As a Motley Fool subscriber and part-time admirer, I have to admit that I was a little disappointed at their recent hosing of Tony Robbin’s new book, “Money: Master the Game.” Robbin’s first book effort in nearly 20 years shows why we are both getting old. We will never be tried by a jury of our peers because soon there will be none. The ones that remain, however, should realize that indexed annuities are a good solid way for the right client to create a personal pension or as a bond substitute. In our industry’s case, the peers are older than ever and continue to grumble about the viability of indexed annuities in a diversified savings and investment portfolio.
Meanwhile, brokerage giant UBS rushes out to join the rest of the wirehouse sales forces, who are frantically training their reps to offer this income-for-life solution for retiring baby boomers. The Department of Labor is also escalating efforts to include income annuities in defined contribution retirement plans.
I was blessed to spend half of the last 36 years on the bank and wirehouse side, much of it internally running sales forces, and recruiting and designing products. I know from board-level positions how laughable it is to see mutual fund families and stock analysts design entire marketing campaigns around rolling performance numbers and gimmicks to attract inflows. These shenanigans right around St. Patty’s Day always give me a sense of appreciation for not only the reason behind the first four letters of the word “analyst,” but also why figures lie and liars figure.
I am just as embarrassed, in turn, by how the life and annuity business-builders play games with illustrations, dividends and caps on everything from whole life to fixed indexed universal life. So what is Mr. Self-help Tony Robbins up to that would cause Motley Fool to declare index annuities the scourge of the earth and be so dastardly?
There is no doubt that the opportunity cost of not being fully invested in the current fourth-longest bull market in history makes the upside potential of an indexed annuity seem inconsequential relative to the full return of the S&P 500, especially with cap rates stuck in an annual point-to-point range of 3 percent to 5 percent for the last three years. That’s not why savers are pouring tens of billions per annum into FIAs, however, as Motley Fool conveniently overlooks.