Perhaps in response to (“8 variable annuity myths,” SMA Feb. 2007) Mr. Huggard’s eight VA myths answered with half-truths, I should write my own that will fare better with the NASD.

Myth #1: You don’t pay a commission for a VA.

If you tell a client this lie, you should lose your license. Of course they pay the commissions out of pocket. That’s like saying clients don’t pay commissions on B-shares. If you are truly concerned about a client paying commissions, put them in a wrap account.

Myth #2: VAs are cheap.

Compared to what? Mutual Funds? SMAs? VULs? VAs are not cheap and are one of the more expensive forms of investing. This is not wrong, as long as the benefits match the costs. I would
challenge Mr. Huggard to publish records of his VA outperforming his mutual funds.

Myth #3: Zero trading costs to the VA owner.

Instead, these costs come from the CEO’s paycheck. As for commissions, wrap the investments. As for taxes, the numbers are very close. Otherwise Congress would end the program.

Like many investment products, VAs can be an excellent tool. However, ultra-high commissions and articles such as Mr. Huggard’s lead to agents selling high-commission products by misleading investors with half truths that would never make it through compliance, let alone the NASD. Perhaps this is why the media blasts VAs.

Matthew Jarvis
Jarvis Financial Services

More on Medicare Advantage Plans

The article entitled “Remastering Medicare” in the February issue of Senior Market Advisor was a small step in the right direction, but still much too little has appeared in print in any of the trade journals on the new PFFS Medicare Advantage Plans. Do you have any plans to remedy this?

John J. Baxter, CPCU, CLU, ChFC

Editor’s Response: Private Fee-For- Service (PFFS) Medicare Advantage Plans have not received much ink, but it is a subject we plan to touch on in the November issue of SMA as part of our Medicare supplements coverage.