Annuity ‘Strategies’ Don’t Work
January 29, 2019 by David Stone
I recently read a serious takedown of variable annuities. The author began saying that variable annuities are the “most misunderstood investing strategies…” I could hardly carry on. Annuities aren’t strategies. Conflating “strategy” with “solution” is an old semantic problem, and it probably isn’t an innocent mistake.
The notion of “annuity” as ”strategy” isn’t new. Old-school “sales ideas” and “annuity strategies” have papered registered rep and agent inboxes for more than 20 years. These concepts were imagined with annuities as the whole solution — where a large asset might be located for the promise of high returns and no risk.
Historically, these “annuity strategy”‘ slicks and brochures were presented at free steak dinners along with hard-sell slide decks and scary charts aimed at retirees and pre-retirees. They were designed to obliterate investor objections and boost annuity sales, not to help solve real-world problems for investors.
Appealing to client fears (or greed), they could be touted as one-size-fits-all solutions to protect against market downside, provide guaranteed retirement income, and also leave a lasting legacy. Yes, all three at once.
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