Top company that pays high commission on Fixed and Variable Annuities

[Allen Trent]

Fixed Annuity with a reputably company looking to get paid and do the rt thing 10yr surrender is not an issue for the client.

For the most part, fixed Annuities with 10 year surrender don't exist anymore. There are very few flexible premium annuities in the marketplace anymore. Almost all fixed annuities are now single premium MYGA (Multi Year Guaranteed Annuity) & they act similar to a CD. Client picks a 3, 5 7 or 10 year rate lock (,most all today are 3 & 5 year because of inverted yield curve)

3 year MYGA with most carriers are 1-2% commission & 5 year are 2-3%...the higher commission rate carrier tend to be B rated carriers & they tend to have slightly higher interest rate to client as they are having to lure the cash to them with better rates than the better A rated carriers.

Connect with a good IMO & they will have several dozen carriers. The weekly rate sheets tend to have carrier interest rate & commission on them along with surrender schedule & should also state if they allow any free withdrawals or not, if they have return of premium minimum at surrender or not or if they have an Market Value Adjustment that can hurt client if they surrender early over & above the surrender charge

Here is a website too:. [EXTERNAL LINK] - Today's Best Multi-Year Guaranteed Annuities (MYGAs) — ImmediateAnnuities.com

 

[scagnt83]

Funny how people interpret things differently. My interpretation of his question was simply asking what the average commission he should expect from an annuity sale and not get screwed, even though he used the term "top". I could be mistaken also.

If he is just not looking to get screwed, then he just needs to ensure he is receiving street comp.

But any and every annuity "pays". Basing or limiting recommendations on comp is the last thing that is best for the client. And as we have mentioned, the higher it pays the agent.... the less it pays the client.

 

[titeye]

For the most part, fixed Annuities with 10 year surrender don't exist anymore. There are very few flexible premium annuities in the marketplace anymore. Almost all fixed annuities are now single premium MYGA (Multi Year Guaranteed Annuity) & they act similar to a CD. Client picks a 3, 5 7 or 10 year rate lock (,most all today are 3 & 5 year because of inverted yield curve)

3 year MYGA with most carriers are 1-2% commission & 5 year are 2-3%...the higher commission rate carrier tend to be B rated carriers & they tend to have slightly higher interest rate to client as they are having to lure the cash to them with better rates than the better A rated carriers.

Connect with a good IMO & they will have several dozen carriers. The weekly rate sheets tend to have carrier interest rate & commission on them along with surrender schedule & should also state if they allow any free withdrawals or not, if they have return of premium minimum at surrender or not or if they have an Market Value Adjustment that can hurt client if they surrender early over & above the surrender charge

Here is a website too:. [EXTERNAL LINK] - Today's Best Multi-Year Guaranteed Annuities (MYGAs) — ImmediateAnnuities.com

WOW! That is very good information. I had NO IDEA commissions on annuities have dropped so low! Unless you are a financial advisor and registered representative, marketing that product alone is tough. In my experience, no one has ever transferred a significant amount of their savings, in one lump sum, in the first meeting. Oftentimes, it has taken 3+ meetings the more money involved. Say for example a client has $200,000 and you're recommending a 5yr annuity at 3%. I'm not sure I want to spend 2+ meetings anymore for $6,000, if I don't have other products to offer, while he/she thinks about it.

 

[titeye]

If he is just not looking to get screwed, then he just needs to ensure he is receiving street comp.

But any and every annuity "pays". Basing or limiting recommendations on comp is the last thing that is best for the client. And as we have mentioned, the higher it pays the agent.... the less it pays the client.

I like part of your logic, but can we always be certain that what doesn't go to the agent, goes directly to the client. That's putting a whole lot of trust in the insurance company. We have plenty of history where A+ rated insurance companies did wrong by their clients. I have always taken on the attitude that clients pay for my advice, which may be more costly than the advisors' fees in the next office. Regardless of how low the fee or commission is, some people just won't do business with you. The strange thing is, some people are of the mindset that the more you charge, the more you must be worth it. Go figure.

 

[Allen Trent]

WOW! That is very good information. I had NO IDEA commissions on annuities have dropped so low! Unless you are a financial advisor and registered representative, marketing that product alone is tough. In my experience, no one has ever transferred a significant amount of their savings, in one lump sum, in the first meeting. Oftentimes, it has taken 3+ meetings the more money involved. Say for example a client has $200,000 and you're recommending a 5yr annuity at 3%. I'm not sure I want to spend 2+ meetings anymore for $6,000, if I don't have other products to offer, while he/she thinks about it.

Keep in mind, most MYGAs pay a renewal commission when the rate lock renews in 3 or 5 years. Or, the agent moves it to a new carrier with better rates, etc. So, whike the up front commissions are heavily reduced in the last decade, an agent with a 20-30 year client relationship will make way, way more money & the carrier is matching up better with assets & liabilities & expenses than the way old commissions worked more up front loaded.

 

[titeye]

Keep in mind, most MYGAs pay a renewal commission when the rate lock renews in 3 or 5 years. Or, the agent moves it to a new carrier with better rates, etc. So, whike the up front commissions are heavily reduced in the last decade, an agent with a 20-30 year client relationship will make way, way more money & the carrier is matching up better with assets & liabilities & expenses than the way old commissions worked more up front loaded.

I did not know that. I have not prospected for annuity business since 2008, but will still use the product, if an opportunity presents itself. As such, I am way out of touch and have to ask questions every time someone needs help with investing. Most of those clients are in their mid 80's now. One of them just sold a house for over $450,000 and every dollar of it available to save. Even though she doesn't need the money, an annuity is unsuitable due to her age. She just put it in bank CDs.

 

[Allen Trent]

I did not know that. I have not prospected for annuity business since 2008, but will still use the product, if an opportunity presents itself. As such, I am way out of touch and have to ask questions every time someone needs help with investing. Most of those clients are in their mid 80's now. One of them just sold a house for over $450,000 and every dollar of it available to save. Even though she doesn't need the money, an annuity is unsuitable due to her age. She just put it in bank CDs.

In reality, tax-wise, NQ annuities are unsuitable for 80% of the people over age 70 in my opinion. IRS stats show that 80% of people over age 70 pay no federal income tax, meaning they are in 0% tax bracket. Unless the person needs monthly income (not easy to get on most new MYGA issued initially), why would someone that doesnt owe taxes buy a tax-deferred product so that their heirs owe taxes on all the gains at death with a NQ annuity.

With current CD rates very similar to MYGA, really no reason for those 80% to buy NQ annuity as it is a reverse tax deferral problem most clients & agents dont understand. Better for the someone in 0% bracket to get 1099 each year from the CD interest as there is no tax at death on a CD to the heirs.

Tax deferral is a good thing for high income people(wealthy & those with sizeable pensions) that will be in the same or lower tax brackets or their heirs will be in lower tax bracket. For the other 80% in the 0% bracket, it is bad math & most heirs will for sure be in a higher bracket than zero, especially when they inherit assets that have taxable gain like NQ annuity & IRA if the heirs are still working. A married couple over 70 can literally have $40k of Social Security & $24k in IRA/CD/annuity income & still be in the 0% tax bracket. Because Social Security itself is not directly taxable at modest incomes, the standard deduction of $30k wipes away all the taxable income. So, $64k total spendable income, but 0% taxes. why would anyone in this situation or below buy a NQ annuity to defer the taxes? In reality, most of those 80% of taxpayers over 70 should be taking more out of their IRAs each year than just the RMD to make sure they use the entire Standard Deduction. Otherwise, each year, they miss out on getting some money out of IRA & NQ Annuity in their 0% tax bracket so that the IRS never gets a share of that portion ever again.

Imagine a married couple that could have gotten an added $15k-$25k each year out of IRA from age 65- age 85/90 at 0%, you are literally talking about $500k or more not counting compounding or interest of wherever they re-deposit the money being taken out (Roth, Life insurance, Hybrid Life-LTC, after tax brokerage account, etc).............................instead, most consumers insist on taking only the RMD when forced to & most agents sell NQ Annuities to anyone & everyone regardless of whether it is suitable overall (I dont believe the agents are doing it out of malice, more out of ignorance of how taxes work & how death claims work)

Anywho, here is last weeks page 1 of page 2 from an IMO on the 5 year MYGA--they have same for 3 year & I think 7 year.

Lowest rated carrier has no access to free withdrawals & has the highest interest rate

 

[scagnt83]

I like part of your logic, but can we always be certain that what doesn't go to the agent, goes directly to the client. That's putting a whole lot of trust in the insurance company. We have plenty of history where A+ rated insurance companies did wrong by their clients. I have always taken on the attitude that clients pay for my advice, which may be more costly than the advisors' fees in the next office. Regardless of how low the fee or commission is, some people just won't do business with you. The strange thing is, some people are of the mindset that the more you charge, the more you must be worth it. Go figure.

You miss my point.

Fixed Annuity returns are based on the insurers return on their General Account.

If the average rate is 8% on the GA. There are only so many ways to split up that return. Only 100 pennies in that dollar.

Insurer profit spreads on annuities are not drastically different from each other.

At an 8% GA return: the insurer takes 0.5%, the agent takes 5%, that only leaves 2.5% for the client.

But if you reduce agent comp to 3%, that leaves 4.5% for the client.

Agent comp directly reduces client returns on fixed annuities. Its simple math.

Just look at the top MYGA rates and the comp they pay. Top rates almost always have the lowest comp.

 

[titeye]

You miss my point.

Fixed Annuity returns are based on the insurers return on their General Account.

If the average rate is 8% on the GA. There are only so many ways to split up that return. Only 100 pennies in that dollar.

Insurer profit spreads on annuities are not drastically different from each other.

At an 8% GA return: the insurer takes 0.5%, the agent takes 5%, that only leaves 2.5% for the client.

But if you reduce agent comp to 3%, that leaves 4.5% for the client.

Agent comp directly reduces client returns on fixed annuities. Its simple math.

Just look at the top MYGA rates and the comp they pay. Top rates almost always have the lowest comp.

Thanks for explaining that. That too, is something I never knew
and helpful. Every 24 months, I take the annuity course to fulfill 21 of the 24 hours required for CE. I have been reviewing this exact same course every 2 years since 2006. Even though I have practically memorized the answers by now, I always read the entire course in effort to digest more and more. Would you believe me if I told you that I have never, or at least do not recall ever reading what you just explained?
This leads me to ask a follow up question. Given your example, may the agent request a reduction in comp on a specific product, or would he have to find another product altogether that pays him less?