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If you think handling annuities is a problem , you ’ re not alone .

By Ben Mattlin

Here are a few of the biggest problems — and some sage advice about how to overcome the worst hurdles .

Marketing One common complaint is how insurance companies represent and promote their annuity products .

“ Sales materials for annuities often prominently feature historical returns , sometimes even repeating the 10 best and 10 worst years , to illustrate potential outcomes and capture attention ,” says Todd Wolfe , senior insurance associate at Telemus Capital in Southfield , Mich . “ While these marketing tactics are designed to attract buyers , they can constrain advisors [ who ] strive to provide accurate and unbiased advice .”

The trouble , he says , is that past performance does not guarantee future results . Using so-called back-tested numbers inevitably results in unrealistic expectations and client disappointments .

What ’ s more , this performance data is overly simplistic . Annuities are complex solutions . Variable annuities track a basket of stocks , while fixed annuities offer a set rate of return . In addition , most annuities offer an array of riders to guarantee , say , a death benefit or long-term-care coverage . “ This makes them very flexible products that can meet numerous financial needs ,” says Scott Stolz , a managing director at iCapital in St . Petersburg , Fla .

But how are clients supposed to weigh these different options ?

“ Insurance companies are reluctant to provide any guidance [ on how to use these options ] in their marketing literature ,” says Stolz . It falls on the advisor to understand , compare and explain different products and options for their clients .

“ Insurance companies take the position that it ’ s their job to offer product solutions , not advice ,” he adds .

Lack Of Uniformity This might not be so bad , though , if it were easier to do sideby-side assessments of products from different providers .

“ If you ’ re working directly with the carrier , you ’ re only seeing their perspective ,” says Michael Kazanjian , chief marketing officer at FIDx , a financial planning firm in Berwyn , Pa . “ So it ’ s up to the advisor to go through and create the comparisons on their own . [ It ’ s ] difficult to create an apples-to-apples comparison .”

There are no standard , third-party benchmarks , he says . Even the language about types of products and benefits isn ’ t necessarily consistent .

“ The industry does need better uniformity ,” says David

50 | FINANCIAL ADVISOR MAGAZINE | NOVEMBER 2023 WWW . FA-MAG . COM