Follow-up to the Great Annuity Rip-Off

The January issue of Kiplinger’s Personal Finance had a pretty good article titled The Great Annuity Rip-Off. I posted about the article back in December.

Anyhow, I was thumbing through the March issue of Kiplinger’s when I found this letter to the editor by Frank Keating, President and CEO of American Council of Life Insurers:

“No one is more disturbed by accounts of inappropriate sales than the annuity industry. Life insurers, the manufacturers of annuities, are committed to ensuring that consumers know exactly what they are getting when they purchase annuities. That is why the industry is working with regulators on new disclosure documents. Although not for everyone, lifetime-income guarantees from annuities can provide many retirees with peace of mind. They should have the same peace of mind about the people who recommend the annuities.”

I find this hard to believe. I mean if the industry is so disturbed by inappropriate sales, why do they allow companies to produce products that are crap?

Also, how hard is it to come up with a system that shows customers EXACTLY how much they are paying for their annuity? It’s not hard. The reason it’s not done is that most potential clients would run straight for the door if the salesperson was truly honest about the product.

12 thoughts on “Follow-up to the Great Annuity Rip-Off”

  1. Jeffrey,
    You paint with too broad of a brush, are too dogmatic, and sound like a cult leader we used to know. Some products are suitable for different people. Not all people need the Raiders. Many things are of a personal nature, needs, and relationships, relationships and the building of trust over a long time. Getting taken good care of is better than not understanding but still going on your own into oblivion. Some people need help. Commissions are not all bad, also many things have changed since you have gone into the blogosphere.

  2. yu,

    You can pretty much figure that I’m not talking about you or the products you sell. I know you and I know that you do what’s best for your clients.

  3. Commissions suck — but paying commissions and doing something is usually better than doing nothing. Some people need that hand-holding just to get over their phobias.

  4. Unfortunately, there is no easy way to explain an annuity where the layman with little experience really knows what they are paying for. For example, they need to understand not only fees and commissions but also mortality table with or without projections to know what they are paying for. And, by the time all the legalese gets included, everything starts to spin.

  5. I publicly apologize for my rant. Please forgive me. I should have clicked delete instead of submit.

  6. This problem is that one person’s “crap” investment may be ideal for another. Whenever I hear blanket advice, such as “never buy an annuity” or “never buy b-shares” or “always buy index funds” it is pretty good indicator that the message is without context or perspective.

    The words “always” and “never” are a good tip off that the advice isn’t personal, and if it isn’t, should a person follow it? I don’t think so.

  7. JLP,

    I seem to have caught the same bug as “yu now who”, as my comment was specifically directed at your or the site. Rather I was writing about a propensity in the free advice community for making blanket statements. Your site is actually an exception to the rule in this regard.

  8. I am one of those lucky folks who was sold the dreaded Variable Deferred Annuity. My State Farm agent hooked me up with one when I was 23 and fresh out of college. The worst part is I wanted a Roth IRA. He even gave me the lit on a Roth. A few years down the road, I figured out I got screwed. State Farm’s answer: “You signed the forms, so you knew what you were doing.” THANKS GUYS! Guess who will never get MY business again!

Comments are closed.