How do I Buy a Fixed Annuity

The basic concept and structure of fixed annuities hasn’t really changed since they were first introduced in this country two centuries ago. While the concept of an annuity  remains simple, its structure is somewhat more complicated than that of other fixed yield vehicles.  So, they do require an understanding of their unique characteristics, the contract obligations of the insurer and the owner, as well as the tax implications before a decision to purchase one can be made.

With that understanding, the next issue becomes how to go about buying a fixed annuity. Annuities can be purchased in a number of different ways – through a representative of an annuity provider, from a financial advisor, and directly from the annuity provider. The  determination of how to buy one comes down to a person’s decision making style. 

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Decision Making Styles

Investors generally fall into three categories in terms of decision-making style:  1) Self directed 2) Advice directed and 3) Advisor directed.  Self-directed investors tend to act on their own without the benefit of advice.  They will conduct their own research and make decision independently.  Advice-directed people will seek on the advice of a planner, advisor or representative and then act independently.  Advisor directed investors rely on the advice of an advisor and allow the advisor to act on their behalf. Of course, there are variations in between each of these.

There are downfalls with each of these styles. The self-directed person may feel as though they don’t need to get involved with a person who may be just trying to sell them something. However, if they’re not very thorough in their own research, they could reach a poor decision.  Conversely, the advisor-directed person feels as though they are in a trusted relationship and can count on the advisor to act appropriately on their behalf. While there may be some peace-of-mind for the advisor-directed investor, they are paying handsomely for  it.

Many people fall into the middle category where they will use the information and advice provided by financial representative as part of their research gathering effort. They may or may not purchase the investment through that representative, but the advice they were given will be applied to their final decision.

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How to Buy an Annuity Based on Your Decision Making Style

Self Directed

Simple.  You can buy direct from an annuity provider. This is made easier by virtue of the internet. All of your research can be conducted using educational and comparison sites.  You will be able to compare the financial ratings as well as the product offerings of top annuity providers.  Once you have narrowed down your choices you can request additional information directly from the providers. Just be aware that you will likely be contacted by a representative of the provider.  Some providers do allow for direct purchase on line which means there is no middleman or salesperson involved.


Advice-directed investors tend to seek the advice of advisors and financial reps who serve to assist in the provider selection process. Independent financial advisors usually have access to a number of different providers so, they act to match the investor to the most appropriate fixed annuity.  The decision as to whether the investor will work through the advisor to purchase the annuity of act on his own to buy one directly, is typically going to be based on the relationship the advisor was able to build with the investor.  If the advisor demonstrated professionalism, integrity and a client-centric process, the investor is more likely to work with the advisor. 

Advice-directed investors need to do some advanced research to be able to select a reputable, professional advisor.  The best method of selecting an advisor is to seek referrals from trusted friends or relatives.


Advisor-directed investors tend to already have an established, trusted relationship with an advisor who has taken the time to get to know the investor’s financial situation and who truly understands his needs, priorities and preferences.  Often times, it is the advisor who will recommend an investment purchase based on his understanding of the investor’s situation.  If an advisor-directed investor approaches his advisor on the validity of a fixed annuity purchase, the advisor will either confirm its validity or help the investor understand why it wouldn’t be in his interest to make the purchase.

So, which category are you? If you are self-directed, and willing to assume all of the responsibility for the purchase decision you can go direct to the provider. If you are advice-directed, you should work on getting at least three referrals and schedule some meetings with an independent advisor. If you’re advisor-directed, you should call your advisor.

In the end, no matter how you buy a fixed annuity, it is the responsibility of all investors to fully understand the nature of the investment, how it works and to confirm its suitability. 

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