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VARDS Office Closing: Founder Parting Ways with New Owner

It looks like VARDS' move to Morningstar is truly its last, but this time it loses its founder and most of its staff.

The Variable Annuity Research and Data Service, started by Rick Carey in 1988, has been semi-nomadic since 2000, when Carey sold the company to Info-One, which, in turn, was bought by Wachovia, Charlotte, N.C., the next year.

In 2003, VARDS next went to AnnuityNet in Herndon, Va., which then bought the Atlanta-based unit and rebranded the entire company as Finetre.

Chicago-based Morningstar purchased VARDS from Finetre at the beginning of 2005 and now plans to close VARDS' Atlanta office on May 13. Liz Kirscher, president of data services at Morningstar, said that the company offered positions to the 12 Atlanta employees and a few applied for jobs in Chicago.

However, Carey said that Morningstar will not continue its association with the VARDS Greenwald Strategy service, a joint venture that VARDS had forged with Mathew Greenwald & Assoc. in Washington.

Carey's association with Morningstar terminates at the end of his contract, but he will continue his work with the Greenwald joint venture.

"I am committed to the groundbreaking work in the retirement income arena that VARDS Greenwald started," Carey said, adding, "We have ongoing commitments to continue multi-year research initiatives that we have been working on over the past year-and-a-half."

Morningstar will keep the VARDS Online brand, Kirscher said, but other services, namely VARDS Advisor, will be integrated into the Morningstar brand.

VARDS Online provides the most comprehensive variable annuity data, including detailed contract statistics and information on sales flows, and is primarily used by the carriers themselves. VARDS Advisor, which is in broader use, is geared toward financial professionals who use the information as part of their sales and monitoring process.

The primary impetus to close the Atlanta office was to consolidate data collection operations in one physical location, Kirscher explained. "We're looking to bring the Atlanta operation to Chicago so we can collect the data in one place," Kirscher said. "That's the reason for the decision to close the Atlanta office."

VARDS itself was well known for the high quality of its data collection, which Kirscher assured will remain top-notch. "I think we're well known for the quality of our data as well, so I think we have the systems and a larger group to bring to bear than the VARDS team when they were in Atlanta by itself," she explained.

Investment Data Firepower

The potency of the relationship comes from the combination of Morningstar's investment data firepower with VARDS' contract data. "We are known for our extensive coverage of the sub-account data and had amassed probably the largest coverage," Kirscher said. "What VARDS brought to the table was broader and deeper coverage of the contract portion of the data."

Morningstar does not plan to alter the pricing structure, Kirscher said, although the company will make adjustments as it adds features of data to the product.

While these are the final days for VARDS as the industry has come to know it, the company's intimacy with a nascent industry has given way to the variable annuity's entree into the mainstream. After all, Morningstar's acquisition makes sense only in a world where investors and advisers needed to look up comprehensive information about variable annuities and understood that there was more to them than a set of mutual funds.

"We saw that VA contracts are complicated things and the VARDS opportunity offered us a natural fit," Kirscher said. "I think because VAs are complicated to understand, the more information we bring to investors, the better."

Carey said that, although variable annuities are getting there, they haven't quite entered the mainstream in the same way that mutual funds have. "Almost every U.S. citizen knows what a mutual fund is and fewer know what a VA is, but it's coming: give it another decade," Carey said.

"A growing number of Americans will need to utilize the benefits of annuities to supplement their retirement income efforts and portfolios."

Carey originally started publishing VARDS to straddle the VA data offered by Lipper of New York and Tillinghast of Stamford, Conn. The former had investment data and the latter had contract data. Although this established the publication in the market, sales data really helped it make its mark. Ultimately, good timing combined with a faculty for listening to carrier requests distinguished VARDS from other data services, Carey said.

Right Place, Right Time'

"We were literally in the right place at the right time," he said. "The carriers really worked with us to develop what VARDS is today."

As part of a large global company that is in the process of going public, VARDS will change, and it may be easier for a relatively small area like variable annuities to get lost in the shuffle. Carey said that VARDS has created design templates that it has not yet implemented in the database, particularly related to retirement income.

Trends like guaranteed minimum withdrawal benefits used for lifetime income [see AMN, February 2005] generate the need for tracking more data, such as fund and asset allocation restrictions, Carey explained.

"For us it was easy to keep up with changes in the industry as that's all we tracked," Carey said. "Morningstar has a lot of resources and talent, but the question is whether they will be able to balance their commitment to consumers while maintaining the kind of focus and quality that carriers have come to expect from VARDS."