Licensed Annuity Agent Reveals Secret Agenda

Large financial service organizations tilt the playing field against consumers. Metlife and, more recently, AXA Advisors are in the news for possibly offering incentives to representatives to recommend house products. It has been reported that some companies require the sales of proprietary products in order for agents to qualify for health insurance and other employee benefits.

Are consumers aware of this secret agenda when they meet with an agent? I am hesitant to use the term ?advisor? because that would insinuate the salesperson has the client?s best interest at heart. I am embarrassed to admit that I was offered a position with one of the companies mentioned in this article and was shown an impressive array of financial products available. It was then explained to me that house-brand life products and annuities paid much higher commissions than the ?outside? products and house-brand vehicles would help me qualify for incentive trips much faster.

I receive a monthly financial industry magazine that devotes much of their pages to advertisements from annuity companies pitching their wares. Each ad focuses on their high agent commission payout. One company will send my wife and I to Switzerland if I sell $2 million of their annuities. One ad is from a life insurance company offering a whopping 107% first year commission on the sales of their whole life policy! Another company?s full-page ad touts an average $17,000 commission per annuity and an annuity-selling coach explains that he is willing to teach me the secrets that helped him earn an ?incredible $381,522 in annuity commissions in only 6 months!?

One annuity company offers an a 7% commission on one annuity and an 11% commission on another annuity product. Here are some questions consumers should be asking.

Why would the company be willing to pay me 58% more compensation to sell one product over another? Answer: The higher-commission product is in the company?s best interest, not the client?s.

If an agent sells you a product paying 11% commission, will he advise you that he could have sold a product that paid him much less but he chose not to? Answer: I don?t think so.

Who is really paying the extra 58% in salesperson compensation? Answer: You, the client.

As a financial consumer, do I deserve to know any factor that is influencing the recommendations of my salesperson? Answer: A definitive YES.

Did the annuity salesperson hold himself out as a trusted financial advisor? Probably.

The problem with the real-life annuity example shown above is that the client has no way of knowing how much commission was earned by the agent. The 11% commission product will pay a much lower interest rate to the investor and/or have a much longer surrender period, tying the client?s money up for years. Fixed annuities and equity index annuities need complete commission transparency. Annuity companies know that higher commissions influence the sales practices of insurance agents and they also know annuity clients have no idea of the high price they are paying for a false sense of peace of mind.

I brought these issues up at a recent industry association luncheon. At my table, I had an insurance agent on my left side and an attorney on my right. To quote the agent, ?caveat emptor? or buyer beware. The solution for consumers, don?t be a buyer! See a fee-only advisor who is not tantalized by trips to Switzerland and high commission insurance products with no commission transparency. Also, consumers should demand legislation that forces all annuity commissions to be equal and completely disclosed to the client. The insurance and annuity industry should be embarrassed and any bad reputation is probably well deserved. The good news is that quality no-load annuities are available but don?t count on your average annuity salesperson to tell you about them.

Mark Diehl is a Certified Financial Planner, Chartered Financial Consultant, and author of The Wealth Management Manual available at amazon.com and barnesandnoble.com.

You can learn more about Mark at http://www.markdiehl.info or call 800-304-1232.