What Do Different Annuities Do
Some fixed annuities are built to give you a guaranteed, fixed interest rate that is higher than what CDs pay each year. Others are built for maximum accumulation, offering you interest-earning potential tied to an underlying benchmark. This is known as a fixed index annuity.
However, many fixed indexed annuity contracts are also built to maximize the guaranteed monthly income which they will pay you. People often use these sorts of contracts for income needs down the road.
On the other hand, immediate annuities will pay you a guaranteed monthly income that can start right away or up to a year after you begin the contract. As its name suggests, this sort of annuity is for immediate income needs.
Variable annuities have the unique distinction of being both an insurance and securities regulated product. They allow for the most growth potential among annuities.
However, the fund subaccounts that they invest the contract proceeds in will rise and fall in tandem with the markets. In other words, an annuity owner could lose money in this type of contract.
The point is that there are as many annuity types and contract designs as there are hills.
Its a mistake to put them all into one corner and say how bad they are as one group. This limits options and solutions for you and other retirement savers.
An Open Letter To Ken Fisher
*Inspired by Reagans 1987 challenge to Gorbachev at the Berlin Wall
Illustration by Mark Hill
Have you heard the news? Ken Fisher hates annuities.
In the oft-repeated words of the billionaire owner of Fisher Investments: I would rather die and go to hell before selling an annuity. Ouch. But that got me thinking.
When you announce that you hate annuities, are you effectively throwing out the baby with the bathwater? How should we feel about that? Is it misleading? Does it help financial literacy in our country?
Annuities, in the generic sense, are a basic building block of all economics and finance. An annuity is simply a financial instrument for paying out a fixed payment stream. Yes fixed index and variable annuities can be hard-to-decipher products. But Social Security, a source of income that 63 million Americans rely on, is an annuity too.
Do you remember the good old days of traditional defined benefit pensions that pay out a regular stream of income for the rest of your life? Those are also annuities. Leases and mortgages are annuities they just flow the other way. They are obligations to make steady payments to those on the other end of the transaction. Its no exaggeration to say that we all experience annuities in our lives in one form or another.
Your clients do too. Like most financial advisors, you annually deduct 1 to 1.5% of their assets under your management. That is the case in good years and bad. Do you truly believe that all annuities are awful?
Should You Hate Annuities
When I was a kid, my father taught me to play chess.
Hes a doctor, a master at thinking ahead, and he wanted me to learn that kind of discipline.
Thats what chess is all about plotting and thinking three, four or five moves ahead. Now, as an adult, thats how my brain is wired. Its why I like working with people to plan their retirement incomes.
I see clients all the time who are worried that the money theyve saved and invested wont last their lifetimes. They might have 401s or some other retirement accounts, plus Social Security, but they dont know if that will be enough.
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What Are Pros And Cons Of Annuities
Annuities are no exception to the rule that nothing in the financial world is without flaws. The fees associated with some annuities, for example, might be rather burdensome. Furthermore, while an annuitys safety is appealing, its returns are sometimes lower than those obtained through regular investing.
Pros And Cons Of Annuities: Are They Right For Your Retirement
If someone has ever tried to sell you an annuity, youre not alone if you came away with more questions than answers as to how these financial products can help with your retirement. Annuities are highly complex financial products thus, its essential for you to fully examine the pros and cons of any annuities you may be considering, so you can make an informed decision as to their appropriateness for you.
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Not All Annuities Cost You A Bundle
Fisher criticizes annuities for their fees. However, even this well-known critic knows that things arent that simple.
Many annuities can cost you a bundle, with variable annuities at times charging as much as 2.5-3%. Many fixed annuities actually come with no or low fees. The cost factors for the insurance company are built into the contract design.
What do we mean by that? Fixed and indexed annuities give you the potential to earn interest above bonds, CDs, and other fixed-interest assets. They also provide the highly valuable benefit of principal protection by safeguarding your money from loss when equity markets drop.
Used Correctly Annuities Work Really Well At Helping Investors Avoid The Biggest Danger To Their Investment Results: Themselves
What do I mean by that? Well, many investors have a propensity of letting their emotions drive their investment decisions. When times are good, they like to be in the market . When times are bad, many panic and sell everything .
Annuities arent the only antidote to this destructive behavior, but they can help.
The other thing that will help investors is having a truly good retirement income plan . When that is done correctly investors can see in advance the true pros and cons of all their investment options. After a solid education on how the different approaches work, they then select a plan that fits their emotional fortitude and desired financial outcome. It mitigates the emotional behavior that drives very bad financial decisions.
A good retirement income plan should NOT be done by someone who makes a living selling annuities. Clearly, that would be biased toward selling you the annuity . Rather, it should be done looking at all options available, explaining how those different options work, and actually showing you what to reasonably expect from said options. Then you choose the option that both works, and you feel comfortable with. Sometimes youll find annuities are a great fit, other times you will not.
Nothing is perfect in investing. Nothing is worthy of pure praise at all times, or pure hatred. Every one of us is different, and for each one of our unique circumstances and emotional feelings about money, there are appropriate investment plans.
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Start At The Beginning
When examining the pros and cons of annuities, it is important to understand the basics first. So, what exactly is an annuity? In essence, it is an insurance contract in which the insurer offers the policyholder a stream of payments over a specified timeframe in exchange for premium payments collected and invested on their behalf. These premium deposits receive interest at a rate defined in the annuity contract , until the contract is annuitized and the owner begins receiving payments. This arrangement is often sold as providing guaranteed income for the investor. But the specific contract terms can vary widely from annuity to annuity.
Unlike securities such as stocks, bonds, shares or mutual funds, through which the buyer takes on risk in hope of their investments gaining value, annuities involve the owner transferring the risk of outliving their retirement funds to the insurance company selling the product. However, this means the annuity is only as reliable as the insurance company providing it. While it might not happen often and most state regulators provide protections in the case of such insolvencies, insurers can and do go bankrupt and/or default on payments, which can lead to annuity holders not enjoying the full benefits they were promised. It is wise to remember that transferring risk is not the same thing as eliminating it.
Below we look in greater depth at some of the pros and cons of annuities.
Services Offered By Fisher Investments
Fisher Investments primarily focuses on providing investment and portfolio management services. As part of setting up your account, Fisher Investments may offer a financial plan at no additional cost. This service is offered as part of the firms client onboarding process, and you can then decide whether you want to implement the plan.
Here is a full list of services offered by Fisher Investments:
- Investment advisory services/portfolio management
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So Should You Also Hate Annuities
Only way to know is to see if they fit. If you have questions about this, feel free to reach out and well help point you in the right direction. Just use our secure contact form here. You can ask anything you want and one of the Annuity Gator experts will get back to you within 24 hours. No bias toward love or hatred, only some free feedback to help you determine what really makes sense for your individual circumstances.
Is Fisher Investments Right For You
If youre looking to invest at least $500,000 and want an advisor that will actively manage your portfolio, Fisher Investments could be a good choice. If you have at least $200,000, you could also try applying for the firms WealthBuilder account. Just know that you arent guaranteed to be accepted and the fee will be higher for smaller accounts. But this could be worth it to access the firms customized investment recommendations, flexible strategies that react to market conditions, and highly experienced team.
Regardless of account size, this extra service does come at a cost, as Fisher Investments charges relatively high fees in comparison to median advisory fees. But if investment management is your top priority and youre willing to pay a little more to get its support, Fisher Investments could be worth considering.
When searching for a potential financial advisor, whats important is to do your research in order to find an advisor who is right for your unique needs and preferences.
The Find a Financial Advisor links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor . After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMAs referral program, which may or may not include the investment advisers discussed.
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Fisher Investments Review Is It A Scam Or Legitimate
Welcome to my Fisher Investments review.
Is Fisher Investments a scam?
This is what we are going to find out in this review.
Fisher Investments is a 20-year private currency management company based in the United States.
It defines itself as a portfolio management tool that helps institutions and individuals with high equity to manage money and increase investment routes.
Today I will share my compensation plan with Fisher Investments giving you my honest opinion.
The core business of the company is in the private portfolio management line.
It was established to operate as a discretionary management company only for a fee.
Administrators believe that the use of various tactics in a dynamic scheme is the best approach to financial innovation.
I actually discovered Fisher Investments while doing some research on the popular Investopedia investment site.
It reminds me of the company Agora Financial which publishes many financial publications.
Over the years, Fisher Investments has innovated financial management.
Some of the services it provides have become references in the financial services industry.
The company assigns a financial consultant dedicated to investments for each account he manages.
The account manager makes regular declarations and gives presentations to the client and to the board of directors
Meanwhile Back In The Lab
Before bringing DPL to market in 2018, Lau was the chief operating officer of Jefferson National, an insurance carrier focused on developing products that could work within the traditional RIA business model. During his tenure there, Lau helped architect one of the industrys first flat-fee variable annuity products, Monument Advisor.
I launched DPL to take on that broader challenge of bringing lots of carriers and products to market for the benefit of RIAs. Today there are, I dont know, 70 annuities that are commission-free in the marketplace that you can bill an assets-under-management fee on, Lau said, referencing products sold by such massive carriers as Allianz Life, Great American Insurance Group, Equitable, Security Benefit, and Global Atlantic Financial Group.
One such product is Constance, a commission-free contingent deferred annuity launched a few weeks ago by RetireOne. The product offers insurance protection on ETF or index fund investments in a clients IRA, Roth IRA, or taxable brokerage accounts without requiring the underlying assets to move to the insurance companys administrative platform.
When most people think about annuities, they may think of the classic single premium immediate annuity, which immediately turns the assets over to the issuer to begin making income payments. Variable, fixed, and fixed index annuities work differently.
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What Is An Fia
The performance risk of a fixed index annuity is higher than that of a fixed annuity, but the potential return is higher as well.
This type of annuity is less risky but also less lucrative than a variable annuity.
Alternatively, its called a equity indexed annuity, which is a misnomer because you arent investing in any specific stock products at all.
For example, the S& P 500 Composite Stock Price Index, which includes 500 stocks chosen to represent a broad market section, can be used to help set the interest rate on a fixed index annuity of this type.
As interest is credited to the account, the interest earnings are locked in to the account value and the account will not share in any future market declines.
The annuitys linkage to an index enables it to generate credited interest as a result of a growing financial market while still offering the security and assurances associated with traditional fixed annuities.
Is it better to buy an annuity from a bank or an insurance company?
It doesnt matter if you buy yours via a bank, brokerage company, or local advisor all annuities are sold by life insurance companies.
The annuity options at your local bank likely be restricted to one or two life insurance firms, if at all.
When working with a local independent advisor, they will be able to go out and discover the finest product for your needs.
To calculate your lifetime income, life insurance companies use your life insurance policys life income value.
How Fisher Investments Can Help
Annuities are complex products and can be expensive and potentially illiquid. Too often, insurance salesmen and brokers sell these products to investors because it earns them a higher commission from the sponsoring insurance company. If this describes your experience with annuities, we may be able to help. Fisher Investments has helped thousands of investors learn more about their investment choices, and we have dedicated professionals who may be able to help you. Contact us to discuss your options with a qualified Fisher Investments representative or to learn more about annuities and Fisher Investments services today!
Insured Retirement Institute, 2016 IRI Fact Book , 114.
Investment Company Institute, 2017 ICI Fact Book, https://www.ici.org/pdf/2017_factbook.pdf, 89.
Insured Retirement Institute, 2016 IRI Fact Book , 102.
Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations.
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How Investing With Annuities Compares
In recent years, American retirees have been offered annuity products as a way to investment with less risk. If youre at or near retirement, you may have had people try to sell you one often enough to guess how the conversation may go. Annuities let you get market like returns while avoiding downturns! They will provide you with income for life! Youre guaranteed not to lose your investment!
These assurances are certainly comforting to hear when youre worried about preserving the money you need to last the rest of your life , but the devil is always in the details. How an annuity will provide these benefits is a question that too many retirees wait to ask until after theyve made the purchase. But these same mechanisms that offer protection can significantly limit the growth of, and income generated by, your retirement investments, so it is important you fully understand the inner workings of any annuity youre considering before buying it.
What Types Of Clients Does Fisher Investments Serve
To open an account with Fisher Investments, you typically need to invest at least $500,000. However, the firm states that, at its discretion, it may be willing to work with clients who have less. The firm also offers a WealthBuilder account that targets investors with at least $200,000 in investable assets.
Nearly half of Fisher Investments assets under management come from high net worth individuals. The U.S. Securities and Exchange Commission defines high net worth individuals as those who have at least $750,000 invested, so its possible to meet Fisher Investments $500,000 minimum, or to have a WealthBuilder account, without technically being a high net worth individual.
Clients are based across the globe, in the U.S., Europe, Canada, Asia, Australia and the Middle East.
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How Rich Is Ken Fisher
He is on the Forbes 400 list of richest Americans and as of 2020 is worth $4.3 billion. In 2010, he was named to Investment Advisor magazines 30 for 30 list of the 30 most influential people in the investment advisory business over the last 30 years. As of September 2020, Fishers firm managed $135 billion.