Do Financial Advisors Need Annuity Suitability Training?

Annuities may prove a valuable addition to a client’s portfolio if they’re interested in guaranteed income for retirement. The National Association of Insurance Commissioners (NAIC) requires insurers and agents who recommend annuities to consumers to ensure that they’re aligned with client needs. Annuity suitability training, or equivalent best interest training, is required in every state for financial advisors who sell annuity products.

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Understanding Annuity Suitability Training

The NAIC introduced the Suitability in Annuity Transactions Model Regulation in 2003, as part of the organization’s mission to inform and protect consumers who purchase annuities. The model has been revised several times.

In 2020, the NAIC revised the suitability model to incorporate a “best interest” standard. This change requires that any annuity recommendations made to clients must be in their best interest, rather than just being “suitable” for their needs. Additionally, the client’s interests must always be prioritized over any financial interests an insurance agent or carrier may have in the transaction. ¹

Both the original and revised NAIC models impose a four-credit training requirement on insurance agents, brokers and other individuals who sell annuities. The difference between the two models lies in the ethical standard that’s applied: suitability vs. best interest. Both current and new agents and brokers are required to complete an approved best interest training course.

For a limited time, agents who had already completed annuity suitability training had the option to complete a one-credit best interest training course to meet the revised requirements. However, the deadline to do so expired in most states between 2021 and 2025.

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Who Needs Annuity Suitability Training?

To recap, do advisors need annuity suitability training? Under the old standard, they would have needed to complete the training if they were licensed to sell annuities. The new rules require advisors who are licensed insurance agents to complete best interest training to satisfy the NAIC’s revised regulations.

Annuity Suitability Training Requirements by State

All 50 states have adopted the NAIC’s revised best interest standard of conduct, though they didn’t do so all at once. ² Most states allow reciprocity, meaning that if you’re licensed to sell annuities in multiple states, you can complete the training under one state’s standards and have it apply to all of them.

California is unique in that it does not allow reciprocity. Additionally, the state Department of Insurance imposes an eight-credit training requirement instead of four, along with an additional four-credit continuing education (CE) requirement every two years. ³

 In terms of what annuity best interest training covers, it extends to:

• Types of annuities and their classifications
• Identification of the parties of an annuity
• Annuity contract features that are product-specific and what they mean to purchasers
• Annuity taxation (for both qualified and non-qualified annuities)
• Common uses for annuities
• Best practices and standards of conduct for selling annuities

Again, the purpose of this training is to ensure that anyone who sells annuities does so with the best interests of their customers or clients in mind. Keep in mind that the best interest standard imposed by the NAIC does not equate to a fiduciary status. If you’re a registered investment advisor (RIA), then you must follow a fiduciary standard and act in the best interests of your clients at all times.

Where to Find Annuity Suitability Training

If you need to complete best interest training to satisfy NAIC requirements, your state’s Department of Insurance should be able to tell you which companies are approved where you hold your license. To make your search easier, here are a few companies you may consider to complete the required training.

Before purchasing a training course, verify that it’s approved in your state. Consider how long you’ll have access to the study materials, how many times you can retake any required tests and the cost. As you can see from the options shared above, the training isn’t overly expensive and many providers offer discounts if you purchase multiple CE courses together.

Frequently Asked Questions

Bottom Line

Annuity suitability training is a requirement for advisors who want to sell annuities to clients. Under the 2020 revised rules, the focus of this training is now on following a best interest standard when recommending and selling annuity products. If you’re considering an insurance agent license to sell annuities, take time to research training providers authorized in your state so you can complete the coursework promptly.

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• What does it take to get an insurance license? State requirements vary, but generally, you’ll need to complete approved licensing education, pass a state licensing exam and successfully complete a background check. The process can take one to two months to complete with dedicated study, and you may consider it a worthwhile investment if you’d like to expand your service offerings to include insurance and annuity products.

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