Traditionally, variable annuities haven’t been a product that appeals to wealthy investors. Instead they’re typically aimed at investors looking for a secure source of income in retirement. Recently, however, high and ultra-high net worth investors are looking toward private placement variable annuities (PPVAs) because of their tax advantages and their attractive and transparent fee structure. PPVAs also provide the potential for greater returns by accessing investment options that are generally not available to the public, including hedge funds and private equity investments.
Delegate Advisors CEO Bob Borden discusses this trend in a recent Financial Advisor article, noting that these annuities can be especially beneficial for clients looking to leave money for their children or grandchildren “without the burden of investment acumen or financial discipline.” He acknowledges, however, that not all clients are comfortable with the concept, and like any investment but particularly with private placement, due diligence is required.
“It is important to shop from highly rated, well-capitalized issuers in order to have confidence in the reliability of those income streams and to have a clear understanding of all costs involved,” Bob emphasizes at the end of the article.
The complete Financial Advisor article is available here.