Are Proprietary Annuities a Good Thing?

Shawn Plummer

CEO, The Annuity Expert

The short answer is no.

Proprietary or “exclusive” annuities are a bad thing for the annuity industry as a whole, and I’m going to tell you why.

The annuity industry is structured similarly to the pharmaceutical industry in that there are multiple components from insurer to consumer.

Annuity Industry Structure

Insurance Company – The insurance company (insurer) develops and underwrites their products.

Field Marketing Organization aka FMO aka IMO aka NMO (Wholesaler/Distributor) – The FMO is the marketer and distributor of the insurer’s annuity products. The FMO is also responsible for recommending and educating the advisor or agent in annuity products that are in the best interest of the advisor’s clients.


After a consumer visits their financial advisor (who sells annuities) about their retirement plan, the advisor contacts their FMO to recommend the best annuity product for the client’s retirement plan. The FMO recommends an annuity product and educates the advisor on how the annuity works.

Most independent advisors have to go through an FMO to sell annuities.

A typical FMO represents 40+ annuity and life insurance companies. There are hundreds of FMOs all representing the exact same insurance companies.

I’m one of these guys.

Financial Advisor/Insurance Agent – Well we know who the agent or advisor is.

Selling Proprietary Annuities

Insurance companies creating proprietary annuities specifically has been an ongoing trend going back to 2006.

When I say “proprietary” I refer to insurer’s creating exclusive products with “limited distribution” to one or a very small handful of FMOs.

This means every other FMO does not have access to these products.

Ok so why is this a bad thing?

Annuity Product Development

The first thing you should know is that this is a tactic used by the insurance company to dramatically grow a new product in a short amount of time.

In a few cases of “proprietary gone bad”, annuity companies have overpromised and overpriced on their exclusive annuity product to the point of stop production (with little to no notice) because they could not fulfill their guarantees on future business.

Currently, there are some proprietary annuity products that have become real “duds” in terms of performance leaving consumers and advisors upset.

This is a huge red flag.

FMO Leverage

Secondly, proprietary distribution is a tactic by FMOs to dramatically increase their sales by marketing the gimmick of “exclusivity”. Let’s call this leverage.

Thirdly the advisor or agent will want to sell the product because of the exclusivity, and human nature tells us that “we want what we can’t have”.

On a positive note, the insurance companies typically pay the advisor a fixed commission percentage which leaves the advisor not driven by compensation. This is a good thing.

With that said, the annuity company pays the FMO a higher commission on their exclusive annuity than most other annuity companies which is a negative attribute.

Why is this a negative attribute? Because the FMO’s product recommendation to the advisor is now driven by exclusivity (leverage) and compensation.

The FMO will recommend this exclusive annuity over and over again whether this the best product for the client or not for those reasons.

One of the FMO’s primary role in the insurance industry is to recommend the best products to the financial advisor in the best interest of the advisor’s client, not the FMO’s.

So how does one recommend the best products when exclusivity and higher revenues cloud their judgment?

The answer is they don’t.

Getting back this trend, how do we avoid it?

Avoiding a Negative Trend

For Financial Professionals

First I want to point out that there are “only 100 pennies in a dollar”.

In terms of creating an annuity, there is not one annuity that outperforms all the other annuities in all aspects.

If designed efficiently, the annuity will lack in one or more areas (features, bells, whistles, commissions) to outperform other annuities in another area.

For example, the Safe Income Plus annuity by Fidelity & Guarantee has really good income benefits compared to other annuity’s income riders, but the accumulation potential is terrible.

If you’re a financial professional, ask for a quote from your current FMO, and get a 2nd quote from an independent FMO.

I recommend working with an FMO that is not owned by an annuity company.

When I started in the annuity industry 10 years ago, I worked for an FMO that was owned by a massive insurance company.

We represented 12 different annuity companies at the time.

No matter how many other annuity companies we represented, our owners wanted their product sold first no matter if it was the best product or not for the client.

For Consumers

If you’re a consumer, get a few annuity product options every single time. If it were me, I would get annuity recommendations from 3 different sources, and pick the best option for myself just to ensure (no pun intended) I was getting the best solution for my retirement.

Find out all the negatives within the annuity recommended.

You’d be surprised how often an annuity is sold, and you (the consumer) could’ve received more benefits with a better-rated annuity company.

Research is crucial in the product recommendation especially if you’re on a fixed income for your retirement.


It’s not about whether the “exclusive” annuity is a bad product. It’s about recommending the best annuity to the individual …every single time.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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