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Table of Contents
Lifestyle Magazine®
Best Performing Fee-Based Annuity
What is the best performing fee-based annuity?
Go ahead and sit down for this one.
Because the answer is probably not what you think.
There is no best fee-based annuity.
In fact, I’ll go one step further.
Most annuities should not have a fee at all.
Key Takeaways
- There is no “best” fee-based annuity
- Most annuities should not have ongoing management fees
- Annuities are contracts, not assets to manage
- Fixed annuities and income annuities are turnkey products
- Wrap fees are often used for revenue projection, not client benefit
- If you want market growth, an annuity is not the right tool
Annuities Are Contracts, Not Managed Assets
Let’s start here.
Annuities are contracts.
They are turnkey.
Once you buy the contract, it does what it says it’s going to do.
So the question becomes:
What exactly is being managed?
Income Annuities Do Not Need Management
Let’s talk about the basics.
These are pension products.
They pay you income.
So if someone says they are charging a fee to manage that…
What are they managing?
Fixed Annuities Do Not Need Management
Now let’s look at:
These are CD-type products.
They have:
- Principal protection
- A contractual guaranteed rate
- A set time period
Again…
What are you paying a fee for?
The Indexed Annuity Argument
Now we get into Indexed Annuities.
This is where you’ll sometimes hear:
“We’re going to manage this for you.”
No.
Indexed Annuities lock in gains typically one day per year.
So the question is:
What are you managing the other 364 days?
That’s the issue.
The Wrap Fee Problem
This is where the industry shifted.
Back in the day, everything was transactional.
Then came wrap fees.
Why?
To create predictable revenue for firms.
If you have assets under management, and you charge a percentage, you can project future income.
That works for investments.
It does not make sense for annuities.
The Only Real Exception
There used to be something called:
**No-load **Variable Annuities
These were used for tax-deferred growth and managed by fee-only advisors.
Most of the best versions of those are gone.
So that option is not what it used to be.
If You Want Growth, Don’t Buy an Annuity
Let’s simplify this.
If your goal is:
- Market growth
- Stock market participation
Do not buy an annuity.
Go to the market.
Work with a fee-based advisor if that’s what you want.
But don’t try to turn an annuity into something it’s not.
No Fee for Any Annuity
I’ll say it clearly.
There should be:
No ongoing fee for managing an annuity.
It’s a contract.
It does not need to be managed.
If someone is telling you otherwise, you need to ask questions.
What You Should Be Asking Instead
Instead of asking:
“What’s the best fee-based annuity?”
Ask this:
What do I need this annuity to contractually do?
And:
When do I need it to start?
That’s the real conversation.
The Bottom Line
There is no best performing fee-based annuity.
Because most annuities should not have fees in the first place.
They are contracts.
Not managed assets.
If you understand that, you avoid a lot of unnecessary costs and confusion.
If you want help reviewing your situation and making sure you’re looking at annuities the right way, you can connect with The Annuity Man team for a conversation.
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