Variable Annuity Suitability

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Hi there, Stan The Annuity Man, America's annuity agent,

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licensed in all 50 states and Puerto Rico, founder of CGO: Contractual Guarantees Only.

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We only look at what a policy will do, not what it might do.

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Today's topic is about variable annuity suitability, but I'm going to cover

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suitability in general for annuities and what you should do there. We're going to talk about that

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weird little practice that is very important so you don't overfund annuities after this.

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Alright, so, the first thing you probably need to know, especially if you're thinking

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about working with a local agent and not us, I don't know why you'd do that,

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unless you're your brother-in-law, and even then there's reason not to.

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With annuities, the National Association of Insurance Commissioners,

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which oversees the body of the states that issue annuities, etc. They recommends no more than 50%

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of your investable assets in annuities. That does not include your house, property, cars,

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guitars, and all that stuff. We're talking about investable assets, no more than 50%.

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If you're one of those people out there that says, "Well, this dude sold me 80% of my money

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or 100% of my money," then they committed fraud. That's fraudulent. They either did something on

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your application to show more net worth, or they were not honorable in filling out the application.

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If that's the case, it's a misdemeanor, and they could definitely lose their license.

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But I always tell people with annuities there are eight different primary types of annuities,

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and they solve for four things: principal protection, income for life, legacy,

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and long-term care. When you're looking to solve for one of those situations,

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we try to use the least amount of money to solve for that contractual goal.

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I had a guy call me the other day. He said, "I'm thinking about putting a lot

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of money in an immediate annuity, son. What can you do?"

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Well, I can quote all carriers and find the best contractual guarantee,

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A+ or better. But the bigger question Ernie, "How much money do you need?"

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He goes, "Well, I kind of need about $2,500."

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I said, "Okay, we reverse-engineer the quote for $2,500 using

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the least amount of money to solve for that goal."

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So, when it comes to annuity suitability, whether it's a variable annuity, registered index-linked

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annuity, index annuity, MYGA, QLAC, SPIA, DIA, it doesn't matter, you have to be suitable from

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the standpoint of the insurance company looking at your finances so that the annuity makes sense

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for you. It's specifically solving a goal, and you're not putting too much money into an annuity.

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Annuity suitability on the brokerage side, which is where I came from, Morgan Stanley,

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Dean Witter, PaineWebber, UBS, those products are variable annuities and

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registered index-linked annuities. Brokerage firms and banks sell those hopes-and-dreams

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products because they're not guaranteed, and that's the reason we don't look at them.

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There's a whole litany of suitability they go through from the standpoint of background

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checks and things like that. There's a lot on the brokerage side. It's extensive.

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If you have a brokerage account, you know that.

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On the life insurance side, fixed annuities include index annuities, MYGAs, QLACs, SPIAs,

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DIAs, etc. Those are regulated at the state level. The National Association

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of Insurance Commissioners kind of oversees the whole thing. The SEC

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and FINRA over here on the variable annuity and registered index-linked annuity side,

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while your state's insurance commissioner oversees the fixed annuity side.

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So suitability means: should you own it? Why are you trying to purchase

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this? What goal is it going to solve? What's the proportion? What's the amount percentage

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of your money are you putting into the annuity as supposed to the rest of your investable assets?

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People say, "Well, Stan, can you get more than 50% of my

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investable assets into an annuity if my situation's different?"

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Yes, we can. There are unique situations on a daily basis that I personally get involved

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with. I talk to the carriers and say, "This is what they're trying to do. It actually makes

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sense. I'll put my license on the line for it because I believe it's suitable."

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With my explanation and documentation,

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the carrier either says yes or no. It's not always going to be yes.

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Suitability is your best friend. Suitability makes sure that you're

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not buying a product that's not going to do what the agent said it's going to do.

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In the application, you have to say what your goals are. What are you trying to

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solve for? What's the goal? You have to do all of that. That's suitability.

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Now, the information that's provided to the annuity company is confidential. It's encrypted.

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Nobody shares it, keeps it, or sells it. So don't go down the privacy rabbit hole and say, "Well,

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I'd like an annuity, son, but you're not going to get my social. I haven't done that. I'm a patriot."

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Well, then you're not going to buy an annuity. Okay?

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Back in the day, with the Patriot Act, there was a lot of money laundering in the life insurance

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and annuity space. Crypto kind of stolen that mantra. But before crypto, the life

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insurance and annuity side was where a lot of the money-laundering shenanigans were happening.

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So the Patriot Act was put in place to make sure there weren't those kinds of shenanigans.

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Are there still shenanigans? I'm sure there are. But guess who's on the hook for that? The agent.

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We have the responsibility to know our customer.

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So, when we're talking about the title of this video, variable annuity suitability, let's

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just talk about annuity suitability because suitability is suitability.

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The agent is responsible to know their customer. We have to know the customer. There are some red

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flags that a customer might say to me that require me to dig deeper. Where's the money

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coming from? What's the source of that money? Why are you trying to do this? What's the goal of that money?

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Suitability is very, very important.

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As part of the process, if you went to our site, ran quotes, or talked to me and said,

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"Okay, that's what I want to do," you're going to have to get on the phone with

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my team. Everyone is licensed in every state, so they can legally speak to you.

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By the way, if you're on the phone with someone, you need to ask them,

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"Are you licensed in my state?" If they're not, they're breaking the law.

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Everyone in my building is licensed in all 50 states. They can legally speak to you, and they're

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going to ask suitability questions, not from us, but from the annuity company that you chose.

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The questions are from the annuity company so that when we submit the application for the

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annuity you want, and we've locked in the quote, the person at the carrier is going to review

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your case from a suitability standpoint and either approve it or not approve it.

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I would encourage you to ask for a copy of the application because that's where

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the games are played. It's a misdemeanor. In some states, it's actually a felony.

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It's kind of like filling out your mortgage application. If you fictitiously

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put something on there, you can go to prison. I'm not sure it's that harsh in the annuity business,

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but it should be because there are a lot of agents out there who will try to get more of

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your money by altering your net worth or altering your investable assets. That's against the law.

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So don't hesitate to ask for a copy of the application. It should reflect exactly what

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you told the person taking the application. That's part of the suitability process.

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A lot of times, these companies will come back and not approve it or say that's too

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much money. The person typically gets mad, and I get on the phone with them and say,

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"I'm very, very sorry, but it's in your best interest. They're looking out for you. They

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don't want you to either overfund, or they're worried about your liquid

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assets. They're worried about you living day to day if you're putting too much money in."

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That doesn't happen with our group because we've trained our people on what to look

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for. If someone says, "Well, I've got $2,000 in my checking account, and I'm

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going to put this amount into the annuity," they're putting too much into the annuity.

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But we get a lot of third-party cases where we reviewing, and we see some wild things.

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So suitability is your friend. The questions that you have to

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answer confidentially are good for you. It's a good thing.

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Don't hesitate to provide that because you're getting filtered at our level, The Annuity

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Man, and then you're getting filtered at the suitability level at the carrier you choose.

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You have two levels looking out for your best interest, in essence acting like a fiduciary

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without the plaque on the wall, putting your best interest ahead of everything.

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So suitability, it's a good thing. It's part of the process in the annuity world.

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How AI is going to change all of this? I don't know. We're looking

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at some things that can maybe make the process go a little smoother for you.

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But at the end of the day, right now, this day,

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AI means "Actual Individuals" when you work with The Annuity Man.

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So go to my site, theannuityman.com, run quotes, download the books, watch more videos,

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see the live events, and sign up for the live events. I do one a month. You can email me, [email protected].

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One last thing. Above my head is a spinning clock and a video that I did on "Why People

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Still Hate Annuities?" I go through that, and I blame the people who deserve the blame, not

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me, of course. I'm trying to edutain everyone out here on how annuities actually work.

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There is a reason annuities have such a bad image. When people hear the word "annuities,"

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they want to throw up. I blame the agents and advisors a lot of the time, but I also

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blame the people who talk about annuities without knowing what they're talking about.

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That's a fun video. You'll have a good time watching it. It's one you'll probably share

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with your friends because I kind of go off, like I sometimes do.

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Hey, I'm Stan The Annuity Man. Thanks for joining me.

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We'll see you next time.