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September 28, 2005 at 08:00 PM
Any astute advisor can overcome the arguments raised by the negative press surrounding annuities
After all these years, it still amazes me that the things my mother tells me are true. I’ve learned that it is easier to follow the crowd than to stand against them–but that it doesn’t always mean the crowd is right.
Since 2001, the popular financial press seems intent on the ruin of variable annuities, particularly variable annuities inside qualified plans.
With my own eyes, I have seen variable annuities being positioned as preying wolves, sins and “simply not appropriate for someone in retirement.” Even the former chair of a large financial company who basically pioneered variable annuities “for the greater good,” now says, “I can’t imagine a situation when I’d recommend a variable annuity.”
Scandals within mutual fund companies (many having subaccounts inside annuity products), mergers and acquisitions of insurance companies, and the change in annuity tax treatment in May 2004 added to the negative press.
A somewhat unpredictable stock market also would lead people to believe the crowd is running away from variable annuities by the busload.
What’s more, over the past five years, the increased scrutiny of variable annuity sales by regulatory agencies, broker-dealers and the press has contributed to uncertainties.
Now, let’s look at what has been happening to variable annuity sales: The sales ended 2004 at a record high, according to data from National Association for Variable Annuities, Reston, Va., and Morningstar, Chicago.
So, how can sales continue to climb when most of the stories about variable annuities have been so negative?
I have spoken to advisors on a daily basis, trying to understand the apparent disparity in what is presented to the public from non-industry sources vs. what is actually occurring inside their offices.
One very successful advisor explained it this way: “I wouldn’t write an article about mechanical engineering based on the opinions of three car owners.”
