Incentives

PriceWaterhouseCoopers ("PWC") released a report suggesting that the landscape for financial advisors may be shifting towards more objective, performance-based compensation. The report indicates that the financial advisor of the near-future may be compensated based on the long-term performance of client assets: In this increasingly competitive environment, compensation of advisers will change to reward long-term investing , with less money earned from short-term “ churning ” of...

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Reverse Mortgages -- A Source of Income in the Wake of the Financial Crisis?

Do reverse mortgages deserve a second look in light of the financial crisis? Similar in some ways to annuities, reverse mortgages have received little attention from conventional financial planners and investment advisors. Part of this reluctance involves lack of familiarity with the products, part of it involves lack of financial incentives to discuss the products, and part involves genuine, well-founded skepticism regarding product value. The reality, though, is that home equity is a major...

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Consumers Should Think Twice about Replacing an Annuity

A very balanced article in the Chicago Tribune discusses what consumers should consider when they are concerned about credit risk or the financial health of their insurance company. Dumping an existing life or annuity policy when reading headlines about the health of an insurer may not be the wisest idea. At a minimum, consumers should seek a couple of informed opinions before replacing an existing policy. There are fees and tax consequences that may come into play. In addition, there are...

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Financial Advisor Views on Annuities Appear Tightly Related to Business Models

A recent study from Cerulli Associates indicates that registered investment advisors (RIA) are more than hesitant to recommend annuities to their clients.

The report surveys and compares the views of various forms of financial advisors. Not surprisingly, financial advisors’ product views are tightly related to the financial incentives that support their business models. Consider, for example, the following: