Variable annuities are underwritten by life insurance companies, but are more of an investment vehicle than true life insurance. The large majority of variable annuities are sold by stockbrokers and financial planners who hold insurance licenses in addition to securities licenses. Their efforts are rewarded handsomely with up-front sales commissions typically in the 5 percent plus range.

For sake of full disclosure, I do not personally hold a life insurance license, and my firm does not sell financial products for commissions. I'm also pretty neutral on annuities in general. The original concept was good, offering a vehicle where investors could achieve tax deferred growth of capital (like an IRA) with essentially no limits on how much you could put away each year. Inside a variable annuity resides a selection of mutual funds where investors can build a portfolio plan appropriate for their situation.

Over time variable annuities underwent an evolution where a lot of bells and whistles were added, with all of these making promises to the investor, but generating significant fees for the underwriting insurance company. The promises are generally in the form of guaranteed withdrawal benefits and death benefits, where if you met the required guidelines, you would receive a guaranteed income stream, or benefits for your heirs.

The menu is much more detailed than we have space to cover adequately today, but I think it's fair to say that the full list of features is generally a trade-off of the investor paying fees in exchange for promises from the insurance company to pay certain levels of monthly income, provide death benefits and perhaps providing inflation adjustments to these benefit levels.

The fees for these benefits along with the expense ratios charged by the managers of the mutual funds contained in the annuity can reach the 3 to 4 percent range annually. Obviously, these fees eat into the returns achieved, and the investor must value the guarantees offered and backed by the insurance company enough to accept the fee structure.

Quietly, in the last 10 years or so, there have been some fine annuity products developed for the investor who desires the basic concept of a tax deferred annuity, but who doesn't need the bells and whistles that have become popular in broker-sold annuities. With no sales-people promoting these no-load annuities (because they don't pay any sales commissions) you have to look on your own or work with a fee-based adviser to find them.

Most major discount brokerage firms like Schwab, TD Ameritrade, and Fidelity offer no-load annuities that are also able to be exited without any surrender fees that are common with broker-sold annuities. Mutual fund giant Vanguard has a good one as well. Perhaps the most exciting option for the fee conscious investors is the Monument Advisor annuity from Jefferson National. As far as I know this annuity has the lowest internal fees of any annuity and offers over 300 mutual fund investment options.

Don't look for too many bells and whistles though. Some of these no-load annuities offer some simple guaranteed income options, but some offer nothing at all, other than being a plain vanilla variable annuity – which may not be a bad thing.

Tom Breiter is president of Breiter Capital Management, Inc., an Anna Maria based investment advisor. He can be reached at 778-1900. Some of the investment concepts highlighted in this column may carry the risk of loss of principal, and investors should determine appropriateness for their personal situation before investing. Visit www.breitercapital.com.