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Stan Haithcock

Retirement Planning > Retirement Investing > Annuity Investing

Wrap Fees on Indexed Annuities Are ‘Ridiculous,’ Stan the Annuity Man Says

By Jane Wollman Rusoff

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Advisors are “being forced” to offer annuities “because all the baby boomers turning 65 need income or principal protection, or both. Any advisor who doesn’t at least discuss the positives of annuities with … clients is kidding themself,” argues Stan Haithcock, aka “Stan the Annuity Man,” in an interview with ThinkAdvisor.

Licensed in every state, he says he is the top independent annuity agent in the country.

Much of the annuity business is booming thanks largely to interest rate hikes. LIMRA forecasted record-breaking sales of multiyear guaranteed annuities for the first quarter of this year.

These are fixed annuities that function like CDs, Haithcock explains. “Ever since the guarantee went over 5% last October … there has been overwhelming demand” for them. “It’s a demographic tidal wave of [baby boomers],” says the annuity expert, who recommends only fixed annuities, never variables.

In the interview, the founder and owner of Stan the Annuity Man, based in Las Vegas and with a second office in Florida, unpacks how annuities can be used to fill a gap in retirement income and why he sees no reason for annuity-selling RIAs to charge a management fee for them. He calls that “ridiculous.”

Haithcock, with his humorous and blunt style, is a wellspring of reliable information about annuities: He generates videos — new ones are posted Monday through Friday on his Stan the Annuity Man YouTube channel, he has “The Annuity Man” podcast and he’s penned seven books on the subject.

Before venturing on his own, Stan the Annuity Man was a wirehouse man, having worked at Dean Witter, Morgan Stanley, PaineWebber and UBS. ThinkAdvisor recently interviewed Haithcock, speaking by phone from Las Vegas.

Named for a great baseball hitter, “Stan the Man” Musial, Haithcock grew up poor in North Carolina. In the interview, he explains how that background led him to a career in financial services and why investors should work with an advisor whose childhood was marked by a scarcity of money. Here are highlights of our interview.

THINKADVISOR: Why should more financial advisors offer annuities?

STAN HAITHCOCK: They’re being forced to because all the baby boomers turning 65 need income or principal protection, or both. There’s only one product that will pay you as long as you’re breathing, and that’s an annuity.

So any advisor who doesn’t at least discuss the positives of annuities with every one of their clients is kidding themself. Period.

How are the indexed annuities that are designed for RIAs doing?

Any RIA that’s charging a wrap fee — management fee — for an indexed annuity is ridiculous. It shouldn’t be allowed. It’s garbage.

Indexed annuities reset annually, so there’s nothing to manage and nothing to charge a fee for.

I’m going to get all kinds of hate mail on that. But bring it on. I’m right.

Why did LIMRA forecast record-breaking sales of multiyear guaranteed annuities for the first quarter of this year?

Those are the annuities that everyone’s buying. Ever since the guarantee went over 5% last October, there’s been unbelievable demand. Carriers have been inundated with applications.

Multi-year guarantee annuities are fixed annuities, but they function like CDs. You give the annuity company money, never touch the principal and you get interest.

People haven’t seen interest rate guarantees like this for a long time.

Are carriers meeting the demand?

There’s been a capacity issue for the last four or five months. It’s hard for the companies to process all the applications. So the turnaround time has been longer than normal.

It can be a two-to-four-week process, and sometimes four weeks is too long for [consumers] to wait — they get frustrated.

But processing a contract — an annuity is a contract — takes a while.

What’s the significance of these soaring annuity sales?

All of the overwhelming demand is a positive for the annuity industry [especially since] there have been so many idiots out there saying, “I hate all annuities.”

I think people are finally realizing that that’s dumb.

What’s your outlook for annuities in general — if I may generalize for a moment?

It’s very good: Regardless of anything that happens, there are 11,000 people turning 65 every single day.

It’s a demographic tidal wave of people looking for either lifetime income or principal protection, or both. It’s going to happen just because the aging population wants less risk.

With an annuity, you never have the fear of running out of money. That’s why you buy a lifetime income annuity.

You’ve said that people who insist that an annuity can never be put inside an IRA are “as dumb as a box of hair.” Why do you say that?

Because it doesn’t matter where you put an annuity — whether it’s an IRA or a Roth IRA or a non-IRA.

You’re buying a guarantee, and guarantees can be held inside an IRA.

Who are the people who say you should never do that?

Journalists and advisors. It’s a stupid statement to say you can never put an annuity inside an IRA. It’s a misinformed and uneducated statement.

Many journalists have written just that. They should never be allowed to write or publish again. Period.

One of the reasons that’s the dumbest statement ever is because a qualified longevity annuity contract [QLAC] can only be used inside an IRA.

What makes annuities so effective for retirement?

People long for guarantees, whether it’s an annuity for a 401(k) rollover or for their IRA or Roth IRA. Annuities provide contractual guarantees.

For people with 401(k)s who [retire] and are losing the income from their jobs and from growing their 401(k), the four types of lifetime income annuities are going to be attractive.

How can an annuity be used to fill a gap in retirement income?

Let’s say you retire and have $4,000 a month coming in from Social Security and rental properties. But you really need $5,000 for your income floor.

The best way to get it is to find an immediate annuity for that [additional income of] $1,000 a month, using the least amount of money. That’s how you fill the income gap.

Why should someone buy an annuity even if they have a pension?

For principal protection or additional income based on a need or goal. You already own an annuity: Social Security.

And if you have a pension, that’s an annuity too.

On one of your videos, you recommend that people should choose a financial advisor who grew up poor. What’s your point?

People that grow up poor look at money differently, whether it’s theirs or someone else’s. If it’s your client’s money, you manage it differently. You care about it differently. You recommend things differently.

You don’t take it lightly that someone worked their whole life to accumulate a lump sum.

Poor advisors never forget the scars they got from when they grew up without money.

You grew up poor, didn’t you?

Yes. In rural North Carolina. We didn’t have any money. My parents never bought a stock in their lives.

What brought me into the financial world was trying to figure out why some people had big houses and why some didn’t.

(Pictured: Stan Haithcock)

Jane Wollman Rusoff

@jrusoff2

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