Annuity Sales Pitches: What to Watch Out For

An annuity should not require an elaborate sales pitch.

It is a contract.

The important questions are what the contract guarantees and whether those guarantees solve your financial objective.

Unfortunately, many annuities are still sold using bonuses, hypothetical growth, urgency, and other sales tactics that can distract from the actual contract.

Knowing what to watch for can help you make a better decision.

Key Takeaways

• Annuities should be evaluated by contractual guarantees.
• Be cautious with one-product presentations and "best annuity" claims.
• Large bonuses should not determine which annuity you buy.
• Annuities should not be sold primarily as market-growth products.
• There is no reason to rush into an annuity before you understand it.
• Compare multiple carriers and ask to review the contract before purchasing.

Watch Out for One-Product Presentations

If someone presents one annuity and tells you it is the best product available, be cautious.

Annuities are commodity products.

The strongest contractual guarantee depends on your specific situation.

That means multiple carriers should be compared.

A recommendation should begin with your financial goal, not with a product someone already decided to sell.

Be Careful With Dinner Seminar Pitches

Annuity seminars are often built around a presentation and a meal.

The food is not the problem.

The problem is when the entire presentation is designed to funnel everyone in the room toward one product.

Your retirement needs are individual.

A product that may be appropriate for one person in the room may be completely wrong for someone else.

Education should come before the sale.

Be Skeptical of "This Is the Best Annuity"

There is no annuity that is universally best for everyone.

Different carriers are competitive for different goals.

One company may offer the highest lifetime income guarantee.

Another may have the strongest MYGA rate.

Another may be better for a different age or income start date.

The correct product depends on your objective.

Watch Out for Market Growth Claims

If an annuity is primarily being presented as a way to achieve market growth, be cautious.

Annuities are insurance contracts.

They are designed around contractual guarantees.

If market growth is your objective, market-based investments are designed for that purpose.

Trying to combine market-growth expectations with an insurance contract can lead to disappointment.

Hypothetical Returns Are Not Guarantees

Sales presentations can include attractive projections.

These might involve:

• back-tested returns
• indexed performance
• hypothetical future values
• illustrated growth
• historical scenarios

Those numbers may demonstrate how a strategy could have performed.

They do not guarantee future performance.

The contractual guarantee is what matters.

Large Bonuses Can Distract From the Contract

Annuity bonuses are another common sales tool.

A 20%, 30%, or larger bonus can sound impressive.

But the bonus is part of the overall economics of the contract.

It should never be evaluated in isolation.

Ask:

• What does the bonus apply to?
• Is it part of cash value?
• Is it part of an income base?
• What restrictions apply?
• What are the trade-offs elsewhere in the contract?

The bonus alone does not tell you whether the annuity is appropriate.

There Is No Urgency to Buy an Annuity

Annuities are long-term contracts.

You should take the time you need to understand them.

Be cautious if someone pressures you to sign immediately because:

• a bonus is expiring
• a rate is supposedly disappearing
• the product may not be available tomorrow
• you need to act before a deadline

Quotes can change, but understanding the product is more important than rushing into a contract you do not fully understand.

Ask for the Specimen Policy

If you are seriously considering an annuity, ask for the specimen policy.

That gives you an opportunity to review the contract before you buy.

Look at:

• surrender charges
• guarantees
• rider costs
• beneficiary provisions
• liquidity rules
• how interest is calculated
• what is guaranteed and what is not

The policy is what you are actually purchasing.

Make Sure the Recommendation Fits Your Goal

Annuities generally solve four primary contractual objectives:

• Principal Protection
• Income for Life
• Legacy
• Long-Term Care

If the product being recommended does not clearly solve one of those goals for you, ask why you are buying it.

That question can eliminate a lot of unnecessary complexity.

Work With Someone Who Can Compare Carriers

The person helping you should be able to explain why one annuity is being recommended over another.

That means comparing multiple carriers.

If the recommendation starts and ends with one company, one brochure, or one product, you may not be seeing the entire market.

Education Should Come First

You should be able to understand the annuity before you buy it.

If the product is so complicated that you cannot explain the basic guarantee in plain English, keep asking questions.

There is no prize for buying quickly.

The goal is to make a decision you understand.

Where to Compare Annuities

Use our annuity calculators to compare contractual guarantees from multiple insurance companies.

You can evaluate current lifetime income guarantees, MYGA rates, and other annuity solutions without relying on one product presentation.

The Bottom Line

The biggest thing to watch for in an annuity sales pitch is anything that distracts you from the contract.

Bonuses, market-growth projections, hypothetical returns, urgency, and one-product recommendations can all pull attention away from what matters.

Determine what you want the money to accomplish, compare multiple carriers, and make the decision based on the contractual guarantees.

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