Close Close

Life Health > Annuities > Fixed Annuities

Anti-Annuity Advisors Shouldn’t Be in Business, ‘Stan the Annuity Man’ Says

Your article was successfully shared with the contacts you provided.

The advisor who tells clients to never consider an annuity is “a fool” and “shouldn’t be in the financial business,” argues Stan Haithcock, otherwise known as Stan the Annuity Man, in an interview with ThinkAdvisor.

Such financial advisors are ignoring the fact or not acknowledging that Social Security benefits and pensions are themselves annuities.

These advisors are “doing their clients a disservice,” adds Haithcock, who is licensed in every state and the country’s top independent annuity agent.

There are four chief reasons to buy an annuity: income, principal protection, legacy and long-term care. They “should not be purchased for market growth,” says Haithcock, who is adamant about that.

“Most retirees aren’t looking to be the next Gordon Gekko; they’re not looking for the next hot stock tip,” he says.

“They’re looking to live their life and not lose money,” adds Haithcock, who recommends fixed annuities only.

Can an annuity take the sting out of high inflation? Haithcock, who has been dubbed “the walking middle finger of annuity truth,” says it cannot: “There’s no perfect solution for inflation with annuities. Period. End of story.”

On the upbeat side of the ledger, he points out that because annuities are contractual guarantees, they aren’t affected by war, geopolitical events, the market, interest rates or Bitcoin.

Further, annuities can be the “secret weapon” in a retirement portfolio with their capability to create a lifetime income stream, combined with Social Security and required minimum distributions [RMDs].

He calls RMDs “forced annuitization.” 

The government “makes you take the money out of your IRA as long as you’re breathing,” he says.

Last year, U.S. annuity sales industrywide came to $254.8 billion, a 16% increase over 2020, according to the Secure Retirement Institute.

Haithcock’s sales were “off the charts,” as they have been for the last six years, he says.

In the interview, he names the top three misconceptions about annuities, why multi-year guaranteed annuities, or MYGAs, are popular with baby boomers and how annuities benefit advisors in managing clients’ money.

Haithcock is a prime source of annuity education: He posts five videos about them weekly on his Stan the Annuity Man YouTube channel, hosts a weekly podcast, “Fun With Annuities,” and has written seven books on the subject.

Founder and owner of The Annuity Man, based in Las Vegas, Haithcock earlier was with Dean Witter, Morgan Stanley, PaineWebber and UBS.

ThinkAdvisor recently interviewed Haithcock, who was speaking by phone from his office in Ponte Vedra, Florida.

He noted that new indexed annuity products specifically designed for RIAs were in development. 

He then offered advice about these new entries: “No one annuity is better than another,” he says. “You have to shop all carriers for the best contractual guarantee.” 

Haithcock’s general advice to advisors is that they “should be introducing contractually guaranteed concepts within the overall financial plan.”

Here are highlights of our interview:

THINKADVISOR: Sales of U.S. annuities in 2021 totaled $254.8 billion, up 16% from 2020. Those were the highest annual sales since 2008 and the third highest in history, according to the Secure Retirement Institute. What accounts for this rise?

STAN HAITHCOCK: A lot has to do with the fact that banks and brokerage firms are, I guess, holding their noses, and starting to sell annuities after all these years.

So the distribution channels have opened up.

Still, why don’t more financial advisors recommend annuities?

When there’s a lifetime stream product in place, they lose control over the assets. And they don’t want to do that.

But if you’re an advisor who tells clients, “You should never look at an annuity,” you’re a fool and shouldn’t be in the financial business, because what you’re really saying is: “That pension or Social Security you’re getting, don’t get them, because they’re annuities.”

Advisors who have just one piece of information in their mind about annuities and are telling clients, “You should never buy an annuity,” are dumb and doing their clients a disservice.

They should be introducing contractually guaranteed concepts within the overall financial plan.

But annuities are still being knocked by parts of financial services and some experts in the media. Should that just be overlooked?

People who are knocking annuities have an agenda. It’s almost Democrat vs. Republican, almost a political sound bite when someone in the non-annuity industry says: “Annuities aren’t good. You shouldn’t buy them. The return on investment isn’t that good.”

Can an annuity be a secret weapon in a retirement portfolio?

The weapon is creating that lifetime income stream. You’re enhancing your income floor by combining it with the two annuities you already own: Social Security and what I call “forced annuitization,” which are RMDs [required minimum distributions].

Those are forced annuities because [the government] makes you take money out of your IRA for as long as you’re breathing. That sounds similar to an annuity. Guess what? It is an annuity.

How is Russia’s invasion of Ukraine impacting annuity purchase in the U.S.?

The majority of annuities are contracts with a contractual guarantee that aren’t affected by war, geopolitical events, the market.

Politics, interest rates, Bitcoin — all that doesn’t matter [when it comes to annuities].

Because of the chaos in the world, people are looking for contractual guarantees, whether it’s for income, principal protection, long-term care or providing legacy for their beneficiaries, [all of which annuities offer].

Broadly, what are most people seeking financially in retirement?

They’re not looking to be the next Gordon Gekko. They’re looking to live their life and not lose money.

They’re not looking for the next hot stock tip, the next Bitcoin or the next Tesla. They’re looking for lifestyle — lifetime income — and guarantees.

Annuities should not be purchased for market growth.

Suppose a client expresses interest in buying an annuity, but their advisor tells them they don’t do annuities. What should the client do?

Find another advisor. That’s like going to a doctor and saying, “I think I have high blood pressure” and the doctor says, “I don’t do blood pressure.”

It’s that ludicrous. If the advisor is advising the client on Social Security or their pension, they’re advising them on annuities.

[Moreover], there are annuity types that work similar to CDs or bonds. If an advisor isn’t addressing those, they’re not informed.

What should advisors keep in mind about annuities that’s beneficial to them?

This is the bottom line: If the guaranteed income floor — the income coming in every month — is in place, their clients will be better investors and better clients for them to manage their money.

If the income stream is in place with [maybe] a pension, Social Security and an annuity that pays lifetime income, managing the money will be a lot easier.

If advisors don’t recommend annuities, what do they stand to lose out on?

Advisors who haven’t included annuities in their planning or recommendations are missing the biggest demographic tidal wave of opportunity ever.

There are [more than] 10,000 people turning age 65 every day and who aren’t looking for market growth — they’re looking for guarantees.

On average, how knowledgeable are advisors about annuities?

Most advisors know nothing about annuities as a general category.

The biggest thing is that advisors need to become informed on the complete annuity category and not just listen to people who say, “Annuities are bad; annuities are expensive.”

Advisors who aren’t informed are going to look ignorant to a growing number of baby boomers who do understand annuities.

What are the top misconceptions about annuities?

No. 1, the biggest one, is that when you die, the annuity company keeps the money.

There are about 40 different ways to structure an annuity. The majority of people structure their immediate annuities for lifetime income payments so that 100% of any unused money goes to their beneficiaries, and the annuity company doesn’t keep a penny.

What’s the second biggest misconception?

It’s that annuities are only for income. Annuities are also for principal protection, or they can be for legacy — leaving money — or they can be for long-term care.

If you don’t need to contractually solve for [one or more of] those four, you don’t need an annuity of any kind.

And the third biggest misconception?

It’s that annuities are expensive. That’s a joke, because the majority of annuities don’t even have annual fees or expenses.

How does today’s high inflation impact annuities?

There isn’t an annuity type on the planet that perfectly solves for it.

You can attach an inflation rider to lifetime income streams, but the annuity companies lower the initial payment to make up for that increase.

If you’re buying a principal-protection product, like a MYGA [multi-year guaranteed annuity], interest rates aren’t going to keep up with inflation. But MYGAs are better than CDs.

There’s no perfect solution for inflation with annuities. Period. End of story.

Tell me more about MYGAs.

They’re fixed-rate annuities and have been really popular. They’re pro-customer: You can buy a one-year, two-year, three-year, four-year [and so on] MYGA — so you don’t [have to necessarily] lock up your money for 10 years.

Boomers like that because they like short-term durations, contractual agreements and products that don’t have annual fees.

But [for advisors], the built-in commissions are minuscule compared to [those from] other types of deferred annuities.

People are starting to substitute the phrase, “lifetime income guarantee” for the word “annuity.” Your thoughts?

I think it’s a mistake. Why tiptoe around it? It’s an annuity — a great product. It’s the only product that pays a lifetime income stream as long as you’re breathing.

We should be very proud of what annuities do contractually.

As an industry, let’s better explain what annuities should be used for and address the misconceptions that I’ve just talked about.


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.