Annuities and Sales Abuse: Know the Warning Signs
Annuities can be excellent products — but they’re also sold by commission-driven agents, which creates incentive for abuse. Here are the red flags that should make you pause before signing.
Red Flag #1: Pressure to Decide Quickly
“This rate is only available until Friday.” “I can only hold this offer for 24 hours.” Any artificial time pressure on a financial product that will hold your money for 10+ years is a manipulation tactic. Good products don’t disappear overnight.
Red Flag #2: Recommendations to Liquidate Everything
No reputable advisor suggests putting 100% of your retirement savings into a single annuity product. Any recommendation to liquidate all your assets and concentrate them in one annuity — especially from an agent who only sells one carrier’s products — is a major warning sign.
Red Flag #3: The “Free Lunch” Seminar
Free dinner seminars targeting retirees are notoriously used to sell high-commission annuity products. The meal isn’t free — it’s a sales presentation. Attend if you want, but don’t make financial decisions at or immediately after these events.
Red Flag #4: Can’t Explain the Fees Clearly
A legitimate agent can tell you exactly what all fees are — rider fees, M&E charges, administrative fees. If an agent says “there are no fees” on a variable or complex indexed annuity, they’re either mistaken or misleading you. Demand full fee disclosure in writing.
Red Flag #5: You’re Replacing a Recent Annuity
Being advised to replace an annuity you bought in the past 2–3 years is suspicious. Churning — replacing annuities to generate new commissions — is illegal but occurs. The agent earns a new commission; you restart your surrender period.
Red Flag #6: Product Doesn’t Match Your Needs
A SPIA for a 60-year-old who needs growth. A variable annuity inside an IRA with high fees. A 10-year surrender period for an 80-year-old. If the product doesn’t logically match your age, goals, and timeline, question it.
How to Protect Yourself
- Get a second opinion before signing anything
- Ask the agent how much commission they earn on the sale
- Look up the product on FINRA BrokerCheck or your state insurance department
- Take at least 2 weeks to review before deciding
- Work with a fee-only financial advisor who doesn’t earn commissions
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