Annuities

Understanding Annuity Costs and Compensation

Annuities can offer valuable guarantees and income features, but their costs and compensation can differ from traditional investment accounts.

How We Are Compensated

Frazzetta Financial Strategies does not charge a separate advisory fee for a commission-based annuity. Instead, the issuing insurance company compensates our firm through a commission. The method and amount of compensation vary by insurance company, annuity type, contract, and the compensation option selected.

Common Compensation Options

Upfront
commission

A larger portion of the compensation is paid when the annuity is issued, with little or no ongoing trail compensation.

Reduced upfront commission with trails

A smaller amount is paid when the annuity is issued, followed by ongoing compensation while the contract remains in force.

Primarily ongoing compensation

Little or no compensation is paid upfront, and the insurance company instead pays an ongoing trail over time. When available and appropriate, this is the compensation option we use most often because it most closely resembles the ongoing nature of our advisory platform and the continuing service we expect to provide. Availability and terms vary by insurer and contract, and the compensation option does not determine which annuity we recommend; the client’s best interest remains our priority.

How We Approach the Choice

When more than one compensation option is available, we seek a structure that is reasonable for the services we expect to provide and resembles the ongoing nature of our advisory fee model. Above all, our recommendation is guided by what we believe is in the client’s best interest, not by the compensation we receive. We consider the client’s goals, financial situation, time horizon, liquidity needs, risk tolerance, product features, and the costs and benefits of available alternatives. Our priority is to recommend the annuity and compensation structure that we believe best serves the client’s individual needs.

Costs Within an Annuity

Although the insurance company pays our commission and the client is not billed a separate commission directly, an annuity is not cost-free. Depending on the contract, costs may include mortality and expense charges, administrative expenses, investment-option expenses, rider fees, surrender charges, or a market value adjustment. The applicable costs and compensation will be explained before a purchase is completed.

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