Displaying items by tag: commissions

(New York)

As inflammatory as it may sound, most of the time media coverage on annuities does not speak the whole truth about why advisors often have a negative opinion of annuities. Of course, there are quite legitimate reasons like higher fees and the possibility of an esoteric product not being a good deal for what a specific retiree actually needs. However, when you get down to it, fee-based advisors have a significant financial incentive to dislike annuities. That incentive? It is that the advisor will not earn fees on the assets in an annuity, which means a client buying one can take recurring revenue out of an advisor’s pocket.

FINSUM: There are legitimate issues with annuities—including bad sales practices in the past—but when you realize this simple fact, it doubly reminds one why brokers sell 99.9% of annuities.

(New York)

The annuities business has long been “plagued’ by commissions. High fees paid out to sales people had a multi-part effect that hurt the industry’s reputation. On the one hand it made the products look less competitive, and on the other it led to some bad behaviors among brokers. However, as the industry has been changing, so have the fees structures, with commission-free annuities now an important fixture of the market.

FINSUM: DPL Financial specializes in providing commission free annuities from top providers so that RIAs can now sell annuities.

(Boston)

Anyone who sell variable annuities, or even has a passing familiarity with the business, know that the headline above is a controversial one. The reason why is that the first version of the DOL rule caused annuities sales to drop. Even though that rule was vacated, it had already changed the structure of the market. However, Harvard is now saying the rule actually helped the VA industry. It says fees were lower and returns higher, that the rule did not force smaller investors out of the market, and that captive brokers put more weight on client interests. However, those in the annuity industry say the report is completely biased and that the researchers went in with the intention of proving the exact points they already assumed were true. Critics cited a number of flaws with the study, such as the methodology for calculating expenses and commissions.

FINSUM: While it is clear that variable annuity product suites, including fees and commissions, came down because of the rule, it does not seem clear that it helped everybody in general because of differing market access based on investor size.

(New York)

Investors and advisors—don’t get too excited about the zero fee shift among the big brokers, it is not all that it appeared to be. In particular, mutual funds seem to have been entirely left behind in the zero fee shift. Essentially, none of the big brokers has scrapped fees on mutual fund trades. While ETFs are now free to trade, mutual funds in some cases have transaction fees as high as $75.

FINSUM: This is going to wound the mutual fund market further, as not only do mutual funds have higher fees, but trading them will now be commensurately more difficult than ETFs too.

(New York)

It actually took longer than we expected. Last week there was a big splash in markets and media when Schwab, TDA, and E*Trade all cut their commissions in response to a first move by Schwab. Now, unsurprisingly—except for how long it took—Fidelity has followed suit. The unique part about Fidelity’s move is that in addition to free trades, it is also offering free money market funds for any cash left in accounts. Those are currently 1.58%, and way ahead of the near zero yield you get on cash at Schwab, TDA, and E*Trade.

FINSUM: The whole market has gone to zero on trading commissions. One wonders if the same is going to happen on large ETFs.