Before you can make a decision on whether you want a lump sum or monthly payments you first need to know what a structured settlement is. Let’s break the terms apart and give a quick description of each. Settlement: If you were involved in an accident at work (workers compensation claim), been involved in an automobile accident.
What is more important?
With all of the recent press on variable annuities lately, the issue many people have is over commissions paid to brokers. What is more important, the fact that the variable annuity is delivering what it promises and is doing what you want it to do, or your broker/agent earning a commission? In a nut shell, who cares that the broker is earning a commission? We do not care, we focus on the product s performance and if it delivers. We have a general idea of what these variable annuities pay in the form of commissions, but that is not a factor in our rating process. What commission your broker earns on a variable annuity sale should be of no concern to you either. Frankly, does it matter if a product pays your broker a 1% commission or a 7% commission? As long as the fees are inline and the variable annuity is not over priced, it should have no bearing on your decision to buy or not buy the annuity. We do not believe a broker should intentionally sell the highest paying product, but we, as a firm, see the commission as being irrelevant to the over all performance of the variable Annuity. The commission paid on a variable annuity is designed to compensate the broker, either with an up-front commission or a mixture of an up-front commission and a trailing commission for servicing your account and your investment needs. This is no different than a fee based planner who has you pay a wrap fee for mutual funds, or this is no different than an A or B share mutual fund. The fees and commissions paid on those products compensate the broker for servicing your account. Managed money will pay the broker anywhere from 1%, or more, a year and mutual funds can pay a broker as much as a 5.75% up-front commission with a .25% trailing commission. At the end of the day, the broker can actually make less from the up-front commission of a variable annuity compared to these other options over the long term. Did you know that some REIT s pay as much as 10% commissions? The fees can be higher than a variable annuity, and you typically have to hold on to the REIT for as long as 10 years. We never hear anything negative about this, and we find that odd. For some reason, people have a bone to pick with insurance companies or they just plain do not understand how variable annuities actually work. Therefore they concentrate on how much commission they pay. When people start talking about how much compensation the broker gets for selling annuity products, keep in mind that annuities, for all intents and purposes, pay the broker less over the long term than other investment products. Use The Annuity Report to find the best product for your needs and forget about commissions ..We did. Get an honest third party evaluation of variable annuities.
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Mad as Hell at NBC
If you saw the nightly news on NBC last night you saw the story on annuities. I cannot believe they actually aired that story. Now, I am not justifying the broker who sold that person the annuity at all I think that broker should be imprisoned. But, NBC failed on being specific on the Annuity contract sold to the investor. They did not mention that the contract sold was an equity index annuity, not a variable annuity or a fixed Annuity. There is a huge difference in these products, but NBC made blanket statements that are inaccurate and untrue about annuities as a whole. What they did was generalize all of the products and the sales people selling these products. I am no fan of equity index annuities, but even I think this story was over the top! Stories like these, which I have direct knowledge of the industry and the product, raises my suspicions about the information I receive from the mainstream media. I know this story was inaccurate and full of generalizations; do they do this with all stories? Your guess is as good as mine. The product sold to this investor was clearly the wrong product. Given the fact that this person was 87 and had dementia he should not have been sold any investment product. That was the real story, not just the annuity product. This misinformation is the reason annuityiq.com exists to begin with. NBC needed to do real research, apparently they did little to none at all. They interviewed Consumer Reports for an annuity story, I mean come on! This is not a TV or a car this is an investment product and they should have consulted experts on this issue. I do not like equity index annuities. I think they are extremely confusing and dangerous products. With that being said, there are some good equity index products out there that can help and not hurt people. The first rule of thumb is, if it sounds too good to be true, it probably is. This was clearly a bad story and I sent off a very strongly worded letter to NBC, let s see if they respond back. Here is the letter I sent: Dear NBC News, I just watched your piece about annuities and I am concerned. Not at the agent who sold it to the gentleman, but at you (although I am angry at the agent too). I feel that the broker who sold this product to a person with dementia was the real story, not just the product. As a former financial advisor, I would never sell any product to anyone with dementia or any other mental illness, and that should have been the key component of the story. How in the world can you generalize that all annuities are like the one sold to that gentleman? You cannot. Did you even know what product he was sold? I do and it was an equity index annuity. You needed to make that CLEAR to your viewers. What you said that was wrong or inaccurate: You said You have to plunk down a huge amount of cash . That is not always true and most investments involve big lump sum investment. You said; annuities take years to mature . That is not true at all, annuities do not mature. CD s mature, annuities have surrender schedules that end after a certain number of years. You can, however, access up to 10% or more of your purchase premium every year. That means you have some liquidity. You said; many agents selling annuities do not understand how they work, but they can make big money . Yes, the investment world is commission driven; almost every job is based on sales, including journalism. You depend on selling ad space. No ad space sold, no paycheck. Your point was not accurate. Most annuities pay 7% or less in commission and the product sold to the gentlemen you interviewed was a high paying and bad annuity product. I cannot believe you did not bring in an expert to talk about this. Instead you used consumer reports, why? I would use consumer reports to talk about cars or TV s, but annuities, I do not think so. A simple Google or Yahoo! Search would have brought you several experts who could have given you a fair and balanced view of these products and given you the problems with the product sold. You just caused panic for every person in America who owns an annuity contract, and why did you do that? Because one broker sold one bad product? You need to run a revision on this story and explain yourself. You need to explain that this was a specific Annuity, an equity index annuity (which are bad products for the most part), not a regular fixed annuity or a variable annuity. annuities are tricky investments and that is why AnnuityIQ.com exists. To state annuities are bad or to use this one case to show annuities are evil is irresponsible journalism. Although this is not an isolated case, it is, however, a serious problem with equity index annuities, not of all annuities. I do not sell annuities I show people how they work. You should have consulted us first and you could have gotten a balanced fair answer. This would have included condemning the broker who did this and the product, but making it clear on what type of product it is and a fair warning to seniors. Instead you opted to generate fear and even more ignorance. Here is the link to the story: http://www.msnbc.msn.com/id/14607656
