VA Living Benefits Reviewed in New Guide

"Something that's attractive for growth," she warned, "can be trouble when withdrawing." Others, she added, have generous opportunities, "but not guarantees," for growth in income once the client begins to withdraw funds. If the client is in her sixties when she begins withdrawal, she "could live for 40 years. If there's no opportunity for a raise, it's not a good thing. Even Social Security gives raises."

Diamond also warned advisors to be very careful of the other withdrawal features, since these vary greatly. Some VAs, she said, have a "free withdrawal" provision of 10% or so per year; others have systematic withdrawal capabilities. These vary greatly on the impact they have on the income base. Some are pro rata, and others are not; "this gets back to suitability for the client."

While she acknowledged that it can be very difficult to anticipate what a client may need, she said advisors must attempt to do that. "Annuities are a fantastic tool, but they're a tool, not a solution to everything," she cautioned. "Don't tie up everything in an annuity, because if the client needs money it could jeopardize the contract. Have other places for clients to take lump sums in case they need it. They always say they won't, but they do."

She told the story of a client that had called her around the holidays, "needing" to purchase a sports car for his wife for Christmas. "That's the word he kept using, 'need,' " she stressed. No matter what she said to dissuade him, in the end he withdrew the money and jeopardized the contract when he took out more than it allowed. "I think he was a bad boy," she confided. "Unexpected things can happen." Advisors, she said, need to be prepared.

A further piece of advice Diamond gave was this: "If you fall in love with an annuity company and their guarantees, talk to their competitors and ask them to poke holes in it." At any given time, she added, she works with three companies and challenges them to prove which is best. It pays off; she explained that good wholesalers will tell her if they're not the best choice for an older client or for another set of circumstances, and sometimes several wholesalers will come in together when she has to decide where to place a large amount of money for a client and they have what amounts to a brainstorming session. "That's very helpful to me," she said.