The past few months have seen a renewal of the usual “trashing” of annuities in the popular press, the financial press and even in broadcast media outlets.
Why do the media hate annuities so much? Why do they seem to have an unbalanced view of these products?
The simplest answer is that controversy sells magazines and newspapers, or that it increases viewers. However, this does not explain the unfair reporting that seems to prevail, not to mention the outright misrepresentation of the product that is standard in so many publications and television programs.
Going beyond the “controversy sells” argument requires delving deeper into probable motivation for the constant bad press about annuities.
There are two professions–trial law and reporting–that require in-depth knowledge about technical subjects that are not part of the professions’ mainstream business. To accomplish their objectives, both professions need (but rarely acquire) detailed knowledge equivalent to almost a lifetime of study on the subject at hand. Once the trial is over or the article written, these practitioners then depart their subject and move on to the next assignment–one likely having nothing to do with the previous subject.
Needless to say, this type of activity lends itself to merely scratching the surface about the subject in order to make the point.
Trial lawyers and reporters are, in fact, salespeople–one selling to juries, the other to readers or viewers. Neither group of recipients of these sales processes desire real depth of understanding about what is being sold. So, these salespeople tend to pick up and emphasize those facts or, in many cases falsehoods, that will catch the interests of the audience. Depth of understanding is not a requirement.
Added to this surface treatment of a complex subject like annuities is the attitude of reporters and columnists that everyone is fully informed about every subject and should be able to make independent decisions based on such information. This bias exists despite the fact that few reporters take time to be fully informed themselves on the subjects they are covering. The attitude is exacerbated by lack of understanding of the basic financial needs of the average American.
The fact that the annuity industry needs to make clear to the media is that annuities are the only products that guarantee that people will not outlive their assets. All too often, the basic feature of annuities–guaranteed lifetime income–gets obfuscated by other product features, by tax deferral or by the very process by which annuities get sold.