Jefferson National Launches Innovative Retirement Income Solution for RIAs & Fee-Based Advisors

Volatility Management

March 25, 2014- LOUISVILLE, Ky.–(BUSINESS WIRE)–Today, Jefferson National, a market leader in tax-advantaged investing, introduced the JNF SSgA Retirement Income Portfolio to be managed by State Street Global Advisors (SSgA), a global leader in asset management. Unprecedented in the marketplace, this new solution is designed expressly for Registered Investment Advisors (RIAs), fee-based financial advisors and their clients, to help them Unlock Retirement IncomeTM while being tactically managed with Volatility DefenseTM.1

Exclusively offered through Jefferson National’s Monument Advisor, the industry’s first and only flat-fee variable annuity (VA)2 with substantially lower cost, more transparency and greater liquidity than traditional VAs, the fund gives advisors and their clients an additional way to unlock retirement income, using a combination of three key components that make this fund the first of its kind.

  • A portfolio of income-generating ETF investments, managed by SSgA, that seeks to provide total return.
  • A tactical management overlay using quantitative and qualitative measures.
  • A “Target Volatility Trigger” (TVT) methodology devised to help manage volatility.

Together, these “Three T’s”—total return, tactical overlay and TVT—are the engine, brakes and airbags that advisors need to navigate today’s retirement income challenge.

“Both Jefferson National and State Street Global Advisors have pioneered truly groundbreaking products that have changed the financial services industry,” says David Lau, COO of Jefferson National. “According to our recent Retirement Income Solutions Survey, 71 percent of advisors say the biggest challenge to generate sufficient income is a combination of three key factors: a low yield environment, maintaining adequate equity exposure and managing volatility.

Mirroring insurer balance-sheets

We believe that this new fund, combining total return, tactical management and TVT, all wrapped with the low-cost tax deferral of Monument Advisor, is a one-of-a-kind solution to these obstacles. By offering an approach similar to what insurers use to manage risk on their own balance sheets, but with substantially lower fees and greater flexibility, we help advisors and their clients meet an urgent need to generate a stream of retirement income while managing volatility.”

“Volatility exhibits some persistent features and our strategy looks to exploit that persistence,” says Chris Goolgasian, managing director in the Investment Solutions Group at State Street Global Advisors. “The goal of volatility management is to enable investors to take on an allocation of growth assets, which are needed to maximize long-term portfolio gains for a retirement that could last 30 years or more.”

Volatility exhibits some persistent features and our strategy looks to exploit that persistence

SSgA’s TVT methodology, is a rules-based strategy that dynamically adjusts the exposure of assets within a portfolio to target a consistent level of portfolio risk. According to a recent whitepaper by Goolgasian in the Journal of Index Investing3, over the past 20 years, a 14 percent TVT strategy outperformed the S&P 500 benchmark by 73 basis points (bps) per year while improving a number of risk metrics, including lower standard deviation, lower beta and substantially improved drawdowns. This is the first time SSgA’s TVT strategy has been made available in the United States, following a successful international launch.

While roughly half (51 percent) of advisors use VAs with income guarantees to generate retirement income, 52 percent are not satisfied. Further, 53 percent of advisors say their clients also express concerns about these products.4 To help financial advisors make an informed decision, Jefferson National conducted extensive actuarial research on the costs and benefits of guaranteed products, developing a new Retirement Income Comparison Calculator. This interactive tool allows advisors to perform a comprehensive stress test, to compare the hypothetical performance, cumulative fees and lifetime income potential of a traditional VA with insurance guarantees versus a low-cost flat-fee VA.

According to the tool—which runs up to 10,000 Monte Carlo simulations to randomly predict the performance of products based on three decades of market data5—most guaranteed VAs are not generating enough income to cover the cost of their riders. In fact, when looking at a standard retirement income scenario, where an investor accumulates assets for 20 years and then generates 20 years of income, the analysis shows that 89.9 percent of the time, investors will pay more for a guarantee than they will ever receive in income. When using a flat-fee VA in the same scenario, an investor would earn 40 percent more potential income each year, accumulate five times more potential assets and pay 30 percent less in fees.

For more information, please contact Greg Hassel at 212-840-1661 or [email protected], or Deborah Newman at 502-587-3858 or [email protected]

About Jefferson National Financial Corp.

Jefferson National is a leading innovator of tax-advantaged investing solutions for RIAs, fee-based advisors and the clients they serve. Trusted partner to a network of more than 2,200 advisors nationwide, Jefferson National provides greater efficiency, transparency and choice through an adaptable technology platform, award-winning distribution strategy, and cost-effective servicing capabilities. Named the industry “Gold Standard” and winner of more than 30 industry awards, including the DMA 2010 Financial Services Company of the Year. The Company is based in Louisville, Ky., with authority in 49 states and the District of Columbia. To reach our advisor support desk, please call 1-866-WHY-FLAT (1-866-949-3528). To learn more, please visit www.jeffnat.com.