Why we don't sell index and variable annuities Internally

Scott Brooks, MBA, CFP®
3-5 mins

Some people might call me crazy for doing this.

We have taken a position of not selling index and variable annuities.

There is nothing wrong with the products. They are financial tools that, when used in the right situation, make sense.

Here is a list of the biggest reasons we DO NOT offer index or variable annuities to our clients.

Index Annuities Are Confusing

Index annuities are confusing.  Don’t feel bad if you do not understand them.

An agent we know recently met with a prospective client for 10 consecutive Saturdays

Because the person could not understand how index annuities worked.

It’s not easy to understand how the returns are calculated for index annuities.

There could be riders attached to the contracts. The riders are not always free and sometimes cost real money.

Also, some of the indexes are brand new.  These new indexes always come with a big story, but some have no proven history in the real world.

There is nothing wrong with the products, but this is the reality in our opinion.  They have the potential for a higher return than a MYGA but are much difficult to understand.

They should be explained by a local financial advisor or insurance agent. Advisors and agents who have the time, desire, and willingness to walk you through the process.

This is why we connect consumers interested in index annuities with an insurance agency they partner with.

Offering Variable Annuities Would Kill Our Business Model

Most financial advisors with a broker-dealer don’t advertise their practice on TV?


It’s compliance.

To offer variable annuities to consumers, we would need to affiliate with a broker-dealer.

The broker-dealer would basically own us. They would supervise every email, fax, and communication we have with the public.

They would also supervise all advertising. Our message would be changed to where it won't be effective.

If they allowed it at all!

Also, the broker-dealer would not allow us to offer as many fixed annuities as we do.

Like many businesses, we depend on advertising to get the word out and spread the message about our service.

Offering variable annuities internally would take this most critical feature away from us.

We Hate FEES!

I am no different from you. I absolutely HATE paying fees.

Especially when there is a cheaper option available.

Variable annuities have fees. Some variable annuities have up to 3-4% per year in fees.

Some of our partners can offer these products to you. In fact, one client of ours in Nebraska provides a lower fee variable annuity to his clients.

Index annuities have fewer fees but can contain features called riders that require you to pay fees.

Internally, we sell fixed annuities (MYGAs), and income annuities (SPIAs and DIAs) which don’t have any fees whatsoever.

This makes it easier for our customers and us.

We Like Guarantees And Want To Make You Happy

When you sell something that is guaranteed, there are absolutely no surprises later. You know exactly what you are getting without exception.

We love positive surprises, but not negative ones.

MYGAs, SPIAs, and DIAs are fully guaranteed. You know what you will receive. There are absolutely no surprises later.

We love this.

The returns in index and variable annuities are not guaranteed. There is no telling what you will earn.  It’s up in the air.

This does not make them bad. They are might do, not guaranteed will do products. You don't know what you will earn.

Index And Variable Annuities Don’t Fit Our Business Model As Well

We do business in almost every state. Our national presence allows up to be more selective and to specialize in the products we prefer to offer our clients.

Guaranteed products are much easier to explain to consumers who live in other parts of the country.

Indexed and variable annuities are harder to explain remotely.

This is why we have leveraged our community to connect you with agencies we partner with.

It’s a win-win because you will be interested in the products they want to offer. Both of you will be on the same page.

There are more things to go wrong!

The stock market tanks 50%.  The bond market finally plunges after a 40-year bull market.

The index annuity carrier drops their renewal rate to the bare minimum.

Indexes change constantly.

The company changes the way your gain is calculated in your index annuity.

Fees go up.

Literally, all of this can happen with a variable or indexed annuity.

You can earn a higher return but also have the potential for things to go wrong.

We Prefer To Specialize

We are entering an era of specialization.  We estimate that over 90% of our business will be with fixed annuities. The rest will be in income annuities.

It’s better to specialize and dominate one market than do several things poorly.

Our website was designed for this type of business.  This is why you can apply directly for fixed annuities, but not for the other types.

Index annuities are very complicated.  Insurance agents sell a few products because they cannot mentally keep track of all of them.

There are just too many moving parts.