All annuity sales require an insurance license, and some require both insurance and securities licenses. Licensing is not a huge challenge, but there is time, effort and cost involved in the process.
You can obtain quite a lot of information about any financial advisor by putting their name or insurance license number into your state department of insurance website. License status as well as any filed complaints or legal issues related to that license will appear.
It is important to note that insurance licensing is on a state-by-state basis. Each state has a department of insurance that handles insurance licensing issues. Your financial advisor must have an insurance license in your state of residence in order to sell an annuity to you.
Variable annuity sales require securities licensing in addition to the insurance licensing. Securities licensing requires the financial advisor to have an affiliation with a broker-dealer because their activities involve the purchase or sale of securities on behalf of customers. Securities regulation is handled on a nationwide level by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) rather than on a state-by-state level by departments of insurance.
Sales of annuities also require something called an appointment. An appointment or contract is a legal agreement between the insurance company and the financial advisor. Among other things, an appointment enables the financial advisor to represent and sell the product and to receive compensation for the sale.
Last, there is an entire system of intermediaries that provide services to retail financial advisors (the term “retail” generally refers to customers who are individuals as opposed to institutions). Often referred to as “wholesalers” because their customers are retail advisors, these intermediaries provide product information, advisor education, contracting services, marketing services and some sales and technology support services.
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