Response: High rates may leave you snakebit
July 14, 2010 by Sheryl J. Moore
PDF for Setting it Straight with Scott Burns3
ORIGINAL ARTICLE CAN BE FOUND AT: High rates may leave you snakebit
Scott,
Alas we meet again!
As you well know, I am an independent market research analyst who specializes exclusively in the indexed annuity (IA) and indexed life markets. I have tracked the companies, products, marketing, and sales of these products for over a decade. I used to provide similar services for fixed and variable products, but I believe so strongly in the value proposition of indexed products that I started my own company focusing on IAs exclusively. I do not endorse any company or financial product, and millions look to us for accurate, unbiased information on the insurance market. In fact, we are the firm that regulators look to, and work with, when needing assistance with these products.
I am contacting you, as the author of an article that was published at The Houston Chronicle, “High rates may leave you snakebit: That generous yield is likely to come with a pitch for insurance.” This article had several inaccurate and misleading statements about indexed annuities in it. Because I know that you DO care about the accuracy of your content, I am reaching out to you to bring these accuracies to your attention. As a syndicated columnist that has the potential to influence tens of thousands of readers, I know you want to assure that they have access to accurate, unbiased information on financial services products. I also know that The Houston Chronicle appreciates having reliable information available to their subscribers. Furthermore, I am certain that other publications that run your syndicated column are just as concerned about the accuracy of their content. For that reason, I am copying editors at other publications where you have published inaccurate articles, since I first began correcting your column.
The indexed annuity product that you referenced in your article, the Allianz MasterDex X, does not “pay 8% simple interest.” This particular indexed annuity has a minimum guaranteed annual floor of 0% and credits limited indexed interest based upon a choice of four crediting options. This indexed annuity has a 10% premium bonus and the only feature of the annuity with simple interest (as opposed to compound) is the rollup on the Guaranteed Lifetime Withdrawal Benefit (GLWB), which is only for use for income purposes. The numbers that you saw in the illustration are the values that would be accessible to you in the event of lifetime income later on, not upon cash surrender.
The Allianz MasterDex X indexed annuity has never been the subject of a class action lawsuit. The product hasn’t even existed for two years, far shy of the time necessary for someone to realize they are displeased with their purchase and subsequently file and settle a class action lawsuit. Need I remind you, Scott, that indexed annuities do not cause lawsuits? Lawyers cause lawsuits, Scott. You and I both know it. In a class action lawsuit, the person seeking damages is lucky to get back what they put in, the insurance company settles to get their name out of the press as quickly as possible, and the lawyers leave fat and happy. We recently conducted some research on class action lawsuits in the insurance industry that you may find of interest. Read here for more information: http://www.sheryljmoore.com/2010/01/ambulance-chasers-and-a-lack-of-responsibility/.
I would also like to remind you that indexed annuities are just a tool in the financial professional’s toolbox. Would you outlaw hammers because a serial murderer used them to plummet their victims? I would think it would be rather difficult to build a house without a hammer…in the same manner, it is not good to damn indexed annuities because you heard a story about someone behaving badly while suggesting an indexed annuity. What your articles consistently communicate is “indexed annuities are bad,” despite the fact that they are not, and I’m certain that is not the message you intend to send to your readers. Please be more careful in how you communicate your articles, Scott. You should care that your readers are receiving the message that you intend to send them.
Furthermore, the Allianz MasterDex X does not offer “one of the highest commissions in the industry.” The commission on this product is barely above the average for the industry. Where did you do your fact-checking, Scott? I’ve offered my services to you in the past, and yet you continue to disregard our data and facts. Instead, you forge ahead with fabrications and illusions. I just hope your readers have the intelligence to recognize these falsehoods when they see them.
I laughed aloud at your insinuation that the lifetime income ($60,000) is not available in a single check. IT IS CALLED GUARANTEED LIFETIME INCOME PAYMENTS THAT YOU CANNOT OUTLIVE, AND AN ANNUITY IS THE ONLY PRODUCT THAT CAN OFFER IT TO YOU! In reality, this lifetime income can provide FAR MORE INCOME to the purchaser than the original principal amount paid into the annuity. You obviously do not understand the illustration or the product. Did the agent leave brochures and materials with you? This fact should be pretty obvious from the collateral materials on this annuity.
For the record, annuitization or an immediate annuity will always provide a higher payout that the guaranteed lifetime income provided through a GLWB. However, you do not lose control of the money and lose flexibility with a GLWB. The “cost” of this benefit is a lesser payout in exchange for increased flexibility and control. Your quotes from immediateannuites.com are impressive, but you fail to realize that only 2% of clients actually annuitize or take an income annuity. For that reason, GLWBs tend to be much more popular than ‘annuicide.’
You also fail to realize that a straight life annuity payout on an immediate annuity will only pay the benefit until you die. So, if you die two months after buying it, you don’t even get a return of premium! (Note that this is merely one payout option of many that are offered on annuities, however.) With a GLWB on an indexed annuity, your spouse can continue payments and the full account value of the contract is paid to your designated beneficiaries upon death. This is a HUGE value proposition for the GLWB over the income annuity.
What you fail to realize is that any client can annuitize ANY indexed annuity. You do not have to elect a GLWB to be guaranteed an income you cannot outlive- it is merely a choice if you want more flexibility. So, every person who purchases an indexed annuity has the option for the higher guaranteed lifetime income payments that you referenced from the imediateannuity.com quote. It just sounds like you need to do more work on researching your options with indexed annuities.
Once again, you have shown that you need to do your homework before publishing information on products that you know little on. And yet again, I will offer my services to you, should you decide that you’d prefer to disseminate accurate information on these products.
Thank you.
Sheryl J. Moore
President and CEO
AnnuitySpecs.com
LifeSpecs.com
IndexedAnnuityNerd.com
Advantage Group Associates, Inc.
(515) 262-2623 office
(515) 313-5799 cell
(515) 266-4689 fax
