Series 26: Customer Suitability

Taken from our Series 26 Online Guide

Customer Suitability

When recommending a fixed annuity versus a variable annuity to a customer, a representative needs to know the customer’s risk tolerance. A fixed annuity purchaser values dependable payments for life over a high rate of return. A variable annuity is for those who are willing to endure greater risk for the possibility of higher earnings.

Deferred annuities may have long surrender periods, which makes them less suitable for people who may need access to their funds soon, such as retirees. Annuities may be appropriate for customers who want to be assured of a death benefit. In addition, the IRS allows the earnings from an annuity to grow tax-free, so annuities can be good retirement vehicles. That said, contributions to traditional IRAs and 401(k) plans reduce one’s taxable income, a feature that most annuities do not offer. So a representative should make sure that a cust

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