Sen. Warren’s Wealth Tax Plan Is ‘Nuts’: Jane Bryant Quinn

Let’s say you do. Yes, you haven’t gotten all your money back. On the other hand, during those five years, you’ll have had a higher income than if you kept that $100,000, or so, in a bond fund. And, you probably would have had a higher income than from your stock dividends.

To what extent are financial advisors recommending immediate annuities?

I see a growing number of advisors getting interested in them. I think fee-only advisors are proposing them more. One problem is that it isn’t a fee-only product, so a fee-only advisor winds up with a commission whether they like it or not. But they’re working on annuities for fee-only advisors because many want to propose them — they’re good, solid income for their clients.

With interest rates so low, is now actually a good time to buy an immediate annuity?

It’s still a better deal than bond funds but not as great a deal as it was five or 10 years ago. However, it remains a very good product for conservative investors needing income.

You also write about a different sort of “sucker factor” related to annuities. Please talk about that one.

You’re a sucker if you buy one of those really complicated annuities that are linked in some way to the stock market. People have the idea that they’re going to get a huge return with this type of annuity. But basically, it’s designed to only yield a little more than bonds, something people just don’t understand.

But with the market doing so well, fixed indexed annuities seem appealing, do they not?

Yes, but basically these are truly fixed income investments – they’re like bond investments but with a little overlay of stocks. It’s possible that you could do very well over a 10-year period, or so, with some of them. But it’s going to be very hard to do any better than you could with a bond fund. These are designed, basically, to slightly outperform bond mutual funds. Sometimes they do, and sometimes they don’t. And they’re expensive.

Please discuss the situation that, amid the pandemic, the stock market is booming, and investors are getting richer, while people who lost their jobs are suffering economically.

That’s why it’s called a “K-shaped” recovery. It’s absolutely terrible that people lost their jobs and can’t pay for food, utilities, rent or mortgage, credit card bills, and have, maybe, stopped contributing to their 401(k)s.

But on the other hand, investors are doing so well in the stock market.

Yes. As far as investing is concerned, the pandemic has been a wow. A significant amount of government payments that people received under the CARES Act went into paying down debt or into investing. That will happen with the next [stimulus checks] too. So deficit spending is very good as a source of business profits and a source of cash for the stock market.

Please elaborate.

If you’re a stock investor doing sensible things, like asset allocation and low-fee investing, you’re just sitting back and saying, “Wow, look how my money has gone up!”    

But what if the subpar economy declines badly and corporate earnings of companies that people invest in plummet? This would impact market returns, and investors’ portfolios would be affected negatively.

Yes, but we get big stock market declines every few years. The recent one we had was artificial because it was pandemic-related. Experienced investors have lived through, probably, five to 10 market declines during their lifetime. They know how to deal with them. You just prepare for the possibility.

How helpful can financial advisors be in that regard?

A good financial advisor is extremely helpful to clients in telling them not to panic. But again, experienced investors have learned not to panic. A good advisor creates the asset allocation that will be good for the client in good markets and bad markets. So that in a bad market, they can say, “You’re OK. Remember the last [bear market] we went through? You were OK. And you’ll be OK during this one too because you’ve got a good asset allocation – we figured it out in advance.”

Many people are generally distrustful of financial advisors, for various reasons. What can advisors do to improve their image?

They should be fee-only. But if advisors are advertising themselves as fee-only and are also taking commissions under another hat, that’s wrong. If someone says they’re a fee-only fiduciary, how does [a prospect know] if they’re a fake fiduciary? 

What do you suggest?

They should look under “disclosures” in the papers they have to sign to open an account. If there’s a long paragraph about buying [certain types of investments], you’ve got a fake fiduciary. A true fee-only fiduciary has a very simple fee set-up and a very short paragraph under conflict-of-interest disclosures. 

Do you personally have a financial advisor?

I have someone who manages my pension fund, and once a year we talk about where we are, what I see ahead and if there are any changes likely in my income or situation. But I don’t have a financial advisor that covers everything because I’ve got an accountant too: I have a second opinion.

What’s an example?

When I wanted to see if I could afford to retire, I asked them both. They figured it out separately, and both said yes. 

Are you working on a new book in your retirement?

Nope! I don’t want to write anymore. I don’t even like to write letters home! I had five deadlines a week – significant work — including appearing on television. And I wrote books. I’ll never write another book. I’m done. My husband [Carll Tucker] and I walk through Rome every day looking at churches or museums. I’m studying Italian and reading novels and histories. I’m having a wonderful time without deadlines. I’m a very happy retiree living in Rome!