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Annuities Hammered by Conflict of Interest Rules (Finally)

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Variable annuity sales have been hammered this year. A new report from Cerulli Associates projects that sales will continue to fall at an annualized rate of 10% through 2017 and 2018. The decline in sales results from a new rule from the Department of Labor that regulates conflicts of interest. Variable annuities don’t belong in most portfolios to begin with. The DOL Fiduciary Rule is a little late to the party.

John Sullivan reports for 401kSpecialist Magazine:

Calling it the “primary issue facing the VA industry is the DOL Conflict of Interest Rule,” Cerulli notes the rule extends fiduciary protection to all retirement accounts, including individual retirement accounts (IRAs), and requires point-of-sale disclosure of an advisor’s conflicts of interest.

Its findings are in line with Ignites Research, which also expects advisors to to scale back their use of variable annuities, “most of which sell on a commission basis and therefore represent potential conflicts of interest under the new regulations.”

I’ve been warning investors about the shady practices behind annuity sales for years (read here, here, here and here), and I have encouraged investors to avoid them whenever possible.

 

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.