The professionals managing your investment assets are paid annual fees and commissions from your investment account. Using only a 1% annual rate, over 10 years you will pay 10% in commissions and fees directly from your account, whether your assets grow, shrink or remain the same. A portfolio of $1,000,000 will shrink by $100,000 over those ten years and another $10,000 in year 11. The business model of stock brokerage firms is designed to build and increase Assets Under Management (AUM) for the broker and the brokerage firm. This article is not a judgement about fees paid to stock brokers and money managers. The purpose is to educate you about the motivations behind the harsh advice about annuities. Are stock brokers the right professionals to counsel you about guaranteed income solutions that in turn will reduce your investment account with them and lower their annual revenues from your account?
Why Does Ken Fisher Hate Annuities? Follow The Money.
The purchase of a Longevity Annuity often involves the liquidation of a portion of your assets controlled at your brokerage firm. When this happens, the stock broker in control of your assets will lose annual revenue from that account. The broker and the brokerage firm will begin a campaign to preserve these assets or offer you alternatives “approved by their firm”. If you are not fully aware of how compensation works, it is impossible to understand the sharp criticism of a solution that will transfer money from their company. With an educated understanding of each parties method of compensation and how each does or does not affect your investment, a transparent evaluation will occur, based on full disclosure.
Longevity annuities pay commissions to the brokers licensed to represent them. These commissions DO NOT reduce your account value, especially when using properly structured contracts. These commissions are a cost of doing business for the insurance company and that cost is factored into the pricing, COMMISSIONS ARE UNLIKE THE FEES AND COMMISSIONS THAT REDUCE YOUR BROKERAGE ACCOUNT EVEN WHEN THE ACCOUNT IS LOSING VALUE. The commissions in longevity annuities pale by comparison to the commissions paid over the lifetime of a brokerage account. As importantly, the contracts I offer pay reduced commissions and guarantee 100% return of principal upon surrender.
This is a subject I know well. As the innovator of life insurance without commissions in the 1980’s, I have a unique understanding about the impact of commissions on these products. Typically, a lower commission will create better liquidity in the early contract years.
For many, the market may be an acceptable place to invest retirement assets. For most, it is not. If you are concerned about risking any or all of your retirement assets in the market, I would suggest that you consider re-balancing in favor of a guaranteed lifetime income stream. Longevity insurance or longevity annuities will be the safety net of your retirement income planning, providing guaranteed income for life. Many retirees would be able to boost their withdrawals by 20% to 30% during early retirement years if they had longevity insurance in place.
What percentage of your invested retirement assets should be at risk in the market? A good rule of thumb is no more than 100 minus your age. If you are 65, you should have no more than 35% in the market and that number declines with age. Smart, sophisticated people always have the same profile. Never with all their eggs in one basket, they are well diversified and well balanced.
In or near retirement, GUARANTEED INCOME IS THE MOST IMPORTANT ASSET you own. You need a longevity advisor on your team, one who understands guaranteed, lifetime income solutions. With 30+ years of experience in mortality and longevity risk, I encourage you to schedule a free, educational meeting with me.
Professors from Yale, Stanford and Wharton are among the growing number of scholars within academia - all touting the advantages of Longevity Annuities in a retirement allocation model. Longevity annuities are unlike the annuities you may be familiar with or currently own.
Professor David Babbel from Wharton says: "Our findings regarding actual products show that since their inception in 1995, they have performed quite well - in fact, some have performed better than many alternative investment classes (corporate and government bonds, equity funds, money markets) in any combination."
Please contact Ted Bernstein, Life Insurance Concepts in Boca Raton, Florida, to schedule a free consultation : 561-988-8984