Fee-Based vs. Commission-Based Annuities: Which Is Right for You? (2026)

Fee-Based vs. Commission-Based Annuities: What’s the Difference?

Commission-based annuities pay your agent an upfront commission, typically 2-8% of your premium, built into the product’s cost structure, so you never see a separate bill. Fee-based annuities remove that commission and instead charge an explicit annual advisory fee, typically 0.5% to 1.5% of the contract’s value, usually through an RIA or fee-only advisor. Commission-based is usually cheaper for a long, hands-off hold (20+ years); fee-based is usually cheaper for a shorter hold where you want ongoing advice. The rest of this guide breaks down the cost math, the regulations behind each model, and how to decide which one fits you.

The annuity industry is experiencing a seismic shift. Americans bought $385 billion in annuities in 2023, breaking the previous year’s record by more than 20%. But beneath these impressive sales figures lies a fundamental transformation in how annuities are sold and how advisors are compensated.

For decades, annuities have been sold exclusively on commission. Advisors received upfront payments (often ranging from 3% to 8% of your premium) built into the product’s cost structure. But a new model has emerged: fee-based annuities, where advisors charge an annual asset-based fee instead of taking commissions.

This shift isn’t just about compensation structures. It’s about transparency, fiduciary responsibility, and ultimately, your retirement security. Understanding the difference between these two models, and knowing which one serves your needs best, could save you tens of thousands of dollars over your lifetime.

In this guide, you’ll learn how fee-based and commission-based annuities work, how regulation has shaped the market, where each model can be cost-effective, and which questions to ask before choosing a product or advisor.

• How each compensation model works
• The regulatory evolution that made fee-based annuities possible
• Top companies and products in each category
• Real-world cost comparisons
• How to determine which model is right for your situation

Throughout, we compare a fee-based annuity vs. commission-based annuity to highlight trade-offs in cost, transparency, and flexibility. If you want the mechanics of specific product-level charges first, see our guide to annuity fees and commissions.

Understanding the Two Compensation Models

Commission-Based Annuities: The Traditional Model

For most of the annuity industry’s history, commission-based compensation has been the standard. Here’s how it works.

How Much Commission Do You Get for Selling an Annuity?

When you purchase a traditional annuity, your advisor or agent receives a commission payment from the insurance carrier. This commission is typically paid upfront, though some products include “trail” commissions, smaller ongoing payments for as long as you hold the contract.

Commission rates vary by product type:

• Fixed Annuities (MYGAs): 2-4% of premium
• Fixed-Indexed Annuities: 5-7% of premium
• Variable Annuities: 5-7% of premium
• Immediate Annuities: 2-4% of premium
• Deferred Income Annuities: 2-4% of premium

Many consumers ask how much commission an agent earns for selling an annuity. The answer depends on the product type, surrender period, and carrier, but the typical ranges above are a useful guide.

Where Does the Money Come From?

Here’s the critical point many consumers don’t understand: although you may not write a separate check for the commission, the carrier’s compensation costs are reflected somewhere in the product economics. Depending on the contract, this may show up through internal charges, surrender schedules, crediting rates, payout rates, rider costs, or other pricing trade-offs, including:

• Higher mortality and expense (M&E) charges
• Administrative fees
• Surrender charges that recoup the carrier’s upfront commission payment
• Reduced crediting rates or lower payouts

Who Sells Commission-Based Annuities?

Independent life insurance agents sell the majority of commission-based annuities, alongside:

• Independent insurance agents
• Broker-dealers and registered representatives
• Captive agents (working for one insurance company)
• Banks and credit unions
• Financial advisors who also hold insurance licenses

The Surrender Charge Connection

Surrender charges, penalties you pay if you withdraw money early, exist primarily to protect the insurance carrier’s commission investment. If a carrier pays your agent a 6% commission upfront but you cancel the policy in year two, the carrier loses money. Surrender charges, which typically decline over 5 to 10 years, recoup this cost. See our full breakdown of annuity surrender charges for how these schedules work.

Since commission-based fixed annuities (MYGAs) are the product type My Annuity Store shops for you, here’s a live look at where guaranteed rates stand today:

Fee-Based Annuities: The Emerging Alternative

Fee-based annuities represent a fundamental departure from the traditional model. Instead of embedded commissions, these products are designed for advisors who charge clients directly for their services. Choosing a fee-based annuity generally removes product-level commission structures and makes the advisory charge explicit.

How Fee-Based Compensation Works

With a fee-based annuity:

1. The annuity contract itself has no commission structure.
2. The advisor charges an annual fee, typically 0.5% to 1.5% of the annuity’s value.
3. This fee is deducted directly from the annuity contract (more on the tax implications later).
4. The fee continues for as long as the advisory relationship is maintained.

Key Structural Differences

Fee-based annuities are designed differently from their commission-based counterparts:

• No or minimal surrender charges: Since there’s no upfront commission to recoup, surrender penalties are eliminated or dramatically reduced.
• Lower internal expenses: M&E charges and administrative fees are typically 0.5% to 1% lower.
• Simplified features: Fewer “bells and whistles” that add cost without adding value.
• Institutional pricing: Access to pricing typically reserved for large institutional buyers.
• AUM-compatible structure: The annuity remains on the advisor’s books as billable assets under management.

Who Sells Fee-Based Annuities?

Fee-based annuities are primarily sold through:

• Registered Investment Advisors (RIAs)
• Fee-only financial planners
• Hybrid advisors who operate under both RIA and broker-dealer licenses
• Specialized platforms like DPL Financial Partners

The Transparency Advantage

The most significant benefit of the fee-based model is transparency. A statement can show the advisory fee as a visible charge, so a client can see what they are paying for advice and compare that cost with the services received. That clarity can also reduce uncertainty about whether a recommendation was influenced by product-level compensation.

The History and Regulatory Evolution of Fee-Based Annuities

The regulatory history matters because it explains why fee-based annuities became practical only recently. IRS guidance clarified how advisory fees may be deducted from certain non-qualified annuities, while federal and state regulators increased pressure for clearer disclosure and better alignment between recommendations and consumer interests.

Early Challenges: The IRS Barrier

For years, financial advisors who wanted to charge asset-based fees on annuities faced a significant obstacle: the Internal Revenue Service.

The problem was simple but serious. One of an annuity’s primary benefits is tax-deferred growth. You don’t pay taxes on gains until you withdraw money. But the IRS viewed advisory fees paid from an annuity as a distribution, which would trigger:

1. Immediate taxation on the withdrawn amount
2. A 10% early withdrawal penalty if the annuity owner was under the age of 59½
3. Potential loss of tax-deferred status if fees were not structured properly

This tax treatment made fee-based annuities impractical. Why would an investor accept annual taxation on advisory fees when they could buy a commission-based product with no ongoing tax consequences?

The industry needed clarity, and in 2019, that clarity finally arrived.

The IRS Private Letter Rulings: The 2019 Breakthrough

What Is a Private Letter Ruling?

A Private Letter Ruling (PLR) is a written statement issued by the IRS in response to a taxpayer’s request for guidance on a specific tax situation. PLRs are binding only for the taxpayers who requested them. They cannot be cited as legal precedent by others. However, they provide valuable insight into the IRS’s thinking and are often adopted as industry practice.

The Game-Changing Rulings

Starting in 2019, the IRS issued a series of PLRs that revolutionized fee-based annuities. These rulings determined that investment advisory fees taken directly from a non-qualified, fee-based annuity do not constitute a taxable distribution under Internal Revenue Code Section 72(e).

Key PLRs include:

• PLR 201945001 (Nationwide)
• PLR 202114006 (Pacific Life)
• PLR 202431004 (Various carriers)

The Five Critical Requirements

The IRS established specific conditions that must be met for advisory fees to be withdrawn tax-free:

1. Maximum Fee Limit: The advisory fee cannot exceed 1.5% annually of the annuity’s cash value.
2. Contract Type: The annuity must be a “fee-based” or “no-load” non-qualified annuity, not a commissioned product.
3. Purpose Restriction: The fees must be used exclusively to pay for investment advice related to that specific annuity contract.
4. Written Authorization: The annuity owner must provide written authorization for the direct fee deduction.
5. Contract Liability: The annuity contract itself must be liable for paying the fees to the advisor, rather than the owner paying them directly from other sources.

Impact on the Industry

Prior to these rulings, withdrawing advisory fees directly from an annuity would have triggered taxes and potentially a 10% penalty for early distribution. The PLRs removed this barrier, making fee-based annuities economically viable.

Important Limitations

It’s crucial to understand that these are Private Letter Rulings, not official IRS regulations or revenue rulings. They apply specifically to the taxpayers who requested them. However, major insurance carriers including Nationwide, Pacific Life, Lincoln Financial, and others have structured their fee-based products to comply with these PLR requirements, effectively making this industry standard.

The DOL’s Best Interest Contract Exemption

While the IRS was addressing tax treatment, the Department of Labor was tackling a different question: when is it appropriate for advisors to receive compensation that might create conflicts of interest when advising retirement accounts?

Origins: The 2016 Fiduciary Rule

In April 2016, the Department of Labor issued a comprehensive rule that would have dramatically expanded the definition of “fiduciary” under the Employee Retirement Income Security Act (ERISA). Under this rule, virtually anyone providing investment advice to retirement plans or IRAs would be considered a fiduciary.

The problem: many common compensation practices, including commissions on annuities, create conflicts of interest that violate ERISA’s prohibited transaction rules. To address this, the DOL created the Best Interest Contract Exemption (BICE).

What BICE Required

BICE allowed advisors to receive variable compensation, like commissions, when advising retirement accounts, but only if they met strict conditions:

1. Fiduciary Acknowledgment: The advisor and financial institution must acknowledge in writing that they are fiduciaries under ERISA.
2. Written Contract: For IRAs and non-ERISA plans, a written contract must be provided to the retirement investor before executing the transaction.
3. Best Interest Standard: The advice must reflect the care, skill, prudence, and diligence of a prudent person, must not place the advisor’s or firm’s interests ahead of the customer’s, and must avoid misleading statements.
4. Reasonable Compensation: All compensation must be reasonable.
5. Policies and Procedures: The financial institution must adopt policies designed to mitigate conflicts of interest.
6. Disclosure Requirements: Extensive disclosures about fees, conflicts, and compensation structures.

The Rule’s Tumultuous History

The 2016 fiduciary rule and BICE faced immediate opposition from the financial services industry. After a series of legal challenges, the rule was partially implemented in 2017, a federal appeals court vacated the rule in 2018, the DOL issued new guidance in 2020 aligned with Regulation Best Interest, and in 2024 the DOL attempted a new “Retirement Security Rule” with similar provisions. A Texas federal court stayed the 2024 rule, and the DOL’s appeal is pending as of early 2025.

BICE’s Lasting Impact

Despite its uncertain legal status, BICE fundamentally changed the conversation about annuity sales. It elevated the importance of fiduciary advice in retirement planning, created demand for compensation models that minimize conflicts, accelerated the development of fee-based annuity products, and established disclosure standards that many firms continue to follow voluntarily.

NAIC Model Regulation #275: Suitability in Annuity Transactions

While federal regulators focused on fiduciary standards, state insurance regulators took a different approach through the National Association of Insurance Commissioners (NAIC).

Purpose and Scope

NAIC Model Regulation #275, titled “Suitability in Annuity Transactions,” was designed to protect consumers from abusive and predatory practices by life insurance and annuity producers. Unlike BICE, which applies to ERISA plans and IRAs, the NAIC model applies to all annuity sales, regardless of account type.

Key Requirements for Producers

The regulation requires insurance agents and producers to:

1. Have a reasonable basis for recommendations, confirming the consumer has been reasonably informed of the product’s features, would benefit from certain features (such as tax deferral, death benefits, or annuity payouts), and that the annuity fits the consumer’s suitability information, including financial status, tax status, investment objectives, time horizon, liquidity needs, and risk tolerance.
2. Collect and document suitability information about the consumer’s financial status, tax status, investment objectives, and other relevant information.
3. Complete product-specific training before selling annuities.
4. Operate under supervision requirements, since insurance companies must set up a system to supervise producer recommendations.
5. Meet disclosure obligations, providing consumers with clear information about product features, benefits, and limitations.

State Adoption

The NAIC model regulation is not federal law. Each state must adopt it individually, and states may modify the model when doing so. As of 2025, all 50 states have adopted some version of annuity suitability requirements, though specific provisions vary.

2020 Update: Best Interest Standard

In 2020, the NAIC updated Model #275 to include a “best interest” standard that goes beyond simple suitability. Under the updated model, producers must act in the best interest of the consumer, make recommendations without placing their personal interests ahead of the consumer’s, and exercise reasonable diligence, care, and skill. This update brought state insurance regulation closer to, though not identical with, the fiduciary standard.

Comparing BICE, NAIC Suitability, and the RIA Fiduciary Standard

Understanding the differences between these regulatory frameworks is crucial for consumers trying to navigate annuity purchases.

What This Means for Consumers

The regulatory landscape is complex, but the trend is clear: greater protection and transparency for consumers.

• Clients working with an RIA have the strongest protections: an ongoing fiduciary duty.
• For a 401(k) rollover into an IRA used to buy an annuity, BICE protections may apply if the rule survives legal challenges.
• Regardless of account type, state suitability regulations provide a baseline level of protection.
• Broker-dealers must meet the Reg BI best interest standard.

The bottom line: fee-based annuities naturally align with the fiduciary standard because they eliminate the commission-based conflicts that these regulations attempt to manage. This is one reason fee-based products have gained traction among RIAs and fiduciary advisors.

The Pros and Cons: A Detailed Comparison

Now that the regulatory landscape is clear, here are the practical advantages and disadvantages of each compensation model.

At a glance, fee-based annuities are generally strongest when the buyer values ongoing fiduciary advice, integrated portfolio management, and lower product-level expenses. Commission-based annuities are generally strongest when the purchase is simple, the holding period is long, and the buyer doesn’t need continuing advisory service on the contract.

Fee-Based Annuities

Advantages

1. Complete transparency on advisor compensation. With fee-based annuities, the client knows exactly what they’re paying the advisor. It appears as a line item on the statement, typically quarterly, showing the dollar amount deducted. There’s no guessing, no embedded costs, no hidden compensation.

2. Eliminates commission-based conflicts of interest. When advisors earn the same percentage regardless of which product they recommend, the temptation to recommend higher-commission products disappears.

3. Aligns with the fiduciary advice model. Fee-based compensation is the standard for fiduciary advisors. It aligns the advisor’s interests with the client’s: when the account grows, the advisor earns more; when it shrinks, the advisor earns less.

4. Assets remain billable AUM. For advisors who charge asset-based fees, keeping annuities on their books as managed assets is crucial. With traditional commission-based annuities, those assets are often “held away,” meaning the advisor receives a one-time commission but loses ongoing management fees. Fee-based annuities solve this problem, which is why RIAs have embraced them.

5. Lower internal product costs. Because there’s no commission to recoup, fee-based annuities typically have lower mortality and expense (M&E) charges (often 0.50% to 1.00% less), reduced or eliminated administrative fees, more competitive crediting rates for indexed annuities, and better payout rates for income annuities.

6. No or minimal surrender charges. Traditional annuities often have surrender charges of 7-10% in the first year, declining over 7-10 years. Fee-based annuities typically have no surrender charges or very short surrender periods (1-3 years), giving much greater liquidity.

7. Better for clients needing ongoing advice. Anyone wanting comprehensive financial planning, regular portfolio reviews, and ongoing guidance is paying for continuous service, not just a one-time transaction.

Disadvantages

1. Ongoing annual fees can exceed a one-time commission. This is the big one. Consider the math: a commission-based sale might cost 6% upfront, or $30,000 on a $500,000 annuity, as a one-time cost. A fee-based relationship at 1% annually costs $5,000 per year. After six years, the cumulative advisory fees equal the upfront commission in this simplified example, before considering investment performance, changing account value, tax treatment, internal product costs, or the value of ongoing advice. After 20 years, the advisory fees total $100,000 versus a $30,000 embedded commission assumption. For an annuity held 20-30 years with minimal need for ongoing advice, the fee-based model may cost significantly more.

2. Limited product selection. Not all insurance carriers offer fee-based versions of their products. As of 2025, roughly 20-30 fee-based annuity options exist versus hundreds of commission-based products. A specific feature or rider may not be available in a fee-based format.

3. Requires a relationship with a fee-based advisor. A fee-based annuity can’t simply be bought directly. It requires working with an RIA or fee-based advisor, which often means account minimums (often $250,000 to $500,000), an ongoing advisory relationship, and advisory fees on other assets as well.

4. May not be cost-effective for “set it and forget it” buyers. For a fixed annuity or immediate annuity that requires no ongoing management, paying annual advisory fees doesn’t make sense. That’s paying for a service that isn’t being used.

5. The 1.5% IRS limit. Those IRS Private Letter Rulings cap advisory fees at 1.5% of the annuity’s value. An advisor already charging 1.5% on other assets is at the limit, and charging more requires a different fee structure for the annuity, adding complexity.

Commission-Based Annuities

Advantages

1. One-time cost structure. The commission is paid once, upfront. After that, there are no ongoing advisory fees related to the annuity (though the product itself has internal costs). For long-term holders, this can be significantly more cost-effective.

2. Extensive product availability. Hundreds of annuity products from dozens of carriers are available, with every conceivable feature, rider, and benefit option, from fixed-indexed annuities with guaranteed lifetime withdrawal benefits to death benefit enhancements and long-term care riders.

3. May be more cost-effective for long-term holds. For a 20+ year hold with no need for ongoing advice, the one-time commission cost is likely lower than cumulative advisory fees.

4. Accessible through multiple distribution channels, including independent insurance agents, banks and credit unions, broker-dealers, financial advisors, online platforms, and directly from some insurance carriers. This accessibility means buyers can shop around and find an advisor they trust, regardless of business model.

5. Often include more product features and riders, such as premium bonuses (5-10% added to the initial deposit), enhanced death benefits, long-term care riders, guaranteed lifetime withdrawal benefits with annual increases, and multiple index options with various participation rates and caps. These features add cost, but they also add value for buyers who need them.

Disadvantages

1. Less transparency. The commission is embedded in the product’s cost structure. There’s no line item that says “Commission: $30,000.” Instead, the cost shows up as higher M&E charges, lower crediting rates, surrender charges, and administrative fees, making it difficult to know exactly how much of the premium is going to compensation versus investment.

2. Potential conflicts of interest. When one product pays a 7% commission and another pays 4%, there’s an inherent conflict. Even well-intentioned advisors may unconsciously favor higher-commission products, and some advisors actively seek out the highest commissions regardless of suitability.

3. Assets are typically “held away” from an advisor’s managed portfolio. If a fee-based advisor also sells commission-based annuities (a “hybrid” model), those annuity assets usually leave the managed portfolio, which can create fragmented financial planning, difficulty rebalancing the overall portfolio, and less comprehensive oversight.

4. Surrender charges can be substantial. Surrender charges protect the insurance carrier’s commission investment, but they also trap the buyer in the contract. A typical 10-year schedule might start at 8-10% in year one, step down a point or two each year, and reach 0% by year 7-10. If circumstances change and access to the money is needed, these penalties can be significant.

5. May not align with fiduciary advice relationships. An RIA with a fiduciary duty faces complications with commission-based products. Many RIAs refuse to sell commissioned products because of the conflicts they create, even when a commission-based annuity might be appropriate.

Industry Trends and Market Growth

The annuity industry is experiencing remarkable growth, driven by demographic shifts, market volatility, and evolving advisor business models.

The RIA Channel Explosion

The most significant trend in financial services over the past decade has been the explosive growth of the Registered Investment Advisor (RIA) channel. As of 2024, RIAs manage an estimated $144.6 trillion in assets across nearly 16,000 SEC-registered firms, compared to $6.4 trillion managed by 3,340 broker-dealers, a number that continues to decline due to consolidation.

Why This Matters for Annuities

Historically, annuities were sold almost exclusively through broker-dealers and insurance agents. But as advisors migrate to the RIA model, attracted by independence, fiduciary clarity, and business ownership, they’re bringing their clients with them. According to a Goldman Sachs Asset Management survey published in June 2025, 45% of insurance industry respondents expect the biggest annuity sales growth to come from the RIA channel over the next three years, a significant shift from previous surveys where the independent broker-dealer channel was expected to lead growth.

What’s Driving the Shift?

1. Consumer demand for fiduciary advice: investors increasingly want advisors legally obligated to put their interests first.
2. Regulatory pressure: the DOL’s various fiduciary rule attempts have raised awareness about conflicts of interest.
3. Business model advantages: RIAs can build more valuable businesses with recurring revenue (AUM fees) versus transactional revenue (commissions).
4. Technology enablement: platforms like DPL Financial Partners make it easy for RIAs to access annuity products.

As David Lau, CEO of DPL Financial Partners, told InvestmentNews: “Financial services has long been moving to consumer value, and moving from transactional revenue and commissions to fee-based revenue from financial advice.”

Fee-Based Annuity Sales Growth

The fee-based annuity market, while still small compared to the overall annuity market, is experiencing rapid growth. DPL Financial Partners has become a leading platform connecting RIAs with commission-free annuities; its reported sales grew from roughly $500 million in 2022 to more than $1 billion in 2023, and its 2024 Series C funding round included participation from insurance-carrier investors, signaling broader industry interest in the fee-based channel.

Fee-based annuities are growing within a broader context of surging annuity sales overall: $312.8 billion in 2022 (a record at the time), $385 billion in 2023 (up 23%, a new record), and $114.7 billion in the third quarter of 2024 alone (up 30% year-over-year). Several forces are driving this growth: a higher interest rate environment in 2022-2023 made fixed annuities more attractive, stock market declines in 2022 drove demand for principal protection, roughly 10,000 Baby Boomers turn 65 every day, and declining pension availability increases the need for guaranteed income.

Technology and Platform Integration

The growth of fee-based annuities has been enabled by technology platforms that make these products accessible to RIAs. In February 2024, Orion Advisor Solutions, one of the largest wealth management technology platforms, integrated DPL’s fee-based annuity marketplace, giving advisors on Orion direct access to commission-free annuities, side-by-side product comparison tools, streamlined onboarding, and consolidated reporting. DPL has also invested heavily in illustration software, digital onboarding, and ongoing performance reporting. Fidelity Institutional, Schwab Advisor Services, and Envestnet are among the other platform players offering or exploring fee-based annuity access for RIAs.

Technology has removed the friction that previously made annuities difficult for RIAs to use. What once required separate paperwork, separate custody, and separate reporting can now be integrated into an advisor’s existing workflow.

Top Fee-Based Annuity Companies and Products

The carriers below are among the most active in the fee-based space, based on public reporting. This is general market information, not a recommendation or endorsement of any specific carrier.

Leading Carriers in the Fee-Based Space

1. Lincoln Financial Group

J.D. Power Customer Satisfaction Score: 659 (industry average: 639). Products available include fee-based versions of variable annuities and fixed-indexed annuities. Lincoln Financial was one of the first major carriers to embrace the fee-based model, launching products in 2017, with simplified fee structures, competitive M&E charges (typically 0.75% to 1.00%), no surrender charges on many products, and an A+ financial strength rating from A.M. Best. Popular products include Lincoln OptiBlend® (a variable annuity with a fee-based option) and Lincoln Level Advantage® (a fixed-indexed annuity built for RIAs). Best for clients working with RIAs who want variable annuity market participation or fixed-indexed annuity principal protection with growth potential.

2. Pacific Life

J.D. Power Customer Satisfaction Score: 653. Products available include fee-based versions of variable annuities and fixed-indexed annuities. Pacific Life has been a leader in annuity innovation for decades, and its fee-based products benefit from an A+ rating from A.M. Best, comprehensive rider options, and an IRS Private Letter Ruling (202114006) confirming tax treatment. Popular products include Pacific Odyssey® (a variable annuity with a fee-based option) and Pacific Index Advantage® (a fixed-indexed annuity for RIAs). Best for clients who want a well-established carrier with a long track record in the annuity market.

3. Nationwide

J.D. Power Customer Satisfaction Score: 654. Products available include fee-based variable annuities. Nationwide was one of the first carriers to receive an IRS Private Letter Ruling (201945001) confirming that advisory fees could be taken from annuities without triggering taxation, making it a pioneer in the fee-based space, with an A+ financial strength rating from A.M. Best and broad distribution through DPL and other platforms. The flagship product is Nationwide Advisory Solutions, a variable annuity designed for RIAs. Best for clients who value brand recognition and want variable annuity features in a fee-based format.

4. Jackson

J.D. Power Customer Satisfaction Score: 650. Products available include fee-based variable annuities. Jackson (formerly Jackson National Life) has long been a leader in the variable annuity market, and its fee-based products offer low internal costs, a wide range of investment options, and flexible withdrawal provisions. The flagship product is Jackson Perspective Advisory, a variable annuity for RIAs. Best for clients who want maximum investment flexibility and low internal costs.

5. Great American Life

Products available include fee-based fixed-indexed annuities. Great American Life has carved out a niche in the fee-based fixed-indexed annuity market, offering competitive crediting rates, multiple index options, and a focus on the RIA channel. Best for clients who want fixed-indexed annuity features in a fee-based format.

6. Allianz

J.D. Power Customer Satisfaction Score: 648. Products available include fee-based fixed-indexed annuities. Allianz is the market leader in fixed-indexed annuities overall and has expanded into the fee-based space, with innovative index options, competitive caps and participation rates, and an A+ financial strength rating. Best for clients who want fixed-indexed annuities from the market leader.

Key Product Features in Fee-Based Annuities

Regardless of carrier, fee-based annuities share common characteristics. Traditional annuities often have first-year surrender charges of 7% to 10% that decline over seven to ten years, while fee-based annuities more often have no surrender charges or shorter surrender schedules, sometimes beginning around 0% to 3% and declining over one to three years. Traditional variable annuities carry M&E charges of 1.25% to 1.50% annually, while fee-based variable annuities typically run 0.50% to 1.00% annually, a difference that compounds significantly over time. Fee-based annuities also typically offer simplified rider options (fewer riders that add cost without adding value), transparent fee disclosure of every cost layer, an AUM-compatible structure that keeps the annuity on the advisor’s books for consolidated reporting and rebalancing, and institutional-level pricing normally reserved for pension plans and large institutional buyers.

Distribution Platforms

Fee-based annuities generally can’t be purchased directly from insurance carriers. Buyers need to work through a platform or an RIA. DPL Financial Partners is the dominant platform in this space, with 50+ carrier relationships, side-by-side product comparison tools, digital application and onboarding, consolidated reporting, and more than $1 billion in annual sales as of 2023. Orion Advisor Solutions integrates DPL’s annuity marketplace directly into the advisor’s existing technology stack. Fidelity Institutional and Schwab Advisor Services each offer a curated selection of fee-based annuities to RIAs who custody client assets on their platforms.

Top Commission-Based (Traditional) Annuity Companies and Products

While fee-based annuities are growing, the vast majority of annuity sales still occur through the traditional commission-based model. The carriers below are among the largest in the space, based on public reporting and industry rankings, not a recommendation or endorsement of any specific carrier.

Leading Traditional Carriers

1. New York Life

Overall ranking: #1 (Annuity.org 2025). J.D. Power Customer Satisfaction Score: 675, the highest in the industry. Products available include fixed, variable, immediate, and deferred income annuities. New York Life is a mutual company, owned by policyholders rather than shareholders, which allows it to focus on long-term value rather than quarterly earnings. It carries an A++ rating from A.M. Best (the highest possible), has paid dividends to policyholders every year since 1854, and distributes through career agents who are employees rather than independent contractors. Standard commission rates run 2-7% depending on product. Best for clients who value financial strength and stability above all else and who are comfortable with a career agent relationship.

2. MassMutual

Overall ranking: #5 (Annuity.org 2025). J.D. Power Customer Satisfaction Score: 661. Products available include fixed, variable, and immediate annuities. Like New York Life, MassMutual is a mutual company with a long history (founded 1851), carrying an A++ rating from A.M. Best, a strong dividend history, a comprehensive product line, and financial planning often bundled with life insurance and other products. Best for clients who want a mutual company structure and comprehensive financial planning.

3. Allianz

Overall ranking: #2 (Annuity.org 2025). J.D. Power Customer Satisfaction Score: 648. Products available include fixed-indexed annuities (Allianz is the largest FIA seller in the United States), fixed annuities, and variable annuities. Allianz pioneered many FIA features now considered industry-standard, offers more index choices than most competitors, and is available through thousands of independent agents. Standard FIA commissions run 5-7%. Popular products include Allianz 222® and Allianz Benefit Control® (an FIA with an income rider). Best for clients who want fixed-indexed annuities with innovative features and strong historical performance.

4. Nationwide

Overall ranking: #3 (Annuity.org 2025). J.D. Power Customer Satisfaction Score: 654. Products available include variable, fixed-indexed, fixed, and immediate annuities. Nationwide offers both commission-based and fee-based products, giving advisors flexibility, with strong brand recognition, a comprehensive product line, and an A+ rating from A.M. Best. Popular products include Nationwide New Heights® (variable) and Nationwide Peak® (fixed-indexed). Best for clients who want a well-known brand with a comprehensive product line.

5. Athene (a member of Apollo)

Products available include fixed annuities (MYGAs) and fixed-indexed annuities. Athene has grown rapidly over the past decade through competitive products and strategic acquisitions, often posting among the highest MYGA rates in the market, backed by Apollo Global Management’s investment expertise. Commissions typically run 2-6% depending on product. Popular products include Athene Performance Elite® (MYGA) and Athene Ascent Pro® (FIA). Best for rate shoppers who want maximum guaranteed returns on fixed annuities.

6. American Equity

Products available include fixed-indexed and fixed annuities. American Equity is a pure-play fixed-indexed annuity company with competitive crediting rates, multiple index options, and robust income riders, distributed largely through the independent agent channel. FIA commissions typically run 5-7%. Popular products include American Equity AssetShield® and American Equity Index Advantage®. Best for clients who want fixed-indexed annuities with strong crediting potential and income guarantees.

Product Categories and Commission Ranges

Understanding how commissions vary by product type helps evaluate whether a recommendation is in the buyer’s best interest.

Higher commissions typically correlate with product complexity (FIAs and VAs pay more than simple fixed annuities), surrender period length (longer periods allow carriers to pay higher commissions), carrier profit margins, and the level of competition within a product category.

Popular Commission-Based Product Features

Traditional annuities often include features and riders not available, or less common, in fee-based products.

Income riders with guaranteed withdrawal benefits are optional riders (additional cost) that guarantee a certain percentage of account value can be withdrawn each year for life, regardless of actual account performance. A typical structure guarantees a 4-6% withdrawal rate against a “benefit base” that grows at a guaranteed rate (often 5-7% annually) until withdrawals begin, at an annual rider cost of 0.75% to 1.25% of account value. For example, a $500,000 deposit growing at 6% annually for 10 years reaches a benefit base of $895,424; a 5% guaranteed withdrawal rate against that base pays $44,771 annually for life. Best for clients who want guaranteed lifetime income with potential for growth before income begins.

Death benefit enhancements guarantee beneficiaries receive a minimum amount upon death, regardless of account performance, whether through return of premium, highest anniversary value, or an annual step-up, at an annual cost of 0.25% to 0.75% of account value. Best for clients concerned about leaving a legacy and protecting beneficiaries from market downturns.

Long-term care riders allow accelerated access to the annuity value if the owner needs long-term care, typically doubling or tripling the annual withdrawal amount for 2-5 years, at an annual cost of 0.50% to 1.00% of account value. Best for clients who want to self-insure against long-term care costs without buying separate LTC insurance.

Premium bonuses add a percentage (typically 5-10%) to the initial deposit; a $500,000 deposit with a 10% bonus starts at $550,000. The catch: bonuses are typically recaptured through higher fees or lower crediting rates, and surrender charges are often higher and last longer, so the buyer may not come out ahead compared to a no-bonus product. Best for buyers certain they’ll hold the annuity for the full surrender period.

Multiple index options let fixed-indexed annuity buyers choose among indexes such as the S&P 500, NASDAQ-100, Russell 2000, international indexes, blended indexes, and volatility-controlled indexes. Different indexes perform differently in different market conditions, so having multiple options allows for diversified crediting strategies. Best for clients who want flexibility to adjust their index allocation over time.

Which Model Is Right for You?

Here’s how to think through which model fits your situation.

Fee-Based May Be Better If:

• You already work with a fee-only RIA or fiduciary advisor. Keeping an annuity within that relationship maintains consistency and simplifies your financial life.
• You want complete transparency on all costs. If knowing exactly what you’re paying, down to the dollar, is important to you, fee-based is the clear choice.
• You need ongoing portfolio management and advice. Regular portfolio reviews, rebalancing, and comprehensive financial planning make the ongoing advisory fee worth it.
• Your advisor charges an AUM fee and you want all assets managed together. Keeping your annuity as part of your managed portfolio allows for better coordination and more holistic planning.
• You value alignment of interests over product features. If eliminating conflicts of interest is your top priority, fee-based annuities deliver.
• You’re comfortable with annual fees vs. one-time costs. You understand that you’ll pay more over time but value the ongoing relationship.
• You want maximum liquidity. Fee-based annuities typically have no or minimal surrender charges, giving much greater flexibility.

Commission-Based May Be Better If:

• You’re making a one-time purchase for a long-term hold (20+ years). The longer you hold an annuity, the more likely a one-time commission costs less than cumulative advisory fees.
• You don’t need ongoing advisory services. A fixed annuity or immediate annuity that requires no management doesn’t justify annual advisory fees.
• You want access to the widest product selection. Hundreds of commission-based products versus dozens of fee-based products means more choices.
• You prefer specific product features like income riders or premium bonuses that may only be available in commission-based format.
• You’re working with a trusted agent who explains all costs. A good agent who fully discloses commissions and total costs can provide excellent service in the commission-based model.
• You want to minimize ongoing fees and prefer to pay once and be done.
• You don’t have enough assets to meet RIA minimums, which often run $250,000 to $500,000.

Key Questions to Ask Yourself

How long do you plan to hold this annuity? Less than 10 years, fee-based may be more cost-effective. 10-20 years could go either way, so run the numbers. 20+ years, commission-based is likely more cost-effective if you don’t need ongoing advice.

Do you need ongoing advice and portfolio adjustments? If you want regular reviews and comprehensive planning, lean fee-based. If this is a one-time purchase, lean commission-based.

Is your advisor a fiduciary? An RIA with fiduciary duty aligns naturally with the fee-based model; a broker-dealer rep or insurance agent typically operates on commission.

What’s the total cost over 10, 20, and 30 years under each model? The table below runs a $500,000 annuity scenario comparing a 6% upfront commission to a 1% annual advisory fee.

This simplified calculation assumes a flat account value and compares advisor compensation only. Actual results will vary based on investment performance, withdrawals, crediting rates, rider charges, surrender charges, product-level expenses, tax treatment, and the value of any ongoing advice received. The rough break-even point in this example is around six years.

What product features do you actually need versus want? If you need specific riders or features, check whether they’re available in fee-based format. If you want simplicity and low cost, fee-based products are typically simpler.

How does this fit your overall financial plan? If the annuity is part of a comprehensive managed portfolio, fee-based keeps everything integrated. If it’s a standalone purchase, commission-based may be simpler.

Real-World Cost Comparison Scenarios

Three realistic scenarios show how the math plays out in practice.

Scenario 1: 55-Year-Old Accumulating for Retirement

Profile: age 55, $300,000 annuity, growing assets until retirement at 67 (12 years), and needing ongoing advice and portfolio management.

Winner: fee-based saves $9,000. The client needs ongoing advice (getting value from the advisory fee), and the 12-year time frame isn’t long enough for the commission-based model to pull ahead. The lower internal costs of the fee-based product also offset the advisory fees.

Scenario 2: 70-Year-Old Buying an Immediate Annuity

Profile: age 70, $500,000 annuity, immediate lifetime income, no need for ongoing advice once the annuity is on autopilot.

Winner: commission-based saves $73,000. Once an immediate annuity is purchased, there’s nothing to manage. Paying an ongoing advisory fee for a product that requires no ongoing advice is wasteful. Even though the fee-based product pays slightly more income, it doesn’t come close to offsetting the advisory fees.

Scenario 3: 62-Year-Old Planning a 30-Year Hold

Profile: age 62, $400,000 annuity, long-term growth with principal protection, planning to hold until age 92 (30 years), minimal need for ongoing advice.

Winner: commission-based saves $4,000, essentially a tie. Over 30 years, even the lower internal costs of the fee-based product can’t overcome the cumulative advisory fees. The difference is small enough that other factors, like the value of ongoing advice or the flexibility of no surrender charges, might tip the scales.

The Future of Annuity Compensation

Several trends are reshaping how annuities are sold and how advisors are compensated. The migration from broker-dealers to RIAs shows no signs of slowing, and as more advisors embrace the fiduciary model, demand for fee-based annuities is likely to keep growing, particularly as RIAs incorporate insured retirement-income products into comprehensive planning. Some advisors are also experimenting with hybrid compensation: reduced upfront commissions (2-3%) paired with a small ongoing fee (0.25-0.50%), or a fee-based structure with performance bonuses. Expect carriers to develop more products built around these hybrid structures.

Regulators are unlikely to ease up. The DOL, SEC, and state insurance regulators continue to focus on annuity sales practices, and more stringent disclosure requirements, standardized fee and commission reporting, and increased enforcement against abusive practices are likely. Technology is also making it easier to compare annuities across carriers and compensation models, with AI-powered comparison tools and real-time cost calculators becoming more common. As younger generations approach retirement, they’re demanding clear explanations, digital-first experiences, transparent pricing, and fiduciary advice, and carriers that don’t offer fee-based versions of their products risk losing market share to those that do.

The net effect for buyers is more choice than ever, better pricing competition as commission-based products respond to fee-based competition with lower commissions and shorter surrender periods, and increased transparency across the board, even on the commission-based side. With more choices comes more complexity, which makes working with a knowledgeable, unbiased source of education, whether the buyer ultimately chooses fee-based or commission-based, more important than ever.

Conclusion

The choice between fee-based and commission-based annuities isn’t about declaring one model superior. It’s about matching the compensation structure, product design, and advisory relationship to your goals, time horizon, liquidity needs, and need for ongoing guidance.

Neither model is universally “better.” Fee-based annuities offer transparency and align with fiduciary advice, but they cost more over long holding periods. Commission-based annuities may be more cost-effective for long-term holds, but they create potential conflicts of interest.

Your time horizon matters most. Holding an annuity for 20+ years without needing ongoing advice generally favors commission-based. Holding for less than 10 years, or needing ongoing portfolio management, generally favors fee-based.

Transparency is valuable, but it has a price. Knowing exactly what you’re paying is worth something, but is it worth $70,000 over 20 years? Only you can answer that based on your values and priorities.

Regulatory evolution has made both models more consumer-friendly. The IRS Private Letter Rulings, the DOL’s fiduciary rule attempts, and the NAIC’s suitability regulations have all pushed the industry toward greater transparency and consumer protection.

The most important factor is working with a trusted source of guidance. Whether fee-based or commission-based, the quality and honesty of the advice matters more than the compensation model itself. If you already own a commission-based annuity and are past the surrender period, it may also be worth exploring whether a 1035 exchange into a different structure makes sense for your situation. And if you haven’t purchased an annuity yet, start with our guide on whether an annuity is right for you before comparing compensation models.

Action Steps

1. Assess your need for ongoing advice. Be honest about whether you want comprehensive financial planning and regular portfolio reviews, or a one-time purchase that requires minimal ongoing management.
2. Calculate total costs under both models. Use the examples in this guide to project your costs over 10, 20, and 30 years under each approach.
3. Ask direct questions about compensation. “How are you compensated if I buy this annuity?” “What’s the commission or advisory fee?” “How does that compare to other products you could recommend?” “What are the total costs over my expected holding period?”
4. Review your existing annuities for opportunities. If you own commission-based annuities and are past the surrender period, a 1035 exchange into a different structure may be worth exploring.

Where My Annuity Store Fits In

My Annuity Store sells commission-based annuities only. We hold life insurance producer licenses, not RIA or investment advisor registrations, so we don’t offer fee-based annuities, and we’re not going to pretend otherwise. We shop 90+ top annuity companies to find competitive commission-based products, and we disclose exactly how we’re compensated on every recommendation: the commission, how it’s built into the product cost, and how it relates to the surrender schedule.

If a fee-based structure is genuinely the better fit for your situation, particularly if you already work with an RIA, that’s a conversation to have with that advisor. This guide exists so you can walk into either conversation, ours or theirs, already knowing how the two models actually compare.

Sources

1. RetireGuide. How Annuity Fees and Commissions Work.
2. AdvisorFinder. Financial Advisor Annuity Compensation.
3. Prudential. Summary Comparison: Variable Annuities.
4. Jackson. Fee-Based Annuities.
5. IRS. Private Letter Ruling 202422004.
6. Nationwide Advisory Solutions. Favorable IRS Private Letter Ruling.
7. Pacific Life. Tax Treatment of Advisory Fee Withdrawals.
8. Investopedia. Best-Interest Contract Exemption (BICE).
9. U.S. Department of Labor. Conflict of Interest FAQs.
10. NAIC. Suitability in Annuity Transactions Model Regulation.
11. NAIC. Annuity Suitability and Best Interest Standard.
12. SEC. Standards of Conduct for Broker-Dealers and Investment Advisers.
13. Wealth Management. Advisory Annuities and the Role of Fiduciary Duty.
14. Annuity.org. Surrendering an Annuity.
15. MassMutual. Understanding Annuity Surrender Charges.
16. Flourish. Fee-Based Annuity Marketplace.
17. CNBC. Best Annuity Companies of 2026.
18. InvestmentNews. Why RIAs Are the Next Growth Frontier for Annuities.
19. Goldman Sachs Asset Management. Insurance Industry Survey.
20. Protected Income. Fees vs. Commissions with Annuities.
21. Annuity.org. How Much Does an Annuity Cost?
22. Retirement Living. Commission vs. Fee-Based Financial Advisors.
23. Investopedia. Fee vs. Commission-Based Advisors.

Frequently Asked Questions