Sunday, April 27, 2014

What Makes A Good Annuity Advisor

By Essie Osborn


Annuity is basically an investment contract between a client and insurance firm enjoying a special tax benefit as a result. For many, it is usually taken as a retirement plan. Just like any other financial asset, you need a very good annuity advisor is you are to rip its full benefits. The consultant is charge of selecting a good investment plan for the clients and advising them accordingly.

It is always advisable to adopt a conservative approach in investment particularly when one is approaching the retirement age. At this time, the nest-egg reaches its largest possible level and is very vulnerable to market fluctuations. This is why annuity is usually the better option.

There are many benefits that are associated with this option which include a guaranteed future cash flow and the retirement income increases every year. This is the easiest way to ensure that you pass something to your heirs and protect any of your assets from the creditors or probate.

The major types of annuities are the variable annuities, equity indexed annuities, fixed annuities and immediate annuities all which are slightly different from each other and as its advantages and disadvantages. With a good advisor, you should get to know which option is better and in which circumstance. It is the duty of the advisor to conduct his planning so that all the requirements put forward by the client are considered. The aim of such financial planning should be to protect and grow the assets of the client and produce a secure retirement income. Actually, not all financial options are appropriate solutions the financial needs for the clients.

A financial consultant should only encourage his client to go for that investment option that is in his best interest and not just anything. However, the consultant has a responsibility to educate the client on the investment vehicle that he is interested in or just curious about. These consultants are usually expected to adhere to a strict code of conduct, practice general ethical principles and avoid unfair marketing practices.

The major issues that your consultant should avoid include misrepresentation of information in sales of the insurance or other financial related products, false advertising, defamation, twisting, rebating (offering the client inducement in any form), use of bait and switch to get client purchase what was not originally planned for.

In addition to these, an annuity consultant must adhere to the same rules governing all other players in financial sector. This include talking ill of the services, products and character of their competitors (unless there are proven criminal or civil records to support their case). They should instead focus their effort on informing the current and prospective clients on what the stand to benefit from after they buy the proposed product.

Many consultants prefer not to recommend annuities to their clients once they realize that there is a possibility that insurance company may be having financial difficulties in the future. Annuities are actually the best way to militate against longevity risk. It is the opportunity to protect the client from the financial problems the insurer is facing.

There are several tips that can be helpful when locating the best insurance firm to take the annuity from. These include working with bigger firms which are known to be less prone to solvency risks, take advice from the rankings as put forward by Moodys, S&P and Fitch and ensuring that the engagement rules are very clear.




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