Wall Street WARZONE
“The Great Rip-Off!” Financial Annuities: Brokers Loves ‘em, Press Hates ‘em! 13 Bad-News Shockers about Sleezy Sales, Conflicts, Excessive Commissions
by Paul B Farrell, JD, PhD
| Discuss | Print | 5/13/2010

Yes, brokers love ‘em, press hates ‘em: “Good for one lady in Iowa,” just treat her “like a blind 12-year-old.” Annuities are marketed by the insurance industry as an alternative to mutual funds and other securities. Annuities are wrapped in insurance. Annuities are a way to guarantee a fixed income stream independent of market volatility and other risks. Unfortunately, annuities have countless, hidden flaws: excessive fees, lower-returns, delayed payments, surrender fees and long lock-ins. Yes, there are some honest annuity sellers, such as Vanguard and TIAA-CREF, but the annuity barrel has far too many bad apples. Over the years financial journalists have regularly trashed annuities as bad investments for most investors, and yet annuity sales climb, now well over $1 trillion, compared to $10 trillion for mutual funds, and growing 20-25% annually.

Imagine this scenario: You’re at a press party. Laughter. Margaritas. Suddenly huge, colorful piñatas float ominously above the crowd, like Goodyear blimps flashing this message: “Buy Annuities!” This sales gimmick unnerves the press. They start whacking at the piñatas. Colorful pieces fly through the air, cover the floor. Satisfied, the party mood returns. More laughter. (More)