The Worst Annuity Advice Ever
This is not the first time I’ve seen it but it has been a while. I was talking to another advisor last week and told him this story and he couldn’t believe it either. There are some really greedy idiots working in this business and it’s frustrating to see them take advantage of people who are just looking for help. There is so much to this story so I’m just going to jump right into it and let you guys be the judge. Please tell me if you think I’m overreacting.
I met a couple two weeks ago in their early sixties with plans to fully retire in a few years. Their meeting notes simply said that they wanted me to review the annuity that had been proposed to see if it was legit. I first asked them what the purpose is for buying an annuity. They both said they wanted out of risky assets and just didn’t want to lose money. After that they couldn’t tell me much about the contract and I need to know what it is first to tell if it’s suitable for the purpose. With the simple goal of protecting money then it’s pretty wide open.
They were finally able to find in the paperwork the name of the contract. Sure enough it’s the good ‘ol Allianz Benefit Control. In itself there’s nothing wrong with it but there’s a little more to the contract. It’s an income contract so anyone using it needs to have guaranteed income as their primary goal. I asked if any income planning came along with it. Do you need income in retirement? They replied that at full retirement they probably needed a few thousand dollars a month.
Next question: “Did the advisor ask if you need income?” According to them he did not. Here’s a paraphrased quote. “He said he didn’t have much time and just handed us some paperwork and told us that there are no fees, we won’t lose money, and we can expect 0-10% return every year.”
Me: How much did he tell you to put into the annuity?
Them: “Well, he told us to move our 401(k)s into it.”
Me: All of it? How much is in your 401(k)s?
Them: “One has $400,000 and another has $1,300,000.”
Me: What other retirement assets do you have?
Them: “We have the majority of it in our 401(k)s.”
Me: Did he show you any other options?
Them: “No, he just told us this was the best thing we could do.”
Me: So, he did zero retirement planning with you and gave you no other options but told you to put all of your money into one annuity?
Them: “Is that bad? We thought annuities are supposed to be a good place to put retirement money so we’re not sure what to do.”
There are a lot of things wrong with this. What do you see as the biggest problem? The first is, should you have all your money in annuities? If yes, should it be all in one contract? Is it ok to buy something that you don’t understand? Is it ok to rely on advice from someone who has no apparent concern for your well-being in retirement? I know a lot of people who have a majority of their money in annuities but none of them have it in just one contract. And they all took time to build a portfolio of annuities with one or more advisors who helped them address specific retirement concerns.
As if the lack of professionalism and respect for these potential clients isn’t enough, there’s also the error of setting unrealistic expectations. He told them to expect 0% to 10% yield. The illustration they had showed five individual index allocations of 20% apiece. One of them was allocated to the S&P 500 with a 5% annual cap and another was allocated to the fixed rate of 2.7%. Neither one of those is close to the top end of 10% so the other allocations would have to seriously overperform to meet expectations. Sure, 0% is realistic but this contract would never reach 10%. It’s likely that if this couple moved forward with the purchase they would be extremely disappointed in just a couple of years.
No one should take the path that this couple was guided down. We are not here to prey on the good nature of nice people who have worked hard to become successful. The exact contract doesn’t really matter but I’ll touch on that shortly. If any of you have been in a similar situation I hope you were advised by someone else to take your time with important decisions. These guys just wanted to protect money. They can do that inside the 401(k) using the money market fund. Then it sits gaining interest while they learn about all the options they have and account for each retirement concern one by one. If someone doesn’t have the time to explain something in great detail along with alternative options then they have no business in this industry.
A lot of people assume that I don’t like Allianz products. I’ve explained several times that each is just fine in the proper situation. I’ve shared the company website and explained to everyone that the conditions of each contract are explained very well for the public to see. With respect to that, Allianz is very open about what they offer. The problem is that the products seem to attract the bottom feeders on the advisory side. Ever since I started talking about the product I’ve seen recommendations to put 100% of assets in a single contract several dozen times. Every single time it was an Allianz bonus annuity. If I’ve seen it that many times, how many other times do you suppose it has happened?
Education is incredibly important. Without it you could end up with something that doesn’t work for you or maybe you’d avoid annuities altogether. Either way you’d be missing out on valuable protection in retirement. From just one phone call I could tell these people had a moderately favorable view of annuities. They landed in the perfect place. I would have been happy to slowly walk them through the process and watch them make a confident decision. What’s most important right now is that they were hopefully able to stop this one in time. If any of you feel like you’re getting similar pressure then I’ll do my best to put a stop to yours too.
Have a great weekend!
Bryan
Watch Episode 194: The Worst Annuity Advice I’ve Ever Seen
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Last Updated on September 12, 2025 by Bryan Anderson
