If you ever meet our featured author (David Stone, founder and CEO of RetireOne, an independent insurance company), we implore you not to refer to annuities as a ‘strategy.’
You’ll drive him from the room, and in doing so, you’ll miss his good advice and counsel. Let’s save the potential bother and review his article on this sensitive matter.
Mr. Stone can get pretty steamed about it – for years, he’s seen hard-sell agents hounding their near or post-retirement targets, pushing them to pile major assets into annuities. All gain, no pain, they’d argue, rushing past any objections or difficult queries.
The annuity pitch is appealing: protection from market slides, a guaranteed income for life, and a golden egg to leave for your heirs to hatch. One-investment-fits-all was the slogan. Get in before it’s too late.
Sometimes, potential investors noticed that the agents were compensated for selling annuities by commissions – remuneration wasn’t performance based. Meanwhile, the products on offer became ever more complex and expensive. These days, the financial press is full of lurid stories describing the plight of retirees stuck with ill-considered annuity investments.
Annuities have their place in a sound retirement strategy, but they aren’t cure-alls, Mr. Stone emphasizes. Sticking with the military lingo, we’d describe them as a tactic: a unique method that helps one progress towards a greater goal. They’re a tool that works well in one set of hands – that is, for a particular client – but in other cases, they might not be appropriate.
Poor marketing practices have darkened the name, as it were, of annuities. But clients should keep an open mind: properly employed, annuities can bring solid benefits to retirees. Likewise, the agents touting the products as a strategy are all hucksters, far from it. They’re simply misinformed and need to better define their terms, both in their own minds and with customers.
For more information, please read:
Annuity ‘Strategies’ Don’t Work | ThinkAdvisor