Unethical Bonus Annuity Presentation

Jan 9, 2009

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  1. insuranceexec
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    Has anyone ever heard that it is Unethical to offer a bonus annuity to help cover the surrender charges of an annuity that is being replaced.

    I am currently working on an individual who has an annuity that is valued at about 300K. This annuity represents a very small percentage of her networth so suitability is not a concern. The customer is currently invested in a fixed indexed annuity with an 7% surrender charge, 30% participation, monthly averaging, and a 2.5% spread tied to the nasdaq.(HORRIBLE) She has owned this annutiy for about three years and her sole purpose of this annutiy is to help supplement her income in another 7 years. I suggested that we replace her existing annuity for a bonus income annuity, that she could annuitize with in her time frame. I will not go into the particulars, lets just say that it is by far a superior product.

    The bonus annuity will pay a 10% bonus to offset the penalty she will sustain when making the change. The agent that sold her the original contract has told her that it is ILLEGAL for an agent to offer a bonus to offset such penalties, and that he would have my license revoked........LOL. I called my local DOI and they said the would have to check into it and get back to me.

    HAS ANYONE EVER HEARD OF THIS?
     
  2. Mr. Bill
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  3. insuranceexec
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    I thank you for the great article. I would agree that there are a great many agents who do not know how to present the pro's and con's of a bonus annuity. I always start a presentation by saying:

    "There is no perfect annuity, there is good and bad with all of them." "The trick is to find the good you like and the bad you can live with."

    I would deduce from reading the article that that individual that I spoke of in my first post would be well suited for the annuity that I presented, because all of the material facts were discussed and disclosed. I would say the biggest problem in the article was the the plaintiff claimed that they were never told of the bonus recapture charges and of the reduced interest they would receive as a result of taking the bonus. As long as the annuity is presented in a manner whereby the client understands that the company is paying the bonus and the guaranteed income interest rate for the clients future business in the form of taking an income then it would be a suitable product. Please correct me if you think that I am wrong, or if you would like to offer a different perspective. I thank you in advance.
     
  4. cloisbarton
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    cloisbarton Super Genius

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    I seems to me that the client was definitely sold a "dog" as we call it on the consultant side of the business. I have not heard of any laws that would cause a revocation of your license. I think the key here is disclosure of the product and product suitability, which from your other posts that I have read I am sure that you know what you are doing. The agent is definitely trying to conserve this case. But, if you would like I will hop on the horn Monday and talk with a couple of contacts I have at the home office about suitability/compliance to see what they say on the subject.

    Did you happen to use one of the income bucket annuities?
     
  5. sman
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    Index annuities don't have M&E charges. And for the next couple of years, index annuities aren't securities so no 6 is required.
     
    sman, Jan 10, 2009
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  6. arnguy
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    Could you please explain your post in plain English?
     
    arnguy, Jan 10, 2009
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  7. arnguy
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    Thanks for the clarification. Your initial post was a bit too much of jargon for someone who has not sold annuities.:biggrin:
     
    arnguy, Jan 10, 2009
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  8. insuranceexec
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    It is definitely a dog! I am not a fan of running hypothetical illustrations on past EIA performances; but did so on this particular dog for my own curiosity. The last 10 years this product (DOG) would have earned 2.2% assuming no spread.........LOL, throw the 2.5% spread in there and the product falls down to its guaranteed minimum which is 1.5% on 90% of the premium. I did sell an "income bucket annuity" as it was a good fit for the client. I will be calling compliance Monday morning to verify, and will write back to give an update.
     
  9. BiggitySwat
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    BiggitySwat Super Genius

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    So was it the Aviva Income Select Bonus or the Allianz MasterDex X? :)
     
  10. tkirk97
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    why don't agent sell the old standby annual p2p. Easy for people to understand and not all the smoke and mirrors of the other index products.
     
    tkirk97, Jan 12, 2009
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