A variable annuity provides lots of choices.

Variable annuities are manufactured by insurance companies either on their own or in conjunction with other financial services companies. They offer variable annuities for sale through a variety of outlets known as distribution channels. These channels include insurance agents, brokerage firms, banks and credit unions, and mutual fund companies.

The sale of variable annuities is an active business. By the beginning of 2004, more than 150 annuity companies offered products, giving buyers a choice of more than 740 separate contracts that together offer more than 22,500 investment portfolios.

The Providers
Annuity companies have an ongoing relationship with customers who buy their variable annuities. The company provides the prospectus, the annuity contract, and periodic statements that detail the transactions in your contract, including premium payments, transfers, surrenders, and contract-based fees. Or, if you have a number of different accounts with a financial services institution such as a bank, a brokerage firm, or a mutual fund company, you may receive a consolidated statement for all your accounts, including your annuities.

The annuity companies also explain the various ways you can take income from your annuity and the tax consequences of these choices. And when you do start taking the annuity payments, the company handles all of those details as well, including figuring the number of units you own and their changing value. The company also computes the amount of annuity payments and oversees delivery of that amount. These services, which simplify what can otherwise be a major hassle, are often cited as a major appeal of owning annuities.

Insurance companies also maintain customer service departments to handle questions about the annuity contracts they offer as well as their other insurance products. If you’re making periodic payments, they send reminders when additional premiums are due.

R&D
There are certain basic elements in all annuity contracts which include:

• tax-deferred earnings
• a range of investment portfolios
• a guaranteed death benefit
• the opportunity to have the accumulated assets paid out as lifetime income.

Annuity companies offer special features to distinguish their annuity contracts from the others and make them more attractive to purchasers. Some examples include enhanced death benefits, a broader range of portfolios, and built-in management aids such as automatic allocation and re-allocation of portfolio assets and internal dollar cost averaging, plus flexible purchase arrangements.

Multimanager Annuity Contracts
A growing trend in variable annuities is multimanager portfolios run by a number of different managers in addition to those administered by the issuing company.

Sometimes, when an insurance company and a distributor, such as a bank or a brokerage firm, work closely together, they offer variable annuity contracts that include portfolios bearing just the issuing company’s or the bank’s name. In other cases, a single contract might offer a variety of individually managed portfolios provided by outside sources, including mutual fund companies.

The more choices of portfolios there are within an annuity contract, the more opportunity individual buyers have to allocate their assets in ways that suit their goals and their tolerance for risk.

The Regulatory Role
Variable annuities are considered securities, like stocks and bonds, as well as insurance products. Variable annuities that are registered with the U.S. Securities and Exchange Commission (SEC) are sold with the benefit of a prospectus that is required to contain all material information about the annuity contract being offered. The SEC does not approve or disapprove any securities, nor does it determine that prospectuses are accurate or complete. In addition, they can be sold only by registered representatives of brokerage firms that are members of the National Association of Securities Dealers (NASD). Just like insurance, annuity contracts sold in a particular state are regulated by the laws of that state, and fall under the jurisdiction of the state insurance departments.

*As reported in Financial Planning magazine June 1996-2007, based on total revenues.

The financial consultants of Byrd Financial Group are Registered Representatives with and securities offered through LPL Financial. Member FINRA/SIPC. The LPL Financial registered representatives associated with this site may discuss and/or transact securities business with residents of all 50 states.

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