Annuity suitability paperwork: what the reviewers actually flag

Every annuity application goes through a suitability review, and a surprising number get held. The reasons are consistent enough to list.

Percentage of liquid net worth. Most carriers want to see the annuity premium as a modest share of liquid assets, and they'll kick back anything that looks like the client is putting most of what they have into a product with surrender charges. Write the other assets on the form accurately. "Other investments: $0" on a client who owns a paid-off house and has a pension reads as either a lie or a problem.

Source of funds. Replacing another annuity triggers a replacement review and a comparison of surrender charges, bonuses and income riders. Moving 401(k) money triggers questions about the plan's own options. Say where the money is coming from and why the move helps.

Age and surrender period. A 10-year surrender schedule on an 80-year-old is a hard sell to a reviewer. Match the term to a plausible horizon.

Income needs. If the client's stated monthly need exceeds their stated income, the reviewer will want to know how the annuity solves that and not worsens it.

Reviewer notes that get apps approved. A short, specific rationale: "Client has $410,000 in liquid assets, pension covers expenses, this $120,000 premium provides guaranteed income starting at 72 and replaces a CD earning 1.5 percent." Three sentences that show you thought about it.

The one that ends contracts. Changing the client's answers to get past the review. Carriers audit, and they compare to earlier applications.

What's your carrier's typical turnaround on suitability, and what's the most common reason you've been kicked back?