According to the Massachusetts legislator, questionable practices highlight the need for a strong conflict-of-interest rule for retirement advisors.

United States Senator Elizabeth Warren sent letters to 15 of the country’s largest annuity providers today. In those letters, the Senator questioned rewards and incentives and cited “the need for a strong conflict-of-interest rule for retirement advisors.”

The letters were sent to the 15 companies with the highest 2014 U.S. individual annuity sales: Jackson National Life, AIG Companies, Lincoln Financial Group, Allianz Life, TIAA-CREF, New York Life, Prudential Annuities, Transamerica, AXA USA, MetLife, Nationwide, Pacific Life, Forethought Annuity, RiverSource Life Insurance, and Security Benefit Life.

The letter explains that “annuity providers offer a vast range of perks – from cruises to international travel to iPads to diamond-encrusted ‘NFL Super Bowl Style’ rings to cash and stock options – to entice sales of their products.”

“I am concerned that these incentives present a conflict of interest for agents and financial advisers that could result in these agents providing inadequate advice about annuities to investors and selling products that may not meet the retirement investment needs of their buyers,” Senator Warren wrote.

Of particular concern to the Senator is “the impact on individuals who are on the verge of retirement because they have little time or ability to recover potential losses from bad investments.”  

According to Warren, “The questionable practices identified in today’s letters highlight the need for a strong conflict-of-interest rule from the U.S. Department of Labor (DOL) to protect retirees by requiring advisors to act in their clients’ best interests.” DOL released a proposed rule earlier this month.

“Annuity agents that are more interested in earning perks than in acting in their clients’ best interest can place Americans’ savings and retirement security at risk,” the Senator wrote.

In the letters, Senator Warren “asked annuity providers for information about the incentives they offer, the number and value of the incentives awarded, and the companies’ policies for disclosing these potential conflicts of interest.” LifeHealthPro.com will bring you responses from the companies as they surface.

A PDF copy of the letters is available here. Examples of the kinds of incentives companies offer to annuities brokers and dealers are available here.