Why Annuities Are Bad Investments

Financial advisers recommend annuities because they make a lot of money in commissions and fees. You should be very, very wary.

An aerial view of a pink piggy bank.
(Image credit: Getty Images)

MetLife recently paid a record $25 million fine to settle FINRA allegations of misleading and misrepresenting investors with annuities. Unfortunately, this practice of overselling and misleading clients with promises of great returns for annuities is common throughout the industry.

As a fee-only, non-commission adviser, I've never liked annuities because I know their sole purpose is to generate commission for advisers. Here's the insider view on how the typical annuity pay structure works—a view few investors ever get to see.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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James M. Sanford
Founder & Portfolio Manager, Sag Harbor Advisors

James M. Sanford, CFA, the Founder and Portfolio Manager of Sag Harbor Advisors, has worked on Wall Street since 1991. Mr. Sanford spent 11 years as a Managing Director at Credit Suisse, marketing credit derivatives and convertible bonds. From 2005 to 2007, Mr. Sanford managed the Hedge Fund Credit Sales team at Credit Suisse within the overall Credit Sales group and was the top U.S. salesperson by revenue in 2007 and 2008. Mr Sanford has a wide-ranging product background, a rarity for RIAs and even most Equities Portfolio Managers.

Phone: 631-740-4498 E-mail: jim@sagharboradvisors.com www.sagharboradvisors.com