Question: I’ve been shopping for annuities online, and it seems that most sites are using worn out “bait and switch” type sales tactics. It’s very frustrating, and I’m wondering why is this allowed by the regulators? Tim from Colorado.
Answer: Tim, I’m as frustrated as you with these sites and ads. These types of marketing and sales practices continue to feed into the negative stigma that the annuity industry has unfortunately earned. I’m sure from the public’s view it looks like a free for all where no rules exist. When it comes to annuity advertising, that’s a pretty good description.
Annuities are regulated at the state level, not the federal level. Every state has a regulatory body that is supposed to oversee these types of inappropriate ads and websites. Unfortunately, I don’t have a lot of faith in the states that are supposed to enforce these unscrupulous actions. Their track record is not very good, and they usually move at tortoise speed to address these types of advertising problems.
Most of the “bait and switch” tactics and outright advertising fraud happens with fixed indexed annuities. With commonly and incorrectly hyped “hybrid annuities”, it’s typical to see pop up ads and educational “front” videos that pitch too good to be true sounding strategies with high % guarantees. By the way, if it sounds too good to be true….it is…no exceptions! Recently, a non-insurance licensed review site did a pretty good job of picking apart these internet annuity promoters (click here to read to full review).
Even the simplest and most efficient annuity design, Single Premium Immediate Annuities (SPIA’s), are being inappropriately promoted on the web as well. One of the most popular sites that only sells SPIAs has an online quotation system that gives a “ballpark” of what the actual quote would be.
These “teaser quotes” are totally misleading and creates confusion when people actually want a real quote in order to make an important financial decision. I guess that site is OK with the fact that they are starting their client relationship with a purposely inflated quote. No agent, site, or advisor one can get a better SPIA quote than the next guy, and we all use the same quotation service (CANNEX) that works as a clearinghouse and filter for the vast majority of carriers.
The wild, wild west is alive and well with annuity internet promoters. Buyer beware is all that I can say. So always do your homework, and be very careful not to take the annuity sales bait.
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