I Hate Annuities And You Should Too…

…is a wonderful headline if your goal is to attract the attention of people who either own annuities or are considering using annuities in their retirement income plan. If you happened to have read The Toledo Blade yesterday, you were likely taken aback by a full page ad on the back of the Second News section that used the same headline I used on this email. The ad should have struck fear in your heart if you’re an annuity owner or an annuity owner to-be. In fact, it’s a master class in marketing. It’s brilliant…and deceptive.

Here’s what you need to know about this alarming ad:

• Ken Fisher of Fisher Investments does hate some annuities, but not all annuities. If you’d like to read his article that was featured in Forbes, click here and you’ll learn that he hates variable annuities only. While I really don’t care what Ken hates or doesn’t hate, it’s helpful for you to know that Fourth Dimension does not utilize the variable annuities he describes, so these ads do not pertain to any of the annuities we may have recommended to our clients.
• The objective of the ad is to scare you into ordering his special report and deciding, with his help, that you may have been duped into buying a ‘bad’ financial product. His advisors will then convince you of the merits of investing in their firm’s expensive investment portfolios, which in many cases, come with a costly penalty to get out of should the marketing elixir wear off. Interestingly, these costly penalties are one of the very items he criticizes of variable annuities. Read the fine print.
• I have the deceptive marketing pieces that you’ll receive should you take Fisher up on his offer to receive the special report. In fact, I have drafted a complete point-by-point analysis and rebuttal to these pieces that demonstrate how very misleading his tactics are. If you’d like to learn more, just ask.

While this all sounds quite critical of Fisher (it should), I’d like to note that his marketing works very, very well. With that said, I’d like to take a moment to deconstruct his methods so you can see how the master does it.

When a savvy marketer uses a fear-based headline, they are knowingly subjecting their readers to mind-games. While this is an awful way to build a genuine relationship, it’s a very powerful means by which to attract your money. The process looks like this:

1. Research what people fear (i.e. annuities and their salespeople are bad)
2. Write a headline to stoke the fire (See, you were right to be afraid of those products and those salespeople!)
3. Either confirm or deny their fear (either 17 reasons why annuities are bad or 17 reasons why annuities are not bad)
4. Inspire fearful reader to take desired action (Therefore, either buy an annuity or investment from me or do not buy an annuity or investment from anyone.)

This same approach can be used for annuities (whether variable, fixed, or fixed index), mutual funds, bonds, CDs, life insurance, dog houses, you name it. So what can you do?

When confronted by an ad such as this, I suggest you take a deep breath and ask yourself these questions:

• Has this person adequately reviewed my financial situation to ensure that this recommendation is in my best interest? After all, financial products like annuities that represent trillions of dollars of our country’s accumulated wealth are all terrible for me, really? Does he even know me and my needs to be able to say that?
• Does this person have the ability to offer me a full range of investment and financial product options, or does he have a clear bias toward one option? (Note: Fisher Investments only sells investment products, thus the reason to attack the use of annuities)

Finally, there are many peer-reviewed academic studies as well as expert articles available that describe the reasons for and methods of utilizing guaranteed income annuities within a retirement plan. In fact, the vast majority of recent studies strongly suggest the use of guaranteed income annuities within a properly-structured income plan, often as the substitute for low-yielding bonds.

Links to some articles here, here, here, here, here, and here.

A brilliant ad can elicit strong feelings, no doubt. The question is: Does the advertisement promote an idea based in fact, or is it simply being used to stir emotions and cloud the truth? In this case, I’ll let you be the judge.

Any and all questions are welcomed. Simply respond to this email or give us a call. The facts are available if you want them; we’re here to help. I love the truth, and you should too.

All the best,

Adam Cufr, RICP®