How Do You Sell Annuities

[padthaiforlunch]

Called up my state securites commission yesterday. Seems lots of life agents are running nervous these days.

He told me a couple of trouble spots for agents and annuity sales.

1. Presenting the annuity as an investment product instead of an insurance product.

2. Claiming the annuity has no sales costs instead of no up-front sales costs.

 

[James]

Called up my state securites commission yesterday. Seems lots of life agents are running nervous these days.

He told me a couple of trouble spots for agents and annuity sales.

1. Presenting the annuity as an investment product instead of an insurance product.

2. Claiming the annuity has no sales costs instead of no up-front sales costs.

Of course a Annuity is an investment, anything of value and brought for future needs would fall under an investment. The cost is built in the product. What you say can also be aimed at any CV Insurance Product.

Investment does not equal Securities.

Cost is Cost, I don't know of any reasonable person assuming the agent that sells Annuities, WL, UL and even Term doesn't get paid.

If these matters are going too make you nervous, I would advice getting out of the insurance biz, it is only going to get worse it seems. Sure you can go out and get your 65, but that doesn't help. This entire discussion hinges on the Commission Vs Fee Only, and the money and power grab by FINRA or whatever they will call themselves tommorrow.

 

[James]

Okay, go get your 65 and think that solves all the problems. Now go to that business owner and sell the idea of putting him in any insurance product but, you have to charge him a Planners Fee! Now what do you sell? A Commissioned product or a No Load? Now, if you think you can sell anything, think again! Rules are changing since the new Fiduciary standards that FINRA is trying to promote, I can not think of how unethical the planner that charges a Fee plus a Commission is viewed!

They are eating their own over there in the golden pastures of the Securities World. Plus, they are also attempting to get the State Issued IA License under the umbrella of the FINRA and the SEC, meaning you don't escape their regulations. Such as they now defining letters sent out to two or more people constitutes an Advertisement, meaning likely (haven't seen the actually ruling on this yet) you may not send a out a letter to a person married because obviously there is two in that household!

Go view the financial forums, find how many threads are now being discussed, "IA's beware, FINRA is coming for you!". Obviously with the nearing mass exodus of financial rep's moving over to the IA or RIA route to escape the insanity of SEC and FINRA, obviously they have noticed!

 

[padthaiforlunch]

Okay, go get your 65 and think that solves all the problems. Now go to that business owner and sell the idea of putting him in any insurance product but, you have to charge him a Planners Fee! Now what do you sell? A Commissioned product or a No Load? Now, if you think you can sell anything, think again!

James,


I'm just looking to cya (er,cma).

The state guy is ok with collecting a fee for AUM and a commissioner on annuities (not AUM).

I don't really care about AUM, but I do want the ability to express my opinion about investments without potential felony charges (as the Alabama Securites Commission is threatening).

 

[Winter_123]

Right or wrong the regulators are taking a position that if you liquidate a security and put that money into an annuity, you are giving investment advice.

I had a regulator tell me this to my face.
Matt

I accept the fact that you were told that because part of the problem is the conflicting positions that states are taking.

Just to add to this though, I spoke directly with the securities commission's lawyer on this point in my state and he agreed with my position that it is not a securities transaction to simply assist a client in summitting paperwork to transfer funds to an annuity if the current funds are in a security.

This assumes that the agent has not delved into any pro or con discussion about the security which would be forbidden. It assumes that the client decided to go with the annuity based on the discussion about the annuity and it turns out that his current funds are in a security. In that case, according to the securities attorney, the transfer of the funds is not a securities transaction or anything requiring a securities license. I realize that this does not match with what was told to you but there we have it. I of course documented my discussion with the attorney as to time and date and content. As an aside, I also spoke wth the regulatory agencies attorney on the insurance side as well.

Winter

 

[djs]

Just a curiousity question, why would someone liquidate a security to buy an annuity? There are some cases, but in general, this does have problem written all over it. I'm sure that is what raises eyebrows.

Usually, the only real reason to do this is for tax purposes, which means annuities are last in the food chain, fund a 401K first, IRA's, and then annuities. I personally can't come up with a scenerio to move 401K money into an annuity, unless, and this isn't necessary, you are in the disbursement phase and want the security of the annuity.

Rolling qualified money over into an annuity (especially a fixed annuity) is hard to see as a wise thing. What is the advantage to the client?

Dan

 

[senior-advisor-indiana]

Rumors are that if you want to continue selling FIA's, you will need to be an IA or a RIA in the next 5 years. That came from my annuity FMO.

 

[Winter_123]

Just a curiousity question, why would someone liquidate a security to buy an annuity? There are some cases, but in general, this does have problem written all over it. I'm sure that is what raises eyebrows.

I personally can't come up with a scenerio to move 401K money into an annuity

Dan

Client has leftover 401k from previous employer and has no 401k plan where he works now. Funds lost 50% of value after 2001 crash and now he wants to control his own retirement account rather than their former employer who is no longer contributing.

Winter

 

[James]

Just a curiousity question, why would someone liquidate a security to buy an annuity? There are some cases, but in general, this does have problem written all over it. I'm sure that is what raises eyebrows.

Usually, the only real reason to do this is for tax purposes, which means annuities are last in the food chain, fund a 401K first, IRA's, and then annuities. I personally can't come up with a scenerio to move 401K money into an annuity, unless, and this isn't necessary, you are in the disbursement phase and want the security of the annuity.

Rolling qualified money over into an annuity (especially a fixed annuity) is hard to see as a wise thing. What is the advantage to the client?

Dan

I'm not sure if anyone here is suggesting taking money out of a 401 or IRA? Yet, Katt makes a good case, it is about lifetime income, pretty simple. April 2007 Newsletter

Yes, most people that would consider dumping a bunch of money within an Annuity would likely be 55 and over and concern about preservation and disbursement.

 

[Winter_123]

I'm not sure if anyone here is suggesting taking money out of a 401 or IRA? Yet, Katt makes a good case, it is about lifetime income, pretty simple. April 2007 Newsletter

Yes, most people that would consider dumping a bunch of money within an Annuity would likely be 55 and over and concern about preservation and disbursement.

You guys are speculating about annuities rather than what the market actually looks like and the profile of buyers. Lots of people do not have company retirements plans, are not comfortable with securities, want to stay ahead of CD's, or have a 401k plan left over from a former employer.
Nor are they interested in whole life. It is a very viable option for many even though it may be unsuitable for some. But that is true of any financial product.

Winter