There’s a lot not to trust about annuities
Annuities are contracts between you and the issuing carrier.
Unfortunately, there are many sales distractions along the way that prevent people from making a truly informed decision. It all comes down to trust.
Don’t trust the advertisement
With annuities regulated at the state level, annuity promoters predictably turn to national advertising so the sales message can go unchecked and unregulated. The vast majority of TV, radio, and Internet ads pitching annuities are designed to manipulate and convince people of a too-good-to-be-true product that doesn’t exist. As my friends Nathan Bachrach and Ed Finke of the Simply Money radio show always say, “You’re smarter than that!”
Don’t trust the seminar presentation
Even though groups like AARP have started sending their own spies into annuity seminars to combat elder abuse, these free food events still happen nationwide and the after meal sales presentation is whatever the agent wants it to be. If you can’t resist going to these annuity dog and pony shows, make sure to only swallow the food and not the sales pitch.
Don’t trust hypothetical return scenarios
With variable and indexed annuities representing the majority of annuities sold, the sales message typically focuses on non-guaranteed return scenarios. Proposals numbers can look fantastic on paper, but have nothing to do with the contractual guarantees.
Always have the agent run any proposal at the policy’s worst case scenario, and make your decision solely on that number.
Don’t trust the sales pitch
Regardless of how you are trying to be persuaded, don’t place any value in that sales message. If you want the unbridled truth, call the issuing carrier without the agent in the room. Internal customer service people at annuity companies have only one agenda and job description, which is to tell the truth about the contract in question.
If the agent said something about the annuity that sounds great, then call the annuity company. During the Cold War, the phrase “trust but verify” was used to make sure that words actually backed up deeds. With annuities, drop the trust, and only focus on the verify part of the equation.
Don’t trust the agent or adviser
I don’t care if your sibling, cousin, frat brother, or fellow church choir member is the agent recommending the annuity, no one can be trusted. Yes, that includes me as well, even though I am proud to point out that I only show contractual guarantees to my clients. It’s all about the contract.
Never depend on the agent as your sole source for information. Every purchased annuity policy has a free look period that allows you to fully examine the contract and get your money back without question. Each state has different free-look time frame, and the policy will spell that out when delivered. Take advantage of the free look, because it’s there for a reason.
Contracts never lie
Whatever is going to happen with your annuity can be found in the policy that is issued by the carrier. There are no surprises, secrets, or hidden gotchas in the contract. Nothing is over hyped or bullet pointed in the policy. There are no hypothetical, theoretical, projected, back-tested, or hopeful return scenarios in the annuity contract. It is what it is.
The annuity policy is the truth, and the contract never lies. With annuities, that is the only thing that you can count on.
Originally published 12.10.2014 by MarketWatch.com – http://www.marketwatch.com/story/theres-a-lot-not-to-trust-about-annuities-2014-12-10