Sen. Elizabeth Warren (D-Mass.) announced April 28 that she has launched an investigation into the rewards and incentives that annuity providers offer to brokers and dealers who sell annuities to families and small investors.
In letters sent to 15 of the country's largest annuity providers, Warren raised concerns that the providers offer “a vast range of perks — from cruises to international travel to iPads to diamond-encrusted ‘NFL Super Bowl Style’ rings to cash and stock options" — as sales incentives for their annuity products.
“I am concerned that these incentives present a conflict of interest for agents and financial advisers that could result in these agents providing inadequate advice about annuities to investors and selling products that may not meet the retirement investment needs of their buyers," Warren wrote. “Annuity agents that are more interested in earning perks than in acting in their clients’ best interest can place Americans’ savings and retirement security at risk.”
The letters were sent to the 15 companies with the highest 2014 U.S. individual annuity sales: Jackson National Life, AIG Companies, Lincoln Financial Group, Allianz Life, TIAA-CREF, New York Life, Prudential Annuities, Transamerica, AXA USA, MetLife, Nationwide, Pacific Life, Forethought Annuity, RiverSource Life Insurance and Security Benefit Life.
The letters ask the providers to provide, by May 11:
- a list of all sales incentives they offer to agents, brokers, FMOs “and other middlemen” involved in annuity sales, including the number of incentives and the total value of each;
- documents describing the incentives and how they are earned; and
- the companies’ policies “for disclosing these potential conflicts of interest” to annuity purchasers.
Warren also released examples of three firms’ sales incentives for annuities brokers and dealers.
In a statement responding to Warren’s investigation, the Insured Retirement Institute (IRI) noted, “Almost all financial professionals who are IRI members hold both insurance and securities licenses and must adhere to a robust framework of consumer protections (at both the state and federal levels) that oversee the distribution of annuity products. IRI and its members expect all financial professionals to meet the requirements of these laws and regulations – no exceptions.”