Response: The question to day is all about that ugly word "commission" when it comes to purchasing annuity. People who sell books and sit at pretty desks on television and even those that don't sell annuities most often throw out the blanket statement that commission on annuities is "too high". I read a lot of stuff and I've never read or hear anyone ever say what they would consider an appropriate commission level is... all we know is that they are too high.
I'm going to kill the elephant in the room and share a secret with everyone... EVERY financial transaction you make on ANY product has some type of commission or fee. I know there some smarty pants out there talking about "No Load" mutual funds etc... but no matter whether you are purchasing a mutual fund, stock, bond, REIT, annuity, car or home... you are paying a commission.
Now that we have that out of the way... let's talk about what's appropriate and what should be a red flag. With my 25 years of experience I will tell you that just like everything else, there are "consumer oriented" annuity contracts out there that actually make the client money, offer them some liquidity etc. and there are also what I would consider "broker oriented" annuity contracts that mathematically don't work and pay the broker more than they should. Here is lies the issue... THEY ALL LOOK THE SAME! Hence the blanket statements and on and on. Let me give you a bit of advice... ask the advisor how much they are making on the deal. If it's more than 6-7%... it's time to start asking questions and a lot of them. One other thing to be aware of is that everything you're told is now quickly and easily verifiable on the web. My proprietary Annuity Report Card® spells everything out for our clients in writing so they can see ALL fees, charges, back end charges, liquidity parameters etc. These are the primary items that will affect how much the insurance company is able to pay the advisor.
I'm going to be doing several features on the DOL Fiduciary Ruling and will get into this topic a bit more, until then please keep the questions coming at www.annuityhack.com or call or text your question to 561-657-3360
Carl Barnowski has 25 yrs. of experience as a retirement income expert specializing in principal protected annuities.