Panelists addressed myriad issues at the annual marketing conference held in New York by NAVA Inc., the Reston, Va.-based variable annuity trade association.
RATINGS CONCERNS
During one session, Doug Meyer, managing director of U.S. life operations for Fitch Ratings Inc. in New York, said that hard times are on the horizon for insurers as commercial-mortgage exposure haunts carriers and capital levels shrink.
"Companies went into 2008 with strong [risk-based-capital levels], well in excess of the triple-A [rating] level," he said during the panel discussion "Living Benefits: The Viability of Insurer Strategies for Guaranteeing their Obligations."
This year and next could test records for defaults in corporate bonds, in which insurers invest. Similarly, the commercial-mortgage market will continue to weaken this year and in 2010, with delinquency rates on commercial-mortgage-backed securities expected to rise 2% this year, Mr. Meyer said.
He expects downgrades of one or two notches for the carriers.
NEW RULES?
Thanks to the global crisis, insurers and other financial companies will likely see new regulations that will further restrict their activities, several regulators and experts agreed at the conference.
For instance, one focus is to develop a method to calibrate the risks that financial services companies take and to establish criteria for intervention at companies that are too big or too interconnected to fail, a Finra executive said during the panel discussion "Selling in a New Regulatory Environment."
A "failure to manage risk and protect investors are two sides of the same coin," said Thomas Selman, executive vice president of regulatory policy at the Financial Industry Regulatory Authority Inc. of New York and Washington.
The idea of a single regulator overseeing systemic risk at the federal level might make sense for the marketplace, but only if there is collaboration with state insurance regulators, said Therese Vaughan, chief executive of the National Association of Insurance Commissioners of Kansas City, Mo.
HIGHER TAXES
The VA industry's future will be marked by triumphs and difficulties as the Obama administration prepares to raise taxes, according to Rob Portman, a former Republican congressman from Ohio.
"If the Bush taxes expire in 2011, capital gains and dividends taxes will rise, as well as income taxes for those making over $250,000 a year," he said. "When you think about it, this might incentivize people to look at annuities."
Mr. Portman spoke at the presentation "Insights from a Capitol Hill Perspective — Helping Americans Prepare for Retirement."
MORE UNDERSTANDING
Financial advisers, already overwhelmed with frazzled clients, want more understanding from their wholesalers, panelists said.
"Wholesalers need to know us and work with us the way we work with clients," Craig Bernard, president of the Advantage Financial/Madison (Conn.) Investment Center, said during the panel discussion "Financial Adviser Perspectives on the Current Climate."
Activity at the panelists' firms has been at a fever pitch, as some are working longer hours and increasing client communications through town-hall-style meetings, phone calls and e-mails.
They said they would like wholesalers to give them the same attention that they pay to their clients. Product pitches and e-mail blasts from wholesalers who are clueless about advisers' firms go by the wayside.
Instead, advisers want to hear plans that they can readily implement at their practices to help them at a time when asset levels have eroded.
Even though clients are a priority, the advisers are business owners and employers first, they said.
PLANNING SOFTWARE
While financial planning software has helped streamline operations at advisers' firms, experts at the conference encouraged advisers to keep the client experience in mind.
"I'm in a different realm from people who use financial planning tools, but I believe financial planning is an art," said Edmond Walters, founder and chief executive of eMoney Advisor LLC of Conshohocken, Pa.
He was a participant on the panel "The New Way of Thinking About Financial Advice." Mr. Walters' program, eMoney Advisor, allows advisers to create personal home pages for high-net-worth clients and puts together graphic presentations that depict clients' financial plans and products they hold.
The point of creating tools such as this software is to free up advisers' time so they can communicate with clients instead of fretting about back-office duties.
Still, advisers can manage the details in these programs so that they are integrated into personalized planning, thus enhancing client relationships.
E-mail Darla Mercado at [email protected].
