Congress is Investigating Annuity Sales Part II

There was an article published in the Wall Street Journal on October 28, 2015, on this topic, and I wrote about this before but I feel it needs to be addressed again. The article states that 13 of the nation’s biggest life insurers use vacations and other prizes to reward agents for selling high-cost retirement-savings products. These incentives are said to be kickbacks that create conflicts of interest. Some of these incentives include cruises, luxury car leases, and other perks to annuity sales agents to promote their products.
I believe that no financial product should be sold to earn a commission, much less a cruise or trip to some lavish destination. How can this be fair to the consumer? The sales agent is given an incentive to sell their client a product that is not only expensive but most likely unsuitable. Insurance companies make a ton of money selling high-cost products to clients. How else can they afford to send their agents on trips or provide other high-cost incentives as motivation to sell the product of the day? It’s pretty simple. The fees that are embedded inside most of these products are extremely high, sometimes up to 4% annually and most come with long, expensive surrender charge schedules that prohibit the client from selling the product. If these products are so good, why is there a penalty for selling it? What usually happens is once the client figures out what they own are not what they were told its’ too late.
The penalties for selling are enormous, in some occasions as much as 20% of the principal. There are warnings posted on the state of Florida website at www.myfloridacfo.com. I would advise anyone thinking of purchasing an annuity to visit this website and do some due diligence prior to making a purchase. Here is a checklist for anyone thinking of making an annuity purchase.
1) Do the annuity benefits provide for your beneficiaries?
2) Have you checked out the background of the broker or agent selling the product at www.finra.org? You can check the person’s background at this site through broker check to see if he or she has any complaints against them.
3) Check out the financial strength of the company before you invest with them.
4) Please make sure you are aware of all the costs associated with the product you are buying. These products will eat up your retirement money in fees most of the time and you need to have it all spelled out clearly. Ask the agent or broker to put all the fees in writing and sign it so you have documentation that shows all fees were disclosed.
Look, I have all my insurance licenses and I get emails daily from insurance companies touting their annuity products. The one thing each email has in common is the promise of a big commission. Never do I see the promise of a great investment. If you have any questions on this article feel free to call Fogel Capital Management at (772) 223-9686.