Last week, I wrote a column, which talked about the top 10 threats to investors. I included as number 9 variable annuity sales practices. Needless to say, I elicited a response that warranted my taking another look at what I said. It came from Garth Bernard who works for MetLife and who is expert in annuities. Here's what he said:

"I read your article which included the tag line 'Welcome to Friday the 13th. Do you know the 10 best ways you can get cheated?'

"It was interesting and provide some good tips. Unfortunately, in tip #9, you did your readers a great disservice. You effectively included variable annuities amongst a group of frauds, scams and dirty tricks thereby implying that variable annuities are frauds or scams. In addition, you are painting all variable annuities with the same brush.

"Variable annuities are registered products which can only be sold by registered representatives and must be sold with a prospectus. Variable annuities are also subject to suitability requirements, and sales practices are subject to NASD guidelines. Due to SEC restrictions on maximum sales charges, they happen to be among the most liquid forms of annuities. A variable annuity is a long term insurance contract whose purpose is to secure retirement income. They provide many important protections and benefits including access to money in case of emergencies. I am unaware of any variable annuity offered that does not include access to at least 10% of the account balance without any penalty.

"Most also provide for access to the entire account without penalty in case of disability, entry to a nursing home or other conditions. Certain share classes (C-share) of variable annuities also provide 100% liquidity at all times and under all conditions.

"For more facts on variable annuities, you could utilize resources of the National Association of Variable Annuities at You must be mistaking variable annuities with other non-registered annuities.

"By way of full disclosure, I work for MetLife and we sell variable annuities. Many in our industry share your concern about inappropriate sales practices that would target seniors, or any consumer for that matter, with products that are unsuitable for their needs.

"Thank you for your consideration."

The bottom line is that Mr. Bernard is absolutely correct. I wasn't referring to all variable annuities just those that were unregistered or preyed on seniors with steep sales commissions. Actually, in full disclosure too, I received this list from the North American Securities Administrators Association.

Mr. Bernard also makes note of the fact that one should ask the sales person directly about commissions. "Or, if they are uncomfortable doing so, which is their right, then they should consult the prospectus. Commissions are required to be disclosed in the prospectus. They can judge for themselves if the commissions are too steep. If there is no prospectus, then they should refuse to purchase the variable annuity, or any other security."

MetLife does a lot with annuities and you might want to tap into their Web site at for more information and a breakdown of what annuities do and what kinds there are.Clearly, annuities can be a key component of an overall retirement savings plan for they enable an individual to save money on a tax-deferred basis, so all of the money can work for that person right now.

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