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:
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:
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.
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".
