COMPLIMENTARY HIDDEN FEE ANALYSIS

Uncover Hidden Fees in Your Investments

Maximize Your Wealth by Understanding the True Cost of Your Portfolio

At Lily Wealth Management, we believe in full transparency. Many investors unknowingly pay excessive fees that impact long-term growth. Our Hidden Fees Analysis service helps you uncover these costs and make informed decisions about your financial future.

WHAT WE ANALYZE

ETF Costs in Your Portfolio

Provide us a recent statement and we’ll run a KWANTI Analytics Report to uncover hidden ETF fees. You may be shocked!

Variable Annuities Cost Breakdown

Click here to see some examples on how your annuity stacks up against major providers like Allianz, Allstate, John Hancock, Lincoln, New York Life, Prudential, and Hartford.
For a free cost comparison fill out the form below

High-Cost Sub-Account Fees in Variable Annuities

Many annuities have higher expense sub-account fees that erode returns. We help you identify and reduce these costs.
Understand how most expenses are deducted before you even see your returns.

Fixed & Equity-Indexed Annuity Cost Breakdown

With insurance-based products, compounding occurs annually, reducing long-term gains.
In your portfolio, compounding occurs daily—maximizing growth.
Some annuities offer only a 1% guaranteed minimum on 87% of your deposit, not 100% of your deposit. Therefore you only have a .87% guarantee, not 1%.

Exposing the Hidden Fees That Others Won't Tell you About in Variable Annuities

M&E Fees

For Example: Suppose you invest $200,000 in a variable annuity.

The annuity contract charges an M&E fee of 1.25% annually (which is fairly typical — the range is often 0.90%–1.50% per year).

This fee compensates the insurance company for providing the death benefit, the guarantee of lifetime income options, and administrative costs.

So:

Annual M&E charge = $200,000 × 1.25% = $2,500

This $2,500 is deducted from your account value over the year, usually in daily or monthly increments.

Rider Fees

When you buy a variable annuity, the salesperson may focus on the “guaranteed income for life” or “death benefit” without fully explaining how much those optional riders actually cost — and how they impact your account value.

For example:

You purchase a variable annuity with:
- Base M&E and admin fees: 1.25%
- Subaccount expense ratios: 0.85%
- Optional Guaranteed Lifetime Income Benefit rider (GLWB): 1.00%

In this case, the rider fee of 1.00% is charged on the benefit base, which may even exceed your actual account value — and it’s in addition to the base fees and subaccount costs.

So the total annual cost of your annuity in this example would look like:

Base + admin: 1.25%
Subaccounts: 0.85%
Rider: 1.00%
Total fees: ~3.1% annually

Often, clients aren’t made fully aware that the rider fee continues every year, even if they don’t end up using the benefit (e.g., if they die early or don’t withdraw the guaranteed income).

Hidden Sub Account Fees

When you purchase a variable annuity, you choose how to invest your money in underlying subaccounts, which are essentially mutual funds inside the annuity.

While the annuity company might clearly state the Mortality & Expense (M&E) fee or the administrative fee (e.g., 1.25% per year), the costs of the subaccounts themselves are often buried in the prospectus and easy to overlook.

For example:

M&E and admin fees: 1.25%
Rider (income guarantee): 1.00%
Subaccount expense ratios: 0.90%

While the company emphasizes the 1.25% and the rider fee, the 0.90% on the subaccounts is not typically called out explicitly in their sales materials.

So your total annual cost in this example could be:
1.25% + 1.00% + 0.90% = 3.15%

This means you’d pay over 3% of your account value every year which can significantly drag on your returns and many investors don’t realize that nearly a third of those fees are hidden in the subaccount mutual fund expenses.

Surrender Penalties - A fee that is charged when you pull money out that is more than the free withdrawal amount. The industry standard is typically 5, 7, or 10 years.

For Example: You purchase a Variable Annuity with a 10-year surrender period.

Initial premium: $200,000
Free withdrawal amount: 10% per year (common industry standard)
Surrender period: 10 years (common industry standard would be a surrender schedule such as declining by 1% each year (10%, 9%, 8%, 7%, 6%, 5%, 4%, 3%, 2%, 1%, and then 0 penalties starting the 11th year).

Scenario:
In Year 3, you need access to some funds.

You are allowed to withdraw up to 10% of your account value without penalty.
So, if your account is now worth $110,000 due to growth, you can take out:
10% of $110,000 = $11,000 free of any surrender charges.
If you needed to pull out $20,000, the first $11,000 would be penalty free but the remaining $9,000 would have an 8% penalty of $720.

Limited Free Withdrawal Amount - A fee that is charged if you need more than allowed during the surrender period.

For Example: You purchase a Variable Annuity with a 10-year surrender period.

Initial premium: $200,000
Free withdrawal amount: 10% per year (common industry standard)
Surrender period: 10 years (common industry standard would be a surrender schedule such as declining by 1% each year (10%, 9%, 8%, 7%, 6%, 5%, 4%, 3%, 2%, 1%, and then 0 penalties starting the 11th year).

Scenario:

In Year 3, you need access to some funds.

You are allowed to withdraw up to 10% of your account value without penalty.
So, if your account is now worth $220,000 due to growth, you can take out:
10% of $220,000 = $22,000 free of any surrender charges.
If you needed to pull out $30,000, the first $22,000 would be penalty free but the remaining $8,000 would have an 8% penalty of $640.

A Real Example: Hidden Fees in a Variable Annuity

Before the TD-Schwab merger, we helped a client transition from a Mass Mutual Group Variable Annuity to a TD Ameritrade account.
What we uncovered in the process was — quite frankly — one of the most egregious examples of hidden fees we’ve seen in over 30 years in the industry.

Here’s what the client was paying in subaccount fees inside their annuity compared to what they paid when they moved their money from Mass Mutual to TD Ameritrade:

Hidden Fee Example in a Variable Annuity.png

The difference was staggering — thousands of dollars annually being quietly siphoned away through excessive fees.

In our opinion, this situation was a disgrace — to the industry, to the 401(k) space, and to the hard-working investors it hurt.

Three parties share responsibility:

The insurance company — for charging such egregious fees.
The mutual fund companies — for cutting hidden deals behind closed doors.
The regulators — for looking the other way and allowing minimal disclosures.

We even filed a formal complaint with the Department of Labor because, as we say:

“Big print giveth, small print taketh away.”

This experience motivates us every day to fight for transparency and fairness on behalf of our clients.

Hidden Fees Matter

In variable annuities Admin fees and M&E fees come out on a daily basis off the top of performance and you never see it. Here are three prime examples below (taken from Jefferson National/Nationwide website), assuming $200,000 with a 6% return over 20 years. Sometimes there are additional sub-account management fees added on that the insurance company receives, like a kickback.

Allstate Hidden Fees

For illustrative purposes only

Fees can be called many things in fixed equity indexed annuities

Spreads - A fee that reduces your return

For Example:
Let’s say your annuity is linked to the S&P 500 Index, and the annuity uses a 3% spread.

If the S&P 500 gains 10% in a year, your credited return would be:
- 10% – 3% spread = 7% credited to your annuity.
If the index gains 2%, your return would be:
- 2% – 3% spread = 0% (You don’t lose money, but you earn nothing that year.)
If the index is negative, you typically earn 0%, not a loss (thanks to the FIA’s principal protection feature).

Market Value Adjustment (MVA) - A fee that can eliminate or double your surrender penalty

For Example:

You purchase a fixed indexed annuity with $200,000.

It has a 7-year surrender period.
It includes an MVA provision, which applies if you take out more than the free-withdrawal amount during the surrender period.
The MVA depends on changes in interest rates between the time you bought the annuity and the time you surrender.

So in this example:

Base surrender value after standard surrender charge: $188,000
(Assume you owed a 6% surrender charge on $200,000)
MVA calculation:
Because rates went up by 2%, the MVA reduces your payout by $4,000 - $6,000 (estimate - multiple variables determine this financial hit).
Final estimated payout = $182,000 - $184,000

Surrender charge = $12,000
MVA = additional $4,000 - $6,000 loss
Total reduction = $16,000 - $18,000

If instead, rates had dropped to 1%, the MVA could have been positive, and maybe you’d only lose the $12,000 surrender charge and subtract the benefit of the MVA in this example (range of $2,000 - $3,000) reducing your total hit down to $9,000 or $10,000.

The MVA small print could potentially eliminate your surrender penalty. The small print is there, it can help you or it can hurt you.

CAPs - A Fee that limits your upside

For Example:
Suppose your annuity is linked to the S&P 500 Index, and it has a 6% annual cap.

If the S&P 500 gains 10% in a year:
- Your return is capped at 6% — that's the most you can earn that year.
If the index gains 4%:
- You get the full 4% credited to your annuity.
If the index is negative, your return is 0% — not a loss, just no gain (due to the principal protection feature of the FIA).

Surrender Penalties - A fee that is charged when you pull money out that is more than the free withdrawal amount (Could be for 5, 7, 10, 15 years or even for life (Allianz MasterDex 10 *Lorio Settlement)

For Example: You purchase a fixed Annuity with a 10-year surrender period.

Initial premium: $200,000
Free withdrawal amount: 10% per year (common industry standard)
Surrender period: 10 years (common industry standard would be a surrender schedule such as declining by 1% each year (10%, 9%, 8%, 7%, 6%, 5%, 4%, 3%, 2%, 1%, and then 0 penalties starting the 11th year). Many contracts charge higher percentages in the first 3-5 years which is even worse if you need your money.

Scenario:
In Year 3, you need access to some funds.

You are allowed to withdraw up to 10% of your account value without penalty.
So, if your account is now worth $110,000 due to growth, you can take out:
10% of $110,000 = $11,000 free of any surrender charges.
If you needed to pull out $20,000, the first $11,000 would be penalty free but the remaining $9,000 would have an 8% penalty of $720.

Income Rider Fees - A fee that can be charged on the growth side or the income rider side of the ledger. Make sure to subtract this fee from the advertised income rider rate of return if the fee comes out of the income rider side of the ledger

Example:
You purchase a Fixed Indexed Annuity (FIA) with an optional guaranteed income rider.

Initial investment: $200,000
Income rider fee: 1.0% annually (charged on the benefit base, not necessarily the account value)
Benefit base for income calculation: Grows at a guaranteed rate (e.g., 7% per year for income purposes only)

Scenario (Year 1):

Your benefit base: $200,000
Income rider fee: 1.0% of $200,000 = $2,000
This $2,000 is typically deducted from your account value annually (not from the benefit base,)
Even worse, some companies advertise a 7% income rider guarantee, but then they pull the income rider fee from the income rider benefit. This misrepresents the true rate of return.

Even if your actual account value grows slower, the fee is still based on the benefit base.

Scenario (Year 5):

Your benefit base has grown to: $280,000 (due to guaranteed roll-up)
Income rider fee: 1.0% of $280,000 = $2,800
This amount is typically deducted from the account value. This could come from the income benefit value also.
Even worse, some companies advertise a 7% income rider guarantee, but then they pull the income rider fee from the income rider benefit. This misrepresents the true rate of return.

Limited Free Withdrawal Amount - A fee that is charged if you need more than allowed during the surrender period.

For Example: You purchase a Fixed Annuity with a 10-year surrender period.

Initial premium: $200,000
Free withdrawal amount: 10% per year (common industry standard)
Surrender period: 10 years (common industry standard would be a surrender schedule such as declining by 1% each year (10%, 9%, 8%, 7%, 6%, 5%, 4%, 3%, 2%, 1%, and then 0 penalties starting the 11th year).

Scenario:
In Year 3, you need access to some funds.

You are allowed to withdraw up to 10% of your account value without penalty.
So, if your account is now worth $220,000 due to growth, you can take out:
10% of $220,000 = $22,000 free of any surrender charges.
If you needed to pull out $30,000, the first $22,000 would be penalty free but the remaining $8,000 would have an 8% penalty of $640.

"Markets change and so will we." TM

COMPLIMENTARY HIDDEN FEE ANALYSIS

Uncover Hidden Fees in Your Investments

WHAT WE ANALYZE

ETF Costs in Your Portfolio

Variable Annuities Cost Breakdown

High-Cost Sub-Account Fees in Variable Annuities

Fixed & Equity-Indexed Annuity Cost Breakdown

Exposing the Hidden Fees That Others Won't Tell you About in Variable Annuities

M&E Fees

Rider Fees

Hidden Sub Account Fees

Limited Free Withdrawal Amount - A fee that is charged if you need more than allowed during the surrender period.

A Real Example: Hidden Fees in a Variable Annuity

Hidden Fees Matter

Allstate Hidden Fees

Allianz Hidden Fees

Lincoln National Hidden Fees

Fees can be called many things in fixed equity indexed annuities