Who Pays Annuity Commissions?
The Annuity Man
The annuity industry is filled with over-hyped sales pitches and too good to be true proposals. However, some of the biggest word games and semantic nonsense revolves around annuity commissions.
Annuities, regardless of type, are issued by life insurance companies. Annuities are a separate product and strategy from life insurance, but commissions work the same for each. Both pay commission to the agent, but those commissions are hidden from the consumer and built into the product. In other words, if you put $100,000 into a consumer annuity (of any type)...you would see $100,000 on your statement and $100,000 would be going to work for you. But let's be very clear about this, the agent or advisor did get paid a commission by the issuing carrier. That commission comes out of the reserves of that carrier.
In a perfect world, commissions would be the same for every type of annuity. That perfect annuity world doesn't exist. Commissions vary depending on the type and complexity of the annuity. A simple rule to remember is, the more simple the product...the lower the commission. The more complex the product...the higher the commission. The shorter the surrender charge time period...the lower the commission. The longer the surrender charge time period...the higher the commission. It's really that basic.
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