Advisors should brush up on their education about annuities because their clients are probably confused by the many kinds of annuities and the rules that apply to each, say advisors who work with annuities on a regular basis.

Sales of all types of annuities have increased in recent years, says the Insured Retirement Institute. Annuity sales for the second quarter of the year grew to $59.9 billion, a 6.8 percent increase over the first quarter of the year and 9.9 percent increase over the second quarter of 2013, says IRI.

Although some major insurance companies are pulling out of the annuity market, the number of annuity products is still growing, making the market even more confusing.

“New products pop up all the time,” says Mark Triplett, president of Mature Markets at AMZ Financial Insurance Services in Des Moines, Iowa. “I’ve seen close to 10 new products in the last few months.”

For instance, Allianz Life Insurance Company of North America recently announced a new fixed-income annuity, the Essential Income 7, with an option for a lifetime payment called the Essential Income Benefit, which is available for an extra cost.

Annuities come in different forms and offer different kinds of riders for such needs as long-term health care or guaranteed income for life. Each rider carries an additional cost. Variable annuities have fees associated with them, as well as the cost of purchasing the product. To further complicate the situation, states have different regulations that apply to these products.

“What is often overlooked by advisors and their clients is that they are dealing with insurance companies for annuities. Our job as advisors is to understand what the insurance companies are legally obligated to do for our clients,” says Triplett.

Another factor that is often overlooked is that when a client has money in an annuity with guaranteed income for life, he or she can then invest more aggressively with the rest of the portfolio, adds Triplett.

Vince Oldre, an advisor with Secured Retirement Advisors in Minneapolis, says any advisor should start by looking at all income sources for their clients first and then consider annuities to fill the gaps.

“You should never put 100 percent of a client’s investments in annuities, but you should put some in annuities so you have protection for the principal,” Oldre says.

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