Conundrum of the day:
April 2, 2025 by Sheryl J. Moore
Conundrum of the day:
“I have $3 million in investments and I own three rental properties with no debt. I’m a lifetime federal employee with all the perks. I’ll be retiring in three years and I’ve previously worked with a large investment company but they’ve been awful and want me to buy annuities.
Is it time to leave the big firm and find a financial planner to help guide me through this next chapter? What kind of adviser should I be looking for specifically?”
Read MarketWatch’s full response:
‘I’m a lifetime federal employee with all the perks.’ I have $3M in investments, 3 rental properties and no debt. Now my adviser is pushing annuities – what’s my move?
“It sounds like you’re probably in great financial shape, but getting unbiased advice is key as you are approaching retirement, and as such, you’ll probably want to look for a fiduciary who can’t take a commissions.”
And then, there’s this:
“Also keep in mind that annuities are among the most abused financial vehicles available.”
Says who? The last time I checked annuity complaints with the National Association of Insurance Commissioners (NAIC), complaints about annuities were negligible.
“Often, they are complex contracts with high fees and steep surrender charges, which pay commissions of up to 10% to the salespeople promoting them,” said James Hemphill, CFP®, CPWA®, ChFC®, CIMA®.
FALSE.
First of all, the vast majority of annuities are similar in design to CDs.
Most annuities have NO fees.
More than 43% of annuities have a surrender charge of five years, or less.
And the suggestion that agents selling annuities receive commissions of “up to 10%” is absolutely false.
And Jim- what motivated you to say that “the most suspect annuities are those called fixed-index or equity-indexed annuities?” Why do you feel that way?
Mark Struthers CFP®, CFA®, CRC®, RMA®commented, “Technical knowledge is meaningless if commissions taint the advice.”
Interesting. Mark, do you realize that if an insurance agent gets paid a 5% commission on a 10-year annuity sale, s/he makes about half of what a financial planner would make over that same period? Plus, the commission is paid to the agent one time, at point-of-sale. Consumers pay their financial advisor infinitely.
Different forms of compensation; neither is better than the other.
Just the typical annuity bashing in this one…perhaps next time MarketWatch could get a source that is an actual expert on annuities. -sjm
