Buck the ‘annuity establishment’ when choosing what to buy

If you have followed the Republican presidential primary at all, you are aware that the so-called party “establishment” is trying to influence the voters to choose anyone other than Donald Trump. Regardless of how many states he wins, and what the voters seem to want, the “elites” of the party are trying to tell the masses that the inner circle knows better when it comes to choosing candidates.

The more I watch this political train wreck, the more it seems to mirror the archaic sales agenda of what I now call the “annuity establishment.” Yes, I believe there actually is one and they are trying to steer the consumer to their favorite profitable annuity types. Facts don’t lie.

Even though there are many annuity strategies available, the more complex and longer surrender charge indexed and variable annuities represent over 70% of all annuities sold every year. This is no accident, and exactly what the “annuity establishment” wants to happen because these two types are the most profitable for the carrier and the selling agent.

They don’t know better than you do

There is a reason that if you talk to nine out of 10 annuity salespeople, most will try to sell you a variable or indexed annuity. That one primary and unfortunate reason is commission. These two products pay the selling agent the most, and is why agents typically steer you away from more simplistic low commission annuity solutions.

The “annuity establishment” is definitely behind this one size fits all approach, and is why the annuity industry’s bad reputation is self-inflicted, and certainly one reason the Department of Labor has annuities in its regulatory crosshairs.

Status quo = more money for them

Just like the Republican establishment is protecting their monetary turf and traditional way of doing things, the annuity elites are also trying to keep their LearJets and marble floored big buildings in place. Simplistic annuities like Single Premium Immediate Annuities (SPIAs), Deferred Income Annuities (DIAs), Qualified Longevity Annuity Contracts (QLACs), and Multi-Year Guarantee Annuities (MYGAs) are fantastic transfer of risk strategies with low built in commissions and no annual fees….but are not a big time profit center for an annuity company when compared to the variable or indexed strategies.

Indexed and variable annuities with attached riders carry fees for the life of the policy. That’s a pretty good residual income structure, huh? In addition, most of these product offerings require you to lock in your money for a long surrender charge period. Always remember that the longer the surrender charge time period, the higher the commission to the agent.

Simple is always better

Recently, fellow MarketWatch and USA Today contributor Bob Powell asked me to respond to his reader’s question about the overhyped indexed annuity product. My answer was to consider short term MYGA (Multi Year Guarantee Annuity), instead of locking the money up with a long-term indexed annuity. The predicted “establishment” hate mail and responses happened immediately. In an unpredictable interest rate world, it’s just common sense to try to short maturity dates if at all possible. There is no rational argument against this from the industry, unless their primary agenda is profit.

Let me be very clear in saying that all indexed and variable annuities are not bad. In some specific situations, they do have their place. However, they are not the one size fits all panaceas as typically pitched by agents, and are never too good to be true. No exceptions.

So when considering the purchase of an annuity, do not be influenced by the “annuity establishment.” Always try to find the most simplistic solution possible, and “vote” with your money. Buy an annuity that you fully understand, and don’t be steered toward what the establishment wants you to buy.

Originally published 3.15.16 by MarketWatch.comhttp://www.marketwatch.com/story/buck-the-annuity-establishment-when-choosing-what-to-buy-2016-03-15