When it comes to annuities, the person you are buying from is just as important as what you are buying. You need to have complete trust that the agent will honestly guide you about the pros and cons of the annuity plan; otherwise, you may end up with an unsatisfactory product. Unfortunately, not all agents are committed to the same standards.
Agent Requirements for Selling Annuities
To be able to sell annuities, an agent only needs a life insurance license issued by their state. Annuities represent five main products: immediate annuities (SPIAs), deferred income annuities (also known as longevity annuities or DIAs), fixed rate annuities (also known as multi-year guaranteed annuities or MYGAs), qualified longevity annuity contracts (QLACs), and fixed indexed annuities (FIAs). Annuities are classified as life insurance products, so a life insurance license is all that is needed to apply for and sell these types of strategies.
Fixed Indexed Annuities
In some circles, there is ongoing debate about whether fixed indexed annuities (FIAs) should be considered securities or not. These annuities have a growth component involving an option to invest in an index (usually the S&P 500), with limits on potential returns. This overlap with the stock market has prompted some people to call for stricter regulations, but the insurance industry has resisted it. As of January 2021, fixed indexed annuities are still considered a type of annuity and are not regulated as securities.
Variable Annuities
Variable annuities may not necessarily be a better product than fixed indexed annuities, but the process to obtain licensing is more stringent. This is because variable annuities are classified as securities. To sell them, an agent must pass the Series 7 exam (which qualifies them to sell most types of securities) or both the Series 63 and Series 6 exams (which focus more specifically on mutual funds, retirement plans, insurance products, and variable annuities). These tests are not easy, and even after passing, agents must comply with rigorous continuing education requirements.
Do Your Research
Ask any agent you speak to about their financial background, and do your own research online regarding their qualifications before making any decisions. Experience does not always equate to competence, but it is a good indicator that they have at least some foundational financial knowledge. Insurance agents (especially annuity specialists) have become as common as people with their real estate licenses. They are plentiful, and not all are equally qualified to advise others regarding retirement. Be cautious there. When in doubt, interview a wide array of consultants and agents to find the right person for your personality and financial situation.
Source: https://www.thebalancemoney.com/what-are-the-agent-qualifications-to-sell-annuities-145997
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