JB Quinn on Annuities

[mickeyd]

Interesting article about a piece from written by Jane Bryant Quinn about annuities. 99% of consumers should avoid VAs and Fixed Income Annuities (Equity Index Annuities).

I'm thinking that it should be more like 100% for me.

Quote:

What type of client could be a good candidate for a variable annuity with living benefits? Someone who understands the product and knows exactly what they’re getting – which, I believe, eliminates 99% of [consumers]. It would be for people who think the costs are low enough and their timeframe is long enough to have a chance of getting more than the minimum guarantee. But you’re not going to get anything much out of variable annuities with a living benefit as an investment because of their 3.5% — and higher — fees.

Quote:

Do you think the industry purposely obfuscates? Well, look at equity index annuities. They were sold as being linked to the stock market and that you could make some market gain. But as soon as the regulators started [scrutinizing] that, the name was changed to fixed index annuities. So I’d say that was purposeful. There couldn’t be a clearer case of being purposeful.

The Annuity 99% of Clients Should Avoid (and One That’s Better): Jane Bryant Quinn (Select Single Page View to avoid turning pages)

[pb4uski]

While I agree 100%, I suspect that the name change from equity indexed annuities to fixed index annuities was to avoid any suggestion that the owner was investing in equities. I know at one time the SEC was considering whether these were an equity product.... which would have required a higher level of licensing that not all life insurance salespeople have so it would have made for a more difficult sale and a higher level of regulatory scrutiny. Also, the equity index juice is provide for by investments in equity based derivatives, not equities.

[nun]

If you want to invest in the stock market why do it through an insurance company? If you want to insure a fixed level of income buy an SPIA.