Chad Owen describes an anecdote where a client was unsure if a product was a variable annuity; an agent initially denied it until pressed. He emphasizes poor disclosure practices, demonstrates difficulty obtaining a full fee breakdown from an insurer's 800 number, and offers an Annuity Academy form to help advisors collect precise product features and fees.
I ran into an interesting case the other day where a client wasn't quite sure what type of product she was in. And fortunately, it hadn't been solidified yet. They still hadn't received the actual policy, and. But the other company had actually received the funds. And I asked the client, I said, what type of product is this? And she goes, well, I'm not sure what it is. I think I'm protected from market losses. And I said, okay, well, why don't we call the agent and see what type of product this is? So we call the agent, and this guy gets on the phone and we say, you know, I'm talking. I say, you know, I just need to have some questions answered. The client's not really sure what type of product she has. And I asked the agent, I say, what type of product is this? And he said, well, this is a group of mutual funds with the option of annuitizing. I said, okay, so this is variable annuity. And he goes, well, it's actually a group of mutual funds, funds with an option of annuitizing. I said, well, you can't have something that has the option of annuitizing unless it's an annuity. So I said, I'm going to report you to the insurance commissioner if you don't answer this question correctly. And honestly. I said, is this a variable annuity? And he said, yes, it is. I said, why didn't you just disclose that to the client? Why didn't you tell them this is a variable annuity? Why didn't you give them the perspectives that told them exactly what the fees are, how this product worked? You didn't give them any of this. And he goes, well, you know, I told him what it was. I said, no. We just asked right now in front of the client on speakerphone, and you denied it. And I was like, man, it's no wonder why variable annuities have such a bad rap. It's like what I call the 800 number with the client, because the client will tell me to have a variable annuity, obviously, for replacement purposes. I need to know what the features and what the fees are on that annuity. So I'll actually call with the client the 800 number. And I always tell the client I prepare them ahead of time. I said, watch how difficult it is to get the fees, the total fees out of this 800 number. They don't like to disclose that, so watch what I have to do. And I saw. I prepared that ahead of time. And I also tell them I am not a Variable agent. I cannot advise you what to do with this product, but what I can do is tell you this is how it works, and this is what it does. And then you make the decision what's best for you. So we call the 800 number with the client online and say, you know what? I just want to find out a couple things. And if you're actually in the Annuity Academy membership, you'll actually have access to this next piece of paper that I'm going to that. This next form that I've actually created to make it a little easier for you. But I'll say, okay, what's the account value? They disclose that. What's the surrender value? They disclose that. What's the death benefit? What's the income account value? And I go into all these particular benefits and features and downfalls of the annuity where once again, I asked this on that form that you would have access to. I asked these questions, but then I asked this, okay, I need to find out the total fees. And they'll say, okay. I say, what's a mortality and expense fee? And they say, okay, it's 1.25%. And I'll say, okay, is that the only fee? And they'll be like, well, yeah, it is. I say, okay, well, what about the admin fee? Oh, okay, that's 0.15%. Okay, what about the death benefit fee? There is no death benefit fee. Okay, okay. Is that all the fees? Well, yes, it is. Well, what about the rider fee? Oh, okay, that's 1.15%. Okay. Is that all the fees? Well, yeah, of course that's all the fees. Okay, what about the fund fees? Oh, that's actually about 1% average. Also, they're up to 3.75%. And the client's never able to get this information out because the person on the 800 number keeps saying, well, that's all the fees. Well, the client doesn't know how to ask these questions. So once again, when we're helping our clients, if you're an Annuity Academy member and you're part of the membership program, you actually have access to this. But we want to make sure we're able to give the client the information they need to make an educated decision on if it's beneficial to them or for them to replace their variable annuity. But at least out of anything, even if they decide they don't want to replace it, at least they got to know the pure information, the factual information, not what the broker told them. I was able to help them understand exactly what they were getting. Until next time, thank you very much.
