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Retirement Planning > Retirement Investing > Annuity Investing

The annuity dilemma

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A dilemma is typically described as a tough or unpleasant choice. For example, a current dilemma for the Fed is if they stop the current “easing” strategy, it might hurt the stock market. On the other hand, if they don’t stop printing and buying back money, they are continuing to create huge future problems. Dilemmas abound in the financial world, but one of the most intriguing dilemmas going involves how the annuity industry promotes and frames their product strategies.

I think that this is a defining moment for the annuity leaders, and they have a difficult choice looking them in the face. Their dilemma is “Should we not change anything and everyone keeps making a good living? Or should we proactively frame one consistent message and reel in all of the cowboys that continually hurt the brand?”

Eyes wide shut

This great Stanley Kubrick film title appropriately explains the annuity industry’s current dilemma. Everyone knows that there is a huge enforcement problem with advertising and some FMO promotions, but no one wants to upset the premium applecart. The undesired plight of the vast majority of annuity agents is the constant re-education of prospects that are only hearing the too-good-to-be-true or one-size-fits-all message on the Internet, TV and radio. 

On a side note, I travel the country and listen to a lot of talk radio in transit to appointments and I swear that Glenn Beck and Sean Hannity are the self-appointed voices for the annuity industry. Is that what we want? They certainly don’t have the needed licensure to say what they are saying. In just about every city I’ve been in, they are endorsing some agent who “has never lost a penny” and can “get you an 8 percent bonus on your money.” Just when I thought it couldn’t get any weirder out here in the annuity hinterlands, we now have the paid political endorsers pushing annuities without ever saying the word annuity!

Another ongoing predicament is the raising of the educational standards. The last time I mentioned this idea in one of my columns I got over 500 emails from the angry fixed annuity agents. Warm up those keyboards, because I still think this raising of the educational bar is needed, and a proactive step by the industry would send a positive loud and clear message to the annuity consuming public.

We all know that change is hard, but change is definitely needed. The annuity argument continues to be framed by people, stock market homers, and journalists that don’t sell annuities. It’s time that we (the annuity industry) start framing that argument ourselves. 


Let’s dream for a second and ask what would Steve Jobs (Apple) or Jeff Bezos (Amazon) do if they were in charge of the annuity message and corresponding strategy implementation.

Steve Jobs once prophetically said “People don’t know what they want until you show it to them.” Jeff Bezos could have been speaking directly to the annuity industry when he said “What’s dangerous is not to evolve.”

I’m pretty sure that neither of them would be in a quandary when it came to addressing, changing and upgrading our antiquated yet profitable industry. Here are the three main things I’m pretty sure that they would implement immediately.

1. One simple clear message

Annuities are not growth products at all. They are transfer of risk products, period. Let’s stop focusing on the accumulation story, and start pounding the guaranteed story. Let’s stop selling dreams, and start selling contractual realities.

Even though both Apple and Amazon have multiple product lines, they both exude one message: simplicity through innovation. The annuity industry should constantly be innovating and designing new products, but all around one message: transfer of risk contractual guarantees. We should pound that message until anyone that hears the word annuity immediately thinks transfer of risk contractual guarantees, or a similar simplistic message. The industry should have a contest for that one message. Think about how we should frame it, and examples of how it has been done well. 

  • Nike: “Just do it”
  • KFC: “Finger lickin’ good”
  • M&M’s: Melts in your mouth, not in your hands”
  • McDonalds: “I’m loving it”
  • Energizer: “Keeps going, and going, and going…”

And hopefully:

Annuities: “Transferring risk with contractual guarantees”

2. Place the customer first in every industry decision

Right now, our industry is slave to the agent. The agent runs the show, and the FMOs are the show promoter. Even though most carriers would secretly love to get rid of the agent model, they also are afraid to make the needed changes to protect their own carrier brand and product message. Some carriers are making stabs at the problem, but there needs to be a “herding of cats” so that all carriers are on the same page. 

Apple and Amazon both are about the “customer experience” and every move is made with them in mind. Does the annuity industry do the same thing? That answer would be a no. But there’s no reason we can’t change.

3. Protect the brand at all cost

Working with the NAIC, and directly with each state’s insurance commissioner, the industry has to protect the annuity message and enforce the rules already in place. Just ask yourself if Jobs or Bezos would control the annuity message if they were in charge. You better believe they would! Then why don’t we?

The dilemma for the annuity industry is to not change and continue to carve out a very small, profitable niche and remain the curse word of the financial world, or evolve into a proactive and ongoing force that protects the brand and frames the message we want the consumer to consistently hear. 

The choice is obvious for those with insight and foresight. Let’s start making those hard choices sooner than later before the annuity haters and agent cowboys permanently damage a potentially phenomenal brand annuities.

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