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Stan Haithcock

Retirement Planning > Retirement Investing > Income Investing

‘Stan the Annuity Man’: Why the ‘Annuity Truth’ Beats the Annuity Dream

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Many independent annuity agents, long successful at selling to clients in person, are struggling to chalk up substantial sales in pandemic-imposed virtual meetings. It is one reason annuity companies are looking, increasingly, to broker-dealers for distribution, argues Stan Haithcock, aka Stan the Annuity Man, in an interview with ThinkAdvisor.

Meanwhile, says the nation’s self-described top independent annuity agent, financial advisors nowadays are, for a variety of reasons, selling fewer annuities. Haithcock reveals four causes.

Indeed, the industry as a whole is taking the wrong sales approach, Haithcock insists. Instead of pitching “the dream” of potential, they should “tell the truth and be brutally frank” that annuities are contracts. “People can handle the annuity truth,” he says. 

Annuity sales declined industrywide last year, but Haithcock scored big in what he calls “a monstrous banner year.” In the interview, he tells why. The chief reason is his focus on contractual guarantees using fixed annuities only. Variable annuities can “go down in value”; consequently, they have no place among his offerings.

The former wirehouse advisor, who was with Dean Witter, Morgan Stanley, PaineWebber and UBS, contends that FAs “don’t understand” annuities’ powerful transfer-of-risk benefit proposition nor the great opportunity for annuities to fill a “huge void” left by the elimination of private-company employee pensions.

ThinkAdvisor recently held a phone interview with Haithcock, speaking from Ponte Vedra, Florida, where The Annuity Man LLC is based. He has written seven books on annuities, and his YouTube channel serves up five new educational videos a week. His podcast is called “Fun with Annuities.” In the interview, The Annuity Man reveals the fun of annuities.

Here are highlights of our conversation:

THINKADVISOR: Annuity sales fell 7% in the third quarter of 2020 vs. the previous year, according to the Secure Retirement Institute. And when I interviewed retirement expert Professor Moshe Milevsky last November, he noted the year’s decline. How were your own sales in 2020?

STAN HAITHCOCK: We had a huge, great, monstrous, banner year. Here’s the reason: There’s a demographic tidal wave of 10,000 baby boomers over age 65, and they need guarantees, period. I focus only on contractual guarantees. I don’t talk about hypotheticals, theoretics or projected anything. 

But why did annuity sales, in general, fall last year?

It’s the industry’s fault that sales are down. It isn’t focused on the right products or the right solutions. The mistake made by people that sell annuities is that they don’t focus on the contractual guarantee.

Are you including financial advisors? 

Absolutely. I don’t think advisors truly understand the transfer-of-risk benefit proposition that annuities provide and that annuities have a monopoly on lifetime income. In [today’s] pension-less world, where less than 10% of private companies offer pensions, annuities are the pension. So there’s a huge void that needs to be filled. 

Any other reasons that FAs aren’t selling more annuities?

I think a bigger issue is that they don’t want to lose control of the [clients’] money. They want to wrap the money. Or they think they can do better, and maybe they can. But most [clients] want guarantees. 

What’s a major challenge right now to selling annuities? 

COVID has forced the annuities agent-army and advisor-army to do Zoom [virtual] meetings. For all those who’ve sold annuities face-to-face their whole life, making that transition is really hard.

Even for financial advisors?

The brokerage firms have done a pretty good job of keeping up with technology [virtual meetings], but the independent agents aren’t as technically savvy. They’d better get up to speed very quickly because the carriers are going to demand them to. If they don’t, it’s going to hurt them. This is the biggest challenge for independents and a lot of the reason annuity companies are going toward the broker-dealers now for distribution.

In a recent newsletter, you wrote: “You can’t polish a turd — but you can roll it in glitter.” Please explain.

Annuities are contracts, but agents are always trying to make them sound better than they seem. You can roll an annuity around in glitter, but it’s still a contract. You can polish it up and make it shine at those bad-chicken-dinner seminars and in TV and radio ads. You can sales-pitch people to death. But they’re still going to get a contract.

How should agents sell annuities, then?

Just tell the truth about the benefits and limitations. When you do that, people will, surprisingly, buy contractual guarantees. I wish the annuity industry would just be brutally frank about these products. People can handle the annuity truth; you’ve just got to tell it to them. 

What’s the typical sales approach instead?

The majority of products sold in the annuity world are variable annuities and index annuities because they’re [pitched as] the dream, the hope, the hypothetical, the potential. But you should never buy an annuity for market growth. That’s where the annuity industry has gone in the wrong direction.

Why is that wrong? 

They promote potential when they should be promoting the guarantees — annuities have a monopoly on them. If you want growth potential — the possibility of upside, upside, upside — never, ever buy an annuity. But potential is all the annuity industry promotes. I know that people like buying the dream, but the [important] reality is the contractual guarantees of these products. 

How has the pandemic itself impacted annuity sales?

COVID-19 has made people realize there aren’t any U-Hauls behind hearses — you can’t take it with you. We’ve all been reminded of the fragility of life. So [I recommend that] you’d better turn on that guaranteed lifetime-income stream now.  

But many worry that they’ll contract COVID and die; so they see no sense to buying an annuity. Your thoughts? 

Too many people assume that with a lifetime income product, when you die, the company keeps the money.  But that’s only one of about 35 ways to structure the annuity. All lifetime income products can be structured contractually so that 100% of any unused money goes to the family and the “evil” annuity company doesn’t keep a penny.

What type of annuity would be good to buy in today’s environment?

All of them. Lifetime income is good. Principal protection is good. COVID or no COVID, contractual guarantees are always good. And It doesn’t matter whether interest rates are high or low.

Are most annuities “lifetime income products”?

No. There are three annuity types that don’t address income unless you design them to: a multi-year guaranteed annuity, which is the industry’s version of a CD; fixed indexed annuities and variable annuities, which aren’t income products unless you attach an income rider. But single premium immediate annuities, deferred income annuities and qualified longevity annuities [QLACs] are income products, period. 

Many consumers object to buying an annuity because they think they’d be unable to withdraw any of the substantial amount of money they would pay into it, should the need for liquidity arise. How do you overcome that objection?

[It depends on] which type of annuity. It’s the illiquid ones that you can’t draw money out of: immediate annuities, deferred income annuities and QLACs. But you have 100% control over multi-year guaranteed annuities, fixed indexed annuities and variable annuities. They have surrender charges; but typically, companies allow you to withdraw 10% penalty-free annually.  Some multi-year guaranteed annuities are a little more restrictive, allowing you to take out only the interest or only 5%. But most give you a provision to take money out in some form or fashion.   

Your weekly consumer podcast is called “Fun With Annuities.” What’s the fun part about contracts?

Annuities are fun because lifestyle is fun, guarantees are fun, lack of volatility is fun. That’s what the public wants. 

What’s up next from your company?

This year we’ll do some things that will change the industry. They’ll absolutely turn it upside-down [insofar as] how people are getting educated about annuities. There’s never an urgency to buy an annuity; the urgency is to understand it before you buy it. 

How will you turn the industry upside-down?

I want to push it to where “annuity” won’t be the financial curse word anymore. Right now it is, and it’s earned that. Every time people think of annuities, I want them to think of lifetime income or guarantees. I want it to be Pavlovian: “Annuities are guarantees.” Now they go, “I hate annuities!” just because somebody said so. Annuities are guarantees, and every single United States citizen with a Social Security number owns an annuity [Social Security benefits]. So how in the world has the industry let it get to the point where the word “annuity” equals hate? I don’t understand it. 

— Related on ThinkAdvisor:

- Find the latest Social Security & Medicare, Financial Planning and Tax information in National Underwriter’s 2021 resources.   - Discover the latest 2021 annual resources for financial professionals on the NU Resource Center. ThinkAdvisor readers save 10% with code TA10


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