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The Truth About Annuity Commissions

[VidSitePro id=107 ]in this video we’re gonna be covering the topic of annuity Commission’s we’ll go over how much you’re writing agent gets paid for selling in the new ‘ti who pays for it and how does that affect the policy owner that’s coming right up hello everyone Braden here with all things annuity which provides clarity to those researching annuities as a safe retirement option to those of you who are new to our channel please consider subscribing and I also highly recommend clicking on the link in the video description below this will allow you to instantly download our annuity buyers guide which is a complete overview of exactly how annuities work and will give you a better understanding of whether or not it would be a good fit for you so let’s get started on today’s topic which is annuity Commission’s one of the most frequently used negative claims against annuities is that they pay too high of a commission or that their fees are too I this argument is often used as a blanket statement against all annuities with no further explanation and no comparison to other investment vehicles but to make those comparisons we first need to know how much Commission is actually paid through the sale of an annuity and that’s the first topic in today’s video annuity commissions can range anywhere from two to eight percent the general rule of thumb when it comes to annuity commissions is that the more complicated the annuity the higher the Commission will be to look towards the selling agent if it’s a straightforward multi-year guaranteed annuity that pays a fixed interest rate to the client for a set amount of years it’s going to be on the lower end of the spectrum for annuity commissions a more complicated product like an indexed annuity it’s going to be on the higher end of the spectrum the reason being is that the multi-year guaranteed annuity is more of a commodities driven product it’s easy to explain and easy to understand while the indexed annuity will have a lager surrender period and will have moving parts and will be a more complicated sale so does that mean that a person should only buy the simpler annuity with the lower Commission no not necessarily the type of annuity to buy is completely situational to the buyers needs and despite the fact that it indexed annuity may have higher Commission’s the overall value might be much higher for the client as well and keep in mind anytime you’re considering the purchase of an annuity the financial planner or agent you’re working with should always be very upfront and forthcoming about the Commission’s he or she will receive and if they don’t provide that voluntarily you were well within your rights to ask for it so now that we know how much Commission’s are paid for the sale of an annuity the next question is who pays for it the simplest answer as to who pays the annuity Commission’s to the writing agent is that the insurance company pays it as the purchaser of an annuity you would never pay anything directly to your financial planner nor would you have anything taken off the account value if you invested $100,000 into an annuity with a 5% Commission your starting value would still be a hundred thousand however in order to offset the cost of those commissions and a safeguard against early termination the insurance company will impose what is called a surrender charge a surrender charge is a penalty applied to the annuity value the penalty decreases over time until the contract length is fulfilled keep in mind as long as you follow the stated rules of the annuity contract and allow your money to grow for the entirety of the contract you will never be subject to a surrender charge and finally we want to compare annuity based Commission products with fee based investment vehicles annuities are generally commissioned based products while other investment vehicles such as mutual funds are fee based a fee is a percentage taken off the account value each year and it’s used for operating expenses including Commission for the financial planner the trade-off for a fee is that there’s no surrender charge however you are essentially paying out of pocket each year if you invest in a mutual fund that has a one and a half percent fee by the fifth year that amount has already reached nine percent and that’s assuming no growth and even higher when you calculate any positive gains but keep in mind while annuities typically have the upfront commission system there can be fees associated with annuities for additional benefits such as a guaranteed roll-up rate or an income Rider thank you for checking out this video for more information click on the link in the video description below to download our annuity buyer’s guide or visit us at all things in newett e.com as always remember annuities are not designed to make you a lot of money they’re designed to make sure you do not run out of money

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