Annuities-The Biggest Problems Part 3

Ok…so here it is. Problem #3 of the Annuities Biggest Problems Series. Annuity agents are not held accountable enough for the sale they make to you. Let me tell you what I mean.

Agents get paid handsomely for selling you an annuity as we mentioned before. And they typically get paid ONCE. There are different payout options and some annuities that pay agents once per year (much less than a one time upfront payout) but for the most part, agents get paid one time handsomely up front.
Why is that important? Because, where is the incentive to KEEP helping you? Your agent doesn’t have an incentive (other than getting more of your money later) to keep helping you. Once you’re fully invested, there’s no financial motivation to keep helping you. And if you’re in a long term annuity, you may never see your agent again.

Now, does this mean that most agents do take off after the sale for you to never see them again? No, not necessarily. All I am saying is that there is really no reason for them to hang around helping you. After all, they are not going to get paid again unless you buy another annuity or something else the agent is selling.

I think that needs to change. An agent should be paid a smaller up front commission and paid over time while you are riding out your surrender charge. Now, that would do a couple things. Number one, it would keep them accountable knowing that they would not get their full commission unless you stayed in the product. Number two, it would probably make them more conscious and aware of what they were selling you. Why? Because the pay would depend on maintaining a relationship.

Furthermore, the insurance companies should make this change to pay the agents over time. It would hold their agents more accountable. Sure, you can find some arguments against this but I guarantee it would do more good than harm when it comes to annuities.

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