An Annuity for the Teacher — and the Broker

Tara Siegel-Bernard takes down a 403(b) beast in this article spotlighting some conflicts of interests and poor business practices by AXA, a company that caters to teachers.

An Annuity for the Teacher-and the Broker

Here are a few of the most egregious parts:

“From the teacher’s standpoint, they really miss out getting quality advice,” said Mr. Bergeron, 27, who sold the plans for Axa Advisors’ retirement benefits group. “People who are in the schools pitching them and positioning themselves as retirement specialists are really there just to sell them one product.”

When all you have is a hammer, everything looks like a nail.

“Teachers are still being preyed upon by salespeople,” said Dan Otter, founder of the advocacy and educational site, and a longtime teacher now working at the University of New Mexico. “The problem is their first experience with a 403(b) is in a sales environment.”

"Many of these practices are plainly stated on Axa’s website, including the fact that brokers are paid more to sell annuities than to sell mutual funds. Axa said that reflected the complexity of selling annuities."

Selling annuities is not more complex, you have to go through the same process regardless of what product is ultimately recommended. Complexity is just an excuse.

It gets much, much worse.

To qualify for Axa’s health insurance plan and retirement benefits, moreover, brokers must sell a certain amount of proprietary insurance-related products, including annuities.
Justin Victor, a certified financial planner who left Axa in 2008 after three years, recalls the intensity of that pressure. “I am not going to lie,” he said. “When you have your health insurance on the line in the commission-based financial advisory world, you will do whatever you can to get a commission.”

Axa said certain tax rules required its insurance sales representatives to solicit and sell mostly insurance products, including annuities, so they could receive employer-provided benefits.

This is a huge conflict of interest and not acceptable as a business practice in today's modern financial system. No one should have their health insurance at risk because they didn't rip off enough teachers for the month. This is an unconscionable business practice.

Go and read Tara's second article in the series, it's another great one.

Scott Dauenhauer, CFP, MPAS, AIF

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