Nationwide Terminating 300 plus PPA's

[Guest TerminatedPPA]

Just wondering if there are any terminated Nationwide PPA's which participate here. If so, would you please Email me regarding your contract termination and what has happened. We have recently been placed in this situation and I am concerned about our future. Any feedback would be appreciated.

[Guest J. David Wright]

Nationwide is changing from a network of independent third party administrators to a much smaller network of what they are calling "Franchise PPA's". "Franchise" strongly implies more centralized control, less independence or no independence, and territorial restrictions. Unlike many other vendors who work with independent third party administrators, in order to become a Nationwide PPA, you must sign a General Agency agreement with Nationwide. Like many agency or general agency agreements, the Nationwide agreement has a provision that the agreement can be terminated at will by either party with or without cause with 90 days written notice. Nationwide may have already brought this provision to your attention in a form letter. There are a series of interrelated contracts as well. If you have not reviewed the interrelationship between those contracts, I highly recommending doing so.

In a series of by invitation only meetings to discuss "Franchise PPA's" last Fall, Nationwide related these changes to their involvement with farmers who are Directors of Natiowide. So let me explain it in terms a farmer can easily understand. Consider Nationwide as the farmer and the PPA's as chickens. The farmer gather and sell the eggs the chickens lay as long as they lay and gives chicken feed in return for production to the chickens. The chickens labor day in and day out under a dark cloud, the shadow of the farmer. As the workforce [chickens] increase in age and grow tired of working from daylight to dark and production plateaus, declines, or stops entirely. As a final reward for years of faithful production which supported the farmer [and helped pay for the farm plus their Country Club membership and Mercedes payments], the farmer turns the chickens into fryers.

Nationwide is and has been using this contract provision quite literally for years. The fact is there are lot of ex Nationwide PPA's out there and the number is going to increase dramatically. The future does not look good if you are in the 80% of PPA's whose Nationwide contracts have either already been terminated or will be terminated in the near future. If you want to know more about how this is working, please email direct. Know a Nationwide Director? Forward this posting to him.

[Guest TerminatedPPA]

Your reply is what I am afraid of. The information I have obtained clearly states they will end up with around 80 right now. I have been told by Nationwide that I can't sell any more plans, but they will service the ones I have. However, I read the GA contract and it clearly states that upon termination, they will cease electronic transmissions between my firm and Nationwide. So no matter what they have said, I am sure at some point that they will "pull" the plug because they have said this is a partnership and they have shown that it clearly is not. If this happens, what will happen to my plans? I will no longer be able to service them so they will leave and transfer to another PPA. Like I said, Nationwide says they will continue to service my plans and I am sure they will, right over to one of their other PPA's

Thanks for your response and if you know of any other PPA's in the same position, let me know please.

[Guest sbewley]

We have experienced a similar problem regarding the contract issue your refer to. Our contract was terminated a month ago and apparently Nationwide has not thought this situation through. Your concern is valid and I have heard of several PPAs who are in the same position. Are you aware that Nationwide has purchased 3 or 4 PPA's which are actively competing against the other PPA's? I ran across this situation last week.

The chicken analogy is right on the money. They are apparently confused as to how they got into the position they are in. It was from the PPA's who provided their product to our clients and an insurance contract doesn't override a service agreement between the client and the TPA since the plan has the agreement with Nationwide. If they cutoff your electronics, this will put you down for the ten count. I would think that a good lawyer could fix this situation with little effort. How about a class action lawsuit? It smells like a good one to me.

[Guest TerminatedPPA]

PPA stands for Prefered Pension Administrator. PPA is what Nationwide Life calls their Third Party Administrators. Sorry for not being clear but if you are involved with Nationwide Life, you would know what a PPA was.

[R. Butler]

We have been contacting various investment companies about their TPA alliance programs. Nationwide is on our lists of companies to call. Judging from the tone of this thread you wouldn't recommend Nationwide? Also, from reading J. David Wright's and sbewley's replies Nationwide probably has some kind of quota or production target it expects TPA's to meet. A vast majority of business we would run through another program. Would Nationwide even be interested in us?

[Guest J. David Wright]

My suggestion would be call them and talk to them. It might be interesting to see what they tell you. You might even be surprised. They are seeking to retain TPA's who have the potential to attain and maintain minimum assets in the $ 500M range developed through brokers primarily. If you believe you fit their criteria, by all means call. From information I have seen, there are numerous pre requisites that did not exist before such as maintaining a person to do nothing other than work with brokers [kind of like a regional person except you are paying them]. They are likely imposing production quotas and minimum assets even though there are no production requirements in their contracts as well [unless they have been added to the new contracts] and there could be territorial restrictions. Although I have not seen a clear number for minimum assets, the number may be $ 50 M at least and could be as high as $ 100M. They are evidently not looking to sign TPA's just so they can say they have a network of X hundred TPA's since they are cutting somewhere between 50% and 80% of existing TPA's. Where they are in the process, I am not certain, but I would certainly like to know. It sounds to me what they are saying if a broker calls and says he has a client in Atlanta, GA and wants to do a plan with them for instance, their response is going to be something like, "Our TPA in Atlanta is _________ and his phone number is ______________. He will be contacting you to quote the plan and go out with you and sell it." That might not be a bad deal if your phone number is _________ and your office is in Atlanta, GA, but if you are a Nationwide PPA with office in Atlanta, GA and that is not your number????? Oh well. As they say, there are other vendors. Look at them all very closely before you commit. If there is any c contingency that could result in the inability of being able to get out with your shirt, don't sign.

[Guest DebN]

We are a PPA firm as well. We have not signed the new agreement yet, and we are hesitant to do so. We have been told if we do not sign it that we will not be able to write any new business after 90 days. We have also experienced the situation where a broker has been given another PPA firm's name and number to contact, since we do not use Nationwide exclusively. I would not put all your eggs in their basket!!

[Guest J. David Wright]

Hi, Deb. If they are sending you a new contract, I have not seen one like it. It must be the "Franchise" or maybe the "Accounstable" or whatever they are calling it now contract. I would read it carefully because for certain it will have hooks in it. Putting all of your eggs in one basket does not help either. We sold no product other than Nationwide's for eleven years and qualified for their top production group. I have a Taiwanese clock that does not run to prove it. We had so many plans moved to other PPA's [two] in the past six years, I coined a term for it. Lateral Plan Movements, and it only requires two signatures to effect. They simply line the account off your statement and write it in on someone elses statement. We have had eighteen plans make such movements in the past six years including the most recent to their latest wholly owned subsidiary PPA. Nationwide people were out calling on our broker on the case while we were at the 2000 Pinnacle meeting. We were told that the moves was initiated by the broker in every case. In addition, Nationwide co-hosted broker seminars in our market [four PPA's in the market] with one of the other three, invited every broker in this part of the state, attempted to have Nationwide exclude from the mailing list invitations to the other three area PPA's. Invitations were mailed to brokers in Nationwide's database including those we have worked with and developed relationships more than ten years. Don't believe it? Email me and I will email you a PDF copy of the seminar invitations. If that was not bad enough, the PPA Nationwide was co-hosting the seminars is an outside director in Nationwide Trust Company, FSB. Don't believe that either? Check Nationwide Insurance Company 1999 Annual Report, but you really have to look hard and know what you are looking for. Are we feeling secure yet?

[Guest TerminatedPPA]

DebN:

As Mr. Wright stated, read the agreement carefully. The original contracts clearly state that upon termination, Nationwide has the right to disconnect you electronics. What assurance does anyone have that they will not do this immediately? Some would refer to the promise by Nationwide to allow you to service the cases you have and not allow you to sell any new ones. Why would they do this? There is no reason why Nationwide should cancel a contract if they intend for the PPA to service current plans. All they have to do is not allow PPA's to sign the Trust contract and they are no longer competing with themselves. We have several instances where Nationwide's company administration firm has been contacting our brokers and plan sponsors over the last six months. If they truly intended for the terminated PPA's to continue to service their clients, they would not be sending out their company owned TPA trying to undercut admin costs and services.

We have also discovered that several PPA's have been endorsed in several areas via broker seminars. We have also discovered that several PPA's are directors in Nationwide's Trust Company. This makes it hard to compete when your competitor has direct insight into the daily operations of the company in which you work for.

Call Nationwide if you have concerns. I can assure you that they will tell you that there is nothing to worry about. If you believe their answers, please refer to your contract with Nationwide. Pay particular attention to the part, which states, "Upon termination of the contract, we will discontinue electronic communications between you, the client and Nationwide." So why would anyone believe these people. They cancel your contract because they can, what makes anyone believe they won't stop electronic communications between the PPA? Why would they unplug you? Your clients will not receive timely service; they can send one of their TPA's in and solve the client’s problems. They are now paying the override to themselves and have made sure the client is not moved to another provider. Asset retention is the name of the game.

My two cents.

[R. Butler]

Just for anyones information, I contacted Nationwide to get information about their PPA program. The regional sales person basically said they weren't looking to add new PPA's at this time. As many of the posts indicate, the individual I spoke with did confirm that Nationwide intends to cut its PPA's by more than 50%.

[Guest DebN]

Thanks for info from Mr. Wright and termed PPA. We have also been a firm like yours, David, where we have been pinnacle for many years, sold mainly their product for most of the 90s, etc. We have moved to doing daily val work in our office now and maintain our own system. We feel we have much more control over what happens with our clients! We do have that franchise new agreement and the supplement that came out after the Feb. mtg. I am reading it AGAIN. Could one of you reference the section that states "upon termination we will discontinue elec communications" etc? We are concerned as well about them buying PPA firms and using them to take business. We are also in the same boat where "our" area rep has had seminars and we have not been invited since we are considered direct write. I wonder what would happen if we did not sign and chose to not write new business? If we would eventually lose our electronic connection for existing cases? That is a very scary thought. So, is there anyone out there who has signed the new agreement?

[Guest J. David Wright]

Deb, as I said, Nationwide was talking about Franchise PPA's and some abstract name for direct writers. After whacking us, we are not in the loop so I have not seen either of the new contracts, although I would certainly like to do so. Unless Nationwide has changed their entire contractual procedure, which I doubt, the new contracts are likely amendments to the original contract.

There was an Amendment [i signed it in 1996] called Electronic Transactions Amendment which gives the GA access to electronic transactions. Find that contract amendment. Read III Article IX, TERMINATION - It states "Either party may terminate this agreement at any time by giving 90 days written notice to the other party. Access to electronic transactions may be terminated by Nationwide at any time without prior notice. Upon termination of access, Nationwide will notify GA of the termination and the reason for termination. Such termination shall in no way affect continuing obligations of GA under the terms of this agreement. Nor shall said termination relieve GA's obligation to continue to offer administrative services to any Plan". Since Nationwide says they are not processing any paper transactions and we are in a world of faster and faster horses, how long do you think you could maintain your exising accounts if your processing time decreases by 200%, 300%, 500% or more because you are without the ability to utilize electronic transactions?

Since the Electronic Transaction is an amendment to your original GA contract, if your GA contract is cancelled, this contract is cancelled as the result. From that point, it is like a gun [not to be construed as a threat of physical violence to anyone]to your head, just like the possibility of elimination of participant level accounting, which seems to be governed by subjective rules for continuation that may not even exist. If that is not bad enough, Nationwide is holding you responsible for the continued administration of the plan while eliminating access to electronic transactions. Having first hand seen the dreaded "90 day written notice by either part", I can tell you, there is NOTHING in that letter that says Nationwide does not intend to invoke the provisions of the Electronic Transaction contract. They don't even address this issue in the letter.

Nationwide has already bought three PPA firms that I am aware of. They are Pension Associates, Wausau, WI, The 401(k) Company, Austin, TX, and Nationwide Retirement Plan Services, Inc. [fka Diversified Pension Services] Cincinnati, OH. We had the first of our Nationwide plans laterally move to NRPS in January 2001. Yes, it is a scary thought. You sell too much, you don't sell enough, somebody complains, you ask too many questions, or you simply ask the wrong question. Consider the results if one day, Nationwide decided to simply "unplug" your firm. Your local Franchise PPA and/or representatives of a Nationwide owned PPA will be calling on your clients telling them how they can "plug them back in" and saving them by merely signing two forms. A new contract holder's authorized representative form appointing the new PPA and an agent of record letter appointing someone else as the agent of record and presto chango, your client account disappears from your Nationwide desktop, never to be seen again and it disapperars from your commission statement as well. How much do you think the new PPA is going to pay for you accounts? ZERO. Have you considered the impact of the value of your Nationwide accounts if you decided to sell them or to retire? What is the impact of these marketing direction changes on the value of your firm? If you were to decide to sell, who now would be potential buyers? We have already been told Nationwide is not adding any new PPA's and they are eliminating "more than 50%" of existing PPA's. Do those who remainder have any motivating reason to buy your Nationwide plans? The big winners in this tontine arrangement are those PPA's who sold more than $ 500M in assets and are being bought by Nationwide. Lets revisit this in about five years and see who is left standing.

[Guest Phil L]

I am with a PPA in the midwest that has not yet signed the new agreement. We decided a few years ago to have our own daily recordkeeping shop so that we wouldn't have be so vulnerable to any particular organziation, including Nationwide.

Even though we have added lots of plan to our own in-house daily system, we have generally produced enough Nationwide business to qualify for their Pinnacle program. Lately however, Nationwide has really given us the red headed step-child treatment for not being an exclusive Nationwide producer.

Somehow a bunch of our clients happened to get contacted from a rival PPA, one that is an exclusive Nationwide producer I believe. How on earth did they happen to get a list of our clients and their phone numbers? We are very careful about shredding documents etc. so it is unlikely that someone got our client list from inside our organization (though not impossible).

According to a very reliable source, a person we've known for more than 10 years, the local Nationwide wholesaler apparently initiated the call to action for the rival (exclusive) PPA to call the brokers and the customers on our client list. How is that for a "parnership"?

Do you think that the upper levels of management at Nationwide would be appalled if they knew what was going on? Well, guess what. In a phone call to the National Sales Manager for Nationwide, we requested that they immediately cease this practice. The National Sales Manager said he would look into it. This was quite a while ago and we haven't heard a peep from him.

I guess I don't have proof that they actually condone such practices so I will stop short of making that statement. However, apparently this issue wasn't important enough to warrant a return phone call or an apology or even a watered down explanation. No repsonse at all. And, judging by other responses in this thread, it appears that this practice might be more common than a lot of people think.

It appears to me that the Nationwide partnership might be a little bit one-sided. You can draw our own conclusions.

[Guest DebN]

Hi Phil, your firm sounds just like ours w/daily etc. We have also produced enough NW to be pinnacle, but are not getting star treatment either!! I cannot be certain that our clients have been contacted, but I do know our local rep is not contacting us.

So, if you don't sign the contract, I believe you cannot write any new business after 90 days. The BIG question is, what about your existing business? Will they cease electronic communication so you can't service those clients?

[Guest J. David Wright]

Phil, we produced exclusively for Nationwide and they did the same thing to us. We had seventeen accounts make lateral moves to one local PPA plus one to Nationwide Retirement Plan Services over the past six years.

I was led to believe the problem you described was a local problem. From what you are saying, it is not a local problem. With this re-alignment of distribution channels, I think it is going to do nothing but get far worse and quickly. I would like to know if this sort of thing is going on in other areas. You will likely be waiting a long time to hear back from the "NSM". Nationwide does not deal with hard questions or problems they create; they ignore them and hope they will go away. When they don't go away, you get axed. You want to know about no response? I can tell you about no response from these people.

"Partnership?" What partnership? You should hear their real explanation in the context I heard it! In a deposition. Your "Partnership" agreement [Contract] is terminable at will by either party with 90 days written notice and it does not require cause. Ask the wrong question? Ask too many questions? Raise too many issues or the wrong issues? Adios.

[Guest TerminatedPPA]

Phil:

Been there and done that. We have experienced similar problems and they seem to keep getting worse. We have had wholesalers solicit clients based on fiduciary liability issues and suggest that they move to the trust product that will solve their problems. After they sales pitch and the client wants to buy, the wholesaler "discovers" that the broker who sold the case can't sell the trust product because his broker dealer won't sign the selling agreement. This is an even worse situation because the broker is upset and trying to move the case while the wholesaler is pushing full ahead over to the trust company and another PPA.

This is a one-sided partnership for sure. We sell their products to our clients and brokers, service them very well and still end up getting screwed. Somewhere along the way, all of the management within Nationwide must have experienced a memory lapse which wiped out the reality portion which included the part "THESE ARE THE PPA'S CLIENTS, NOT NATIONWIDES. WE DID NOT REFER THEM, WE PROVIDE A FUNDING VEHICLE IN WHICH WE GOT PAID VERY WELL". All of these clients didn't buy the Best of America because of the Nationwide name, it was bought based on the PPA's recommendation and relationship.

Or maybe Nationwide sees a problem brewing in the distance and this is their way of trying to retain assets and profitability. Whatever it is, client lists don't just fall in the trash and end up in the "hands" of some wholesaler. We are sure our client lists have never left our office and yet we experience similar problems. I think my conclusion matches yours.

Good luck in getting a response out of the powers that be at Nationwide. Will you please post a response when someone gets back with you? If this thread is still in existence anyway. Hang in there, good luck and keep moving those plans away from Nationwide.

[Guest sbewley]

We have had similar situations like the others. Wholesalers soliciting our larger plans trying to get them to move to Nationwide Trust. Unfortunately, many of the "wirehouses" we work with have not and will not sign the trust selling agreement. This creates a problem for us since the trust product is probably a better choice for some of our clients. But if your broker can't get paid because his broker dealer will not sign the agreement, it appears that the PPA is not looking out for the client and plans best interest.

Nationwide has a simple solution to this problem, it requires 2 signatures, two forms and the plan is moved to another broker and PPA. Simple for them to do and you won't even get a thank you letter. The broker you worked with on the case probably will not continue their relationship with you either as many consider the PPA as an extension of Nationwide. Problem created and solved by Nationwide. The plan stays and the PPA gets "dumped" on. Whatever happens, we loose.

[Guest TerminatedPPA]

All of this time, we thought that we were the only ones having problems with Nationwide. I guess it is good(?) to see we are not being singled out and that others are having similar problems.

[Guest]

I have read with much interest all the postings on this topic and am very sad about what is happening to the Nationwide PPAs. I worked for NW when we first introduced the OPUS product and the whole reason NW has been so successful is because of the relationships we developed with the TPAs over the years. The OPUS product was then turned into the Best of America product and now things are changing significantly. Most of these changes are occurring now because NW has had a significant change in the management now responsible for the PPA product. I think it's a damn shame what is happening to the PPAs now.

Our firm is currently working with a NW TPA to determine their next steps. One consideration is to move the plans to your own in-house daily platform...this is not as scary as it sounds if it is done properly. Another option is to work with one of the other insurance providers out there, such as Manulife, Aetna, Hartford, Lincoln National, and Scudder Kemper.

I'd be happy to discuss some options with you if you'll send me an email. As someone who was taught that the TPA was the lifeblood of our business when I was at NW, I am ashamed at how things are being handled now. It can be very scary and frustrating, but there are some options available that may be better in the long run for you and your business.

[Guest J. David Wright]

DEAR NATIONWIDE AT URANUS.NATIONWIDE.COM AND WAUSAU INSURANCE COMPANIES AT MERCURY.NATIONWIDE.COM

You know who you are. So do I.

I hope that you enjoyed the tour of our web site this afternoon. Come and visit again when you can stay longer.

We are watching you too. And so are a lot of other people.

[Guest TerminatedPPA]

I noticed this too. Why would Nationwide be browsing my website day after day? I guess they do not have anything better to do. Big brother is watching and snooping.

[Hoard1]

I've been away from the board. My Manulife Rep suggested I look at this thread...wow.

I too was courted extensively by Nationwide to support their "partnership" program. I listened to their lies and believed a few, I must admit. I am certain that their decision is based on sound actuarial projections on attrition, goodwill and product loyallity and they found an acceptable level of risk to proceed with their franchise model.

I believe they have not factored in the following:

1. The power of the interent to connect the pension community like a diamond net of Indra.

2. Brokers reactions to their clients being contacted by selling TPA's. I for one am making this know to all my producers. Picking up new business in their wake. For they listened to the same lies I did.

They were loosing market share and were being down graded now they are degraded in the market. Centralized PPA's will be characterized by poor service, high turnover of staff and a disenfranchised client base looking for a way out. Remember BYSIS/American Funds ML/PBC and most recently SmithBarney & Blue Print, Chase & Hancock...shall I continue.

Nationwide... I hope your listening for the writing is on the wall and it is too late to take back the spoken word or the spent arrow. You may be watching but we are comming at you from so many dirrections in such numbers it will be impossible to mount a defence. You will be surprised how the market will come willingly to our aid. The market does not care who is right or wrong. The blood is in the water.

Instant Karma is out to get you. We should all do our part to help salt the ground of Columbus OH. See you at ASPA!!!!!!!!!

[Guest BAR]

I confess, I am addicted to this thread. I start each day off by checking to see if there are any updates, almost as though it is a soap opera. Does Nationwide have any idea what they have done?

[R. Butler]

I really don't have much experience with Nationwide, but from this thread and from speaking to them about the PPA program, I am not sure they care what they have done. The individual I spoke with was a regional sales manager, he talked as if the current PPA's were Albabnians and Nationwide was Milosevic. He went so far as to refer to their current policy as a "cleansing process".

One thing I have learned from this thread, be careful about relying too much on one investment product, alliance program, etc.