At Jefferson National, we’ve been following for years the polarizing debate around whether variable annuities are a key part of retirement planning or the worst of all possible investment vehicles. To say the least, the question has been treated as a black and white issue.
Recently, the question gained further steam with the recent publication of a Q&A with Fisher Investments CEO Ken Fisher essentially saying that he “hates annuities” — especially variable annuities — because they are a “Ponzi scheme,” sold on “lies” that are “too good to be true.” A rebuttal quickly followed, quoting industry experts, including Dr. Wade Pfau, Dr. Moshe Milevsky and others, which took the counter position that annuities, especially immediate annuities, can be “a very important retirement tool.” So what does this all mean? To cite a rather famous Clint Eastwood movie, are annuities the good, the bad or the ugly?
We come down squarely on the side of ugly — but mostly in terms of perception. Ugly because the virtues of variable annuities are often masked behind layers of asset-based fees, complexity and lack of transparency.
To get past the ugly and beyond the question of good versus bad, it’s essential to start with the consumer and their advisor. For whether a variable annuity is good or bad depends on the unique financial profile of the client and their level of risk tolerance. And, it’s the advisors’ job to help sort through the available products to look for transparency, low cost and client value.