What is a ‘sales charge’ in the context of annuities?

In the context of annuities, a ‘sales charge’ refers to a fee applied when purchasing an annuity. This fee can effectively reduce the amount of money that is actually invested in the annuity, as it is deducted from the initial investment. Sales charges are often a percentage of the total investment amount and are one of the costs clients should be aware of when considering an annuity as part of their financial planning.

Understanding this concept is crucial for individuals looking to invest in annuities, as it impacts the total amount that will be invested for potential growth. It also highlights the importance of comprehensively assessing all costs associated with an investment product before making a purchase decision. Different annuities may have different sales charges, so knowing how these charges function allows for more informed comparisons between products.