We study the roles of traditional governance (boards, sponsors, etc.) and market governance(investors voting with their feet) in mutual funds and variable annuities. We find that market governance is less pronounced for variable annuity investors. Using a matched sample of variable annuity-mutual fund twins, we find that variable annuity investors are less sensitive to poor performance and high fees than mutual fund investors. Given the weaker role played by market governance, we then examine the role played by traditional governance in variable annuities. Variable annuity boards and sponsors add alternative investment options and replace advisors on behalf of their investors after poor performance and high fees. These traditional governance mechanisms are, however, less effective when conflicts of interest exist between variable annuity sponsors and fund advisors.