MutualFundWire.com
   The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication |
Tuesday, May 18, 1999 Skandia's New VA Product Provides 1% Bonus While many fund companies try to soften performance comparisons, by stressing management, style continuity, and relative performance to its peers, all of which are obviously important, one company is saying, "Wait, it isn't everything, but yes we should stand up and be counted for performance." American Skandia is putting its money where its mouth is, offering a new variable annuity feature, called Performance Advantage, which will provides a 1% bonus on all purchases made during the first year of the contract. "Variable annuities are not wealth transfer vehicles, they are retirement and investment vehicles," Wade Dokken, President of American Skandia marketing, told the MFWire.com. "And of the product innovations in variable annuities in the last few years, most have been gimmicks." With the patience of investors shortening, with regard to their returns, the company needed to extend the amount of time that people leave their investments in an account. And with the average variable annuity investor at age 57, the company wanted to add a younger demographic to its investor mix. So the emphasis needed to be put squarely on the shoulders of the investment manager selection process. While the younger investors might not know American Skandia, the names of the funds' sub-advisors should sound familiar, including Janus and Alger, which have managed Skandia funds for years, and newcomers AIM and American Century, which recently replaced Putnam. The company's belief in the lack of conflict of interest inherent in its funds' management, as all the funds are sub-advised, and belief in its process of selecting those advisors, led to the current addition of the Performance Advantage feature. Here's how it works: The company is essentially guaranteeing a return of 7.2% percent for the 10 years necessary for the bonus to be vested.
Although a death benefit option exists with the program, Skandia characterizes it as a "scaled-down" feature, and adding the benefit requires a 30 basis point fee. Printed from: MFWire.com/story.asp?s=24883 Copyright 1999, InvestmentWires, Inc. All Rights Reserved |