This undisclosed conflict of interest hurts annuities, hurts the reputation of the good insurance agents and most importantly hurts the purchasers of these products. If an annuity product is good for a client, it doesn't need to come with extra perks to sell it. Finally, someone in Congress is listening to what we've been saying.
The full press release is below:
Questionable practices highlight the need for a strong conflict-of-interest rule for retirement advisors
WASHINGTON, DC - In letters sent to 15 of the country's largest annuity providers today, United States Senator Elizabeth Warren raised concerns about the rewards and incentives these companies offer to brokers and dealers who sell annuities to families and small investors. The letter explains that "annuity providers offer a vast range of perks - from cruises to international travel to iPads to diamond-encrusted ‘NFL Super Bowl Style' rings to cash and stock options - to entice sales of their products."
"I am concerned that these incentives present a conflict of interest for agents and financial advisers that could result in these agents providing inadequate advice about annuities to investors and selling products that may not meet the retirement investment needs of their buyers," Senator Warren wrote. The Senator notes particular concern about the impact on individuals who are on the verge of retirement because they have little time or ability to recover potential losses from bad investments.
The questionable practices identified in today's letters highlight the need for a strong conflict-of-interest rule from the U.S. Department of Labor (DOL) to protect retirees by requiring advisors to act in their clients' best interests. DOL released a proposed rule earlier this month. "Annuity agents that are more interested in earning perks than in acting in their clients' best interest can place Americans' savings and retirement security at risk," the Senator wrote.
Senator Warren today asked annuity providers for information about the incentives they offer, the number and value of the incentives awarded, and the companies' policies for disclosing these potential conflicts of interest. The letters were sent to the 15 companies with the highest 2014 U.S. individual annuity sales: Jackson National Life, AIG Companies, Lincoln Financial Group, Allianz Life, TIAA-CREF, New York Life, Prudential Annuities, Transamerica, AXA USA, MetLife, Nationwide, Pacific Life, Forethought Annuity, RiverSource Life Insurance, and Security Benefit Life.
Unfortunately the DOL proposed Fiduciary rule would not apply to annuity sellers who service 403(b) plans.
Scott Dauenhauer, CFP, MPAS, AIF