Presenting Inde Annuities: Be Clear About Their Role

Fixed index annuities are here to stay, their popularity fueled by consumer demand for a financial product that has guarantees. They are not equities and should not be sold as such. (They are often called equity index annuities but should not be–because they are not equities.) They should be sold by agents as fixed annuity contracts.

Unfortunately, not all sales representatives market these fixed annuities properly. Frankly many of these representatives don’t understand the products well enough to make the proper disclosures to clients. Here are some pointers for improvement.

There is specific jargon to the fixed indexed annuity which field representatives should use when making a recommendation to purchase this insurance product. For example, gains in the contract, if any, are interest-linked and are not and should not be referred as units or shares.

Also, the sales rep must be sure the purchaser understands that these products are long-term accumulation programs which can be used to supplement retirement.

Additionally, when rep and client are comparing and contrasting the fixed indexed annuity to other options, do so by reviewing the company’s disclosure forms. My experience in selling these products is that the proper review helps clarify any potential misunderstandings the client may have in the future.

These products do have lots of moving parts, so the policies should be gone over very carefully at delivery. If the policy is not delivered properly, the client will have questions and can exercise the contract’s right of rescission (in the first 10 to 20 days, depending on policy).

Keep in mind the fixed indexed annuity has terminology and wording that is very different than straight fixed or variable annuities. Again, these are not equities. They should not be referred to as such. Furthermore, agents who do not comply with guidelines established by their insurance carriers or state regulators should not be allowed to market these products.