By Andrew Cohen in InvestmentNews, featuring Nick Strain, CFP®, CPWA®, AIF®, Senior Wealth Advisor/ Chair of Wealth Advisory Committee
Potential Misuse
Several other types of annuities (variable, single premium immediate, deferred income), alongside their accompanying fees, commission rates, and surrender periods, make annuities a complex product that can be misused by advisors.
The Financial Industry Regulatory Authority (FINRA) fined Florida-based AGA Capital $138,591 in May, with the regulator claiming AGA’s policies “failed to reasonably describe the steps that supervisors must take to evaluate whether the registered representatives had a reasonable basis to believe that the RILA recommendations were in the customers’ signatures on annuities documents.
Learning Curve
Annuities carry surrender periods that can last between three and 10 years but are usually between six and eight years. The surrender period marks the time after purchase that clients will face a penalty for taking out money from the annuity.
“I think bringing a client up to speed if they’re not really familiar with annuity concepts, it takes a while to educate them and for them to be comfortable with moving forward with a decision to make a change,” says Nick Strain, senior wealth advisor at Halbert Hargrove. “Annuities can be simple, but they can also be complex. If you’re trying to not take a single premiums annuity right away, if you’re trying to add some layers of defense or layers of guaranteed income, especially deferred income, there’s multiple options.”
Halbert Hargrove, a California-based RIA with $3.5 billion in assets under management, partners with DPL Financial Partners to sell annuities. DPL’s software integrates with Envestnet to share annuity and insurance product data with advisors.
