Confused, embarrssed. “There’s something that does not compute.”
January 18, 2023 by Sheryl J. Moore
Wow. Just wow.
This one had me at, “there’s something that does not compute. Click to read “‘My adviser insists this is a good, low-risk investment.’ I’m semi-retired at 63 with $2 million saved. My financial adviser wants me to sink half my money in an annuity. Should I do it?”
Chris Chen, CFP®, CDFA™– did you know that there are 138 different annuities (35 of which are indexed annuities), that are specifically for fee-based or fee-only advisors, and don’t pay a commission?
Further- I thought the CFP board has been very intentional to say fiduciaries can take commissions by declaring they are fee-based vs fee-only?
In fact, insurance companies have been working hard through National Association of Personal Financial Advisors to educate members about these non-commissioned annuities.
And I am confused. Deferred annuities pay an average commission of 4.75%. This commission is paid a single time, by the insurance company, on a typical eight-year annuity. So, the annuity salesperson is making the equivalent of about 0.59% a year. How does that compare to the typical AUM charge over a seven-year period? And is it a conflict of interest that some financial advisors get paid a single time on a product that cannot lose value, versus others getting paid every single year on a product that CAN lose value? These are just different ways of getting paid; one is not better than the other.
Elliot Dole, CFP®– did you know that there are nearly 20 indexed annuities with no surrender charge, and that the average surrender charge is eight years? You must not know that indexed annuity purchasers can withdraw up to 10% of their annuity’s value annually, without being subject to surrender charges either.
Indexed annuities guarantee no risk of loss as a result of market performance. Plus, they guarantee an income that cannot be outlived. ETFs cannot provide the same guarantees. Did I miss something?
After reading this article, it seems obvious that MarketWatch is now in the lead generation business. It’s just too bad they didn’t seek out ONE SINGLE EXPERT on annuities for a piece where the consumer was specifically asking about them. I’m embarrassed.
