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Why Ken Fisher Hates Annuities (and thinks you should too)

Maybe you’ve seen the advertisements from Fisher Investments that offer a free report on why Ken Fisher hates annuities? If not, here’s the ad that’s been popping up on various websites I visit often:

The ad as it appears on Google Finance

The ad as it appears on Google Finance

For those not familiar with Ken Fisher and why he’s a very note worthy figure in the investment world, here is the first paragraph on Mr. Fisher per Wikipedia.org:

Kenneth Lawrence Fisher (born November 29, 1950) is an American investment analyst, and the founder, chairman, and CEO of Fisher Investments, a money management firm with offices in WoodsideCaliforniaSan Mateo, California, and Camas, Washington. Fisher writes a monthly column in Forbes magazine, contributes to other financial and news magazines, has written seven books, and has written research papers in the field of behavioral finance. Fisher is on the 2011 Forbes 400 list of richest Americans[3] and Forbes list of world billionaires, and as of 2011 was worth $1.7 billion.[4] In 2010, he was named to Investment Advisor magazine’s “30 for 30” list of the 30 most influential people in the investment advisory business over the last 30 years.[5] As of 2010, Fisher investments assets under management firm manages $41.3 billion in 38,521 customer accounts[6] and has been called the largest wealth manager in the United States.[7]

Mr. Fisher is clearly an accomplished business person and I think a very smart guy.

So why does he hate annuities so much?

I took a close look at the report offered (Fisher Investments Good financial advice or bad financial advice?Annuity Insights),  Fisher investments annuity calculator, and found the information well written and laid out very nicely. It’s fairly generic in nature, initially explaining the basics of annuities and their terms. All good and accurate info, but nothing really revealing at first.  They also offer Fisher investments newsletter.

It then gives some examples that I think explain what he dislikes so much about annuities. The big gripe (best I can tell), is Mr. Fisher doesn’t like the fees associated with annuities.

Here are some quick bullet points that I take away:

  • It gives an example of Variable Annuities and their additional costs relative to buying the same investments but not paying all the insurance related fees. This is a good comparison, as variable annuities are designed to compete with market investments; but obviously, if the costs are a lot higher (which they are with variable annuities) then the returns will certainly be lower.
  • It does give an example of Index Annuities compared to the S&P 500, but that’s not really a good benchmark.  Fixed Index Annuities are not built to compete with the stock market as they are fixed investments. A better benchmark might be a conservative bond index.

Make no mistake – fees are not good for investors. If you pay an arm and a leg, well…you don’t have an arm and a leg anymore.

For some of us though, there are very good reasons to use annuities. Just not all of us, and certainly not all of the time. Below I’ll explain what the good reasons are.

Where the hatred falls short (in the Annuity Gator’s opinion)

I think Mr. Fisher is spot on in sharing the importance of keeping costs low. Annuities are not usually associated with the best way for that. One thing not discussed in the report though is the real reason to use annuities (for some investors): to get a guaranteed lifetime income they cannot outlive.

It’s important investors understand that annuities used correctly are a transfer of risk investments. This means that if we try to use them as maximum growth investments, we’ll likely be disappointed (as Fisher shows well in his report). This is because the costs of variable annuities will make them incomparable to non-annuity investments, and fixed index annuities should not be compared to growth securities in the first place.

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 (after the biggest gains are in the rear view mirror). When times are bad, many panic and sell everything (essentially locking in losses).

annuity saleguyAnnuities aren’t 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 (a financial plan designed for retirement). 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 (sometimes) 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 (doh!). 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 you’ll 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.

Annuities done right will lower your returns. But they will also lower your risk. And for many, the tradeoff is well worth it (at least in moderation).

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 we’ll help point you in the right direction. Just use our secure (and free) 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.

Have an Annuity You’d Like to See Reviewed?

No problem, our team of highly trained annuity geeks can jump to it! Click here to get started and we’ll do our best to get it online as soon as possible.

Ask Us a Question

If you ever need to ask specific questions or need some one-on-one guidance (for free and with no pressure, of course), feel welcome to reach out by clicking here. We’d love to hear from you.

Best,

The Annuity Gator

Here’s some other independent annuity reviews we’ve recently done:

Metlife Preference Plus Income Variable Annuity

33 Comments
  • Blair Aaronson
    1:58 PM, 28 August 2013

    I have come across several of Kens clients and they were devastated in 08-09. Call me a SISSY but my clients didnt lose a penny in 08-09 nor did they pay a FEE in 08-09. So at the end of the day.. Lay down the statements for the last 5 years and lets see who has what! And the best part is when clients had to take funds to live on during those down years they had to lock in those horrific losses. A well structured Indexed annuity returned about 50% for the last 4 years with No RISK and the gains are locked in, Ken cant do that!

    • Annuity Gator
      2:10 PM, 28 August 2013

      Well said Blair. Thanks for the comment and shared experience. As I wrote, Annuities will have lower long term results, but they’ll do so with no risk (at least fixed annuities). That tradeoff is worth it for some, but not others.

      Thanks again,

      -The Annuity Gator Team

  • Frank Laise
    2:44 AM, 2 November 2013

    Jason,

    It’s amazing that you would characterize Ken Fisher’s “I Hate Annuities and You Should Too” as well written.

    Fisher purposefully blurs the lines between fixed (including fixed indexed) and variable annuities and shamelessly implies that ALL annuities are FEE INFESTED. His purpose is clear; to create fear and doubt about annuities for those people contemplating moving some (or all) of their money out of “managed money platforms” and mutual funds because they’ve finally waken up to the fact that those programs don’t fit THEIR risk tolerance.

    I agree with Fisher that variable annuities are a poor choice for most people when compared to equity mutual funds during the accumulation phase of life. The same cannot be said for fixed and indexed annuities for people approaching or already in retirement. For many, fixed and indexed annuities are the ONLY financial product that can protect them from the Sequence of Return risk that could turn their retirement into a nightmare.

    America’s broken retirement system is in the process of being rescued by the insurance companies who design and distribute innovative annuities that provide guaranteed streams of lifetime income that can supplement Social Security and the dwindling population that still benefit from and enjoy defined benefit pension plans.

    I’ll never forget the Fisher Investments client I came across in March of 2009. Then 60 years old, he and his wife had to postpone their planned retirement because their IRA was hammered from October of 2007 through March of 2009…to the tune of $ 811,000 in losses. What was once a $ 1,500,000 IRA had collapsed to $ 689,000 under the brilliant management of Ken and his cohorts…and not one phone call during that time to the client suggesting that some or all of their money be taken off the table…You just don’t forget sad stories like that!

    There’s a reason why Ken Fisher is so wealthy. He’s the king of “Buy and Hold”…he and his firm make obscene money whether their clients do or not.

    • Faye Carlson
      4:25 PM, 15 May 2017

      Wow… The story above sounds just like my investments with Ken Fisher during the 2007-2010 .
      I lost 48% of my investment and he never once told me that I should check out out of Stocks. I am at that retirement age and I am in the process of educating myself to annuities and probably changing from Fisher to annuities .
      Thank you for your information!

      • Annuity Gator
        12:35 AM, 17 May 2017

        Hi Faye – Thank you for your message. We appreciate you checking out our website. Please let us know if we can provide you with any additional information or answer any questions that you may have. We can be reached directly via phone at (888) 440-2468. Best. – Annuity Gator Team

  • Frank Laise
    2:08 AM, 4 November 2013

    Jason,

    It’s amazing that you would characterize Ken Fisher’s “I Hate Annuities and You Should Too” as well written.

    Fisher purposefully blurs the lines between fixed (including fixed indexed) and variable annuities and shamelessly implies that ALL annuities are FEE INFESTED. His purpose is clear; to create fear and doubt about annuities for those people contemplating moving some (or all) of their money out of “managed money platforms” and mutual funds because they’ve finally waken up to the fact that those programs don’t fit THEIR risk tolerance.

    I agree with Fisher that variable annuities are a poor choice for most people when compared to equity mutual funds during the accumulation phase of life. The same cannot be said for fixed and indexed annuities for people approaching or already in retirement. For many, fixed and indexed annuities are the ONLY financial product that can protect them from the Sequence of Return risk that could turn their retirement into a nightmare.

    America’s broken retirement system is in the process of being rescued by the insurance companies who design and distribute innovative annuities that provide guaranteed streams of lifetime income that can supplement Social Security and the dwindling population that still benefit from and enjoy defined benefit pension plans.

    I’ll never forget the Fisher Investments client I came across in March of 2009. Then 60 years old, he and his wife had to postpone their planned retirement because their IRA was hammered from October of 2007 through March of 2009…to the tune of $ 811,000 in losses. What was once a $ 1,500,000 IRA had collapsed to $ 689,000 under the brilliant management of Ken and his cohorts…and not one phone call during that time to the client suggesting that some or all of their money be taken off the table…You just don’t forget sad stories like that!

    There’s a reason why Ken Fisher is so wealthy. He’s the king of “Buy and Hold”…he and his firm make obscene money whether their clients do or not.

    • Annuity Gator
      8:17 PM, 6 November 2013

      Hi Frank,

      Thanks for adding your perspective and experience.

      I thought the Ken Fisher booklet on annuities was well written, from a grammar and readability perspective ;). Some of the content was spot on in terms of Variable Annuities, but I did take issue with his benchmark for fixed index annuities.

      I could be wrong, but I think any Fisher clients who stayed the course (even though it might have been really tough) have more than made up any 2008 losses. That’s not to say I agree that people 60 years old should have 100% stock portfolios, just that those who had losses have likely more than recovered them.

      In the long run, what’s best for each investor is different. I’m sure there’s plenty of people who are great candidates for Fisher Investments, just like there are great candidates for certain annuities. No product or service, however, is a great candidate for everyone.

      Thanks again,

      -Annuity Gator

      • Frank Laise
        10:24 PM, 10 June 2014

        Hello again Jason,

        It’s been awhile since we conversed here, but I came back to your site to retrieve some information to share with a prospective client who suspected that Fisher wasn’t entirely credible when it comes to the subject of annuities, and asked me for my perspective.

        It was while reviewing the discussion above between us last November that I realized I did not respond to your assertion that any INVESTOR who stayed the course would have recovered (over a five year period) the losses they incurred in their equity portfolio during the horrendous 18 month period between October of 2007 and March of 2009. That might be true.

        However, it’s been my experience that most retired Americans are not investors. They are retirees ill equipped to handle and manage the risk that too many investment advisors build into their portfolios once they retire. Sadly, too many of these investment advisors do not understand, let alone communicate the disastrous consequences that the sequence of return risk can have that can potentially result in the complete loss of the portfolio that was earmarked to provide the retiree with income for life.

        With fewer Americans entering retirement with defined benefit pension plans, it is incumbent on ANY advisor, whether their practice is predominantly securities or insurance based, to recognize that their clients need and deserve to have a solid foundation that will guarantee a lifelong income they cannot outlive. Once that foundation is in place, both the client and advisor can assume more risk with assets not required to fund the foundation.

        And as we know, annuities are the ONLY retail financial product available in America to deliver the guaranteed lifetime income that the majority of Americans need and desire. Accordingly, there is no need for any advisor, anywhere, to over-inflate the actual investment returns that any particular annuity will achieve…because when it’s all said and done, annuities (with the exception of variable annuities) are not investments products…they are insurance products…

        People around the world turn to insurance companies to manage risk that they are unable or unwilling to manage on their own. And that’s why increasing #’s of Americans are looking to annuities (and advisors who properly educate them on their benefits and limitations) to insure lifetime retirement income streams that simultaneously protect their principal and provide the opportunity to earn reasonable interest credits annually as well.

  • Behind the Curtain
    4:16 PM, 5 December 2013

    Perplexing, if not hilarious, is this ad that I saw today on LinkedIn:
    Fisher Investments posted a job you might be interested in:
    Annuity Specialist
    San Mateo, CA (San Francisco Bay Area) Overview Do you speak fluent variable, fixed, and indexed annuity? Can you explain an income benefit rider roll-up off the top of your head? As an Annuity Counselor, you’ll use your excellent communication…

    • Annuity Gator
      12:16 AM, 19 May 2017

      Hi – Thank you for passing that along. Yes, that is interesting indeed… particularly for a firm that “hates” annuities. Please check back with us again soon, as we’ve been updating and adding to our list of annuity reviews. Best. – Annuity Gator Team

  • Matt
    11:32 AM, 1 January 2014

    very informative content. I tried to download your e-book but could not. Thank you.

    • Annuity Gator
      5:17 PM, 28 May 2017

      Hi Matt – Thank you for your message, and we apologize for the technical difficulties that you had with getting the booklet. We have recently made some updates to our site – and also added additional annuity information – so please feel free to check back with AnnuityGator.com for our annuity guide, as well as additional details. If we can answer any questions for you, you can also reach our team of annuity “geeks” by calling us directly at (888) 440-2468. Best. – Annuity Gator Team

  • Marshall Bento
    6:17 PM, 13 January 2014

    in most or all cases, does the insurance company offering the annuity pay the selling agents commission fees?

    • Annuity Gator
      5:04 PM, 28 May 2017

      Hi Marshall – Thank you for your message. With both life insurance policies and annuities (which are also offered by insurance companies), the commission that is paid to the agent who sells the product is typically built into the policy itself. So, while you may or may not see a ‘hit’ to your annuity’s value, it is highly likely that that agent still got paid. Let’s take an example here. If you deposited $100,000 into an annuity, you will still see that $100,000 on your initial statement – and, the entire amount of that $100,000 will go to work for you in the annuity. However, don’t feel that the agent who sold the annuity to you is going hungry and not able to pay his or her bills, because they will still be paid. Typically, the higher the surrender charge is on that annuity, the more the agent likely was paid on it. So, if your annuity has a surrender charge of ten years, the agent would typically make more than if the annuity had a surrender charge of only five years. Also, the more complex the annuity product it, the higher the commission amount to the agent typically is. In this case, if the annuity that you purchase is a fixed index annuity with a number of “moving parts,” the agent who sold it will usually make more than if they sold a basic single premium immediate annuity (or SPIA). Hopefully this helps to clear up the commissions on annuities. However, if we can help further or answer any additional questions, then please feel free to reach out to us directly, toll-free, by calling (888) 440-2468. Best. – Annuity Gator Team

  • Michael Schulman
    3:30 PM, 4 February 2014

    Look boys and girls, annuities are just like SUVs, 60 degree lob wedges, and tuxedos: not necessarily for everyone but in certain situations they are perfect. Suitability is a relative concept. A car salesman that suggests that an SUV is NEVER suitable as a family car for a family of eight should look for another job.

    • Annuity Gator
      12:25 AM, 19 May 2017

      Hi Michael – Thank you for your comment. What a great analogy! And you are correct, while annuities may not be for everyone, they aren’t “not for anyone” either. Please check back in with us again soon. Best. – Annuity Gator Team

  • Sandy Solomon
    12:43 PM, 22 February 2014

    Jason-
    Your objectivity is appreciated………seems to be in somewhat short supply these days, everyone has to be selling something. Mr Fisher is considerably more accomplished than I, but he is no less inclined to use other people’s fear of making a mistake to his own advantage (hence the FULL PAGE ad in our local newspaper promoting the ‘I Hate Annuities’ diatribe). My guess is it’s an easy position for him to take, since he’ll have little chance of outliving his weath absent some catastrophic personal failure. Even buying a boat probably won’t wreck his financial plans.
    I’ve been working diligently as a ‘front lines’ financial professional for almost two decades, and I’ve observed something you might call a phenomenon, not taught in any course or anywhere else to my knowledge; successful investing doesn’t have much to do with investments (or markets), it’s more often an issue of behavior and client disposition. Most ordinary folks just don’t have the fortitiude to invest correctly for a 3 decade retirement (or quite enough money either) without some backstop against their own tendancies to make the big mistakes. The higher fees associated with a carefully selected annuity product may be the best bargain some investors ever make…..just ask the nice fellow who retired in the cold winter of 2007 with a ‘prudent withdrawal strategy’ from his wrap account. The advisory fee would have gone a long way toward the cost of an income benefit rider.
    Sandy Solomon, Charlotte NC

    • Annuity Gator
      12:23 AM, 19 May 2017

      Hi Sandy – Thank you for your comment. What a great perspective you have – and you are absolutely correct in that there are many investors who just simply do not know how to properly allocate their assets – especially given the vast number of years that they may be required to live off their savings. Please check back in with us again soon. Best. – Annuity Gator Team

  • charles vaughn
    12:41 PM, 1 March 2014

    Ken Fisher hates annuities because he doesn’t sell the. He complains about fees but what about his fees? Year after year of his fees will exceed the initial cost and ongoing cost of an annuity.

    • Roland Roy
      12:58 PM, 4 August 2014

      Hi Jason, just looking to where to invest my IRA. I’m 63 and self employed. I was looking to Annuity. But after reading some report I don’t know anymore. Thanks

      • Annuity Gator
        12:16 AM, 20 April 2017

        Hi Roland – Thank you for your message. We would be happy to chat with you about where to invest your IRA funds, based on your future income goals, as well as other financial needs that you may have. In order to do so, it would be best to discuss directly via phone. Please feel free to call, toll-free, at (888) 440-2468. We look forward to chatting with you. Best. – Annuity Gator Team

      • Annuity Gator
        2:21 PM, 23 May 2017

        Hi Roland – Thank you for your message. We would be happy to discuss some potential options with you. In order to provide you with the best advice, we would need to get a bit more information from you. Rather than emailing sensitive details back and forth, though, it would be best to chat via phone. Please feel free to reach out to us directly, toll-free, at (888) 440-2468. We look forward to speaking with you. Best. -AnnuityGator Team

  • Nina Jones
    2:17 PM, 17 March 2014

    I read your review of the Allianz MasterDex X Annuity which I am considering. I want to move my money in mutual funds to something with little or no risk. I am 62 and don’t have time to recoup losses if the stock market tanks again. What I would like to know is if not an indexed annuity then what other products should I consider?

    • Annuity Gator
      12:41 AM, 20 April 2017

      Hi Nina – Thank you for your message. We would be happy to answer any questions that you may have about the Allianz MasterDex X annuity, as well as to walk you through some scenarios in order to determine how it may work for you. In order to do so, we would need some additional information from you. Rather than sending sensitive personal details back and forth through email, though, it would likely be best to discuss by phone. Please feel free to reach out to us at your convenience, toll-free, by calling (888) 440-2468. We look forward to talking with you. Best. – Annuity Gator Team

    • Annuity Gator
      2:37 PM, 23 May 2017

      Hi Nina – Thank you for your message. We would be happy to discuss some potential options with you. In order to provide you with the best advice, we would need to get a bit more information from you. Rather than emailing sensitive details back and forth, though, it would be best to chat via phone. Please feel free to reach out to us directly, toll-free, at (888) 440-2468. We look forward to speaking with you. Best. -AnnuityGator Team

  • David Schechter
    12:48 PM, 21 July 2014

    The Bonus-Paying (immediately vested) Fixed Index Annuity (as sold by Midland National Life Insurance Company) is one of the best products available. My preference is for the Capstone 14 which pays bonuses on all premiums paid during the first 7 years. It also offers in addition to a menu of indices a fixed interest strategy of up to 3.25%. It beats bank certificates of deposit and taxes are paid only during years where distributions are taken.
    I agree with Fisher’s argument against variable annuities. That is why I switched to FIA’s in 2008.
    Liquidity is obtained (penalty-free) on 10% of cumulative balance. If you need more than 10% do not put all your eggs in this basket. NEVER incur surrender charges. Good savers never do.
    For younger folks, indexed universal life insurance policies are even better.
    Do not play Wall Street roulette. Life Insurance Companies are a better bet than banks or stocks or even US Treasury Bonds.
    For safety of principal, protection against inflation, limited liquidity, income tax efficiency, it is tough to beat Fixed or Equity Indexed Bonus-Paying Annuities.

    • Annuity Gator
      10:38 AM, 3 July 2017

      Hi David – Thank you for your comment. Agreed! Best. – Annuity Gator Team

  • Myrna Spangler
    2:34 PM, 17 August 2014

    I have an annuity with Allianz insurance its anniversary is august 28th I would like to do something else with it as I could use more income They advised me to annuitize it and collect an income for life Is this a bad idea and what else is there Thanks for you’re information

    Sincerely Myrna Spangler

    • Annuity Gator
      4:05 PM, 11 April 2017

      Hi Myrna – Thank you for your message. We would be happy to walk through some other potential options with you, including whether or not it makes sense to keep the annuity that you currently have. In order to provide you with the best information, we would need to gather a few more details from you. Rather than emailing personal data back and forth, though, it would likely be best to discuss via phone. Please contact us directly at (888) 440-2468. We look forward to talking with you. Best. – Annuity Gator Team

  • Stewart Ogilby
    5:54 PM, 19 May 2016

    It’s unsurprising that so many market investors don’t know about sequence of returns risk. Educate them. I wrote this for a reason.

    http://sequence-of-returns.com

    • Annuity Gator
      5:10 PM, 6 April 2017

      Hi Stewart – Thank you for your comment. Great article! Yes, order / sequence of returns can make a definite difference in how much income someone has over time – and even if the income will last as long as they need it to. We appreciate you sending the information, and will definitely reference this risk in future posts. Best. – Annuity Gator Team

  • Mikel
    2:05 PM, 29 August 2019

    Valuable information. Lucky me I discovered your site by accident,
    and I am stunned why this twist of fate didn’t came about
    earlier! I bookmarked it.

    • Annuity Gator
      3:58 PM, 29 August 2019

      Hi Mikel. Thank you for your comment.
      We are happy to hear that our website has been of great help to you. Please continue to read us and share this info with others.
      We would be happy to help you understand any product better and get into all of its details to see if it is a good fit for your financial needs.
      Please feel free to contact us directly, toll-free, at (888) 440-2468 to chat with one of our annuity specialists or visit http://annuitygator.com/contact/
      We look forward to hearing from you.
      Best,
      Annuity Gator

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