Is it any surprise that a product that has little oversight, pays large commissions and offers amazing incentives to agents for selling is setting the world on fire in terms of sales?
I've written a lot about equity indexed annuities, but it doesn't do any good. People continue to buy. Indexed annuities sell due to fear and a story that sounds good on the surface, but falls flat in reality.
According to InsuranceNewsNet.com:
Fifty-five indexed annuity carriers participated in the 75th edition of Wink’s Sales & Market Report, representing 99.9% of indexed annuity production. Total first quarter sales were $15.0 billion. First quarter indexed annuity sales were down more than 3.0% when compared to the previous quarter, and up nearly 33.0% when compared with the same period last year. “This was the highest first quarter sales of indexed annuities have been in the history of the product line!” exclaimed Sheryl J. Moore, President and CEO of both Moore Market Intelligence and Wink, Inc. She explained, “While there is typically a huge drop in sales from the fourth to the first quarter, sales of these principal-protection products are down less than 5%! This obviously speaks to the impressive product demand for indexed annuities!”
I'm not so sure that the sales volume is explained by demand, more likely it's the hefty sales incentives (see here, here and here).
Indexed annuities are an easy sale to an unsuspecting public. They promise the upside of the market without the downside, no fees and liquidity, unfortunately they don't deliver on any of those promises.
When people ask me if these products are good for retirement, I tell them "yes, just not yours"! These products are great for the retirement of the agent selling them, but terrible for you.
Scott Dauenhauer, CFP, MPAS, AIF