With a national footprint, Valic Financial Advisors has more than $23 billion in assets under management (AUM). In addition to being an investment advisor, Valic is also a broker-dealer. Its name is an acronym of its parent company, The Variable Annuity Life Insurance Company, but the firm also goes by AIG Retirement Services.
Though advisors are employees of the company, they are technically independent advisory representatives (IARs). They are also broker-dealer representatives and most are insurance agents, making Valic a fee-based firm.
Valic Financial Advisors Background
Like many corporate subsidiaries, Valic Financial is part of a large (and confusing) organizational structure. It is wholly owned by The Variable Annuity Life Insurance Company (VALIC). That entity in turn is owned by AGC Life Insurance Company, which is owned by AIG Life Holdings, Inc., an entity owned by SAFG Retirement Services, Inc., which in turn is owned by American International Group (AIG), Inc. This is all to say that Valic Financial is a part of AIG.
Valic Financial Advisors Client Types and Minimum Account Sizes
The vast majority of clients are not uber-wealthy. Most clients are not considered high net worth individuals, although a sliver of Valic Financial client base is considered to have a high net worth. The company also works with participants in employer-sponsored retirement plans, trusts, corporations and other business entities, depending on the advisory program.
Minimum account sizes also depend on the advisory program. For the Managed Investment Program (MIP), Valic Financial requires $5,000 to $250,000, depending on the portfolio. There is no minimum for the Guided Portfolio Services (GPS) Program, which is available only to participants in a retirement plan with VALIC or VALIC Retirement Services Company. There’s also no minimum for the Guided Portfolio Advantage (GPA) Program, though you need to purchase a Porfolio Director (PD) Freedom Advisor contract to participate and the contract has a minimum premium payment of $25,000.
Services Offered by Valic Financial Advisors
Valic Financial provides discretionary investment management services through three wrap fee programs. MIP accounts can choose from 15 model portfolios. Ranging from very conservative to very aggressive, these portfolios are managed by advisors from Envestnet Portfolio Solutions, Inc., Russell Investment Management, LLC, The Vanguard Group, BlackRock Investment Management and CLS Investments, LLC.
Accounts in the GPS program invest in a VALIC Portfolio Director variable annuity or in a mutual fund program. Again, participants are limited to those in retirement plan accounts where VALIC or VALIC Retirement Services Company is the plan service provider.
To be eligible to enroll in the GPA Program, you must purchase a VALIC PD Freedom Advisor fixed and variable annuity contract. Contributions are invested in diversified model portfolios that are designed and managed by Morningstar. The portfolios use a tactical asset allocation.
Financial planning is also available, though only to investment clients.
Valic Financial Advisors Investment Philosophy
Valic Financial’s IARs are not investment managers. The actual work of constructing portfolios is outsourced to people who specialize in securities analysis. The models they use run the gamut, providing an appropriate asset allocation for every kind of risk profile.
Depending on the program in which a client enrolls, their assets may be invested in mutual funds, exchange-traded funds (ETFs), annuities and other investment vehicles.
Fees Under Valic Financial Advisors
Clients who have MIP accounts will be charged a program fee. This program fee is a percentage of assets under management (AUM) and includes the fees and costs for services provided by the IAR, Valic Financial, Envestnet, the investment manager and National Financial Services. It doesn’t include underlying mutual fund or exchange-traded fund fees or other costs. The exact rate a client will pay may vary from portfolio to portfolio.
The firm does not charge an advisory fee for use of the GPS Portfolio Advisor servce. However, fees for the GPS Portfolio Management Program are as follows:
|GPS Portfolio Manager Program|
For the GPA Program, clients pay an annual advisory fee of 1% of AUM for PD Advantage offering, while clients enrolled in the PD Freedom Advisor service within the GPA Program will pay fees according to the following schedule:
|GPA PD Freedom Advisor Program|
|More than $5MM||0.57%|
Finally, Valic Financial does not charge for completing a financial plan.
What to Watch Out For
In its most recent U.S. Securities and Exchange Commission (SEC) filings, Valic Financial reported 22 disclosures, nine of which involved advisory affiliates, while 13 involved Valic Financial itself. Fines ranged from $50 to $20 million.
In 2020, the firm paid a $20 million penalty after the SEC alleged it failed to disclose to certain teachers in Florida that its parent company had "provided cash and other benefits" to a for-profit company owned by the Florida K-12 teachers' unions in exchange for referring teachers to products and services offered by VALIC and the firm.
That same year, Valic Financial paid a $4.5 million penalty after the SEC alleged it had not disclosed conflicts of interest regarding certain mutual fund share class selection practices. In addition to the fine, Valic Financial accepted a censure and cease-and-desist order, and agreed to pay affected investors disgorgement of $13,232,681, plus prejudgement interest of $2,211,072.
You should also note that affiliated IARs wear multiple hats. When they are advising you on investments, they are legally bound by a fiduciary duty to put your interests first. But when they are selling you products or acting as your broker, they do not have to bide by a fiduciary standard. This can be confusing to clients.
Opening an Account With Valic Financial Advisors
You can schedule an appointment with an advisor by visiting the firm's Houston office, or you can contact Valic Financial at (866) 544-4968.
All information was accurate as of the writing of this article.
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