11% Surrender Charge

[Experienced Agent]

I was referred to a client regarding her displeasure with her Phoenix annuity (IRA). It has an income rider that charges her a significant fee. She petitioned Phoenix to drop the rider, they will not. Her main contention is that she was not aware of the charges and she is a woman of principal, regardless of what may be best for her. She has had the annuity two years with an 11% surrender charge.

My question is whether another company will accept a rollover of this annuity. Perhaps Allianz 222 with 15% bonus. Would suitability prevent this transaction? She does have plenty of liquidity, an amount equal to her annuity in a bank savings account.

She is 74, not sure what other info would be necessary to help. I realize the only definitive answer would be to actually submit the contract and wait for underwriting review. I'm trying to get an opinion so as to save the time and effort of the whole application/underwriting process. Any thoughts are appreciated.

 

[Tahoe Ray]

I was referred to a client regarding her displeasure with her Phoenix annuity (IRA). It has an income rider that charges her a significant fee. She petitioned Phoenix to drop the rider, they will not. Her main contention is that she was not aware of the charges and she is a woman of principal, regardless of what may be best for her. She has had the annuity two years with an 11% surrender charge.

My question is whether another company will accept a rollover of this annuity. Perhaps Allianz 222 with 15% bonus. Would suitability prevent this transaction? She does have plenty of liquidity, an amount equal to her annuity in a bank savings account.

She is 74, not sure what other info would be necessary to help. I realize the only definitive answer would be to actually submit the contract and wait for underwriting review. I'm trying to get an opinion so as to save the time and effort of the whole application/underwriting process. Any thoughts are appreciated.

What is she trying to accomplish? Why is the fee an issue?

A bonus offset is not normally a something positive to put down on replacement paperwork, let alone one that is not a real bonus.

What's her objective?

 

[DHK]

I was referred to a client regarding her displeasure with her Phoenix annuity (IRA). It has an income rider that charges her a significant fee. She petitioned Phoenix to drop the rider, they will not. Her main contention is that she was not aware of the charges and she is a woman of principal, regardless of what may be best for her. She has had the annuity two years with an 11% surrender charge.

My question is whether another company will accept a rollover of this annuity. Perhaps Allianz 222 with 15% bonus. Would suitability prevent this transaction? She does have plenty of liquidity, an amount equal to her annuity in a bank savings account.

She is 74, not sure what other info would be necessary to help. I realize the only definitive answer would be to actually submit the contract and wait for underwriting review. I'm trying to get an opinion so as to save the time and effort of the whole application/underwriting process. Any thoughts are appreciated.

Let's summarize, shall we?

Current age: 74
Issue age: 72

It's an IRA, which means that she should be receiving RMDs from the contract.

She wants out of a contract that should guarantee the income of these RMDs (or higher)... just because of the fee?

And that she'll do things "regardless of what's best for her."

I would walk away from it. This could be a ticking time bomb and E&O claim waiting to be transferred to you.

If the annuity in question is a Variable Annuity, she can contact the compliance department of the firm of the broker that sold it and file a complaint. In addition, she can contact FINRA directly. It'll show up on that broker's U-4 until it is resolved, as well as involve the issuing insurance company directly.

If the annuity in question is a fixed or indexed annuity, she can file a complaint with the state department of insurance.

By doing these things, it can cause an action on the part of the firms/insurance carriers to "make her whole" and even get her completely out of the contract with no charges.

But if she likes these ideas, DO NOT write her another contract. That's just bad news for you down the line too.

 

[Experienced Agent]

That confirms my thoughts. I was trying to help this lady, but appears it's best to move on

 

[scagnt83]

Yeah, if she will not listen to reason then walk away.

The highest true bonus that I am aware of is 10%. Both Midland & NA offer this on some of their 14 year products.

The 222 Bonus is only on the PIV account (Income Rider Account). So I highly doubt that would pass Allianz suitability.

But DHK makes the best point. She is being forced to take distributions no matter what.... her product, regardless of fees, is producing a higher income than taking normal RMDs (most likely), and guarantees it for life.... and RMDs are well known for destroying IRA account values...

Give her the best advice you can. Either she will listen or she will not. But I wouldnt touch the money... even if that is what she wants.

 

[LauderdaleBAUS]

Suitability will not even consider that, especially for Allianz. Ive had them deny some policies with a 5% surrender charge...

 

[Norwayguy]

As I read it the customer will definatly take a hit on surrender charges that will not be made up fully by a bonus which is almost always a no go....Then add to that the customer will almost certainly need to do RMDs which may be subject to surrender charges in the first year I would not want to touch this with a 10 ft pole.

Tell the customer you recommend she stay put explain that almost no insurance agent will be able to help due to suitability but your in luck because I am sure a bank may help her take a surrender charge and move her to an IRA cd earning less plus the hit on surrender charges and if she is that adamit she is more than welcome to pork herself over.

 

[jmhalvo]

I was referred to a client regarding her displeasure with her Phoenix annuity (IRA). It has an income rider that charges her a significant fee. She petitioned Phoenix to drop the rider, they will not. Her main contention is that she was not aware of the charges and she is a woman of principal, regardless of what may be best for her. She has had the annuity two years with an 11% surrender charge. My question is whether another company will accept a rollover of this annuity. Perhaps Allianz 222 with 15% bonus. Would suitability prevent this transaction? She does have plenty of liquidity, an amount equal to her annuity in a bank savings account. She is 74, not sure what other info would be necessary to help. I realize the only definitive answer would be to actually submit the contract and wait for underwriting review. I'm trying to get an opinion so as to save the time and effort of the whole application/underwriting process. Any thoughts are appreciated.

not even close: walk away

 

[LauderdaleBAUS]

If you are licensed with the 7, If she is deadset on it, surrender it and open a brokerage account up. Once you are there, you can open your options up.

 

[DHK]

Nope. Don't even THINK about it.

How can you defend this as an UNSOLICITED transaction (surrendering the annuity)... when you open a brokerage account where you would CLEARLY benefit from any trades placed within it???

If you have a securities license, you'd have an IMPOSSIBLE time defending this transaction.

However, if you have a compliance officer, explain the situation to them and get their feedback. Most would rather help you AVOID a sticky situation than to have to defend or investigate anything after the fact.

LauderdaleBAUS has clearly never been securities licensed for giving such a stupid post such as he did.