology, which tends to reinforce my opinion about their offerings, so I was rather surprised when I was recently asked by Jefferson National Life Insurance to take at a look at its annuity Web site.

Perhaps it should not have come as a complete surprise. After all, Jefferson National is not your average annuity provider. The firm views itself as an innovator, and on the product side certainly appears to be one. Most of the executive team was formerly involved with creating the nation’s first pure-play Internet bank, Telebank, which subsequently became E*TRADE Bank. The philosophy at Telebank was to lower overhead and pass the savings on to consumers through higher returns and lower fees.

The team eventually decided to try a similar approach to annuities at Jefferson National. The result of this effort was “Monument Advisor,” the industry’s first variable annuity with a flat $20 per month insurance fee. The average policy size is $200,000; this means the average policyholder pays just 12 basis points per year while many competitors charge 130 basis points for similar products.

How can Jefferson National keep fees so low? By following the same formula it did for Internet banking—leveraging technology and lowering expenses by eliminating wholesalers and commissions (the advisors who use the annuities earn a fee for managing the assets). Rather than rely on the traditional sales model, Jefferson National relies on a centralized sales/operations center and technology to keep distribution costs low. The company direct-markets to advisors through its Web site, webinars and industry conferences.

While the Monument Annuity, with its extensive selection of investment options, tactically managed models and low fees, is Jefferson National’s primary allure, the firm also promotes a suite of online tools for advisors as part of its overall value proposition. For example, I was told the company offers an “advisor-friendly” technology platform incorporating features such as simplified fee management, agile Web-based trading, an easy-to-use dashboard and seamless integration with custodian platforms. The promise of all this great technology piqued my interest, so I decided to take a closer look.

The Jefferson National Web Site
My introduction to Jefferson National’s advisor tools was delivered courtesy of company president Larry Greenberg. He said his firm did not set out to have the most cutting-edge platform, but simply wanted one that was reliable and easy to use. As we shall see, it is not cutting edge and it is reliable; whether it is easy to use is somewhat more questionable.

Before we get into the details, let’s start with some basics. The platform is Internet-based. That means it is less expensive for the company to maintain than other systems would be. It is also an Oracle-based system, which means it is reliable and highly scalable. Although I did not test compatibility in-depth, I did try and log on to the platform with a variety of devices, including a Windows 7 PC, a Windows 8 PC, a Windows 8 phone, a Mac (with the Safari browser) and an iPad. In all cases, I was able to log on and access information.

The Jefferson National Web site offers a number of tools for advisors. Some tools help with the proposal and sales process. Others help with the management of the investments within the deferred annuity. In addition, there is a library of digital forms in PDF format, as well as an online annuity application assistant.

Among the tools are two calculators: the tax deferral cost comparison calculator and the variable annuity cost comparison calculator. The first can be used to consider, say, how a client would fare holding tax-inefficient assets such as taxable bonds in a taxable account and then see how it would be different from holding the same assets in a Jefferson National deferred annuity. The calculator requires only a few variables for a result because it pre-populates some information about the investment assumptions (tax rates, rates of return, etc.).

On a less-positive note, it only allows for a few asset classes (large-cap equities, small- and mid-cap equities, and long-term bonds). There are three default model portfolios you can choose from (conservative, moderate and aggressive), as well as a custom portfolio choice or an active trader assumption. As you can imagine, if you have a long enough deferral period, the annuity will always come out looking good.

The report shows the yearly cash flow both before and after tax, but it does not provide the details about how it arrives at those numbers. So, for example, if you have an allocation to large-cap equities, it’s unclear how much of the return comes from capital gains, from short-term gains or from dividends. You can edit the inputs, but I don’t see a way to edit the way the taxes are calculated other than with the gross tax rate.

Nor does the calculator allow you to examine the role that annuities should play in the total client portfolio. For example, you can’t compare holding a portion of the tax-inefficient assets in a Roth IRA.

The variable annuity cost comparison calculator is a bit more straightforward. Here, the advisor can compare a client’s existing annuity, or one that the client is considering, to a similar Monument Advisor annuity. The comparison will take into account any loss of benefits and surrender charges. It also notes that Jefferson National does not offer enhanced living, death or withdrawal benefits, so in some cases the comparison is not apples to apples. Under many circumstances, the Monument Advisor annuity will look better because of its low expenses.

The other important section of the Web site is the account management site. This is where you can view account information, create investment models and process trades (single trades and block trades). You can also view transaction histories, generate reports and view performance at the fund level and/or the allocation model level from third parties such as Envestnet.

Once you’ve built your models, and applied them to accounts, they can be used to allocate or reallocate an account, be applied only to future investments or used to rebalance an account. Models can also be applied to a single account or multiple accounts. You can choose to rebalance just once or you can schedule monthly, quarterly, semiannual or annual rebalancings. If you do it periodically, Jefferson National will automatically rebalance to the designated model on the specified dates.

The Web site offers a couple of ways to access digital forms. One is the library of PDF forms that can be filled out online or printed and filled out manually. The other is the “Online Application Assistant.” There are a few advantages to using this tool. One is that it can remember and automatically fill in an advisor’s information. Another is that it is a sort of wizard that can walk you through the application process.

Evaluating The Web Site
Evaluating the Jefferson National Web site presents something of a dilemma. How do you rank something like this against other offerings? If we rank it against what other annuity providers offer advisors, it would probably fare well, since many competitors offer less or in some cases no technology to independent advisors. When you look at what custodians or other third-party vendors provide, however, the site leaves something to be desired.

First, the design is not very good. You start at the main home page, and when you log in as an advisor, you go right back to the main home page. Since there is so much going on there, the actual tools are scattered all over the place and difficult to find. For example, you access the PDF forms in the “Advisor Management” section. You access the Online Application wizard by clicking “Products” at the top of the page and then clicking “Apply Online” (instead of choosing the online application wizard) from the drop-down menu.

Most of the hot links that lead to major portions of the Web site, like “Advisor Tools” and “Account Management,” are represented by tiny links on the left of the home page. This to a large extent negates the compatibility of the Web site with mobile devices, since the links are almost microscopic on a mobile screen. I could go on, but let’s just say that the site is difficult to navigate and that it is not mobile-friendly. Advisors would be better served if Jefferson National had one informational site that wasn’t password protected, with information of a general nature, and a separate site containing only advisor tools, one designed around advisor work flows that is easier to navigate.

The model building and trading application is generally OK, but it has a few quirks that bother me. One was that the application would not let me create a model until I had assigned one or more accounts to it. That seemed counterintuitive to me. In most of the software packages I’ve used, you build the models first, then you apply the models to client accounts. The other unusual thing is that you build models directly from the list of mutual funds. Most applications I’ve seen start by building an optimized asset class model, and then users can select the individual investments to fill those asset class slots.

Perhaps the greatest disappointment, however, is the lack of integration. When I asked Jefferson National about it, the company mentioned a few integrations in place and a few in the works. Unfortunately, its definition is different from mine. For example, the company told me the site could integrate with iRebal, but that means iRebal can send trades to Jefferson National. In other cases, there is some ability to send information, like balances, one way, but there is no robust two-way integration. On the portfolio and trading side, this limits the value of the modeling and trading tools. On the account application side, a lack of integration with custodians and/or CRM applications means that forms cannot be prepopulated using client data already available on other systems.

I don’t want to beat up on Jefferson National too much. Unlike many of its competitors, it is making an effort to deliver technology and a positive user experience to independent RIAs. With some constructive feedback from advisors, and with a better understanding of how fee-only advisors’ businesses operate, the company can do a better job offering technology tools that advisors can truly benefit from.

The company deserves a great deal of credit for making the effort to deliver value-added technology tools to advisors in the first place. But for now, let’s just say that it’s a work in progress.