Jackson National has designed the fee-based IOVA
contract to eliminate mortality, expense and administration charges.
may provide the IRA owner access to alternative investments such as managed futures or private equity.
The competitive landscape continues to evolve, and more companies are entering the IOVA
For clients who can live without that income until they're 59 and a half and can withdraw it without incurring an IRS penalty, an IOVA
might be able to meet their needs.
While inflows into IOVAs
have been relatively modest to this point, McCarthy says he expects interest to grow as IOVA
products proliferate from companies such as Jackson National, Jefferson National, Nationwide, MetLife, Principal and SunAmerica.
are also attractive because the fees that a client must pay to maintain an IOVA
are much less than those applicable to other types of annuities (some products offer a flat fee that is as low as $20 per month, and many products have no surrender charges).
A solution with greater control is to designate a charity as a beneficiary of an IOVA
through a Net Income with Makeup Charitable Remainder Unitrust (NIMCRUT).
If they are taxed at higher rates for short term capital gains and ordinary income such as fixed income, REITS, commodities, actively managed strategies and liquid alternatives, locate in a low-cost IOVA
to mitigate the impact of taxes.
While variable annuities have traditionally been distinguished by high fees that buttress the annuity company's guarantees, the fees in these IOVA
contracts are much lower and competitive with those charged by more traditional investment vehicles, such as brokerage accounts.
To compensate, insurers' asset managers are focusing more on investment-only variable annuities or IOVAs
Are you and your client comfortable with the possibility of being automatically moved if a non-proprietary fund is replaced in the carrier's IOVA
lineup with a propriety fund?
Although there are no traditional guarantees, the use of such a wide range of investment options theoretically allows an IOVA
to offer downside protection through the use of hedging strategies and diversification.