Quotables by Notables On the Subject of Annuities

John Rafferty
Principal, Rafferty Annuity Framing LLC

"Eight months ago, a back-of-the-napkin review of the prior decade would have revealed a 16.5% compounded return in the SPY (vs a long-term average of about 10.7%); It would have revealed only one of the prior 10 years being a loss (and a mild one at that, -4.3% in 2018, versus the typical three losing years in a decade). The Fed had announced in November of 2021 that ZIRP was RIP. If those weren't signals that a reversion to the mean was in the offing, I don't know what would be.”

Tom Hegna
Principal, TomHegna.com

“In this last crash, it wasn’t just stocks that fell; bonds did too. I think the simplest way for people to add annuities to their portfolios is to replace their bonds with annuities (SPIA, FIA or MYGA). First, the payout rate (or interest rate if a deferred annuity) is significantly higher than what bonds are paying. Additionally, the annuities don’t have the interest rate risk that bonds have. Think of it this way: In a portfolio, the annuity functions like a AAA rated bond with a CCC rated yield with zero standard deviation. Replacing the bonds in a portfolio with annuities will lower the risk and increase the returns of the portfolio.”

Michael Finke
Investments/retirement professor, Frank M. Engle chair of economic security at The American College

“I continue to see the cost of lifetime income insurance characterized as ’fees’ and not as a premium for protection against the combined risk of poor investment returns and longevity. A guarantee that a client can spend a minimum amount from a portfolio each year isn’t free and can be a particularly valuable way to help investors feel comfortable maintaining their desired lifestyle when markets fall early in retirement. I’m guessing that a lot of retirees who don’t have insurance are facing the decision to spend after experiencing negative returns and wondering if they need to cut back. “

Gary Mettler
Author and immediate annuity agent

"Because of annuity industry ‘purchase suitability rules’ people would have been much better off if they purchased contracts six months ago when annuity rates were lower. And while annuity rates are higher today, people can’t ’qualify’ for that same purchase capacity for annuity safety because their financial net worth has diminished. For example, if $100,000 was suitable six months ago, perhaps now only $75,000 is suitable. People lost the ability to safeguard that $25,000.”

Ted Bernstein
Financial advisor, Life Cycle Financial Planners LLC

“Every time there is a significant downturn in the markets, notwithstanding the marketing messages from the Ken Fishers, there are millions of wise people who simply sleep better. What is that worth?”

Kerry Pechter
Editor, Retirement Income Journal

"The saving grace of the Fed's low-for-long interest rate policy after 2008 was its contribution to a long bull market in stocks. As the years went by and stocks kept rising, near-retirees had ample time to take winnings off the table and lock them into lifetime income vehicles. But there is no easy path or mechanism or guidance available to help people do that, regardless of whether their money is inside or outside qualified plans. The process is complex, laborious, and entails daunting tradeoffs. We need to make that process easier without allowing it to be deceptive or expensive."

Curtis Cloke
International keynote speaker, retirement income expert

“In 2019 I took on Ken Fisher Investments. I was on a Delta flight from Detroit into Philly when the Ken Fisher Investment commercials appears touting its website, "AnnuityBunk.com." I decided to play the game too! I created three URLs: "KenFisherBunk.com," "KenFisherAnnuityBunk.com," and "FisherInvestmentsBunk.com." I knew Fisher’s brand intelligence would eventually catch this. Six months later they did!

As a result, they agreed to add a small disclosure to their public adds when mentioning annuities and AnnuityBunk.com that would indicate the annuities mentioned were not SPIAs. I agreed to turn back over to them the URLs I created. Ken Fisher Investments has created more doubt and confusion about the word annuity than anyone else for the cause of demonizing annuities over the high fees they desire to charge. It is not hard to show the clear facts of their games and the bad reputation of their founder.”

Sheryl Moore
Founder, Wink, Inc.

“People who had purchased annuities wouldn't have had to worry about losing money in their contract, and they could be confident in their ability to have a paycheck for their lifetimes."

Jason Ray
Managing director, Wealth2k, Inc

“The data is clear for middle market and semi-affluent, soon to be retirees. They err on the side of stability of income over leaving a potentially bigger legacy. That stability can be a percentage of income, a coverage of non-negotiable fixed expenses or something else entirely. Its imperative for retirement income professionals to help them craft a plan that not only works in the software but allows then to sleep at night as well.”

Paul Tyler
CMO at Nassau, Strategy, Marketing, & Technology

"Choppy markets like this prove the value of annuities more than ever. Fixed indexed annuities have offered strong storm walls for millions of retirees over the past few months."

David Stone
Founder & CEO, RetireOne

"If we look back to February, clients with an annuity would be able to sleep at night knowing there was a contractual guarantee of lifetime income protecting their retirement and they were well positioned to reap the upside of any market recovery as, with an annuity linked to mutual fund assets, there is no need to move to cash."

James Wong
Area executive V.P., Partners Advantage

"The value in annuities are revealed during times of uncertainty...and that's just what we've seen the past six months. Having solutions to key risks like sequence of returns should be a part of everybody's retirement income plan. Much like the trial process in our legal system, I hope Americans get to hear all the facts about Annuities before making a decision that could impact them greatly...for the good or for the bad."

Doug Schwarzwaelder
Principal, Schwarzwaelder Associates

“My own annuity, with an April 2022 anniversary, paid me a net return of over 30%. That big result surpassed both my Morgan Stanley managed money account and E-Trade trading account, by wide margins. On my April 2022 anniversary, my cap rate was raised from 200% to 300%. In other words, I made over 30% with a lower cap rate, so now I have 50% more cap rate and look forward to even more than 30% going forward. It's all about diversification. To me, almost everyone should have some annuity money working for them. As you most likely know, even the taxes are deferred. I get interest on my interest during the accumulation period. And I’m lucky to be one of the limited number of distributers of this product.

Annuity criticisms are often because there are around a thousand annuities to choose from. The key to success is knowing which ones to own. Luckily, today we have amazing software to do the work for us. Founded by Kent Jaquay, the industry leader is now Indexalyzer. I saw a recent report that showed my annuity came out number one. But I bought the one I have, before Indexalyzer existed. I guess that made me the Ken Fisher of annuities!

I believe the key to a successful annuity is to have the chassis be short term, have software back testing for quality, have a powerful index behind it, one that is transparent so you can see the basket of stocks in the index, and then obviously get the highest participation rate you can get. Just amazing that anyone can get a 30% return, with no risk. My own statement proves it. If you wish to see it, just reach out.”

Michelle Richter
Principal, Fiduciary Insurance Services LLC

“Our financial professional regulatory framework implicitly assumes that the only valid lens to advise upon consumer financials is to maximize assets. This worldview is consistent with the AUM-based billing model that is perfectly appropriate for investment (asset) advising, but which may not always be the best model for consumer financial advising. Financial advising means advisement upon all elements of consumer financials, not merely upon the left side of the consumer’s balance sheet. Those of us whose expertise has been developed in the insurance arena see the consumer imperative through the lens of liability management (right side of balance sheet) and/or of income maximization (a cumulative income statement, not a balance sheet, premise). Our flawed regulatory framework results in a twisted incentive system best exemplified by the conduct of the fired persona Ken Fisher.

The above-mentioned persona bears the same name, but not the same beliefs or identity, as the human being who founded Fisher Investments. It is an entity that continues to profit from the revenue stream that the persona created under this regulatory frame that erroneously conflates institutional asset management regulation with human wealth management regulation. (Human wealth occurs when assets grow in excess of liability meeting.)

Asset managers need not know an asset owner to manage to an investing mandate. Asset managers are not required to understand or to manage to the meeting of the consumer’s liabilities, such as the need for stable retirement income streams from their portfolio of assets. It is unclear in this case which of the two Ken Fishers described above purports to be the ‘fiduciary.’I Is it the persona who was fired for communicating its perspective that financial planning and wealth management is an ineffective means by which to get into the pants of one’s potential asset management clients at the Tiburon Conference in 2019? Or is the fiduciary the person who continues to profit from the brand built by the persona with the egregious public behavior?”

Marc Geels
Financial advisor, owner, EFS Group Wealth Management

“Annuities are another tool to help fund retirement income and there are many ways to use them. They are not the holy grail, as there is no such thing. But they help to keep people from making emotional decisions when they don't have the guarantees that these products provide. Experience has shown me when there are guarantees incorporated into a distribution strategy, this helps to alleviate bad decisions. Incorporating an annuity helps to plan for the certainty of uncertainty. And that is what retirement planning, an income distribution strategy, is all about.’

Rob TeKolste
President, Sammons Independent Annuity Group

“As I look back on the past year, rates have risen. Fixed annuities are uniquely positioned to protect principal and offer guarantees around income and interest credits. The value proposition these products offer is significantly higher today than just a few months ago.”

David Blanchett
Managing director, head of retirement research, PGIM DC Solutions

“The markets have been a bit of a hot mess in 2022. Inflation is up, stocks are down, bonds are down, and crypto is way down. Allocating to high-quality annuities that provide protected lifetime income can reduce or eliminate many of the uncertainties associated with funding retirement that you can’t get from a portfolio alone. Those retirees who had purchased an annuity pre-2022 would have likely slept better this year knowing their income is protected!”

Bruno Caron
Associate director, A.M. Best

“As the macroeconomic environment changes, the impact on retirees’ balance sheets is easily observable; the impact on income for the unknown remaining retirement period is harder to assess. Annuities can help retirees manage and predict their income.”

David Lau
CEO, DPL Financial Partners

“If advisors would educate themselves on the facts about annuities and leverage them more, it would be transformative for their practices and their clients. There would be far less and far more. Less phone calls from panicked clients imploring them to ‘stay the course’ as portfolio values and retirement plans suffer from market declines. Less fretting the ups and downs of the market. Less lost revenue for firms. Less worry about income guardrails and sequence risk. Less work having to manufacture retirement paychecks. Less execution risk by not having to actively manage retirement income. And less worry from clients about outliving their money. While at the same time, far more time to grow practices and work with clients. More held away assets brought under management. More sleep-filled nights for clients. More consistency of retirement income. More liquidity in portfolios. More legacies for heirs. And most importantly, far more enjoyment of retirement.”

Alan Gappinger
Chairman, Heartland Institute of Financial Education

“As a financial planne and advisor, I am often asked about annuities. Insurance companies are the only institutions allowed to provide annuity products and there is a reason: financial stability and financial reserves. Of course, all insurance companies are not created equal, and all annuities are not equally valuable. However, good annuity products, backed by good companies are as good as gold. Actually, better since gold isn't guaranteed!”

Matt Zagula
Founder, The Smart Advisor Network

“I can only imagine the value of your article six months ago to new retirees who used an approach like Fisher Investments and the sequence-of-return risk they’ll endure for their entire retirement as a result of taking that narrow view of retirement planning possibilities.”

Tyrone Clark
CEO & founder, Brokers’ Choice of America

“During economic times like this, consumers want certainty, security and guarantees as opposed to volatility, speculation, and uncertainty. That’s why consumers are pouring massive amounts into the time-tested confidence provided by rock solid guarantees from annuities. Had more advisors had an open mind about annuities (perhaps as a missing asset class) then they would not have to be worried about losing clients and answering calls and emails, saying ’hang in there,’ or having clients with doubts about their recommendation and one step away from moving assets.“

John Shrewsbury
Financial advisor, co-owner, GenWealth Financial Advisors

“For a great majority of Americans, one of their constant concerns is whether they will have too much ‘month’ at the end of the ‘money’ as they try to make ends meet in their monthly budget. Likewise, for a lot of retirees, the question transforms into, ’Will I run out of money before I run out of life?’ For the client who made a well-informed decision to move a portion of their assets into an annuity before the inflation/interest rate driven fall of the market, they were able to quell those concerns.

Likely, if that client were advised by a well-trained retirement income planner, they were able to establish a foothold for their future income using an annuity product whose features fit their situation. That foothold, in the form of some type of income guarantee from the annuity issuer, would not be loosened by this or any other market downturn. The client would have transferred the risk of depleting their income to what was likely a large, well-capitalized insurance company that is well experienced in managing and hedging such risks.

In making this decision, the client would have averted the concern of the effect of the market downturn would have on their ability to generate a certain amount of income to cover their basic needs through the balance of their retirement. The decision to provide a base level of income, in combination with other sources like Social Security, also gives our friend the freedom to spend other assets on discretionary items without the concern that they would be undermining the assets which provide for the monthly liabilities such as food, clothing, utilities, medicine, shelter and transportation. Parallel to Maslow’s hierarchy of needs, this client has taken care of their foundational need for income and has created a sense of liberty to make spending decisions without a concern of eroding that foundation.”

Peter “Coach Pete” D’Arruda
Host of the Financial Safari radio show, investment advisor at Capital Financial Advisory Group, LLC

“It is always amazing to me that people who claim to be fiduciaries ignore a very fundamental piece of what the word fiduciary means. How can one push all risk all the time and say what they are doing is in the best interest of the client? Answer: They can't! They are lying to themselves and their clients when they neglect to isolate some of the client's hard-earned money that is dedicated for retirement, in a place that will guarantee the money will be there, in retirement. Risk is one of the 4 deadly financial termites that eat away at what should be a happy portfolio. The other financial termites are fees, commissions, and taxes. To put it quite simply, a firm that only pushes all risk all the time is not one that I would trust with my hard-earned retirement money. To further pile cherries on top of this sundae, spending millions yearly slamming annuities and influencing the public to ignore safe strategies in a combination plan of risk and safety is not something a true fiduciary should be doing. Annuities aren’t the solution to every problem, but not including some safe money into the retirement equation while claiming to be a fiduciary is mind-blowingly idiotic. It is easy to get away with financial malpractice when the market is rocketing up, but it is equally obvious that one had no clue what their duties as a fiduciary is when the market goes South. Not offering the perfect combination of risk and safety based on the client's wants, needs, and risk tolerance while claiming to be on their side could almost be looked at as criminal, especially in the ties we are in. Being a true fiduciary takes a lot more insight, knowledge, and ethics, than simply telling everyone you are one while spending millions a year slamming a great tool that is used in many plans to take the worry out of living in retirement.”

Ken Sadler
Investment advisor, Summerhill Asset Management LLC

“I know firsthand that I’ve helped to secure retirement security for some of my clients by moving a portion of their portfolios into annuities. This helped protect against the recent downturn in the market and will provide lifetime income.”

Dallas Richardson
Financial advisor, Sky Tower Counsel

“The recent market losses have once again provided a blatant reminder, and defined the difference between true fiduciaries that operate in an agnostic, comprehensive approach by protecting their client's future, and those who are obsessed with the outdated lie that they can protect client's assets by controlling the market.

Mathematics and research have determined the right annuities provide an enormous number of benefits to their users. In the battle between asset management and life insurance products, the only casualties are our client's life goals and their trust in the financial industry. Until more advisors incorporate the guarantees provided by the right annuities to protect their clients from their worst fears, which is to run out of money before they run out life, they will always appear nothing more than a bookie gambling away their client's life's work.”

Alex Murguia
CEO, RISA LLC

“It's difficult for me to say what benefits they would have enjoyed. It can come across as a statement with the benefit of hindsight... That being the case, the benefit is one of omission. Individuals would not have subjected their retirement income success and projections to the vagaries of the stock market. While one may have the full expectation that stocks will produce positive rates of return over the long term, it is a leap of faith to expect these positive returns to consistently manifest themselves to satisfy your shorter-term retirement income needs.”

Jean Statler
CEO, Alliance for Lifetime Income

“Market volatility and economic uncertainty are surely keeping pre-retirees and retirees up at night. Americans who wisely added an annuity to their retirement portfolio avoided these risks and are sleeping better knowing their retirement is protected with monthly income they can count on. The antidote to risk is certainty, and annuities provide certainty. In fact, recent Alliance research shows that more than a third of annuity owners would actually consider adding another annuity to their portfolio.”

David Macchia

And one from me… “My greatest wish for all facets of the community of financial advisors, including all practice models, compensation structures, financial planners, investment advisors, and insurance agents, is that each segment realizes its specialized competencies are not the entirety of the ‘answer’ for retirement income. Instead, each is a vital component of the true answer. This means that a broad embrace of annuities is a condition that can no longer be prudently delayed.”

Wealth2k® founder David Macchia is an entrepreneur, author, IP inventor and public speaker whose work involves improving the processes used in retirement income planning. David is the developer of the widely used The Income for Life Model®, and the recently introduced Women And Income®. David has authored many articles on the subjects of retirement income planning and financial communications. He is the author of two books, Constrained Investor®, and Lucky Retiree: How to Create and Keep Your Retirement Income with The Income for Life Model®

Read more articles by David Macchia