Why Does The Media Hate Annuities?

Since annuities are complex products, they require professional salespeople to explain them to the people who purchase them. These salespeople, like everyone else in our economy, have to earn a living. This brings commissions into play and the media often concentrate on sales compensation in their reports instead of describing the guarantees that are unique to annuities and the valuable advisory services provided by the salespeople.

Annuities, like many other products and services, can be purchased direct without the intervention of salespeople. In the real world, though, this is a rare occurrence. Hardly anyone wakes up in the morning with the idea that he or she needs to buy an annuity that day. It takes the intervention of a trained professional who can explain the need for lifetime income and describe how annuities work to provide such income.

Granted, annuity pricing is sometimes hard to understand, what with the interplay between commissions and surrender charges. Nevertheless, it is indisputable that the vast majority of modern annuities permit purchasers to have their premiums fully working from the date of purchase, without reduction for sales charges.

The media also seem to hone in on some of the abuses that various regulators have publicized regarding annuity sales–particularly with respect to exchanges of annuities and of sales to seniors.

Taking unfair advantage of anyone, let alone senior citizens, is despicable. However, the law has adequate mechanisms to deal with such abuses. Moreover, the documented cases involving sales of annuities seem to deal more with the effect on variable annuities following the downturn in the stock market in 2000-2002 than from anything else. Besides, the suitability and replacement regulations dealing with annuity sales have the potential to prevent most abuses in the annuity business.

Perhaps more discussion about this will help ensure more balanced reporting about the products in the future.

The bottom line regarding misreporting on annuities is that those doing the reporting do not understand the products and have not bothered to become informed about them and the critical need for annuities. It is an indisputable fact that the United States is faced with a longevity crisis that the government cannot resolve. The Social Security system is in crisis, and the majority who face retirement have not taken adequate steps to secure guaranteed lifetime income on their own.

If Social Security fails, or is severely curtailed, people who have not purchased annuities to secure their own futures will look back on the media reports of today–reports that perhaps spurred them not to buy annuities–and regret that the media was not better informed.

Norse N. Blazzard, JD, CLU, and Judith A. Hasenauer, JD, CLU, are attorneys in the Pompano Beach, Fla. office of Blazzard & Hasenauer, P.C. Their email address is: [email protected]