Annuities have taken a beating since the start of the financial crisis a decade ago. And although they are not right for everyone, annuities still have a valid place at the retirement planning table. That’s why dealer-brokers like Western International Securities continue offering annuity contracts.
Western International encourages its financial advisors to be fully informed about annuity contracts at all times. They should have all the information necessary to answer client questions so that no one purchases an annuity without being fully informed.
To that end, here are 10 annuity questions every financial advisor should be ready to answer:
1. What are the different kinds of annuities?
As you know, there is no single annuity product that covers every situation. Depending on how annuity contracts are defined, there are upwards of seven different options including single premium, flexible premium, fixed, and variable annuities. Financial advisor should be prepared to explain each of them.
2. What are the minimum interest rates on your contracts?
An annuity is only as good as its interest rate. Where retirement savers are concerned, an exceptionally low interest rate could have a significant impact on retirement income. Clients deserve to know interest rates up front.
3. What are the fees and charges of your contracts?
Annuity providers charge certain fees deducted from premiums, additional fees deducted from contract values and, in some cases, surrender charges for premature termination. All fees and charges should be fully disclosed prior to purchase. If clients do not understand the fees and charges, advisors should be making every effort to correct that.
4. Are partial withdrawals possible?
Some clients may choose annuities based on the possibility of making partial withdrawals. This question may not be asked, but the financial advisor should be prepared for it anyway.
5. What are the income payment options?
This is one question that should be answered even if it never comes up. Why? Because retirement savers need to know what their options are before they can sensibly agree to a retirement plan. You cannot plan for the future if you do not have a basic understanding of what the future looks like.
6. What insurance companies are behind your contracts?
The smartest retirement investors ask this question so that they can do a little research on their own. They want to know the financial health of the insurance companies offering the contracts.
7. What happens to my annuity at my passing?
You already know that the terms and conditions of annuities differ from one contract to the next. Clients need to know what will happen with their annuities after passing. This information could make a substantial difference in choosing the right annuity.
8. What is your commission on each contract?
Though it is an uncomfortable question, it is one that needs to be answered if asked. Clients hoping to learn their advisors’ commission payments are simply trying to look out for their own best interests.
9. What are the risks of a particular contract?
It is easy for financial advisors to explain the benefits of a given annuity contract. But that’s only half the equation. Clients also need to know what the risks are as well. Any broker-dealer or financial advisor unwilling to disclose risk is not acting in good faith.
10. Which contract would you purchase for yourself?
Lastly, advisors should be prepared to explain which of their available contracts they would purchase for themselves. They should also be able to explain why. Clients put a lot of stock in what their financial advisors would do in their own situations.