The Ken Fisher Watch has yielded good news and bad news in recent weeks.
First the good news: Fisher will likely not be as big a thorn in agents’ sides once he steps down later this year as head of Fisher Investments.
The bad news is the annuity-hating Fisher is seemingly on a PR campaign to keep his empire running smoothly.
Fisher, known for his nationwide “I HATE Annuities. And you should too.” campaign, consented to several high-profile interviews recently. The Fisher blitz fired up opponents in the financial field who say annuities are a desperately needed source of guaranteed retirement income for many Americans.
Fisher, who began the ad campaign in 2013, likens annuities to Ponzi schemes that rip off clients.
“He’s really doing a disservice to the population,” said David Littell, program director of the American College of Financial Services, which offers financial education for securities, banking and insurance professionals. “Income annuities have an important role in retirement income planning.
“People who have more guaranteed income in retirement are happier. There have been several studies over the years that make that very clear.”
Fisher, 65, has been a columnist for Forbes for 31 years and is also No. 211 on the Forbes 400 list of richest people, which estimates his worth at $3.1 billion. He has long railed against annuities in his columns and in many of his 11 books.
The strategy helped Fisher establish an investment empire — his firm serves nearly 20,000 clients, with $68 billion under management. Fisher, who did not respond to requests for comment, has said his team moves aggressively to convert people who respond to his anti-annuity ads.
So how can agents counter a billionaire with a powerful, national multimedia campaign backing him?
With an honest discussion about annuities, said Jack Marrion, author of “Change Buyer Behavior And Sell More Annuities.” It might not be a quick, sexy soundbite, but agents who patiently explain the benefits of annuities have truth on their side, he added.
Marrion offers five reliable sales tips:
Just the facts, ma’am. Show clients the “real money” value in specific dollar terms, stressing the guarantee.
Reframe the psychological distance. Ask clients to recall a point from the past, for example, 20 years ago. From that standpoint, 20 years into the future seems awfully near.
Make it part of the whole. Accentuate the crucial role annuities play in a balanced, responsible retirement portfolio.
Paint the next wall. Remember that a client who is set with two-thirds of their retirement income is highly motivated to finish the job. The right annuity can complete the portfolio.
Pivot around regret. Show the client the safest return from an annuity first, then present options to increase income.
Fisher’s anti-annuity campaign is very successful at generating new clients. When he began his aggressive strategy to buy annuity owners out of their contracts in 2012, his personal wealth stood at $1.7 billion after 33 years in the business. In the three years since, he has added $1.4 billion to his worth.
Fisher Investments accepts only clients with at least $500,000 to invest.
Fisher is a more vocal example of the divide between investment advisors and insurance agents, Littell said, and annuities are often caught in the crossfire.
But the irony of Fisher’s campaign is that annuities are best-suited for the wealthier clients that he seeks, Littell pointed out.
“Annuities are a better deal for people who live longer,” he explained. “And wealthier and better-educated people, at least on average, live longer. So they live a reasonably long life, and they might end up with more security of their income and more wealth if they annuitize a portion.”
Littell’s father, William James Littell, died Nov. 17 at 104 years old. He had spent many years as vice president of the family business, F.J. Littell Machine Co., in Schaumburg, Ill.
William Littell had lived at Presbyterian Homes in Evanston for the past 24 years. Were it not for his annuity holdings, the elder Littell likely would not have lived so comfortably and happily free of worry, his son said.
“He always talked about how much he liked (his annuities),” Littell said. “There’s the satisfaction element of it. There’s all the research that shows it gives you more security and it increases the sustainability of your retirement income over the long haul.”
Harold Evensky, chairman of Evensky & Katz/Foldes Financial, once called “the Dean of Financial Planning” by Don Phillips, then CEO of Morningstar, is a former critic of annuities. He now says immediate annuities will be “one of the most significant investment vehicles of the next decade.”
‘Evaluate Both Sides’
Fisher is contributing to the retirement readiness problem, said Evensky, who teaches financial planning at Texas Tech University.
Inappropriate annuity sales are an issue, he added, but have nothing to do with the product itself.
“It does a disservice to many people,” Evensky said of Fisher’s campaign. “It’s incumbent on investors to do their own due diligence and decide who they’re going to listen to and evaluate both sides.”
Littell, 62, owns several annuities for the income guarantees. Even a simple comparison shows how annuities are a better option for typical retirees, he said. For example, someone with a $1 million nest egg drawing down the standard 4 percent would have $40,000 annually to finance a comfortable retirement.
“But you don’t really have any liquidity,” he noted, because a person would need to maintain the $1 million to generate enough income to draw on.
“But if you bought an annuity to generate the same income, maybe it costs you $700,000,” Littell said. “Now you really do have $300,000 that you can do anything you want with.”
Deferring Social Security is universally recognized as a crucial part of good financial planning, Littell said. And Social Security acts the same as an annuity in providing lifetime income in perpetuity.
In short, Fisher is fighting a losing battle, Littell said.
“I think he’s moving more and more out of the mainstream,” he added. “I don’t see as much resistance, even from five years ago, to having an annuity income as part of the solution from the investment community. I don’t know if we’re coming to complete agreement, but I think we’re coming to more of an agreement.”