Annuities with DPL's David Lau
Updated: Jan 20
RL099 – Annuities with DPL's David Lau
In today's episode of the Retirement Lifestyle Show, Erik Olson and Adrian Nicholson talk to David Lau, the CEO and Founder of DPL Financial Partners, an RIA insurance network that brings fee-based insurance solutions from a variety of the nation's top carriers to RIA practices. They explain what annuities are, the emergence of commission-free financial products, and how interest rates affect annuities.
David Lau is widely recognized as an innovator and disruptor in the financial services industry. Most recently, he is Founder and CEO of DPL Financial Partners', a privately held financial services firm that specializes in development and distribution of commission-free insurance and annuities for Registered Investment Advisors (RIAs) and individuals. David is a sought-after speaker, commentator, and adviser to financial journalists, insurance carriers, RIA firms, fintech providers and others in the financial services and fintech industries. His work has received coverage in The Wall Street Journal, The New York Times, Barron's, CNBC, Wealth Management, InvestmentNews, and other financial media where he provides insights on industry products, players, trends, and best practices.
Earlier in his career, David served as Chief Marketing Officer at E*Trade Bank, and its predecessor Telebank, which was the nation’s first internet bank, and served as Chief Operational Officer for Jefferson National, where he led marketing, sales, and operations, and was pivotal in developing the industry’s first flat-fee variable annuity product.
[05:00] Getting to Know David Lau
[08:01] Commission-free Financial Products
[12:36] The Use of Technology in the Financial Industry
[16:50] Product Versus Outcome When Selling Insurance Products
[18:03] What are Annuities and How Do They Work?
[25:20] Annuities and Bond Interest Rates
[28:03] Why Interest Rates Are Often on the Lower End of the Spectrum
[33:20] Risk Pooling and Annuities
[36:50] People Who Have Annuities Live Happier Retirements
[39:00] Guaranteed Income From Annuities and the License to Spend
[45:30] Ordinary Income and Tax Deferment
[47:30] Banks Versus Annuity Providers
[49:40] Parting Thoughts
For more links and the full show notes keep scrolling down!
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Full Show Notes:
What are Annuities and How Do They Work?
Annuities are contracts between an individual and an insurance company. A person makes single or multiple payments to an insurance company and, in return, receives regular disbursements, beginning either immediately or at some point in the future.
The primary goal of an annuity is the promise of a steady and consistent income stream, generally during retirement. What's appealing about these contracts is that the funds grow on a tax-deferred basis and can only be withdrawn without penalty after age 59½. Further, most aspects of an annuity can be tailored to the specific needs of the buyer. For example, an individual can choose between a lump-sum payment or a series of payments to the insurer. You can also choose when you want to start receiving payments, i.e. immediately or during retirement. An annuity that starts paying out at a predetermined date is called a deferred annuity, while the ones that begin paying out immediately are referred to as immediate annuities.
Another thing you need to understand is that the disbursement durations can also vary. A person can settle on a 30-year payment period while another person would want payments for the rest of their life. Settling on lifetime payments can lower the amount of each disbursement, but it also helps ensure you don't run out of money during retirement.
Non-Commissioned Financial Products
One of the major reasons why financial products like life insurance policies are extremely expensive is the existence of middlemen who get paid through commissions. Brokers, wholesalers, and intermediaries who sell these products on behalf of the parent company need to be paid, and sometimes it can be a lot of money. And although these individuals might convince you that their commissions don't come directly from you signing up, they actually do. According to David, one of the easiest ways to get more people signing up for financial products is to remove the middlemen. This will lower the product prices and, two, get more fiduciaries signed up, who in turn help the buyers get the most out of these products.
All opinions expressed by podcast hosts and guests are solely their own. While based on information that they believe is reliable, neither Arete Wealth nor its affiliates warrant its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only, and should not be regarded as specific advice or recommendations for any individual. Before making any decisions, consult a professional.