Why I Don’t Sell Variable Annuities
A lot of research went into this one. Where does a person go to get a bunch of unbiased information about variable annuities? It seems like when you search the topic, all you get is a Ken Fisher ad along with those from some of the major management institutions. Well, I went to my newsletter page because it’s all there. It’s not that I don’t know what I’m going to talk about, rather it’s important to organize the info so I say what needs to be said. The topic of variable annuities is rather complex and could be the singular focus of a podcast itself, not just one episode.
The main reasons I don’t sell variable annuities are as follows:
- Better value with other products: I firmly believe that there are superior financial products available that provide more value than variable annuities.
- Ethical considerations: While I am fully qualified to sell variable annuities, I prioritize ethical considerations in my practice. I focus on providing unbiased advice rather than promoting specific products.
- Personal specialty: My expertise lies in other financial strategies that I believe offer more advantageous solutions for my clients’ needs.
- Referral to specialized advisors: Instead of selling variable annuities myself, I prefer to refer clients to advisors who specialize in these products when I believe it’s the best option for the individual.
Let’s dive a little bit more in.
In the past year or so I’ve written three newsletters and recorded a podcast on the subject. Anyone should be able to get a reasonable idea of whether they want a variable annuity with the information on this site. Product reviews are also important but I stay away from those because this is where all the complexity is. If you want an individual recommendation you’ll have to reach out to me.
I don’t sell variable annuities and it’s not because I can’t. I’ve held the licenses required in the past but it’s just not my business. If I ever decide variable annuities are the best value then I’ll do what it takes to promote the products. For now, there is better value with other products in my opinion and I’ll explain why I feel that way.
First, I wrote the “Simple Guide to Variable Annuities“, which clearly and quickly explains all the features, options, and nuances of this product, including why they are the most popular annuity sold. It’s mostly because investment advisors don’t want to lose assets under management and variable annuities stay on the books.
In addition, tax deferral, guaranteed income, full market participation and death benefit provisions are all part of it. Each adds a cost and it’s up to the buyer to determine if the benefits are worth the price. If you don’t want the benefit then don’t pay the fee. These fees can add up to a tremendous amount and it’s actually a pretty good deal with all things considered. But people don’t like fees and a properly structured retirement portfolio can cut fees dramatically while giving people a reasonable assurance that all benefits are well within reach. There’s often a better way so I don’t sell variable annuities.
Next I wrote “When a Variable Annuity Works”, because there are some very specific times when a variable annuity is the perfect financial vehicle. Tax deferral for non-qualified assets is a hallmark of all annuities and this is a huge advantage for someone in a high tax bracket. When the person also wants a market investment, the average base fee of 1% could be far less expensive annually than paying taxes on dividends and short-term capital gains. The base contract fee guarantees the owner’s beneficiaries will never inherit less than the initial investment, no matter whether the market drops in value. This makes it an excellent option for a market-based inheritance of non-qualified funds. But I don’t run into these situations very often so I don’t sell variable annuities.
And finally I wrote and recorded “What Would You Do with an Old Variable Annuity” (Newsletter – Podcast). A lot of people have called over the past few years asking for advice on a VA contract they have held for a long time. The market has done really well on average in the past 30 years and most contracts have done really well also. But with the market having been at record levels everyone was asking if they should do something different. In this newsletter and podcast I gave you three scenarios and each person was advised to do something different. I picked these examples out of more than 30 or 40 times I was asked the question. All but a few were told to keep what they had. Since all of these people contacted me after they had already bought the contract, it makes no sense for me to sell them a variable annuity.
It all comes down to fees, market volatility and personal preference. I truly don’t mind being available for someone who needs advice so I didn’t set myself to be able to sell something to everyone I meet. My mentors in the business are extremely ethical advisors with decades of experience and they sell variable annuities. There’s no reason for me to sell them when I have better strategies within my specialty and I have a good recommendation for an advisor when a VA is the perfect option.
Educate yourself at Annuity Straight Talk and let me know if you need more. If you really want a variable annuity I’ll send you to someone who will get you the best available.
Episode 42: Why I Don’t Sell Variable Annuities
What You’ll Learn from This Episode:
[2:20] Variable Annuities are the most popular annuity product on the market.
[6:35] How do you best maximise the potential benefits of retirement?
[8:26] Why are variable annuities the most popular product?
[13:22] Additional fees for contract guarantees
[18:01] Instances where a variable annuity is the best option for the traditional purpose of variable annuities
[24:58] The variable annuity opens a certain type of protection if you want to invest in the stock market.
[31:26] Variable annuities come down to their fees, market volatility and personal preference
Key Quotes:
[4:17] “Variable annuities are what got me into the topic of retirement planning.”
[12:24] “Essentially what they are doing is trying to maintain assets or collect more assets that they can put on their books as managed.”
[15:23] “If you want the benefit, you have to pay the fee.”
Resources:
Further readings
Fixed Indexed Annuity Withdrawals
How Much Do Fixed Annuities Pay?
Last Updated on March 4, 2024 by Bryan Anderson
