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That depends because brokers usually are on commission levels based on production. However, your commission doesn’t effect what you put into the annuity. It comes off the fees that the company will charge you anyway just for doing business whether a broker is involved or not. Simular to Real Estate.

LONG STORY SHORT: Average commisions on a variable annuity - 3%-3.5%, on a fixed or equity-indexed annuity - 8%-10%. But really, don’t worry about the agent’s commission, because it doesn’t come from your money directly. Instead look for the fees associated with the product, which can be found in the prospectus, or look for the oppurtunity cost you can be missing out on if the investment doesn’t let you have full participation in the market.

DETAILED ANSWER: With an annuity, the commissions aren’t taken out of your principal (like the 5.75% sales charge on A share mutual funds, for example), they’re taken from the misc. fees underlying the account. It can be kind of complicated, so allow me to elaborate.

Say on a Variable Annuity, for example, the underlying fees total up to 1.2% (this is a pretty typical cost not including the fund expenses - unless you add different riders or death benefits). This 1.2% is not a charge that you see come out of your account. If you put in $100,000, you will see $100,000 go in. However, over one years time, assuming you get a 0% gross rate of return, your account will go down to $98,800, a net return of -1.2%. Or said another way, if you invest everything in the S&P 500 and the S&P goes up 11.2%, your net rate of return would be 10% (11.2% minus 1.2% annuity fee. This does not take in to account the fund’s expenses). Now, all of that 1.2% goes to the company to allow for marketing, overhead, profit, and the agent’s commission. It’s near impossible to trace exactly how the commission is taken out of the 1.2%, so rather than worry about the commission, just pay attention to those underlying fees.

For equity index annuities, which is what Allianz is known for, there are no fees, per se. Index annuities usually have a participation rate and a cap rate, which severely dilute the returns you see from certain indexes (the S&P 500 being the most popular). So if the S&P goes up 10%, and your participation rate is 80%, your return would be reduced to 8%. THEN, if your cap rate is 7%, even though you earned 8% with the participation, 7% is the max you can earn. Leaving behind a spread of 3%, which goes to the company (bear in mind this not only means profit for the company, but also the premium you pay for guarantees against loss in the market). Even though there are no fees, these are considered more expensive in my book, because they offer less participation in the market, while the whole point of investing in the market is to maximize returns.

WHEW… so I got a little carried away there, sorry. But hopefully you see now how these work and have a better idea of the cost structure! Good luck!

Why does it matter? Annuities are the most transparently illustrated savings or investment products there are. Whether the returns you’re shown are actual or hypothetical, they are illustrated completely net of all fees and expenses. Compensation to the agent, broker, or advisor is not transaction-based, so there is no incentive for him to engage in unnecessary activity on the account; and his compensation does not affect your outcome. Quite frankly, concern yourself with what is in it for you, not your broker.

The real issue here is that all too often, people don’t deal on a professional level with their financial planning. They do business with their friends or relatives who are “in the business.” They buy life insurance and investment products from the same guy they buy their car insurance from. Instead of using bona fide financial professionals, they deal with salespeople. If you can’t operate with your financial guy with the same level of trust and confidence that you do your physician, it’s time you changed either your mindset, or your advisor.

You wouldn’t ask your doctor about his compensation. Your advisor’s is none of your business either.

Broker commissions on variable or equity indexed products can range anywhere from 2-8%, but like most people have mentioned, that money never comes directly out of your pocket. That being said, variable annuities typically have much higher fees associated with them, than fees associated with fixed or equity indexed products. In your case, you should probably spend more time looking at the different fees and surrender charges.

You can open an annuity with a onetime deposit (single premium) or can add money on a regular basis (flexible premium). Variable annuities are decent if you want investment flexibility, but your gains are subject to how the stock market is doing. Equity indexed annuities allow you to enjoy in some of the gains of the market, while having no downside risk should the market drop. Some equity products even pay a minimum guaranteed rate. Allianz has some decent products that we use weekly.

If you wish, our company has a free report entitled “Confessions Of An Annuity Agent (How agents really make their money)” which answers your question in detail. I’d be happy to send a copy if you email me(annuityexpert@yahoo.com).