Magazine article American Banker

Great Western Sets Up Allocation Annuities

Magazine article American Banker

Great Western Sets Up Allocation Annuities

Article excerpt

Great Western Financial Corp. has taken the unusual step of adding "asset allocation" investment portfolios to its proprietary variable annuity.

The new portfolios periodically adjust their mix of mutual funds to stay in sync with the market and customers' risk tolerances. The Los Angeles-based thrift sees the asset allocation approach as a way of standing out from an increasingly crowded field of annuity creaters.

Many other financial institutions are just starting to get into the business, and their proprietary annuities do not feature asset allocation options, said Keith Pipes, senior vice president with Sierra Investment Services, Great Western's broker-dealer unit.

"What we've done is good for our customers and keeps us apart from other annuities," Mr. Pipes said.

Variable annuities are insurance contracts whose returns are generally linked to individual mutual funds. Asset allocation plans take a different approach, linking a group of mutual funds to gain greater diversity and, hopefully, higher returns.

Right now, fewer than a dozen banks and thrifts offer their own annuities. Great Western and First of America, Kalamazoo, Mich., are among an even smaller number that include asset allocation options.

Insurance companies, which create the lion's share of annuities, also have had limited involvement with asset allocation portfolios, said Rick Carey, editor of Vards Report, a variable annuity service in Atlanta.

"This approach may have merit, but I think most companies will want to see how customers take to it before jumping in," Mr. …

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