A recent investigation conducted by a U.S. Senator’s office revealed that companies that
represent billions in annuity sales offer kickbacks to sales agents and
marketing organizations in exchange for selling their company’s products.
Some regulations have been introduced in order to limit these perks, but
they are vastly inadequate, as they still leave room for loopholes that
allow companies to continue to offer these kickbacks. Disclosing these
payments to consumers is also lacking, according to the investigation.
The current rules:
- Do not explicitly prohibit non-cash compensation in exchange for fixed
- Allow companies to incentivize with expensive vacations, which they promote
at “sales conventions”
- Allow companies to compensate third-party marketing companies
- Allow companies to incentivize with non-cash products in exchange for the
promotion of that company’s products
When sales agents and marketing agencies get perks in exchange for recommending
annuities, it can result in investors receiving bad recommendations. For
example, many investors who are nearing or at retirement age can be sold
annuities even though that particular type of investment may not match
their current financial situation or goals.
Annuity companies have found holes in state and federal regulations that
allow them to continue offering things like vacation giveaways, iPads,
and gift cards in exchange for selling their products. These incentives
create a conflict of interest, to which The Department of Labor has responded
with a proposed rule that would aim to eliminate such practices in the
The new law would prohibit investment advisers from recommending inferior
products solely because they would get a kickback out of it. It would
also require investment advisers to disclose any such conflicts of interest
to their customers clearly and prominently.
If your investment adviser recommended an unsuitable annuity and you lost
money as a result, we invite you to contact Meyer Wilson. Our law firm
helps investors recover losses caused by investment misconduct. We provide
free consultations, so get in touch with us today to learn your legal rights and options.
You can also learn more about annuities by watching Attorney Dave Meyer's