Vacations at luxury resorts, golf outings, tickets to sporting events and other incentives have led to inappropriate sales of annuities, Sen. Elizabeth Warren, D-Mass., claimed in a study released Tuesday.
In a survey of 15 firms, Ms. Warren's staff found 13 offered non-cash inducements to their agents to sell their annuities, which guarantee income but often are complicated, are known for having high fees, and can tie up large chunks of a client's money.
Disclosure requirements surrounding the perks are inadequate and usually buried in lengthy prospectuses, leaving investors vulnerable to sales professionals who are trying to win an award rather than find the best investment products for their clients,
according to the report.
“Companies shouldn't be allowed to offer expensive vacations, prizes and other kickbacks to agents in exchange for selling costly, second-rate investment products to unsuspecting customers,” Ms. Warren said in a statement.
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Nine of the companies that responded to Ms. Warren's queries said they provide incentives directly to agents. For instance, American Equity and Lincoln Financial offered trips to San Francisco and South Africa, respectively, for hitting sales targets.
Ten of the 15 companies in the survey said they made incentive payments to third-party marketing organizations that then passed them on to agents.
Two of the 15 companies said they provide no non-cash incentives to agents either directly or indirectly.
An insurance industry organization disputed Ms. Warren's findings.
The report “may raise inappropriate and unnecessary worries among retirees and workers considering retirement about an insurance product that can provide financial security and peace of mind,” Carl Wilkerson, vice president and chief counsel for the American Council of Life Insurers, said in a statement.
The group, which said life insurers paid $74 billion in annuity benefits last year, maintains that the products have adequate oversight.
“The senator's report misrepresents the comprehensive regulatory framework that governs conduct in the sale of insurance products and protects consumers' interests,” Mr. Wilkerson said.
The antidote to harmful annuity sales, according to Ms. Warren, is a
Labor Department fiduciary proposal designed to curb incentives for brokers and insurance agents to steer clients into high-fee products.
“This investigation highlights the need for a strong conflict-of-interest rule to protect the savings of families trying to save for retirement and to ensure a level playing field for companies and advisers who want to do right by their clients,” Ms. Warren said.
