Annuities Unfairly Attacked?

Q. I was recently forwarded a copy of your article regarding equity indexed certificates of deposit. I read with some interest your comments regarding the following, "Equity-Indexed Annuities are probably the most heavily promoted investment for seniors in today’s marketplace. The sales pitch is appealing and the payoff to the agent is very big—up to 13%. The enormous commissions have led to sales abuses which leave seniors holding the bag."

As an industry professional, I realize that there are many products with over-the-top compensation. But there are also many many more with reasonable payouts to producers. In the past few months, many annuity products have been unfairly attacked and lumped in with many other annuity products. The reality virtually every financial product out there has room for abuse, and if a person selling this product lacks scruples, abuses will occur. I hope you share with your clients and potential clients that fact. There are those of us who work very hard to do an outstanding, ethical job for our clients and we really do not appreciate being lumped into the same pile as those who don't.

A. I agree that there is the potential for abuse with most financial products. My criticism isn't just of EIAs, but most other commission-based products as well.

I believe there is an inherent problem with the commission-based compensation system being used by the financial services industry. Other reputable professions such as doctors, lawyers, and accountants don't work on commission and they tend to be highly trusted by their clients. True, many accounting firms are starting to leverage that trust by getting into the financial business....

I want to see our profession be on par with those I mentioned. Especially with all of the scandals that are constantly in the news, it is vital that as an industry we remove as many of the inherent conflicts of interest as possible.

Your posted comments on this and other questions are welcome.
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