When it comes to annuities, clarity is everything.

Advisers need to be clear about their clients’ needs, and they also must be clear about how annuities work and what the terms and compensation arrangements are.

“People need to buy annuities for what they will do, not for what they might do,” says annuity agent Stan Haithcock, or “Stan the Annuity Man” as he refers to himself on his website. “Annuities are contractual guarantees — they’re contracts — but, unfortunately, too many annuities are sold on potential, hypothetical, theoretical, hopeful agent return scenarios.”

The biggest mistake that advisers make about annuities is thinking that they can offer growth and income guarantees together, Haithcock says.

“They can’t,” he says. “You have to choose which one you want.”

Because annuities are essentially commodities, advisers need to shop across all carriers for the best contractual guarantees, Haithcock says.

“So as an adviser, you’re wise to look at what the compensation levels are like and really ask, ‘Are you doing better, or is your client doing better?’” says Anthony Ogorek, CIO, Ogorek Wealth Management.

“I always tell people, ‘Fall in love with the number, not the company, not the name,” he says. “Now that’s tough for guys just selling one name, but that’s their problem.”

Although Haithcock says that he has always showed clients a wide selection of annuities, the new Department of Labor fiduciary rule will require that approach more widely from advisers.

“You cannot in good conscience and under the DoL rule just show one carrier,” Haithcock says.

“You have to shop all of the carriers, show clients the highest contractual guarantees, so they can make an informed decision,” he says. “You can’t just say, ‘I know the people at this firm, so let’s just go in that direction anymore.’”

The need to shop and compare extends to income riders attached to variable and indexed annuities, Haithcart says.

“I’m glad they’re being overseen now by the DoL ruling, because that’s the wild, wild West, right there; it’s pretty scary,” he says. “The DoL has forced the annuity industry‘s hand by saying, ‘Enough of this nonsense, enough of this hype, enough of these shiny things and bonuses.'”

Complex products and agent compensation make some advisers wary of some annuities.

“I think there’s an inverse relationship most times between the compensation that the agent receives and the quality of the product the client receives,” says Anthony Ogorek, a CFP and the founder and chief investment officer of Ogorek Wealth Management in Williamsville, N.Y. “So as an adviser, you’re wise to look at what the compensation levels are like and really ask, ‘Are you doing better, or is your client doing better?’”

The answer is key in helping an adviser make a decision about which annuity to suggest.

“The final check is asking yourself, ‘Would you recommend this to your mother or your siblings in good conscience?’” Ogorek says.

This story is part of a 30-30 series on tools and strategies for retirement.