Episode Transcript
[00:00:00] Speaker A: Hello and welcome everyone to the Annuity Straight Talk podcast, episode number 146.
My name is Brian Anderson, founder and creator of Annuitystraighttalk.com.
crazy things happening in the annuity business these days, mostly for the benefit of everyone who is searching for annuities. Consistently healthy rates for retirees, although they might mean not so great things for people taking loans, you know, mortgages, all that stuff. But we're in the retirement market, so times are good and you guys get everything you need right now. 2024 Allianz Annuity Exodus are people getting out of Allianz? The contracts? I told people whenever you told anybody not to buy them, but I have talked about the company a lot, and a lot of people think that I don't like the products, and that's not at all what the issue is. I have serious concerns about how they are sold. I blame greedy agents and marketing organizations, not the company itself. Oftentimes, even in the podcast, I have pulled up the company website and said, here they explain it perfectly. Allianz is a solid company.
They certainly have a niche for products, have decided what market they're going to target, but when it comes to the products, they have. So I think they are being, they're on the up and up for the most part. But agents get greedy and say, oh, hey, we can show these big numbers and doesn't always work out that way. So rates have risen substantially for retirement savers in the past two years, and anything bought three, four or five years ago maybe doesn't look so good now. I sold a few of them as well, but the ones from then don't have near as much growth potential as the ones purchased today. Now, at the time, I talked to everybody who's got one. I said, listen, we did the best thing we could. For the most part. It's like, let's rework the contract, change some things up. Still, some people are looking. I was like, oh, I wish I wouldn't have done that. And I certainly understand that. We're doing lots of things, laddering out, getting back into money market funds, going back into the market, lots of podcasts or newsletters that relate to this, get out of how to get it out of an annuity, what to do. There's lots of things we can do, but replacing the contracts is not necessarily a last resort.
But it's been a good business for a lot of agents, including me, where it's not a large part of my business. But I've done a few of those, either from other companies or in a couple cases contracts I've sold, where we've redone them and been able to get people into better opportunities, I'm going to cover what that process looks like and what you have to consider. Next week we'll talk about replacing annuities, maybe life insurance policies. We've done that as well. I'm going to stay on point and talk about what I noticed that is different about Allianz recently.
So every time an annuity is sold, the company who's going to get the money and issue you a new contract has to review and approve all the details of the transaction. The biggest part of that is a suitability assessment, and it determines whether the purchase is appropriate for you as the contract owner. So the size of the contract in relation to assets and their alignment with your overall financial goals, personal objectives. Part of the process is saying this is a suitable transaction. Now, if the company doesn't believe the transaction is suitable or it doesn't hit the requirements that they have, they won't approve the sale, they won't send transfer forms, they won't take the money, they'll send the money back. All that stuff safeguards in place to make sure that you are doing the right thing. If the agent is not smart enough to figure that out from the beginning, a lot of people have had that happen. So a couple times in the past it's happened to me where it's like, for one reason or another, it's not always bad. I had one that was like, hey, maybe it's a little too large a percentage of this person's portfolio. Okay, we dial back the purchase, we get it, get it approved. It's not uncommon, but for the most part, again, it's on the agent to determine that it is within boundaries before they even sell the product or sign the paperwork. Do all that work, then it wastes everybody's time if you don't get it approved. So receiving companies have to determine suitability because it's a liability issue. If an unsuitable product is sold or placed in your ownership, then you, as the owner, or even maybe your beneficiaries might look at that one day and bring legal action against the company because it's like, why would you ever sell this? There was, I don't know, 1215 years ago there was a guy in California who sold an annuity to an 82 year old woman. He actually served jail time. I think you still look it up probably, but he went to jail because it was unsuitable and the annuity did fine. His, her kids didn't like it. She had dementia. They could prove, you know, a lot of those things. Like, I've had family that has neurodegenerative, generative diseases, and they're often, like, back diagnosed. So it's like, wow, mom had dementia when she bought this, so she didn't know what she was doing. That in and of self, wasn't a bad annuity in that case, but anyway, so there's liability. It's really more serious than it sounds, because every single financial institution, be it a bank, a brokerage company, insurance company, are worried about liability. They invest serious amounts of money in departments that will verify that they're doing things the right way.
In the brokerage business, it's called compliance insurance. It's suitability. In the investment world, that's fiduciary.
I'm going to talk about that as well. Fiduciary standards being what they are, you are the only true fiduciary. You're the only one that knows what's really in your best interest. But it's part of the business and doesn't matter like what type of what area of financial services someone is in. Every financial professional is used to it, and every single company that wants to sell an annuity has to do it. So what is normal for the receiving company is non existent for the company giving up the money, whether it's an insurance company, a brokerage company, or a bank, they don't do all that process because they're just letting the money go, and they have requirements as to when they're supposed to do it or how long they have to process that transaction. So if an annuity is being replaced, in a lot of cases, there's a surrender charge. Now, sometimes you replace them after the surrender period. You still have to compare annuity contracts, you still have to prove that it is in the best interest of the client. But it's the responsibility of the receiving company to document the suitability of that. The resigning company almost always just deducts the surrender charge and sends the money to the new contract and the new company. I say almost always only because I recently saw it happen a different way. It was with a client who took an Allianz contract and was moving the money to nationwide for a better benefit.
So this gal had purchased the 222 four years ago. In the four years had grown a little over 1%, around 1% in total, it had almost not grown at all. So she wants to take income jointly with her husband in another three or three to four years. But with the current contract, the two to two, you have to wait ten years. To maximize the benefit, she'd have to wait six more. So that wasn't suitable.
But she also may not have decided at the time she thought, ten years is okay. Now she's closer to her goal. That's what she wants to do. But she'd have to wait six more years to get it. Now she wants it in three, maybe four. So the Allianz 222. We did specific podcasts about this. I'm not going to link them all in the newsletter, but it's performance based income. The growth in the contract is what determines the income benefit in the future. Because it had not grown, the guaranteed income would be a lot lower than expected and come three years later than they now want it.
With the new contract, she'd be able to take far more lifetime income. Much earlier, I ran the numbers. There was no mathematical way the current 222 contract could compete. There's no way they get there, given what's available today in interest rates and income payouts. So nationwide, we put the application in, because I looked at it, hey, this is good. Nationwide evaluated it for suitability, passed it right away. They looked at the numbers involved in the clients goals.
They sent the transfer form to Allianz, and we expected them, hey, this is going to take ten days. Two weeks is about what is normal, and your contract should be issued. So what happened next was interesting, and I've never seen it before, more than two decades in the business. Alliance sent a letter to the client, said that said, display to us why this is an appropriate transaction.
Never happens from the company giving up the money. Allianz is going to sell their bonds. They're going to pocket the surrender charge. They're going to move on, right? That's what they do. But then, instead of the receiving company, who had already approved the transaction, alliance sent a letter requiring them to prove suitability for the money to leave. They can't do that with your money. Suitability is the purview and the obligation of the receiving company. So we called nationwide. Me and my assistant Leandra, she's awesome. A lot of you guys are going to meet her. She's great. Appreciate what you do, Leandra. Ask for their guidance. No matter, hey, what do we do about this? Because, you know, this gal sent this to me and said, hey, what do I do? I'm like, wow. They want suitability to leave the company. And nationwide kind of said the same thing. The company giving up money, in this case, Allianz, cannot require that of the policy owner. So there are a couple of little other changes. That we had to make. It was interesting. They wanted specific titling. And other times I've moved money from Allianz to other places.
On the transform, we say, Allianz life. They said, no, we need a transformer that says, allianz life insurance company of North America. So we had to change the title of the company. Get to that in a second. So we talked. It's like, this is really weird that we saw this. I talked to a couple other brokers and agents, talked to a journalist I know, and from a few different sources said, oh my goodness, there's a lot of money. Leaving all of the ons. They had a lot of contracts that underperformed, as many index annuities have, including some of the ones that I sold. And a few different people felt as though Allianz was in damage control mode right now, just because a lot of it's leaving so slightly speculative on my part. It's just interesting to determine that I do have documentation of them throwing interference in a way that they are not even authorized to do. They can do it, it's not required. But if I get it confirmed from a few other people that this has definitely happened to them, I consider that to be relevant news. That's a small cross section. Now, if I talk to three or four people that I know that might have experience with this, and none of them said they ever saw that before and be like, okay, well, that's kind of weird. When all of them said it, oh my goodness, what have I talked to everybody?
So once we changed the name of on the name on the transfer form, they didn't hold it up a whole lot longer. And now the clients got a new, more beneficial, much higher income contract from nationwide. So all financial institutions have a defined period of time to release the customer funds. Seven days, ten days. Depends on what the funds are, where they are. It's not uncommon for them to throw interference. And what I think Allianz was doing is you sow a seed of doubt in the customer's mind that says, maybe I don't want to do this. But this transaction was done with a couple where we go back five, six years, since well before they even bought the Allianz contract.
And so we like, and we've been talking about the possibility of this transaction for six to twelve months. It wasn't something I just ran into. I don't do that for a lot of people. They get a letter from Allianz and the person, I don't know what suitability is, how am I going to do that. Fortunately, they shared it with me and I said nothing to worry about. They can't do that once we change the name. Alliance sent the money, she's got the new contract. But yeah, they'll throw a little interference. And a lot of institutions do this differently. Most of them are getting a whole lot better and making transactions easier for you and every other consumer. But a lot of times it'd be simple things like, oh, we need a signature guarantee stamp on the form before we release funds or a notarized copy of something. Or they'll say, well, we have our own internal form that you have to sign and do this and send in your driver's license. It'll just make it a little harder for you to do it, but it's kind of normal and less common than it used to be. But a lot of these institutions will throw, hey, a little interference. Let's make it a little harder for maybe they'll decide not to. So this is happening all over the annuity industry right now. Allianz isn't the only company dealing with it, and I'm not trying to pick on them at all, as I think they explain things appropriately. I think there's a bunch of dumb, greedy agents out there that will use these fantastic illustrations. Fixed index annuities with bonuses and higher growth potential now can be more beneficial for people. I've replaced a few of the ones I sold back then as well, just a couple, and I've had a couple people look at it, decided not to. Let's rework the index allocations. Let's write it out. None of these were, none of the contracts I sold were a major part of anybody's financial plan. It was just a little bit of safe money. So a lot of companies are losing business or getting business replaced. Some of we've done internally, some of externally, that's know, internally is sticking with the same company. New product, new rates. Externally is from one company to the next. It is going to be more common. And I will say this with confidence. I know exactly why.
Hyped up illustrations are something I've tackled consistently throughout my career. Even when rates were low, there were agents boasting about double digit rates of return. And the Allianz contracts like the ABC or the 222, they had some fantastic projections that were 8910, 12%. I thought it was very disingenuous to do so. If you look at the mechanics of the indexes used and the hypothetical historic performance that produce those returns, you can't necessarily repeat those circumstances over time. So any of the contracts. Then I told people, hey, you know, three, four, 5%, pretty reasonable expectation for growth. Well, why, that doesn't sound very good now. But at the time, money market rates were paying a 10th of a percent.
Fixed rates on index annuities were 2%. Index potential was four, maybe five. So some of my clients maybe only received half that. Maybe they've only done one or 2%, but they only expected four. Now, can you imagine if someone was showing you ten or 12% in those days, which we could have, but I didn't. I disclaimed that with every single one I saw, I showed the variable possibilities. It's zero to whatever, hey, now it's higher because we got better growth potential.
Now if that was tacked to retirement income, and there was a substantial amount of money on the line, in the case of the one we replaced, it was a big chunk of money. It was going to be a core of their retirement income plan that was a big deal to them. And when they didn't get their 1012 percent, they said, wow, who cares what this crazy illustration says? I didn't come anywhere close to that. And I've had some people beat me up when I talk about these products. So I put this podcast that addresses the issue, specifically B's annuity illustrations. They are pure bullshit. In that podcast I talked about an accumulation contract, not an income contract. But the lesson is the same. You can look at what I said about all those stuff. The Allianz 222 is not a bad product. The ABC is not a bad product. Neither one are the highest guarantee you can get, neither one of the best growth you can get within an income product. But if you understand what you're getting into, and you realize what the limitations are and the provisions of the contract, I say go for it. I've told a lot of people, hey, you like the guy, you believe what he says and you understand what your restrictions are, do it. So a lot of people had serious retirement hopes placed on products that came nowhere close to working out that way, and right now is a good idea to review those for a possibly better option. It's not always the right thing to switch out and pay surrender charges. I've had a lot of people look at it and decide not to, and then we just roll with it. Hey, let's go. A few more years, you'll be free. You can reposition, rebalance, do all that stuff. I do feel bad for anyone who's stuck with extremely low growth. When there were sold expectations that were many multiples higher, companies who allowed this to happen deserve to pay the price.
And my only hope is the agents dealing with this are smart enough to handle the situation in a way that's beneficial and helps each contract owner in a positive way. So suitability review is something that every annuity sold has to go through, but it's the receiving company's job to do it. If you are thinking about it, you got to think about it carefully. Now, two, three years ago, I would have said never surrender an annuity. Well, now you can, but you have to be. And this is the same with anybody in retirement. As time goes by, your goals become more focused. Maybe you have more focused goals for that money, but you got to think about it carefully. And if your goals are more focused, someone with experience can help you potentially get to a better spot. The agent should be able to take care of that well before the insurance company ever has to take a look at it. That's why all of our contract suitability flies right through, because I've done it long enough. We know what's going on and I stop you from doing something that would be seen as unsuitable. So I'm going to cover this in more detail next week. What you go through, the process of deduction you got to perform in order to decide if it's worth moving to a new contract. Paying surrender charges. Now, if you're surrender free, it's a little bit easier. You have the freedom to kind of pick and choose what you want and you got through it. There's no charges, so you can take your time. But if you're paying a surrender charge, man, you're right for a sales pitch. So be careful. That's why I'm here, to keep it straight for everybody and make sure you have all the information you need so you don't do another purchase that you regret. Talk to a few people like that. They've gone two or three times and at that point they just keep what they have and write it out because clearly they can't make good decisions about annuities. So I'm going to hit that more detail next week. What the requirement requirements are, what you need to think about. This has been episode 146 the 2024 Allianz Annuity Exodus. I think a lot of money is leaving. If you want to talk about this, about your contract, be happy to do it. Not going to try to sell you anything, just try to make, make your goals relevant for you and make sure that you understand what the implications are of making a change right now. So schedule a call to me top right corner of any page on annuity straighttalk.com dot schedule a call button. It's pretty simple, like subscribe or comment on any of your favorite podcast platforms are on YouTube. I'm going to go in the mountains this weekend. I'm excited about it. Summertime in Montana.
My name is Brian Anderson. I appreciate you joining me. You guys have a great day. Okay, bye.
[00:19:38] Speaker B: You have been listening to annuity straight talk.
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The views expressed by guests on this program are their own and do not necessarily reflect the views of annuity straight talk or its partners.
No information presented today should be acted upon without meeting with a qualified and licensed professional.
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