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Annuity & Financial Product Sales
Old 12-22-2015, 01:06 PM   #1
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Annuity & Financial Product Sales

I know we have hashed over the pros and cons of annuities and the sort but thought I would post a link to an interesting article with the caveat that these practices apply to probably 100% of financial products and not just most annuities.

These “kickback” practices, she found, are widespread. In fact, the report concluded that they cost Americans an estimated $17 billion every year. Warren’s view: “That’s $17 billion taken out of the pockets of retirees by unscrupulous advisers who are more interested in collecting fees and prizes for themselves than helping families build real security.”

The seamy side of annuity sales - MarketWatch
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Old 12-22-2015, 01:50 PM   #2
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Thanks Frayne,

I am shocked, shocked that there's kickbacks going on it this slimy (seamy?) industry.
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Old 12-22-2015, 01:57 PM   #3
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Thanks for the link.
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Old 12-22-2015, 02:06 PM   #4
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My dad sold construction equipment for 35 years. The companies that he sold for frequently had sales incentives in addition to commissions, including products and trips. Many companies in all industries use special incentives to give their salespeople an extra incentive to beat the bushes.

I find it interesting that this report is based on the results of a survey but that the Sen. Warren and her staff neglected to include a copy of the survey in the report so the public could see the actual wording of the questions. The first finding is:

Quote:
Nine of the fifteen companies that responded to Sen. Warren’s request letter indicated that they provide non-cash compensation to annuity agents.
I suspect that the survey question was something along the lines of "Does your company offer non-cash compensation to your annuity agents?" and the companies answered "Yes".

In the very next sentence Senator Warren twists it into:

Quote:
One company described these kickbacks as “common in the industry.”
(emphasis added)

and then goes on to use the work "kickback" 21 times throughout the report.

I seriously doubt that any company characterized their sales incentives as a "kickback"! Kickback is defined as "a payment made to someone who has facilitated a transaction or appointment, especially illicitly"... so the Senator's twist changes common non-cash sales compensation and incentives to illicit "kickbacks".

The tone of the report is as if this is startling news. It isn't. It is very common and has been for over 50 years. Most companies have some program where if the agent meets certain sales targets for the year for all company products then they are awarded with an all-expenses paid trip to a company conference at a nice resort. It would be rare that such an award would be based on a single annuity sale... the economics and profitability of annuities just don't support such costs.

The other, almost funny thing is their pre-occupation with making non-cash compensation a bad thing and mentioning that some companies don't offer non-cash compensation and they seem to think that is virtuous.

Quote:
Two of the fifteen companies that responded to Sen. Warren’s letter reported that they refuse to pay non-cash direct or indirect kickbacks, which suggests that it is possible to build a viable business model without offering these inducements to agents.
What they are likely overlooking is that these saints probably pay higher cash compensation than the scoundrels who offer a combination of cash and non-cash compensation.

Mind you, the annuity companies and annuity agents do a lot of unseemly things that many of us don't approve of, but to characterize them as "kickbacks" which infers that they are illicit is just plain deceitful... even for an ultra-liberal US Senator.

The whole thing reminds me of "thou doth protest too much".
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Old 12-22-2015, 05:07 PM   #5
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Does anyone think that the saver would be better served if the government just took over the financial products industry?

Elizabeth Warren is selling something too- her position as Mother Superior to all the downtrodden masses in America.

Oh, you haven't noticed this suffering? She will instruct you, on the government dime, which for the few remaining taxpayers is us.

Ha
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Old 12-22-2015, 05:09 PM   #6
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Not much new in the article. It reiterates the advice often given in this forum to only ever consider SPIAs and simple longevity insurance which should now probably be a QLAC. Still Sen. Warren talks a lot of common sense to Wall Street and I'm glad I voted for her.

If I was to buy an annuity it would be from TIAA-CREF, but people without access to the good deals from TIAA retirement should probably just go through someone like Vanguard or Fidelity. I'd never buy an annuity through an FA or from someone who called me.
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Old 12-22-2015, 10:06 PM   #7
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... I find it interesting that this report is based on the results of a survey but that the Sen. Warren and her staff neglected to include a copy of the survey in the report so the public could see the actual wording of the questions. ...
Interesting, but pretty typical.

It's like the statement that "women make 77 cents on the dollar compared to men", and they (Warren among them) wrap the 'equal pay for equal work' theme around that, in the previous or next sentence, and imply that is the case.

But the survey they quote was not based on equal work, it was just a salary measurement that didn't account for differences in all sorts of factors. But they don't explain that, do they?

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Old 12-22-2015, 10:39 PM   #8
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You are talking about The native Indian Sen Warren, LOL, I could never vote for someone who lied on her college employment app, I can say because I am 25% native American Indian. To make matters worse the press the gave her a free pass.

Warren only represented herself as Native American for employment purposes starting in the mid-1980s, then dropped that representation after gaining tenure at Harvard Law School in the mid-1990s. - See more at: Elizabeth Warren Native American / Cherokee Controversy « Elizabeth Warren Wiki
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Old 12-23-2015, 05:08 AM   #9
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Originally Posted by pb4uski View Post
My dad sold construction equipment for 35 years. The companies that he sold for frequently had sales incentives in addition to commissions, including products and trips. Many companies in all industries use special incentives to give their salespeople an extra incentive to beat the bushes.

I find it interesting that this report is based on the results of a survey but that the Sen. Warren and her staff neglected to include a copy of the survey in the report so the public could see the actual wording of the questions. The first finding is:
You raise a great point. I suspect that number of companies that do use "Kickbacks" to incentivize their salesforce is much larger than those who don't


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I was happy to hear that are requiring more people in the financial industry to have a fiduciary duty, but this report is pretty silly.
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Old 12-23-2015, 08:33 AM   #10
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The article is not about Elizabeth Warren. It uses a report with her name on it as a lead-in, but supplies other opinions and data to describe various annuity types. Stan the Annuity Man is a more enjoyable part of the article.
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Old 12-23-2015, 09:35 AM   #11
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Hey I was just responding to a statement by someone that were glad they voted for her.
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Old 12-23-2015, 09:41 AM   #12
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The article is not about Elizabeth Warren. It uses a report with her name on it as a lead-in, but supplies other opinions and data to describe various annuity types. Stan the Annuity Man is a more enjoyable part of the article.
We've actually found someone that is less liked than annuity salespeople.
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Old 12-23-2015, 10:00 AM   #13
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I have no problem with sales people being incentivized to sell products. If I buy a new car or John Deere tractor I pretty much know exactly what I am getting. What I do have a problem with is sales people selling financial products and lying by omission in order get the awards or gifts.

Not an EW fan but I respect that fact she recognizes many times people who are the least savvy are the ones getting taken to the cleaners by unscrupulous sales people.

We all know who gets hurts by such transactions and it isn't the financial institutions or those selling the products.
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Old 12-23-2015, 10:58 AM   #14
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We've actually found someone that is less liked than annuity salespeople.

I think you may mean Elizabeth Warren, but not sure. For the record, I don't dislike her or annuity sales people. I prefer to evaluate working people on multiple criteria. For example, a relative who is young, educated and employed by Lincoln Financial. He is plus 2. Lol.
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Old 12-23-2015, 11:02 AM   #15
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I think what everyone really objects to is the unscrupulous nature of the products/pricing structure/terms more than the people who sell them. The people are turned into financial snake oil salesmen by the nature of the product with compensation acting as an accelerator like it does everywhere. People being people they gravitate to the highest reward. For-profit companies being for-profit, they incent people to sell their most profitable item. This is like watching water flow downhill.

I'm rarely a fan of govt involvement, but there is a reason we have an FDA and an FAA -- both products are hugely valuable but carry inherent risks if not managed properly. So we create walls around high risk products and tell the market to compete within those walls. We create processes (long and slow to be sure) to then review the size and shape of the walls.

Given the risks, and like drugs the fact that certain groups of people are vulnerable when making the buying decision, increased governance of consumer financial products is sensible. The wizards of Wall Street will cry, moan and tell everyone the entire financial system will implode and no consumer will ever get a loan or insurance again if their genius is constrained, but I think we'd survive and everyone -- particularly the middle class would be far better off.
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Old 12-23-2015, 11:02 AM   #16
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For example, a relative who is young, educated and employed by Lincoln Financial. He is plus 2. Lol.
he in the actuarial department?


https://www.glassdoor.com/Salary/Lin..._D_KO24,41.htm
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Old 12-23-2015, 11:07 AM   #17
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wow - SEC is getting into the game too


"The Securities and Exchange Commission is diving deeply into the retirement-account advice that investment advisers and brokers are giving to their clients, asserting the agency's presence in an area normally associated with the Labor Department."


SEC exam questions dive deeply into retirement-account advice
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Old 12-23-2015, 11:15 AM   #18
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