More people burst into banks and shout "This is a stick-up!" than come in asking for a variable annuity. That's all the more reason for bank advisors to initiate conversations about these often-misunderstood insurance/investment hybrids with their clients. VAs don't sell themselves.

At a time when near-retirees see few answers to their financial dilemmas-stalled or shrunken portfolios, laughably low risk-free returns and a sideways stock market-variable annuities (and their latest riders) may contain the solutions they want.

Variable annuities aren't for everyone, obviously. But with their tax-deferred mutual fund subaccounts, lifetime income options, deferral bonuses (aka rollups), they can provide what lots of people want: Upside potential and downside protection in one package.

Relative to advisors in other distribution channels, bank advisors have been successfully moving variable annuities. VA sales in other channels have declined, but the bank channel share of sales rose to 11% ($3.43 billion) of the total in the first quarter of 2010, up from 9.1% ($2.71 billion) a year earlier.

FIVE TOPS
What are the best-selling variable annuity contracts among bank customers? So far this quarter, the top five differ in flexibility and price, but they all contain options that can protect your clients from the most common financial risks associated with creating and sustaining retirement income. And at a time when advisors and clients should be conversing more often, they can also offer an excellent reason for a phone call.

The five best-selling variable annuities in the bank channel in the first quarter of this year were Perspective II from Jackson National Life, Advisors Plan III from Prudential, Best of America Future Venue from Nationwide, Pacific Voyages from Pacific Life and APEX II from Prudential.

As with most of today's leading variable annuities, these products offer one-stop shopping for the retirement-focused investor. They provide an opportunity for tax-deferred investing prior to retirement and a multitude of options for turning the savings into income after retirement. All are issued by insurers with top ratings for financial strength.

Each product has one or more guaranteed lifetime withdrawal benefit (GLWB) riders, the feature that has driven variable annuity sales since 2007. These riders, by definition, provide a floor income that clients can't outlive. But they don't require clients to annuitize or give up access to their money for emergencies. Of course, there's no free lunch: Withdrawals in excess of prescribed limits (with the exception, usually, of required minimum distributions, or RMDs) may reduce the guaranteed annual income.

Just as important, all of the GLWBs offered in these contracts include "rollups," or deferral bonuses, that increase the benefit base (the amount protected from market declines) by 5% or more a year until the 10th contract anniversary or the first withdrawal, whichever comes first.

Ignoring premium taxes, the most generous rollups ensure that someone who invested $100,000 in say, 2010, would have a guaranteed benefit base of at least $200,000 in 2020, on the condition that he or she took no withdrawals in the meantime. At the end of 10 years, the owner would be entitled to an income of 5% of the benefit base each year, or at least $10,000. If the actual account value is under $200,000 after 10 years, the client is, as they say, in the money. Keep in mind that the cash value of the annuity is the account value; the benefit base is a notional value used to calculate the annual payout. Also keep in mind that, the higher the fees, the slower the account value will grow.

The top five are all B-variable annuities, which require no upfront commission but do impose a surrender charge that typically starts at 7% and declines over seven years. Except for APEX II, which has a $10,000 minimum premium, they typical have relatively low minimum initial premiums, which fit the pocketbook of the typical bank customer.

Each contract delivers the same basic value proposition. They allow purchasers to invest with the option of ensuring that even if their account values drop dramatically, their retirement income stream is protected. That's the principal attraction of the GLWB.

The products differ, however, in ways that reflect a split in demand in the bank channel variable annuity market. That is, some bank customers (like variable annuity purchasers in general) go for the Jackson National and Prudential products, which tend to be option-rich and carry somewhat higher price tags.

But older, more conservative investors lean toward the slimmer, cost-conscious products, like Pacific Life Voyages and the Best of America Future Venue from Nationwide. (Note: Advisory Plan III and APEX II have since been replaced by the Premier line of VAs at Prudential).