That Gut Feeling About Annuities? Trust It.
You know the moment—you’re shown an annuity, and something inside you hesitates. It sounds safe, it sounds certain—but something about the pitch doesn’t sit right. Maybe it’s the jargon, maybe it’s the pressure, or maybe it’s just that you didn’t come in asking for it in the first place.
That instinct is worth paying attention to. More often than not, your gut is picking up on the truth: this recommendation might have more to do with the advisor’s incentive than with your plan.
We believe affluent clients deserve transparency and control, not a sales pitch dressed up as “safety.”
Suitability isn’t the same as “best”
Annuities often clear what’s called a “suitability test.” That means the contract can be justified for someone like you—it fits your risk profile and financial picture well enough to check a compliance box.
But suitable is not the same as best. Suitability leaves plenty of room for products that pay the advisor more, tie up your money longer, or load on fees and restrictions that aren’t necessary. When you hear, “It’s suitable for you,” remember that may simply mean, “we can justify this sale.”
Where conflicts creep in
Think about the incentives at work. Advisors who earn a commission up front have a reason to push products with big payouts. Sales bonuses and product quotas tilt recommendations toward the strategies that are most profitable for the firm—not necessarily the ones that are most effective for you.
Layer on the complexity of riders, caps, spreads, and participation rates, and suddenly the math gets murky. That fog isn’t accidental; complexity makes it harder to see what you’re really paying and what you’re truly getting. And once you sign, flexibility often disappears. Many annuities limit annual withdrawals or impose steep penalties if you want out early.
“But guarantees!” At What Cost?
The word “guarantee” is powerful. Who wouldn’t want steady income or protection from loss? But your hesitation when you hear it is justified—because guarantees are never free.
What’s often overlooked is that you can achieve many of the same outcomes with far simpler tools. A carefully built CD or Treasury ladder can cover known cash needs with full transparency. A core bond portfolio can provide income and stability without locking you into surrender schedules. For longer horizons, disciplined rebalancing of equities and bonds can manage both growth and downside risk.
Spot the Script
One of the most common industry lines is: “Every client should have their essential expenses covered by guaranteed income.” On the surface, it sounds sensible—who wouldn’t want peace of mind knowing their basics are covered? But in practice, this phrase is often used as a gateway to sell annuities, whether or not they’re truly the best fit.
You’ll hear it framed as “This is your sleep-at-night money,” or “Let’s build a floor first.” Sometimes it’s pitched as “You can’t lose principal and still get market upside.” Each version is a sales script designed to make a complex product feel like common sense.
Guarantees always sound comforting, but that hesitation you feel is a reminder: it’s critical to understand the cost, the trade-offs, and the fine print before accepting them as the obvious answer.
Test simpler fixes first:
Annuities are among the most restrictive investments you can make. Once you commit, your money is often locked up with surrender penalties and limited withdrawal options. That’s why they should only be considered when simpler, more flexible strategies cannot get the job done.
In reality, there are often straightforward ways to reach the same goals—income you can count on, stability through market swings, and the peace of mind that essentials are covered. Sometimes it’s making the most of benefits you already have, like Social Security. Other times, it’s about structuring cash to match your actual spending needs, or building a bond portfolio that supports the near-term while leaving flexibility for the future.
We believe the burden of proof is on the annuity. If a simple, transparent strategy can solve the problem, that’s where we start. An annuity should only enter the conversation when every straightforward solution has been ruled out.
Our stance
At Sevey Wealth, we’re an advice-only, flat-fee firm. We don’t sell products or take commissions, so our incentives don’t change based on what you buy. That frees us to recommend what’s best for you—even when the answer is “do nothing,” or “use the simple option you can understand in one page.”
If you’ve been told you “need guaranteed income for essential expenses” or already own an annuity, don’t ignore that first gut reaction. Send us the illustration. We’ll price the promise, translate the fine print, and do the math—so you can decide with eyes wide open.
