How to Evaluate an Annuity Agent
11/21/2012 10:00 am EST
One day, annuities will often be sold without agents, but for the time being Stan the Annuity Man has some tips for investors searching for the right agent.
What to expect from your agent. We’re here with Stan the Annuity Man and he’s going to talk us a little bit about what to expect from your agent and your annuities.
Well, let’s just kind of go backwards a little bit. $200 billion-plus of annuities are sold every year, and most agents choose one product, they learn the product—there’s probably a good Caribbean trip attached to the backend, if they sell a bunch of it—and then they try to fit it in to everyone’s situation.
What I encourage people to do, if you’re looking at annuities, that agent should show you at least five companies—at least five companies A-rated or better that are going to solve your situation from a contractually guaranteed basis.
We have developed proprietary software if you’re looking at income now or income later that we will run your specific situation, date of birth, etc. through that system, and it will list the top contractual guarantees that will solve for your goal.
Now, with agents that are independent, I can see where that works. But even agents that are hooked into a company, can they still have those options?
They don’t. They don’t, and I’m not putting them down. What I’m saying is there are hundreds and hundreds of companies. If you were just looking at immediate annuities, there are over 50 companies that truly play in that arena. You should be quoting every single one of them, because you’re looking at contractual guarantees.
So I really believe independent agents offer value if they truly act like an independent agent. What we’re seeing, though, is most independent agents latch onto a specific company or a specific product, and they, in essence, become captive.
I guess that’s the thing, is we’re transitioning to a new world in annuities, too, right?
We really are, and I’m glad you brought that up. Life insurance went kicking and screaming onto the direct model, and now we have companies like SelectQuote selling life insurance direct. Annuities are going to go there. It’s an archaic business model right now, and I’m probably putting myself out of business eventually, but eventually there will be avenues where you can buy annuities direct.
I think that needs to happen. In fact, I’m trying to get ahead of that curve. In December of this year, we’re launching a Stan the Annuity Man iPhone and iPad app, and you can go on my Web site and you can punch in the numbers yourself and get the exact contractual guarantees.
Now, until it goes direct, you’re going to have to hold your nose and deal with me, but we are going there and I think the industry’s going there, and I’m all for it, even if it puts me out of business. Because t the end of the day, the customer has to get the best product and the best contractual guarantee—not some pitch from some agent—and I think that’s where we’re going.
Well, the agents—especially the independent agents—I mean, they do offer value, though. I mean, just because I can go on and I can plug everything in and I have my options to choose from, I still am not an expert in annuities. So that’s the value that you need: the agent needs to be well informed and the agent needs to work for the client.
Well, and they need to explain the upside and the downside of the product and the realities and the expectations of the contractual guarantees. Unfortunately, in our industry, the sizzle is sold and not the steak. They’ll pick a few really good bullet points that’ll stick in the person’s head, and they won’t fully explain how that works.
I believe that you’re correct, there’s value within independent agents, but only if they come clean with the product and say here’s exactly what it does, here’s exactly what you can expect contractually from this policy.