Tuesday, May 3, 2016

Advice to Potential Buyers of Variable Annuities and Everything Else as Well ... Be Careful, and Be Informed

Knowing what is being sold is always a great idea for potential buyers.

It's also a money saver and a wealth builder over time. Money not wasted is money that can be saved and invested for the long haul.

If something expensive is being 'pitched' by the seller and it seems complicated to the potential buyer, then its provisions and details are definitely worth exploring until simplicity and a full understanding of the essentials of the offering are known and internalized.

Take variable annuities, for example.

MetLife to Pay $25 Million Finra Penalty Over Variable Annuities is subtitled 'Fine for allegedly misleading customers about retirement-income products one of largest such settlements to date:'

"MetLife Inc. agreed to pay $25 million for allegedly misleading customers about retirement-income products, regulators said Tuesday, in one of the largest such settlements to date.

The insurer’s MetLife Securities Inc. unit “made negligent misrepresentations and omissions to customers” when replacing their variable annuities between 2009 and 2014, making them seem better for the customers than they actually were,​ the Financial Industry Regulatory Authority said. . . .

Variable annuities are products popular with older, risk-averse investors that offer tax advantages to invest in stock and bond funds. For an added fee at many insurers, investors can receive lifetime payments of a guaranteed-minimum amount even if the underlying funds perform poorly. . . .
According to the Tuesday settlement, MetLife sometimes overstated the cost of a customer’s existing variable annuity contract, which in some instances increased a customer’s cost by 2% annually. The firm also sometimes failed to tell customers a proposed replacement would reduce or eliminate features of their existing variable annuity, Finra said.

“Variable annuities are complex and expensive products that are routinely pitched to vulnerable investors as a key component of their retirement planning,” Finra enforcement chief Brad Bennett said. “Firms engaging in this business must ensure that the information on the costs and benefits of these products provided to customers is accurate.”

A new rule from the Labor Department requires advisers working with retirement accounts to act as fiduciaries, putting their clients’ interest first."

Summing Up 

Motivated sellers are everywhere.

Knowledgeable buyers are good buyers.

Knowledgeable buyers don't part with their money unless and until they fully understnad that what they are buying is worth the price being paid. 

And that's true about insurance, car pricing and financing, credit card charges, student loans and tuition, home purchases and financing, retirement savings and investing, and so on.

A little upfront time adds up to a whole lot of after the fact savings over a lifetime of hard work.

It's well worth the effort getting to a better reality.

That's my take.

Thanks. Bob.

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