25% Annuity Bonus…Is It Real?: Shootin' It Straight With Stan (TAM Classic)

Welcome to Shootin' It Straight With Stan. I am Stan The Annuity Man. Today's topic is a really good one and timely: 25% annuity bonuses, 35% annuity bonuses. Is this stuff real? Is there actually a philanthropist at an annuity company, the CEO, who wakes up in the morning and says, "You know what? I think I'm going to give money away. I know we have shareholders and are a for-profit business, but you know what? I just want to give money away, so I'm going to tell all the agents out there to hold the bad chicken dinner seminars and say 25% upfront bonus, 35% upfront bonus."

Upfront Bonuses

I'm getting inundated with stupid calls from people that are like, "Well, I'm considering this annuity, Stan, because they're giving us a 25% upfront bonus." Give me a break! And I'm sorry to be harsh. I've got to yell at you. This is your money. Don't be the rube at the table. Don't be the sucker at the table. Don't be the punk they're looking for that you believe, "Well, they're going to give me free money. That's great. What do you think, Martha? Let's do that." That's crazy!

Fixed Index Annuities

Now, does Stan The Annuity Man quote companies that offer upfront bonuses for Income Riders, etc.? Absolutely. So, where are these upfront bonuses coming from? What product type is attached to these upfront bonuses? Spoiler alert: Fixed Indexed Annuities. We have nothing against Fixed Index Annuities, also called Indexed Annuities. We have nothing against those, but that's the product that you're hearing about these upfront bonuses. And every single year, at the first of the year, in January and February, there's a fire sale. There's a, "Hey, we got this upfront bonus. You better get it right now because if you don't get it right now, you won't get it. Because if you don't get it right now, if you don't sign it right now, you're not going to get the bonus!"

Just remember one thing: there's never an urgency to buy an annuity. The urgency is for you to understand what you're buying. And suppose you're deciding to buy an annuity for an upfront bonus. In that case, that's like going to the car dealership and saying, "Hey, forget about the engines, and forget about the tires, and the transmission. I want to see the stereo systems. That's where I'm going to base my buying decision on a car. I want to buy the stereo system. That's what I want." That's how stupid it is for someone to buy an annuity for the upfront bonus. Remember this, there's a hundred pennies in the dollar. Can we all agree with that? Nod your head. If a company is offering an upfront bonus, what are they doing? That's right. They're taking some of the guarantees away and other parts of the policy to make up for that yummy, chunky, wonderful, fictitious upfront bonus. No, it's not fictitious. Do they apply the bonus? Yes. Is it typically vested? Yes. Is it typically attached to the income benefit phantom account or the monopoly money side? Yes, in most cases, but forget about that for a second.

The Two Questions

When you come to us, we ask everybody two questions: "What do you want the money to contractually do? And when do you want those contractual guarantees to start?" I ask every single person those two questions. And if you say, "Income later. Stan, we really want income in the future." One of the products we will quote is Income Riders, attached to Indexed Annuities, and we're focused on that Income Rider.

Running Quotes

Now, when we run those quotes, and you can go to The Annuity Man and run those quotes yourself on our Income Rider calculator, which is the best in the world. Nobody has that. We have it, okay? I'm sure there'll be copiers, but it won't be as good. But when we run those quotes, we are quoting all Income Riders with and without the bonus. We don't care. We're not ranking, "Just run the ones with bonuses, Martha." No. We're running them all.

Client Example

Spoiler alert: most of the time, the highest contractual guaranteed lifetime income stream you can get for your specific situation typically is not attached to the product offering the bonus. Sometimes it is, sometimes it isn't. I got a call the other day. A gentleman had purchased an Income Rider. We had shopped all carriers for him. We found the highest contractually guaranteed number for him and his spouse. He calls me up, and he goes, "Stan, I got the policy, and it says that there was a bonus that was given on the policy." And I went, "Yes, but it doesn't matter because we quoted all carriers for the highest contractual guaranteed number," because the only number that matters to you when you're buying an Income Rider attached to an Indexed Annuity is that lifetime income number. Everything else is garbage. The upfront bonus, garbage, the roll up amount, "It's growing by seven, eight, nine percent," garbage.

The only number that matters is the lifetime income guarantee that the company is backing up. All of the bonuses and all that other, that's just shiny things. It is candy for the stupid. Don't be that person. If it sounds too good to be true, it is every single time, no exceptions with annuities. I wish, hope, pray, whatever, that the annuity companies would stop this bonus nonsense. We don't need to do that. Why wouldn't you just build in better contractual guarantees internally and have a higher payout without the bonus? Like I said at the start, there are 100 pennies in the dollar, so they're moving things around.

It's a shell game. Stop the shell game carriers. People are smart enough out there to figure it out. And with me out here blasting the fact that all of this stuff is commodity, all annuities are commodity products, period; you have to shop all carriers for the highest contractual guarantee. You own an annuity for what it will do, not what it might do; I'm telling you we're getting through because people are calling me saying, "Stan, this guy's offering the bonus," which drives me crazy that they're leading with that. You talk about stupid. I love my agent and brethren out there and brethren nets, okay? But if you're leading with the bonus, you are a jack wagon and an idiot.

Twisting and Churning

Now, let's talk about one more thing with the bonus because this is what really drives me crazy. I got a call the other day. "Hey, Stan, I've got this annuity. It's got a surrender charge, and Willie Bo Johnson, my agent," great name by the way, "says, let's transfer this annuity because this other annuity offers an upfront bonus, and the upfront bonus will make up for the surrender charges that I have to incur to move the annuity." Why am I so mad? Because that is illegal. It's called twisting. It's called churning. It's called flipping. It's called wrong. And if you're acting as a fiduciary, as an advisor, you would never, ever, ever, ever, ever tell someone that they need to incur surrender charges in order to take advantage of the upfront bonus, and the upfront bonus will offset it. That's doing nothing but churning your account to create a commission for that agent. And agents, if you happen to be reading this, you know I'm right and stop it.

If someone comes to you and goes, "You know what? I can get you a better annuity. And not only that, this upfront bonus will offset surrender charges, so you actually will come out ahead," lie, crap! It should be illegal. And in many cases, if that goes in front of an arbitrator, they'll take that person's license, and they should. Anyone that's doing that, anyone that's leading with, "Yeah, you've got this annuity under surrender charge, but we can use this upfront bonus to offset those surrender charges," should lose their license, should not be in the financial business, is not acting like a fiduciary, and should be ashamed of themselves, and you have a case against them, in my opinion.

Let's go back to the upfront bonus thing: 25% upfront bonus, 35% upfront bonus. Get the upfront bonus and free money. You have to be smarter than to fall for that, please. I'm sorry for getting upset, angry, mad, harsh, brutal, and all that stuff, but I'm never, ever, ever going to be your friend. I will be the best advisor you've ever had because I'm going to tell you the truth. There aren't going to be shenanigans of upfront bonuses and all this stuff. There are no shiny things that make sense in the annuity world. You're buying a contract. The upfront bonus is part of the overall contractual guarantee. Do not put any weight on it at all. There's nothing special about it, period.

Every single year, January and February are the upfront bonus season. You have turkey season in some places, deer season in some places, fishing season in some places. It's upfront bonus season, January and February, baby, every single year, upfront bonus season. "Get your bonus. Get your bonus. Got to sign up. You have to do it now because you have to make a decision now because blah." Just understand this: When someone says an upfront bonus to you, and they're pitching one product with an upfront bonus, have them shop all carriers for the highest contractual guarantee. You're going to find out that an upfront bonus product isn't the highest contractual guarantee most of the time.

Hopefully, you choose to work with us. And yes, I will calm down when we talk, but it's situations like this, this upfront bonus is the reason that the annuity industry has earned its bad reputation from a sales practices standpoint. I'm out here to clean that crap up, and I'm going to eventually; I'm telling you this right now. You better have turkey, duck, fishing, and bonus seasons. In the future, there will be no bonus season if I have anything to do with it. That's Shootin' It Straight With Stan. See you next time.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.