Ken Fisher is well-known as the Chairman of Fisher Investments, but his “I Hate Annuities” campaigns may have made you more familiar with him. Fisher is no stranger to controversy, as evidenced by her dynamic digital advertisements and eye-catching TV commercials.
In a famous commercial, he says, “I would rather die and go to hell than sell an annuity.” More importantly, should you write off annuities for your retirement because of Fisher’s criticisms of them? But does he really detest annuities to this extent?
An annuity buyout program is run by registered investment advisory firm Fisher Investments. Fisher Investments will cover the surrender charges on the variable annuities that the investors are leaving in exchange for them becoming clients of his company.
An annuity conversion program that buys people out of their annuity surrender fees if they become long-term clients is what makes Fisher like annuities. The liquidation penalties are deducted from the quarterly advisory fees. ”.
As financial writers have pointed out, this could be considered a sort of paradox in business. This serves as a brief reminder of the benefits of doing your research before making any financial decisions, including whether to invest in an annuity pitch.
There are other things to consider in relation to Ken Fisher and annuities, including the accuracy of his advice. While you consider whether an annuity would be a good choice for your retirement, keep in mind the following additional important points.
Fisher Investments, a renowned investment firm, has consistently expressed its disapproval of annuities. This stance stems from their belief that annuities often fail to deliver on their promises and can hinder investors from achieving their long-term financial goals. Let’s delve into the specific reasons behind Fisher Investments’ aversion to annuities:
High Fees and Hidden Costs
Annuities often come with a complex web of fees that can significantly eat into your returns. These fees can include:
- Commissions: Agents and brokers who sell annuities typically earn commissions, which can range from 5% to 10% of the premium you pay.
- Administrative fees: These fees cover the costs of managing the annuity contract and can vary depending on the type of annuity and the insurance company.
- Mortality and expense risk charges: These charges are used to cover the insurance company’s costs associated with providing death benefits and other guarantees.
- Investment management fees: If your annuity invests in mutual funds or other investment products, you will likely pay additional fees for managing those investments.
These fees can add up quickly, reducing your potential returns and making it difficult to achieve your financial goals. Fisher Investments argues that investors can often find better returns with lower-cost investment options that don’t have the same hidden fees.
Limited Growth Potential
Annuities often prioritize safety over growth, which can limit your returns, especially in a bull market. Many annuities offer fixed interest rates or are tied to market indices, which may cap your potential gains. Additionally, some annuities have surrender charges, which penalize you for withdrawing your money early. This can lock you into an investment that may not be performing well, hindering your ability to adjust your portfolio as needed.
Fisher Investments emphasizes the importance of long-term growth potential in achieving financial goals. They believe that investors are better off investing in a diversified portfolio of stocks and other assets that have the potential to generate higher returns over time.
Lack of Flexibility
Annuities can be inflexible investments, making it difficult to access your money when you need it. Some annuities have surrender charges that can be substantial, especially in the early years of the contract. Additionally, if you need to withdraw more money than the annuity allows, you may face tax penalties. This lack of flexibility can be a major drawback for investors who may need to access their money for unexpected expenses or changing financial circumstances.
Fisher Investments advocates for investment options that offer greater flexibility and liquidity. They believe that investors should be able to access their money when they need it without incurring significant penalties.
Complexity and Difficulty in Understanding
Annuities can be complex financial products with intricate terms and conditions. This complexity can make it difficult for investors to understand exactly what they are buying and the potential risks involved. Many investors may not realize the full extent of the fees and charges associated with their annuity until it is too late.
Fisher Investments emphasizes the importance of transparency and simplicity in investment products. They believe that investors should be able to easily understand the terms of their investments and make informed decisions about their money.
Alternatives to Annuities
Fisher Investments believes that there are better alternatives to annuities for investors seeking to achieve their long-term financial goals. They recommend a diversified portfolio of stocks, bonds, and other assets that can be tailored to your individual risk tolerance and financial objectives. This approach allows for greater flexibility, growth potential, and transparency compared to annuities.
However, it’s important to note that annuities can still be a viable option for some investors, particularly those seeking guaranteed income in retirement or those with a high risk aversion. Before making any investment decisions, it’s crucial to thoroughly research your options, understand the risks involved, and seek guidance from a qualified financial advisor.
All of Your Money Goes to Work for You
The life insurance company pays your agent or financial advisor a one-time payment for fixed annuities, and they initiate the contract on your behalf. This is how the insurer compensates your financial advisor for finding an annuity that meets your needs.
But all of the money you invest in your annuity (20%E2%80%94%), or all of every penny (20%E2%80%94%), goes to work for you immediately. To be clear, the agent or advisor is paid directly by the insurance company from its sizable general fund.
Your fixed annuity premium funds are never deducted for this payment.
Insurance Companies Have Weathered Storms
Among all financial institutions, life insurance companies have some of the highest capitalization levels at the moment.
They have to keep dollar-for-dollar reserves for each dollar they receive in annuity premium income. Life insurers have certain ways in which they can restrict the growth potential of your annuity in return for this protection.
You are locked into the guaranteed rate you were given at the beginning of your fixed annuity contract. There are also growth controls with a fixed index annuity. The contract owner’s ability to receive growth is restricted by the use of spreads, participation rates, and caps.
The protection benefit is traded for not having the full growth potential of the underlying index benchmark.
The insurance company doesn’t just protect your money; it also shares some of its growth with you. It stays profitable by taking a cut of the margins on its underlying investments, which are mostly Treasury securities, premium corporate bonds, other fixed-income investments, and small budgets for call options.
This is one way that fixed annuity contracts can incorporate costs. Some fixed annuity contracts come with add-on benefits called riders. If you choose one of these, the benefits could come at an extra cost or premium, but they could make a nice difference in your income strategy.
Any annuity rider options you have can be explained in detail by your financial advisor.
Ken Fisher Hates Annuities. Why?
FAQ
Why do financial advisors hate annuities?
Does Fisher Investments recommend annuities?
Why are annuities not recommended?
What did Fisher Investments get in trouble for?
Does Fisher Investments sell annuities?
Fisher Investments does not sell annuities. We never have, and never will. Why? Our founder, Ken Fisher, is fond of saying, ” I hate annuities ,” because he believes anything you can do with an annuity can be done better with other investment vehicles. We have worked with countless clients who purchased annuities that did not meet their needs.
Are annuities a good investment?
Annuities may seem like simple long-term investments products. However, deep in the fine print there are many terms, conditions and variables that can affect annuity returns. Helping you make sense of annuities, their promises, the fine print and if one makes sense for you. On the surface, the downsides of annuities aren’t easy to spot.
Should Ken Fisher hate annuities?
Perhaps Ken Fisher should hate annuities because they’re not right for his financial circumstances. But they often are the right choice for other people—for example, people who don’t have billions lying around to last them through retirement. Finally, understanding Fisher’s own interests may help us understand his stance against annuities.
Does Ken Fisher buy out variable annuities?
Fisher Investments, a registered investment advisory firm, operates an annuity buyout program. In exchange for investors becoming clients of his firm, Fisher Investments will pay the surrender charges on the variable annuities which the investors are leaving. As Jane Wollman Rusoff reported in a 2015 ThinkAdvisor interview with Ken Fisher himself: