Annuity Product Unsuitable For Elderly Investors

A New York congressman recently felt it necessary to clarify remarks made after a speech at the National Press Club in Washington. The remarks seemed to imply that brokered annuity products were the answer to the need for lifetime retirement income. The congressman made the remarks while introducing a study commissioned by MetLife, Inc., a New York-based seller of annuity products. The congressman, a former president of the National Association of Insurance Commissioners, remarked: “To paraphrase James Carville, it’s the annuities stupid….Nest eggs never fixed anything.” He also said that annuities should be favored over defined contribution plans. The congressman explained: “I wasn’t talking about annuity products,” but rather assured streams of income.

In an Investment News article published on February 5, 2007, Page Perry senior partner Boyd Page was quoted as follows:

A financial advisor could be disciplined by regulators for saying what the congressman said, noted Boyd Page, a senior partner with the securities law firm Page Perry in Atlanta.

“An advisor has an obligation to look at the cost of the annuity and its income guarantees – and at alternative investments – and not automatically recommend an annuity to everyone,” he said.…

“There are other ways of guaranteeing income, such as through bonds and other interest-bearing investments,” Mr. Page said.

“From doing a lot of investor litigation, I can tell you that annuities are problems for elderly investors because of the tremendous surrender charges.”

Investment News, February 5, 2007, Lawmaker changes horses on income stream comments.