The Suitability Manager provides a simple way to comply with regulations regarding share class suitability, breakpoints, 1035 exchanges, and other point-of-sale requirements. This tool assists advisors in making recommendations with confidence, helps investors secure the lowest cost, and eliminates the time drain of extensive research and data interpretation across individual securities.
The Suitability Manager can be used to create share class cost comparison reports for mutual funds or analyze VA information for a new purchase of 1035 exchanges. From the Tools menu, select Suitability Manager, and then either Mutual Fund or VA.
Relying on artificial share class limits or unscientific rules can result in the recommendation of a share class that is inappropriate for a particular investor. The Mutual Fund Suitability Manager helps prevent misalignment by identifying precisely which share class is the best choice based on a client's time horizon and assets eligible for breakpoint opportunities. In addition, concise reports create an opportunity for dialogue that guides the selection of the most appropriate share class. Within the process, a Compliance Data Digest tool allows on-demand review of prospectus information with the option to print a comprehensive Prospectus Summary PDF report. Using the Digest eliminates the time-consuming task of interpreting complex prospectus language for breakpoints, rights of accumulation, market timing, blue sky, NAV reinstatements/transfers, and exchanges in order to apply point-of-sale rules appropriately.
To start the Share Class Cost Comparison:
Search for a fund in the Select Fund field by entering a portion of the fund name or the ticker and pressing enter. A list of matching funds is then available for your selection.
Enter the Purchase Amount.
Select the Time Horizon from the drop-down menu. This is the expected length of time an investment is held before it is liquidated.
You can compare up to four share classes. Use the drop-down menus to select from the available classes. Note: Mutual fund families often offer more than one share class of their mutual funds. Although the share classes have the same manager and hold the same securities, they apply sales charges and fees in differing ways. Depending on how much you invest with the fund family, how long you hold the fund, and the returns of the fund, your personal return may be better or worse with one share class versus another.
Click Next.
The Cost Analysis tab shows the analysis of the average annualized expenses for each share class, which assumes the investor liquidates at each month-end.
Click Next.
On the Report Settings tab, set the options for the creation of the report.
The Cover Page option is checked (on) by default. Remove the checkmark to generate the report without a cover page.
These options only pertain to the cover page.
Enter the Report Title, Client Name, and Prepare By information.
The Date defaults to today's date. The date can be changed by typing a different date in the field. Note: You must use the mmddyyyy syntax when entering a date.
The Share Class Cost Comparison report and Disclosure statement are selected by default. You can view a sample of either by clicking on the view sample report links. Uncheck either option to prevent it from being included when the report is generated.
Click Next or the Create PDF button to generate the PDF report.
The VA Suitability Manager is designed with FINRA rule 2821 in mind. This tool gives advisors the information necessary to help make a suitable recommendation for 1035 exchanges and new purchases.
The advisor simply enters relevant information about the investor situation and purchase into the tool, and then prints straightforward summary reports. The resulting report discloses fees and benefits associated with the proposal as well as an option to add a comprehensive contract overview and client signoff page.
When you select Suitability Manager, VA, if there are no VAs displayed, you will need to create a new one. From the toolbar above the grid, select New, VA.
Personal Information Tab
On the Personal Information tab, enter the information for the client and plan.
Click Next to continue.
Contract(s) Tab
Use the drop-down menus under the Recommended Contract section to select the proposed Insurance Company and Contract.
Under the Current Contract section, use the drop-down menus to select the current Insurance Company and Contract. Enter any of the monetary values that are applicable:
Exchange Amount - The replacement amount of a life insurance or annuity policy.
Surrender Charge - This is the fee charged to a policyholder when a life insurance policy or annuity is surrendered for its cash value. This fee reflects expenses the insurance company incurs by placing the policy on its books, and subsequent administrative expenses.
Death Benefit Amount - The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.
Living Benefit Value - The amount of your life insurance policy that could be available to you before you die. This is sometimes only available under certain circumstances such as terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home.
Enter the Purchase Date of the currently held contract. Be sure to enter the date using the mm/dd/yyyy syntax.
Enter the Surrender Charge Expiration Date for the currently held contract. After this date, you will no longer be charged a fee to surrender a policy or annuity for a cash value. Be sure to enter the date using the mm/dd/yyyy syntax.
Click on the Calculator button associated with the Benefits % field. The calculator pulls all of the death and living benefits for the selected contract from the Morningstar database.
Select the optional Death and Living Benefits by checking the appropriate boxes.
Checking the Other box under either sections allows you to manually enter the % for a benefit not listed. Use the Description field to enter more details on the values that were manually entered.
The Total benefits selected displays the total charge for the benefits you have selected or manually entered. This is the amount that will populate the Benefits % field.
Click OK to accept and return to the previous screen.
Under the New Contract section, you will enter values for the Recommended Contract selected.
Investment Amount - The invested amount in the annuity.
Premium Bonus % - The percentage the insurance company adds to each of your premium payments. This applies only to bonus annuities.
Premium Bonus Fee % - The commission percentage paid to a broker or agent for a bonus annuity.
Benefits % - See the Benefits % explanation above.
Initial Death Benefit Amount - Enter the initial amount of benefit that will be paid in the event of the death of a covered person. Note: This value must be <= (less than/equal to) the sum of the Exchange Amount and the Investment Amount.
Initial Living Benefit Value - Enter the initial value of the new investment that could be available to you before you die.
Click Next to continue.
Subaccounts Tab
Under the Subaccount Allocation - New Contract section, select the subaccounts and enter the desired percentages for each selection. Note: If assigning percentages manually, the total must add up to 100%.
Place a checkmark next to the Use Average Total Subaccount Expense to allocate the weighting evenly across all subaccounts.
Under the Subaccount Allocation - Current Contract section, select the subaccounts and enter the desired percentages for each selection. Note: If assigning percentages manually, the total must add up to 100%.
Place a checkmark next to the Use Average Total Subaccount Expense to allocate the weighting evenly across all subaccounts.
Click Next to continue.
Report Settings Tab
Place a check next to Select All to include all options on the report.
The Cover Page option is selected by default. Uncheck the option to generate the report without a cover page.
Enter the Report Title, Client Name, and Prepared By information as you want it to appear on the cover page.
The Date defaults to today's date. You can type a different date in the field. Be sure to enter in the mm/dd/yyyy syntax.
Check the box associated with the Fees You Pay option to include a disclosure of fees and conflicts of interest that may affect your decision to buy the new variable annuity.
The Contract Comparison Report option is checked by default. This produces the Annuity Expense Analysis Report, which is shows a side-by-side comparison of the current and new investments.
Check the box associated with the Benefits Detail option to include a breakdown of selected death and living benefits associated with the new variable annuity.
Check the Customer Signature option to generate a page for the customer to sign off on indicating they understand the expenses associated with the new VA contract purchase.
Click Generate Report to create the PDF report.