Do you hate annuities? In this episode of Wine and Dime, I chat with Robert Barnes, and he’s here to share the facts about annuities! Robert is the President of Integrated Insurance Consulting. They partner with advisors to help them serve their client protection needs, and offer support with basic insurance, business, and estate planning. Roberts years of experience led to a great conversations with lots of stories that gives him great insight. This was a great conversation that gets you thinking about retirement and as the title says, tackles some myths about annuities. And even though Robert doesn’t consider himself much of a wine drinker, he shared an Almond sparkling wine that sounds great! So pop open a bottle of your favorite beverage and enjoy the episode!
Robert M. Barnes, CLU, ChFC, CWPP™
Integrated Insurance Consulting, LLC
Phone: 708.307.2577
Email: rob@intinsconsulting.com
With more than 25 years of experience in the insurance and financial services industry, Rob specializes in the use of life insurance for business and estate planning needs. As Founder and President of Integrated Insurance Consulting LLC, Rob partners with advisors to help them serve their client protection needs. Rob also serves as a Regional Vice President for One Resource Group.
Rob is a member and former board member and membership chair for The Greater Chicago Chapter of the Society of Financial Service Professionals. Additionally, Rob is a member of the South Cook County Estate Planning Council, and actively participates in an interdisciplinary study group involving professional advisors from the legal, accounting, investing and insurance fields. Rob regularly attends advanced planning seminars in his field, he is a CFP continuing education provider, and as a proficient public speaker, hosts educational events for advisors, as well as their clients, on a variety of insurance topics. Rob has also been quoted in and authored articles for several industry publications such as Advisor Today, NAPFA Advisor and Insurance News Net.
Rob is a graduate of The University of Illinois and holds the Chartered Life Underwriter and Chartered Financial Consultant designations from The American College. In 2007, he obtained his Certified Wealth Protection Planner designation from the Wealth Preservation Institute.
Rob resides in Orland Park, Illinois with his wife Rita and daughter Cassandra. He currently serves as a board member and active fund raiser for Park Lawn, an organization dealing with special needs children and adults. He enjoys music, travel and being a dad.
Coopers Hawk Winery and Restaurant
The winery produces around 700,000 cases of wine each year, handcrafted from only the finest grapes and fruit available. Trucks packed with up to 20 tons of wine grapes from California, Washington, Oregon, and other grape-growing regions around the country are transported straight from the vineyard to the winery to begin the delicate winemaking process.
We understand that the best fruit produces the best wine and the winery's relationships with top growers throughout the country allows us to source from regions only where growing conditions have been ideal. The winery benefits from not owning its own vineyard or buying from one large supplier. Our winemaker is selective and buys the very best fruits from areas where seasonal conditions have resulted in the year’s most outstanding varietals, consistently producing award winning wines for Cooper's Hawk.
ALMOND SPARKLING
SIGHT
Lemon yellow
NOSE
Powerful aromas of almond cookie, marashino cherry, and nutmeg
PALATE
Tastes just like an amaretti cookie in liquid form
PAIRING
Baked apples or apple pie, almond cookies, cheesecake
Do you hate annuities?
In a recent USA Today article, Why I hate annuities: Here are the reasons these investments are bogus, Ken Fisher boldly starts out by stating “I’d die and go to hell before selling an annuity”. In his next breath he says he is not talking about single premium immediate annuities but seems to bash deferred annuities of any type.
“I’m not referring to simple immediate “fixed” annuities that convert one lump sum to income. Those can be OK, done right. But deferred annuities – “variables,” “indexed” and “deferred fixed” – are bogus. Here, you upfront cash for a contract that pays later. Meanwhile, your principal contract value supposedly grows.”
Hopefully Ken does really understand that a fixed or indexed annuity is going to grow guaranteed, not supposedly.
We often run into clients who want to protect their assets today and decide tomorrow what to do with them. They want to protect their principal from a sudden market decline they won’t have time to overcome. Fixed or indexed deferred annuities protect principal and grow tax deferred. Later, a client can decide to take an income.
Ken goes on to bash variable annuities because of their loads. Is he not aware of the VA’s available on RIA platforms? These plans offer much more competitive variable annuity products by lowering the fees inside and limiting insurance options and riders. These new products take some of the validity away from his statement.
It is his closing line which makes him look even more outdated and set in his ways
“Yes, my advice is conflicted – my firm often helps people exit deferred annuities. My opinion remains, regardless. All but simple immediate fixed annuities should be outlawed because buyers almost always misunderstand what they’re buying. It’s one step from fraud. Everyone deserves more transparent and flexible investments.”
At least Ken admits his conflict and bias and tells us he has no intent on offering insurance solutions no matter what their client needs or wants.
Click to read The USA Today article: Why I hate annuities: Here are the reasons these investments are bogus
The value of guaranteed lifetime income continues to rise.
A recent study sheds some light on a perspective Ken might be trying to share – income riders can be more costly than a SPIA. They came to the following conclusion: “The dominant guaranteed lifetime income alternative is GLWBs (Guaranteed Lifetime Withdrawal Benefit Riders) on Variable Annuities and Fixed Indexed Annuities primarily because they provide flexibility in the event of a change in circumstance. This comes at a cost, but historically not high enough to overcome the illusion of control.”
They also address Ken’s bias noting: “Historic emphasis on recurring commissions and/or AUM-based fees has disadvantaged the selling of income annuities”. In their closing action items, they note: “Many more retirees would elect annuitized income if presented the option. For many retirees, a mixture of both “lifetime annuitized income” and “ad-hoc discretionary withdrawals” from retirement savings may be optimum.”
Click here for the full study: 2018 Guaranteed Lifetime Income Study
Market forces show interest in annuities of all types.
Ken is certainly right about the fact that some clients are better off without an annuity. But the market forces continue to show interest in annuities of all types. For most people, running out of money is their biggest fear. Annuities are uniquely designed to provide a lifetime guaranteed income. Forecasted Monte Carlo analysis can leave some clients feeling queasy and uneasy. When you present the results to a 65-year showing they have an 85% chance their money will last to age 90, I assure you some clients are worried if they are in the 15% quartile in addition to the concern of living past age 90. Thus, the reasonableness of the income study premise that some mixture is best.
Behavior modification is a large part of financial planning. Perhaps Ken should open his mind and consider utilizing annuities in the retirement planning process for certain situations and clients. There are certainly clients who will sleep better and worry less if they had enough steady guaranteed income. They fit especially well for your more conservative clients in good health, especially if there is longevity in the family.
Interested in learning more about annuities? Join us on our next CFP® CE Webinar . . .
