Yes, Ken’s back at it as the hater of annuities. His ads have picked up as has his drip messaging. It seems Fisher Investments has never met a marketing opportunity they are willing to pass up and the Department of Labor rule is just that opportunity.
That is why Americans for Annuity Protection thought it was a good time to remind readers why Ken really does LOVE annuities. Here is what we wrote back in 2015 and have updated for today’s marketplace:
On the one hand, Ken hates annuities because they are bad for Fisher Investments. According to the 2014 Gallup Study, most annuity consumers who buy annuities keep their money in annuities.
That could mean close to $1 trillion dollars of annuity savings lost to Fisher Investments. As they say, you do the math – that’s $10 billion of asset fees not earned by AUM planners at the typical 1 percent per year.
Top 5 Reasons
Here are the top 5 reasons Ken Fisher LOVES annuities. Annuities are GOOD for:
1. Fisher Investments
Based on his aggressive marketing, he must believe annuities are a major source of acquiring assets under management into Fisher Investments
2. Ken’s personal finances
For many years, Fisher Investments was bullish on a major annuity insurance company. So much so, FI was the 6th largest shareholder. Until 2016, you could easily find FI listed as a major shareholder on Yahoo. It is only recently that FI isn’t listed. It is unclear whether the holding caused his company marketing difficulties, or whether his shares changed names, but according to Fisher's most recent posting, he’s still bullish on the company (share price prediction up 99%). Which is good, because strong companies are good for annuity consumers.
3. Ken’s licensing requirements
Advising against annuities does not require an insurance license. Insurance agents and advisors who are not registered investment advisors are prohibited by law from advising about the specific securities people own and recommending they use them to fund an annuity. However, the securities industry does not prohibit the unlicensed and untrained investment advisor from discussing and advising against annuities and recommending their surrender.
4. Avoiding other pesky insurance regulations
It is illegal for insurance agents and advisors to offer rebates. They are prohibited by law from offering any monetary or beneficial inducements to customers in return for purchasing a product. No so for Ken Fisher! Security laws do not have the same prohibition and he publicly offers rebates for surrender charges that the annuity customer may incur.
What’s more, the manner of the rebate isn’t even regulated. Ken’s fine print discloses that the surrender charge is rebated over time in the form of reduced advisory fees. Yippee, I have a $500,000 investment which now becomes maybe $465,000, and I will recover the $35,000 surrender charge over the course of how many years? I lose the earning power of that money for how long? So, if annuity transfers are being rebated with lower management fees, then clients who don’t transfer annuity funds must be paying higher fees. If I were an investor that didn’t move money from an annuity, I’d ask why I am subsidizing annuity investors by paying higher fees? And it isn’t just the rebating, because Ken Fisher is not regulated by insurance laws, he is allowed to get away with ads and interview-materials (read Forbes lately?) that would be considered misleading, inaccurate and, therefore, illegal in the annuity world.
5. Easy money
Annuities are fairly easy to liquidate and transfer funds. Yet, anyone who has funded an annuity with other financial products knows that moving money from risk-based investments to an annuity is fraught with numerous barriers and delays. Even moving money from one annuity to another is very difficult and time consuming. But when Ken helps his clients terminate an annuity, he is not bound by the same rules of suitability, churning and replacement – all insurance laws that protect the consumer from fraud and unsuitable sales.
When an annuity is replaced with another annuity or if the money is a direct transfer from another financial product, the annuity advisor must convince the insurance company that the new annuity is better in many ways than the old product. Unlike Ken Fisher, an insurance company is required (and liable) by law to determine that the exchange or replacement is suitable, which includes taking into consideration whether:
- The consumer will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits (such as a higher crediting guarantee than is currently available, as well as death, living or other contractual benefits), or be subject to increased fees, investment advisory fees or charges for riders and similar product enhancements;
- The consumer would benefit from product enhancements and improvements; and
- The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 36 months.
Another benefit of an annuity - not available in non-insurance products - is the availability of a long-term care rider. A qualifying LTC event exempts withdrawals from surrender charges and turns the taxable portion of an annuity (gain in excess of basis amortized via exclusion ratio) into tax-FREE income. Yet unlicensed Ken Fisher isn’t required to point that out to someone he’s convincing to surrender their annuity!
'His Actions Say Otherwise'
What’s not to love? So, the next time a customer asks, “but doesn’t Ken Fisher say he hates annuities,” you can answer “yes, he SAYS he hates annuities, but his actions say otherwise.
“And his motivations are suspect because he is motivated by good business profits, good shareholder returns, and regulation-free marketing and sales practices. And that is good for Ken Fisher.
“Just because it is good for Ken Fisher to hate annuities, doesn't mean it is good for you to hate them. Quite the contrary...."
If you’re interested in more information on this topic, click HERE for the following articles:
“Why Ken Fisher Hates Annuities”
“Evensky, in Reversal, Sees Annuities as Vital for Retirement”
“Why Ken Fisher is Wrong on Annuities - Milevsky and Finke”
Kim O’Brien is a 35-year veteran of the insurance industry specializing in guaranteed annuities and life insurance. She is the current CEO of Americans for Annuity Protection and Founder of AssessBEST, Inc., a sales and compliance software system. Visit www.AAPnow.com or www.AssessBEST.com for more information.
This article is provided for educational and informative purposes only and not for the purpose of providing legal advice. Readers should consult with their own legal and compliance counsels to obtain guidance and direction with respect to any issue or question. Contact Kim at [email protected]
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