You may have seen my firm’s ads screaming,”I Hate Annuities.” Folks ask why we run them. Simple: Because I do.
Granted, some “fixed” types are okay. But that’s about it.
The contracts are huge, obtuse, confusing and hence rarely read. Sales reps rarely realize the lies they peddle, singing false praises–because they’re paid hugely for a blind eye–that hide obscenely gargantuan commissions.
Hence they regularly mislead buyers, who, like ostriches with their heads in the sand, almost never understand what they’re buying, and who then spend years happily cashing their checks without any grasp of what actually happened.
“Variables” are the cigarettes of the investment world, which has hidden its curse for decades. The two products even share the burden of advertising restrictions: Colorado recently banned saying “safe” with “annuity” in any ad. More states will. Holders of variables, when walked through their contracts, unfailingly awaken–feeling misled, raped, cheated. Don’t believe me? Google this:” FINRA Variable Annuities: Beyond the Hard Sell,” an alert from the Financial Industry Regulatory Authority.
At least with simple securities you know you face risk. Variable annuities are sold as low-risk sure things. As in, “Where else do you get a 6% guaranteed return for life?” Anything that sounds too good to be true is. It’s not a return on capital. It’s a return of capital until the contract ends, you do, or it’s all gone. You can do that yourself, at any percent you want. Anyone can! If you have a million bucks and like the sales rep so much, gift his kid half way through Harvard while buying good stocks and bonds (or indexes) and you’ ll likely be better off.
Disclosure: My firm often buys folks out of the humongous surrender fees that imprison them in variables–if they stay with us. So my advice is conflicted. But we’re simple, open and honest about it. We began because I hate annuities. I think we’re the only ones doing buy outs. Few would up-front that capital. It’s a moral quest.
Sanctimoniously thin-skinned industry shills will attack me online for this column, blathering their non sequiturs like “I hate Ken Fisher (Trades, Portfolio)–nonsense, drivel, spin.” Besieging my many failings doesn’t justify these scumbag products. Ignore them, and buy more up-front, honest risks like simple stocks.
