Retirement Expert Rants: Your Broker Now Sells Annuities

Hi. My name is Stan The Annuity Man, America's annuity agent licensed in all 50 states. Today, I'm going on a bit of a rant about your broker and banker selling you annuities. I know, every time you turn around, someone's trying to sell you an annuity. You turn on the TV, annuity ad. You turn on the radio, an annuity show and an annuity ad. You can't get away from it. So, you go to your banker, thinking you're going to talk about banking, and suddenly, they're trying to sell you an annuity. It's the same thing with your broker, who's there to manage your assets with bonds, stocks, mutual funds, ETFs, and all those things, and suddenly they're saying, "Oh, by the way, I want to sell you an annuity." Huh?

Brokers Charging Wrap Fees

Here's the crazy part: some brokers and advisors want to sell you an annuity, which is a packaged product, but then they want to charge you an annual wrap fee to manage it. In some cases, they're charging a yearly wrap fee on a Fixed Annuity, which makes absolutely no sense because it's a Fixed Annuity. Morally and ethically, there should be no management fee if you have a Fixed Annuity. They're already getting paid a commission. There should be no additional management fee. It's ridiculous.

Annuity Pitches at Banks

Another absurdity is when you walk into the bank. Take my mom, for example. My mom, in St. Augustine, Florida, walks into the bank, sits down with a banker, and he leads with an annuity pitch. That doesn't last long because my mom goes, "Oh, by the way, my son's name is Stan The Annuity Man." That scares the crap out of him. The guy literally called me the other day to apologize for pitching her an annuity. I told him, "You should be ashamed of yourself. She's 81 years old, and you're pitching an Indexed Annuity to her. I should come down there and beat the crap out of you—figuratively, of course." It's crazy.

Shelf Space Fees

Having worked for big firms, I can tell you how annuities get on their platforms. Unless things have changed, annuity carriers must pay a shelf fee. What's a shelf fee? Think of it like grocery store placement. Lay's and Fritos pay to be at eye level, while Fred's Chips are at the bottom. Similarly, at banks and brokerage firms, annuities are pitched based on shelf space fees, not necessarily what's best for the client.

Annuities are commodity products. You need to shop all carriers for the highest contractual guarantee that fits your situation. Fiduciary means putting the client's best interests first. But how can a client's best interest be served if you don't have access to all carriers?

Limited Options and Misrepresentation

When bankers or brokers pitch you an annuity, they don't have all carriers. They only show the ones that paid to be on their platform. A great example: my mom has two bankers. One tried to sell her an Indexed Annuity, which was ridiculous. The other tried to sell her a Multi-Year Guarantee Annuity (MYGA) with a five-year rate of 1.5%. At the time, the best rate was 3.5%, but he didn’t have access to that.

The problem? Limited access to carriers. It's fine for the banker or the bank because that's who paid the shelf space fee, but that's unacceptable for you, the client.

Ask the Right Questions

When you visit your banker, broker, or advisor, ask them how many carriers they represent. You'll likely be shocked. It's like walking into a restaurant with only five items on the menu.

Carriers want brokers and bankers to sell annuities because it's a massive distribution network. However, not all carriers pay the shelf space fee, so you're not getting the best quotes. You're only seeing what those carriers want you to see.

Remember, with annuities, ask two questions:

1. What do you want the money to contractually do?
2. When do you want those contractual guarantees to start?

From those answers, pinpoint the annuity type that fits, shop all carriers, and find the highest guarantee. If the person you're dealing with can't do that, you need to deal with someone else—like The Annuity Man. I'll 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.