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Annuities: Despite What You've Heard, They Aren't All Bad

Biphoo

17 Nov 2017

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Annuities: Despite what you've heard, they aren't all bad

It's not just investment analyst Ken Fisher who hates annuities. On the list of financial products that fiduciary advisers love to bash, annuities — particularly variable annuities — are somewhere near the top.

They are an easy target. The insurance contracts are expensive, difficult to understand (for both consumers and financial advisers), hard to get out of and arguably not in the interests of the millions of consumers who have bought them. Indeed, the sale of high-commission annuities has been flagged as one of the more egregious ways that financial advisers fail to act in their clients' best interests.

Since the Department of Labor finalized its fiduciary rule (now in limbo) last year, annuity sales have fallen dramatically as brokerage firms and advisers anticipate that the products may not pass muster under a tighter regulatory standard.

"Companies have been canceling products left and right because they don't live up to the standard of meeting clients' best interests," said Ric Edelman, CEO of Edelman Financial Services. Like many advisers, Edelman helps clients undertake tax-free Section 1035 transactions that allow consumers to switch out of high-cost annuity contracts into less costly ones. "With that exception, I never advise clients to purchase annuities," he said.

Most fee-based financial advisers regulated as fiduciaries appear to feel the same way. David Yeske, managing director of registered investment advisory firm Yeske Buie, said that variable annuities have fallen out of favor with the fee-based advisors he regularly surveys for the Financial Planning Association.

Source:- https://www.usatoday.com/story/money/personalfinance/retirement/2017/11/10/annuities-despite-what-youve-heard-they-arent-all-bad/843960001/

Biphoo

17 Nov 2017

1050 Views