Annuity Commissions and Fees
Fixed Index Annuities and Hybrid Annuities
Yes, annuities with more complex features, like fixed index annuities or hybrid annuities, especially those with long surrender periods (greater than 10 years), can earn an agent up to 10% in the first year!
Some index or hybrid annuities companies also pay an agent a “trail” commission. He may earn a smaller percentage initially, but continue to receive a "trailer" each year for the life of your annuity. This could be for as long as 20-30 years.
Agents Just Love to Sell These High Commission Annuities!
It’s no surprise nearly 75% of the annuities promoted by agents and stock brokers today are of the more complex type with stock indices and long surrender periods. If an agent tells you that only a hybrid annuity will work in your situation and doesn't offer you an immediate annuity or deferred income annuity option, beware!
I contacted Immediate Annuities.com to buy one of my immediate annuities. They were prompt, very responsive, paid attention to detail, understood my objectives, and were superb when it came to staying on top of seeing the funds transfer and issue of new policy documents through to completion.
There are some big marketing outfits constantly advertising huge "8% annual returns." These are usually hybrid annuities and the public is unaware of the large commissions some agents are making on these sales.
Plus, in addition to the commission the agent earns, the insurance company may also be charging you an annual rider fee in your hybrid annuity.
Along with index annuities and hybrid annuities, the bad rap for high commissions or high fees belongs to the type called "variable annuities" which are similar to mutual funds. Variable annuities typically charge annual management fees and mortality fees, which can range from 0.50% to 4.00% a year. On top of that, in the first year the broker or agent may earn up to 8% commission which reduces the amount left over for investment, plus an annual trail commission.
Putting annuity commissions in perspective
When buying your annuity there should be no surprises about the commissions your agent will earn. When you buy your annuity through our firm, you are perfectly clear about your costs and what we earn. We take pride in being honest and transparent.
I hope I've answered your questions about annuity commissions. If not, let me know what I left out. I'd also be happy to discuss your retirement plans with you. You can reach me at 800-872-6684. I promise, they'll be no sales talk.