To hear some financial experts tell it, annuities are the investment product from hell. One prominent expert featured on Forbes refers to them as the ‘cigarettes of the investment world’. So why would any financial advisor sell annuities? Because they are not all bad. Annuities still have a proper place in the investment world despite their possible downsides.
Financial advisors working through Western International Securities have access to nearly every kind of annuity contract on the market. Furthermore, they offer their broker dealers and financial advisors complete research guidance to help them choose the best annuities for their clients. Western International says the key to selling annuities is educating consumers. Like so many other areas of life, it is all about education.
The Good and Bad of Annuities
Let’s face it; annuities have gotten plenty of negative press since the 2008 crash. Some of that bad press has been well earned; some of it is completely unjustified. The problem financial advisors and brokers face is the fact that all the good aspects of annuities are drowned out by the shouting and screaming of those who hate them.
Yes, it is true that annuities can be bad when they include excessive fees and limit income benefits. They are bad when rider and surrender charges end up punishing an investor who wants to switch to a new product. But there are just as many bad points with every other kind of investment. That is the reality. Every investment has its good and bad points.
The most attractive benefit of the annuity is that it provides stable income. It is a fantastic way to secure some of the money a person has saved for retirement to go along with Social Security payments, without preventing the individual from continuing to invest in other opportunities as he or she sees fit. Provided the investor fully understands what is being purchased, the annuity can be that extra income for a rainy day when other investments are not performing so well.
Important Things Consumers Need to Know
If selling annuities is all about educating the consumer, what kinds of things do consumers actually need to know? For starters, consumers need to know the consequences of switching from an older annuity product to something newer. Take an annuity purchased back in the mid-90s with guaranteed income withdrawal based on the highest value the account reaches. It is hard to find such a guarantee today. It would make little sense to transfer out of that annuity and lose the guarantee.
Consumers should also note that withdrawing too much money could spell problems later on. Just because an annuity lets you take out as much a 6%, for example, does not make doing so a good idea. The thing about annuities is that they are guaranteed income. There is no need to draw out until the money is needed.
Finally, consumers need to understand how annuities work at death. Annuity purchasers designate beneficiaries to receive whatever funds are left in the annuity at the time of death. But how beneficiaries are listed makes a difference. For example, a spouse listed as the primary beneficiary of a joint-life annuity would receive lifetime income. If that same spouse is not listed as the primary beneficiary, the most he or she could inherit is the cash value of the account.
Annuities definitely have their weak points. However, they have their strong points as well. Making sure consumers are making the right decision about annuities is a matter of properly educating them. Financial advisors who focus on education can create happy customers who do not second-guess their investments.