What is the investment management fee in a variable life or variable annuity contract?

What is the investment management fee in a variable life or variable annuity contract?

• A. Administration fee
• B. Surrender charge
• C. Commission
• D. Investment management fee

Answer: (D)

Investment management fee is the ongoing charge for the professional management of the money inside the contract’s separate account. In a variable life or variable annuity, you invest through subaccounts that are managed by investment professionals. The fee compensates those managers for selecting and overseeing the investments. It’s typically shown as a percentage of assets under management and is charged regularly, often by reducing the subaccount value, which lowers the returns you receive. This fee is separate from other costs like administrative fees, surrender charges, or sales commissions. For example, a 0.75% annual investment management fee on $50,000 would amount to about $375 for the year, all else equal.

Investment management fee is the ongoing charge for the professional management of the money inside the contract’s separate account. In a variable life or variable annuity, you invest through subaccounts that are managed by investment professionals. The fee compensates those managers for selecting and overseeing the investments. It’s typically shown as a percentage of assets under management and is charged regularly, often by reducing the subaccount value, which lowers the returns you receive. This fee is separate from other costs like administrative fees, surrender charges, or sales commissions. For example, a 0.75% annual investment management fee on $50,000 would amount to about $375 for the year, all else equal.