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You have to love financial services marketers. The title of this blog post is actually the headline on an invitation that I recently received to a dinner session on annuities. You can’t make this stuff up. While this seminar invitation may be a bit cheesy, it does raise some valid questions about annuities. In that vein here are some thoughts about annuities and about financial dinner seminars.

Financial dinner seminars

Financial dinner seminars are a traditional method for investment advisors, estate planning attorneys and insurance and annuity sales types to get their message out to a group of potential clients. Common sense tells us that these seminars are costly to stage and that the advisors sponsoring them are looking for a return on their investment. In terms of this annuity seminar or any type of financial or estate planning dinner seminar consider the following before you decide to attend:

The ultimate objective of the seminar is to get you to buy something.

Ask yourself if this is really the best route to finding a financial advisor.

Can you resist the pressure, direct or implied, that will be put upon you to meet with the individual(s) sponsoring the session and do business with them?

In terms of this annuity seminar in particular, I called the company sponsoring the session and pretended I had some questions before deciding whether or not to attend. The pleasant young woman on the phone indicated that the organization was “holistic” in their approach to working with clients. They could sell you another annuity if appropriate, manage your money, or consult on matters such as Social Security.

While this all sounds nice, the individual sponsoring the annuity seminar runs a marketing organization and was once affiliated with Tarkenton Financial a financial marketing organization run by Hall of Fame quarterback Fran Tarkenton. In a Motley Fool piece The “Criminals” Who Sell Annuities, the author quotes Tarkenton as saying:

“There are 38,000,000 Seniors in America. Do they know who you are? Seniors know and trust an American Classic, NFL Hall of Fame Quarterback Fran Tarkenton. If you are a professional in the insurance industry focused on the Retirement and Senior Market, Tarkenton Financial can help you build your business.”

The Motley Fool piece goes on to say “Nowhere in these ads will you find anything even vaguely along the lines of “we’ll help you help your clients achieve their financial goals.” Because, for some of these people, it’s more about building their own net worth’s, not their clients’.

This leads me to believe that there will be a lot of direct and indirect selling at this annuity dinner session and very little about helping the attendees to achieve their financial and retirement goals. At least the venue is a restaurant with excellent food.

Considerations before buying any annuity

You might get the impression that I am anti-annuity. You would be wrong. I have nothing against annuities, only the way that they are often sold and with many of the annuity products that are pushed by insurance agents and registered reps. Here are some things you should consider before buying any annuity product:

Make sure you understand all of the expenses, fees, and charges involved with the product. I’ve seen variable annuities with annual ongoing expenses well in excess of 2%. To say this is outrageous and obscene would be kind. Suffice it to say expenses like this are eating away at the amount that will be available to you when it comes time to annuitize the product or to take partial distributions.

If a fixed annuity is paying a much higher rate of interest than other similar products ask yourself why. Is the insurance company taking excessive risk? Will they be able to sustain the returns needed to maintain the payments? Is this a “teaser” bonus rate that drops down to more normal levels after a period of time? The old adage “… if it sounds too good…” applies here.

Who is behind the annuity? How strong is the insurance company? If something happens to the insurer it falls to the appropriate state department of insurance to cover you. There are generally limits on the amount guaranteed for annuities so you will want to read the contract and make sure you understand this all of this.

Many annuities contain surrender charges that impose some stiff fees if you try to get out of the contract during the first few years. Again make sure you are aware of these fees.

Equity Index Annuities are often sold by capitalizing on the fears of seniors and others in the wake of a down market. Typically the returns of these annuities are based on some percentage of an index like the S&P 500, with some minimum guaranteed return and/or floor on the amount that the investor can lose. Again these products often carry steep surrender charges and they must be pretty lucrative for those selling them judging from the comments I received when I wrote Indexed Annuities-Da Coach Likes Them Should You? Don’t take my word for it; check out this SEC investor bulletin.

Don’t fall for annuity sales pitches. An annuity may be appropriate for you but the only way to really know this is by getting a financial plan in place for yourself and your family.

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