Investment Only Variable Annuities (IOVA's)
Investment Only Variable Annuities- the Fee Only Annuity
The Investment Only Variable Annuity (or IOVA) is a financial planning tool we use for clients where tax-deferred growth on larger sums of taxable money is a chief concern. When we can meet client investing goals on long term horizons best with the help of an IOVA, we may recommend them as part of our holistic planning approach.
These IOVA instruments do not carry commissions in keeping with our Fee Only practice. We receive no extra financial benefit from clients choosing this option over other investment options, as our fees for investment and planning advice are consistent and transparent across all platforms we advise clients on. This lack of sometimes costly commissions compared to Variable Annuities helps keep the cost of using this solution to a reasonable expense for our clients.
Aren't Annuities Bad?
Variable Annuities have a bad reputation. They’re known to be expensive, rigid, and often not worth the trouble. So why do we work with them?
In short, they’re simply one category of planning tool. The more tools we have to plan for our clients’ futures, the better our work can reflect the real lives of our clients. Making sure this tool is indeed worth it adds to the overall viability of the planning process.
Our focus on returning the annuity to an investment vehicle focused on tax-free growth instead of an expensive financial product geared toward offsetting the high cost of its income guarantees is crucial. If that can be done, annuities will be fit to serve the new generation of tax savvy investors.
Working With Us
The firm we work with to offer these IOVA’s, Nationwide, charges a flat fee of $20/month for annuities versus asset-based charges on their Monument Advisor Investment Only Variable Annuity (IOVA) platform. Nationwide allows us to deduct our fee for investment management from the account itself, instead of imposing an out of pocket cost on the client.
Further lowering the cost of a Variable Annuity, the IOVA does not carry insurance components- it is simply an annuity product designed for investing purposes, not for insuring a fixed sum of payouts or principal. This feature can increase systemic market risks over other Variable Annuity options, but it can also increase the potential benefits of prudent, long-term investing, as there are no limitations placed on your share of market returns earned on your investments. The high costs and commissions that competing products carry have deterred us from using them with clients, and the IOVA is the only variety of annuity that we work with.
The wide selection of investment opportunities within Monument Advisor’s IOVA’s allow us to construct investment approaches that are highly tailored and comparable to investments we use in taxable portfolios. Options from Dimensional Fund Advisors (DFA), Royce Funds, Vanguard, Third Avenue, First Eagle, PIMCO, T. Rowe Price, among many others, offer us the flexibility to create plans that meet and exceed our portfolio construction standards. In fact, IOVA’s offer access to funds (such as DFA) that could have prohibitively high minimum investments for other investment portfolios. We also have access to Socially Responsible Investing options for IOVA’s.
For certain clients, the Investment Only Variable Annuity may be the only investment option suitable to the planning project at hand, and that is why we are enthusiastic to bring this planning tool into our range of solutions. We use the same process to determine whether any approach is right for you, the client:
Our Investment Only Variable Annuity Pricing
Our prices are always transparent and straightforward. Meetings, phone-calls, and implementation are always free.
This is the flat maintenance fee for contracts of any size
For clients who opt to have assets managed by Chaim Investment Advisors instead of hourly rate, we have a fee model with break points as followed for assets under management:
- $0 – $1,000,000: 1%
- $1,000,001 – $2,500,000: 0.85%
- $2,500,001 – $5,000,000: 0.8%
- $5,000,001 – $10,000,000: 0.75%
- $10,000,001 – $25,000,000: 0.70%
- $25,000,001 – and Up: 0.65%
SEE A CASE STUDY
Take a look at a sample financial plan based on a detailed case study done by our lead planner, Victor Schramm, CFS®
Hourly Rate versus Managed Assets
Hourly Rate Financial Planning has been a specialty of Chaim Investment Advisors since our founding. The ability to pursue hourly rate relationships is one of the defining factors in our decision to be a fully independent firm.
Comprehensive hourly rate projects are best suited to investors who want a detailed framework for their financial future, but want to implement all of the advice offered by a financial planner by themselves.
This includes younger workers who want a roadmap to creating their financial future with detailed instructions along the way, but prefer to do all of the day-to-day portfolio management on their own. It also is popular with retirees who have a fixed income and more tight financial parameters that need little maintenance.
Of course, we work with our hourly rate clients on an as-needed basis: when new situations arise, we’re always happy to help with the next phase of your planning needs.
Financial Planning with Managed Accounts
For all of our Managed Asset clients- those clients who elect for Chaim Investment Advisors to manage their portfolios on an ongoing basis- all of the comprehensive financial planning we offer on an hourly basis is always free.
This includes our Workplace Retirement clients and Investment Only Variable Annuity owners.
Our Approach at a Glance
All financial planning services can be contracted as needed- there is no pressure to bundle more services than you need, and there is no minimum amount of billable hours required. We conduct a free introductory meeting to determine what services make sense for your situation.
We use a wide range of financial planning tools. For retirees and near-retirees, we focus on building and managing tax-advantaged pools of retirement income and long-term growth. For younger workers and small business owners, we focus on maximizing tax-deferral and risk-tolerance optimized growth.
Apart from managing and planning with Individual Retirement Accounts (IRA), SEP-IRA’s, 401(k)’s, and 403(b)’s, we also use Investment Only Variable Annuities (IOVA’s) for clients who can benefit from long term tax deferral on large sums of capital. We utilize 1035 exchange transfers with clients with existing Variable Annuities who can benefit from a flat-fee alternative to the higher fee and commission model of Variable Annuities.
To learn more about our unique approach to Variable Annuities, take a look at our IOVA page and Annuity Rescue page. For information on how we construct and manage portfolios for such vehicles, take a look at Our Philosophy page.
We take particular interest in assisting clients in selecting investment options that meet their needs as socially responsible investors (SRI). You can learn more about our approach to SRI at our page on the topic, or read more in depth on our philosophy on “where values meet value.”
BOOK YOUR INTRODUCTORY MEETING
Schedule your free introductory meeting with Chaim Investment Advisors conveniently online.