Annuity Commission

[Travis Price]

Is it "wrong" or just not the in depth explanation that you would give? It is not wrong, it's just a much simpler way of explaining. Pretty much all companies "buckets" are made up of the same thing. The amounts that go into those buckets are the difference.

If you don't think these companies work the numbers backwards so that they start from a place of profit, you are mistaken. It's all about how much the company thinks they can profit from a particular product. That's the only reason they are in business....to make a profit.

Commissions ARE tied directly to the investment amount. That is how the amount of commission to the agent is calculated. Simple as that. Why complicate things?

Listen "sweetheart" I like to make myself sound smart and handsome by making sure make things sound stupid complicated. This way, I can talk to clients and they have no idea what I'm talking about.

Just sign on the line.. mmmk?

 

[DecisionMan]

Sorry man, thats a great sales pitch to consumers. Doesnt fly with experienced agents. Hopefully you just dont know any better.

This is an informative and excellent post.

Thank you for your input sweetheart,

Pet peeve, but could you use paragraphs or some line spacing in future posts please?

For the past few weeks I've been using AnnuitiesGenius to sort annuity carriers, indexes, products, spreads, fees, hypothetical vs live indices, blah blah blah and its amazing how when you get down to the nitty-gritty (yes, a professional term!) almost all the returns are in the 3-4% range on the A- or better carriers.

Some way or another, the carrier is going to get their cut, the agent will get theirs, and it will come out in the wash in the product's rate of return.

Generally speaking, though, if a carrier's got to offer an out-of-the-ordinary commission there's a reason they're doing it - and it isn't for the client's benefit.

 

[Allen Trent]

This is an informative and excellent post.


Pet peeve, but could you use paragraphs or some line spacing in future posts please?

For the past few weeks I've been using AnnuitiesGenius to sort annuity carriers, indexes, products, spreads, fees, hypothetical vs live indices, blah blah blah and its amazing how when you get down to the nitty-gritty (yes, a professional term!) almost all the returns are in the 3-4% range on the A- or better carriers.

Some way or another, the carrier is going to get their cut, the agent will get theirs, and it will come out in the wash in the product's rate of return.

Generally speaking, though, if a carrier's got to offer an out-of-the-ordinary commission there's a reason they're doing it - and it isn't for the client's benefit.

Agree and if I recall on a MYGA, Colorado Bankers was paying higher than average 2-5 years ago. Now, those same customers may end up waiting 5 - 10 or more years to be able to get any of their money. There was a reason their interest rate was a bit better.

Same seemed to be true for the earlier FIA carriers with 2-tiered annuities. those with highest commissions had the longest (or permanent surrender charges). Many of those carriers settled class action lawsuits over it & were the target of numerous States Attorneys General.

 

[ColtenH]

Is it "wrong" or just not the in depth explanation that you would give? It is not wrong, it's just a much simpler way of explaining. Pretty much all companies "buckets" are made up of the same thing. The amounts that go into those buckets are the difference.

If you don't think these companies work the numbers backwards so that they start from a place of profit, you are mistaken. It's all about how much the company thinks they can profit from a particular product. That's the only reason they are in business....to make a profit.

Commissions ARE tied directly to the investment amount. That is how the amount of commission to the agent is calculated. Simple as that. Why complicate things?

In short my reply was to ensure the consumers and new agents looking into annuities do not get confused. These forms are not only seen by experienced agents. The initial start for this thread was from an agent looking to venture into annuities, and I wanted to ensure the basics of commissions were covered, because one of the first replies was misleading.

Because yes every agent on here knows commissions don't come out of your clients investment. And honestly "that goes without saying" doesn't apply when clients that are searching on google about how agents are getting paid off annuities, these threads often pop up as the top results and personally think offering basic information causes no harm.

The fact of the matter is yes, carriers are in business to make profit and yes commissions are dictated off the products sold, and the future return outlook of those products. But in the way they compensate agents for selling that isn't the same. Smaller carriers vs large carriers have different systems and processes of portfolios, of consumers investments, and payouts to agents.

Again, the generalization is the only thing wrong. The process to get to the end percentage and agent gets is generally different. That difference is minimal but still existent.

 

[scagnt83]

Thank you for your input sweetheart, just was trying to clarify for the agent NEW to annuity sales that point. Because your initial reply did not clarify that, which its not your fault but I've seen too many of these forms confuse new agents and they end up making major mistakes getting information from "experienced" agents. But then again you are not wrong completely, and I am not arguing the way carriers decide commissions for certain products. But you can not seriously generalize each carries commission breakdown as the same. There are so many factors that dictate commissions to agents, and yes product profitability is one aspect but not the sole aspect. Each carriers risk management, and portfolio management teams are different. Their options, and indexes all come into affect. To say its the same all across the board is wrong 100%. At the end of the day these new agents really need to understand their comp rates from their upline, and need to be educated on the different products commission pays. Sad part is most uplines are failing these new agents and replies like yours does as well.
You are getting into the weeds and you should really take a step back and answer these forms to incoming agents, like the initial question that started this form. These discussions are not just between experienced agents. Trust me, its beneficial to repeat "common sense" practices. Because it helps new agents.
These forms should be helpful to all. New agents, and experienced ones as well. Even consumers read these forms. So honestly just think a little more about whose reading your replies and know that your information you think is factual, really isn't. Your generalization of all carriers "buckets" is wrong, consumers investments are not implemented the same, nor is the payouts to agents.

If we had to repeat the extreme basics on every thread, this forum would be a bore and nobody would ever post.

And if you want to be cute and unprofessional and call people names, I am happy to point out every incorrect statement you have made so far.

I made a general example. Of course each carrier has different aspects to how comp and rates are dictated. But it doesnt change the fact that there are 100 pennies in a dollar. Give more to 1 of the 3 parties involved, it takes away from the other two. Its simple math and basic logic.

And annuity comp is not based on "complexity". A 10 year product is not more complex than a 7 year product, it just lasts 3 years longer. Annuity comp is based on product profitability. A 10 year product makes the carrier more money than a 7 year product, a 7 year makes more than a 5 year, etc.

Since you are so concerned for new agents, perhaps you should start a new thread informing them about how they are paid on annuities... maybe you will get a few replies over the course of the next few years. But since the OP is not a new agent, it was assumed that the extreme basics were not necessary.

 

[scagnt83]

Agree and if I recall on a MYGA, Colorado Bankers was paying higher than average 2-5 years ago. Now, those same customers may end up waiting 5 - 10 or more years to be able to get any of their money. There was a reason their interest rate was a bit better.

I remember those rates. Never sold it. Glad I didnt!

I remember thinking there was no way they could make money on that, simply a bid to buy business and gain assets to leverage.

Its sad to see what the clients are going through now. Huge surprise for them. But at least they will come out ok in the end, I dont think SGA funds will come into play, or are they in that bad of shape? I have not followed that closely. Of course that doesnt help the ones who need their money right now and not in 2-3 years time.

 

[scagnt83]

Same seemed to be true for the earlier FIA carriers with 2-tiered annuities. those with highest commissions had the longest (or permanent surrender charges). Many of those carriers settled class action lawsuits over it & were the target of numerous States Attorneys General.

I never came across any of the permanent surrender products, but Ive seen the 2-tiered products and not a single person remembered about the 2nd tier. And not that it was even that bad of a thing for most of them, it was just the surprise of it and not remembering (or not being told as we all know that was glossed over by plenty of agents). Many of them had fantastic returns, but ended the experience pissed at the surprise their 10y product was really a 14 year product.

 

[scagnt83]

For the past few weeks I've been using AnnuitiesGenius to sort annuity carriers, indexes, products, spreads, fees, hypothetical vs live indices, blah blah blah and its amazing how when you get down to the nitty-gritty (yes, a professional term!) almost all the returns are in the 3-4% range on the A- or better carriers.

This is very true imo and ime.

My annuity book averages in the 2%-6% range if I had to put exact figures on it. But the median is certainly in the 3%-4% range.

Market timing varies so much with index annuities. Just 1 month difference in policy date can certainly make a difference, especially with certain index strategies. And especially this time of year when markets tend to have more volatility historically.

And that is basically what an FIA was designed to do concerning returns... provide a slightly higher rate than what Fixed Annuities provide. Generally speaking, FAs & MYGAs are paying in the 2%-3% range over 5-10 years. That puts FIAs in the 3%-5% range over 5-10 years. (since FIA cap/spread/pr are interest rate sensitive, same as the renewable fixed rate on a FA)

 

[Allen Trent]

I remember those rates. Never sold it. Glad I didnt!

I remember thinking there was no way they could make money on that, simply a bid to buy business and gain assets to leverage.

Its sad to see what the clients are going through now. Huge surprise for them. But at least they will come out ok in the end, I dont think SGA funds will come into play, or are they in that bad of shape? I have not followed that closely. Of course that doesnt help the ones who need their money right now and not in 2-3 years time.

The legit carriers will fight the GA having to be involved as those carriers won't want to have to use their funds to bail out CB clients, especially in these bizarre times of low interest rates, surplus strains, etc

 

[Allen Trent]

I never came across any of the permanent surrender products, but Ive seen the 2-tiered products and not a single person remembered about the 2nd tier. And not that it was even that bad of a thing for most of them, it was just the surprise of it and not remembering (or not being told as we all know that was glossed over by plenty of agents). Many of them had fantastic returns, but ended the experience pissed at the surprise their 10y product was really a 14 year product.

Some were even 20-25 year surrender charge periods and even the beneficiary at death was subject to the surrender charge and some of those products unless they annuitize the death benefit over a period of years.