Shock Doc: What Drives Fixed Annuity Sales to Teachers?

I’m beginning to understand why ASPPA/NTSAA is so determined to preserve the status quo in the 403(b) world (I already knew, this is just a fun way to illustrate), it certainly doesn’t appear to be the participant’s best interest.  Here are a few of the perks of selling annuities from Midland National, Horace Mann, LSW:

Costa Rica

Alaskan Cruise

Banff (Alberta, Canada)

Switzerland (Lake Como and Montreux)

Riviera Maya, Mexico

Commissions up to 16%

Stock and Cash awards

All of this can be yours if you sell enough fixed annuities through Four Seasons Financial Partners!

Of course there is no mention of what is best for participants and the F word is curiously missing (Fiduciary), however there are 5 reasons to join Four Seasons (in their own words):

1.  World Class, luxurious conventions to top destinations!

2.  Commissions up to 16%!

3.  Bonuses up to 11% for 7 years.

4.  FSFP offers SPIA’s, MYG’s, Traditional Fixed, Equity Indexed Annuities.

5.  Top notch service

But don’t take my word for it, read the brochure below – you won’t believe it.  Next time an agent sells you an annuity, maybe you should ask what the commissions are and what trip they are qualifying to go on by selling it to you.

Keep in mind (in my humble opinion) that instead of cleaning these shenanigans up, ASPPA/NTSAA supports its proliferation via their “Choice” model.


8 thoughts on “Shock Doc: What Drives Fixed Annuity Sales to Teachers?”

  1. Can somebody please tell me what the surrender charge is for a “managed account” that is down 30% due to market volatility when the client wants his/her money out? What do you call that other than a great “buying opportunity” or another shallow endorsement for dollar cost averaging?Whose “fiduciary responsibility” is it to guard against an army of self righteous “fund managers” who continue to drive unsuspecting and trusting clients to that mess? These Fixed and Indexed Annuity clients have not lost a penny during periods of volatility, and the funds are there when they are desired or needed. Have you ever honestly considered that many people simply are not interested in what you have to offer, and are less interested in the above and more interested in keeping what they have? You’re shing a light alright, but its in a mirror and reflecting right back at you twice as bright. Just my opinion, to which, last time I looked, was entitled to….shields up.

    Great promotion for Fixed and Indexed Annuities! Its no wonder so many Equity Reps are gravitating to these products in droves, individually and as organizations.

    1. Steve,

      Your rant doesn’t change the fact that what drives fixed and indexed annuity sales are programs that would easily be found to be prohibited transactions in an ERISA environment. Our school employees deserve much better.

      Your failure to describe fiduciary based advisors demonstrates an ignorance that is persuasive in this industry.

      I certainly didn’t have any clients down 30% and in fact have plenty of clients in fixed accounts. My obligation is to the client and being paid by another entity conflicts with that duty – this isn’t a difficult concept.

      Steve – it amazes me that you wouldn’t find this document disgusting. Instead, you defend it and attack using a straw man argument.

      I’ve reviewed many EIA’s and your defense of them is not exactly accurate. The surrender charges can be huge and the return is highly dependent on the graciousness of the insurance companies (who are rarely gracious).

      It is to bad that the status quo ignores behavioral economics in favor of their own bottom-line.

      If we want to improve retirement incomes, we have to increase participation. Your method obviously hasn’t worked.

      Scott Dauenhauer, CFP, MSFP, AIF

      1. I would hardly classify my post as a “rant” . Thats kind of humorous. You have stated in other forums that: ” I have worked with hundreds of educators and they have no problem compensating me for my expertise.” My point is simply that are literally millions of 403(b) participants all across the country, who are well educated and informed, and who have invested in annuities, fixed and Indexed, who understand that a commission was paid to their advisor, and also understand that there is usually a fully disclosed Contingent Deferred Surrender Charge. Likewise, they have no problem with a representative being compensated for their expertise. The only difference is their participation in paying the fee is contingent. Your entire premise assumes that these educators are hopelessly unable to determine what is best for them, and what is consistent with their risk tolerance. Yes, there are those who do a poor job, just like there are those on the fund management side, who do an awful job, and yes they might refer to themselves as “fiduciary based advisors.” I’m in schools all across the country every day, and a very common theme(s) expressed is: “I’m tired of the volatility” “I’m tired of dollar cost averaging”, “Im tired of hearing this is a great buying opportunity.”

        It appears as though the marketing brochure you used is almost 2 years old. You doth protest too much, Scott. Keep up the good work. Merry Christmas

  2. Steve, You kind of make my points. Teachers are NOT disclosed the commissions generated or the trips that influence the sales of the products being sold to them. School employees DO want to know what conflicts are involved and they don’t want to be subjected to long surrender periods just so an agent can get a trip to the Caymans. You again fail to mention the pesky little F word – Fiduciary. I fail to see what being tired of volatility has to do with whether or not someone works in a fiduciary capacity. An agent who only has an annuity to sell will sell….an annuity. A Fiduciary Advisor does not have that constraint. All of this actually misses the point about utilizing the advances in behavioral finance to increase the number of participants, the amount they are contributing and finally creating better retirement outcomes. You are so focused on trying to protect your retail distribution model that you fail to see how much larger this market for participant services could be. Our goal should not be to feed school employees to an insurance agent or to an RIA – it should be to do whatever it takes to increase participation in order to get more school employees retiring in dignity. Annuities that are sold with trips to the Caymans do NOTHING to further that objective…but they do further the interest of insurance agents – its a flawed and failed model.


    1. I can tell you with certainty that if after determing that a client’s risk tolerance dictates something other than a fund management platform, that a teacher in middle America, cares little about the “advances of behavioral investing” and more about keeping what they have. There is significant demand for products that offer safety, security and guarantees not found in mutual funds. Declining participation levels in 403(b) plans across the country are certainly not due to too many choices, thereby leading to the premise that a single vendor solution might increase participation. Most Plan Administrators took the opportunity to create very restrictive rules of engagement in their respective plan documents following the advent of Reg. changes, making it difficult, if not impossible for any vendors to communicate with eligible participants. I can tell you that after discussing these challenges with school business officials all across the Midwest, that they acknowledge this, and accept a large portion of the responsibility for declining participation levels. You continue to use your “F” word theory to postulate or suggest that anyone that offers Fixed or Indexed annuities somehow does not have the client’s best interests in mind and that they are driven or motivated solely by these silly trips. As indicated in a previous post to you, there are bad eggs out there, in my world AND yours. My fiduciary responsibility to my clients that equates to and from an earned trust, helps me sleep at night knowing that their funds will be there tomorrow morning regardless of how entirely unprecedented and unpredictable markets perform. Surrender charges are not necessarily a bad thing, and certainly are not there for the sole purpose of providing trips to the Caymans. I know countless numbers of asset managers in the 403(b) marketplace, who have seen their asset fees decline horrificly because of market declines that have happened regardless of their multiple investment models or behavior analysis, who now look desperately to shifting assets from these platforms to annuities with bonuses, to offset losses, and most insurance company suitability guidelines do not allow them to accept these transfers. I consider those representatives as the predators in this equation, and they certainly do not take their Fiduciary responsibility to heart, and yet they, like you, look down their noses at the annuity providers. The vast majority of traditional and indexed annuity providers and their respective field forces, are populated by individuals who care deeply about their clients, just as much as you do, and none of them have lost a dime in their client accounts, and yes their surrender charge products do offer a little protection from the “churn and burn” crowd. For that, I’m grateful. I’ve had hundreds of clients retire in dignity, and who thank me for looking out for their best interests.

  3. It’s funny that your opinion of what teachers need seems to be along the same lines as what you sell…Hammer meet Nail.

    You continue to pursue a line of reasoning that hasn’t been presented. I’ve never said that conservative investments shouldn’t be offered. But your insistence that behavioral finance doesn’t matter is quite absurd and you are certainly wrong – teachers do care. Your “none of them have lost a dime” red herring is simply a furthering of your hammer/nail circular model.

    An advisor can be a fiduciary and offer a fixed annuity – but certainly not if the sale of that annuity (or any product) leads to conflicts that cannot be resolved. I’m not saying that insurance salespeople who hawk Equity Indexed Annuities don’t care about their clients – simply that most of them don’t understand what they are selling and get paid enough on those products to look the other way.

    If you are so insistent that you are protecting your clients best interest – you should have no problem signing that you will act as a fiduciary 100% of the time and you should have no problem foregoing any and all “trips and perks” that may come with what you sell.

    Surrender charges are not always a bad thing, but most of the time they are in place due to the commissions and perks being paid out – not a higher interest rate (or more flexible product provisions).

    There are many great advisors out there and many who care about their clients – we need all of them. But under no circumstance should a school employee take investment or investing advice from a non-fiduciary. Ask a room of people anywhere in the US (any randomly selected group of people) if they would prefer an advisor who puts their interest first or one that doesn’t – I think we all know the answer. Mind you, as a fiduciary one also must be competent.

    Rejecting behavioral finance because it allows you to continue peddling product isn’t living up to the ideals this industry needs to set. The irony is that behavioral finance in many respects supports products that prevent large losses from occurring….keep on rejecting at your peril.

    Scott Dauenhauer

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