Well, we want you to know that this rule does not apply to annuities. As Annuity Guys®, we may be a tad-bit more sensitive to reading the negativity spewed by some writers when it comes to annuities; however, it does appear that any increase in complaints by investors or consumers just comes down to one particular type of annuity – the variable annuity^#.

Watch as Dick and Eric discuss complaints on annuities and other financial products.

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

Overall, annuity complaints actually decreased in 2013, but for the popular media it appears to be a lot more fun to talk about the high commissions, high fees, and bad advisors that offer theses products. You really have to dig to find an article that compares the number of complaints from mutual fund^{^}s and stock transactions — which far outpace those from annuity sales.

As Annuity Guys®, we are on record as stating that an annuity is not where you should put all your money, but it can be a great location to place dollars that will used to fund retirement income. Annuities are a financial tool and when used properly can alleviate risk to your portfolio.

You would never guess this article cites the fact that nine out of ten annuity owners are at least somewhat satisfied…

 Angry Annuity Clients Seek Damages

By Matthew Heimer

When stock markets are humming along nicely, customers are less likely to complain about their brokers and financial advisers: 2013 was on pace to be the fourth year in a row of sharp declines in the number of arbitration cases filed with the Financial Industry Regulatory Authority (Finra), the brokerage industry’s self-regulatory body. But as Matthias Rieker reports this week in The Wall Street Journal, complaints about one kind of investment remain stubbornly high. The outlier: Variable annuities.

Variable annuities usually offer a retirement saver a **guaranteed future payout, along with a chance of increasing the value of the saver’s initial investment depending on how markets perform; investments in many of these annuities can be tax-deferred. But they’ve long exasperated consumer advocates because of their relatively high commissions and fees, along with their often-impenetrable rules about what, exactly, an investor’s account is worth at any given time.

As Rieker reports, “In 2012, the variable annuity^# was the only class of security for which arbitration claims increased”; last year, the total number of annuity complaints dropped about 20%, but complaints in other asset categories dropped far faster. […Read More at MarketWatch]

Video Transcription:

Dick: And I’m Dick.
Eric: Hello, I’m Eric and we’re the annuity guys.
Dick: Well, Eric, are annuity complaints on the rise.
Eric: No… Yes.. No… Ours? no!
Dick: Depends on which annuity complaints you want to talk about.                                                                       Eric: And that’s exactly the case. And then we see the black eye of the industry coming out in the open ever again with the old variable annuity^#.
Dick: Well, and that’s something that has been on the rise are variable annuity^# complaints and it runs the gammon from the fees and the surrender charges and loosing money when stocks go the wrong way.
Eric: You can loose money.
Dick: But what’s very interesting is the fixed annuities which would take in that hybrid annuity and everything. We’ve seen those complaints go down steadily. They kinda of hit the peak somewhere around 2006 – 2007; roughly around 200 complaints. And folks, when you think about this, 200 complaints over ten of thousands of folks that buy annuities in a given year; that’s not a lot of complaints. But now, they’ve actually  tapered down. Fixed indexed annuities sales have been way up and their complaints have tapered down to – last year – i think around 54 complaints for the entire year.
Eric: Even when we look at the variable annuity^# complaints – one hundred sixty-five complaints on variable annuity^#.
Dick: That is not a huge number.
Eric: And we should very clearly clarify here that when somebody complains about annuity, it’s typically not because of the annuity design, it’s  not the insurance company; unfortunately, it’s guys like us.                       Dick: Annuity guys.
Eric: Annuity guys or people that want to be annuity guys…
Dick: I beg your pardon.
Eric: -Who don’t fully understand the product. They don’t explain it very well, so they have consumers confused and they don’t know which direction they’re going; and their inability to articulate what product….
Dick: And Eric, this does not show up later when the person has the policy ans they have some need. They need to get additional money or they need to turn their income on or whatever; and it does not work the way they were told that was supposed to work.
Eric: They get caught with the sizzle side perhaps; the 5 percent **guaranteed roll up for income and deferral.
Dick: Or they though they’re going to earn 5 percent every year, **guaranteed. They see their account dropped a couple of years in a raw and they’re like “hey, this is not what I bought?”
Eric: That’s right! “That’s not what you’re told me”… and that’s where the complaints come from. And I guess, really to be fair to the annuity industry, we should say the number of complaints in comparison to the mutual fund^{^}s…
Dick: Or the securities industry… and that literally, looking at the reports that we’ve been looking at I think the SEC last year had over ten thousand total complaints. Now, that’s a lot of complaints. And we tend to not see that. What’s interesting about this is that we don’t see that in this financial articles a lot; we don’t a lot who talked about that.
Eric: I think we don’t want to talk about the thing we don’t want to know.
Dick: But we see a lot of talk about “ohh, this annuity this, this annuity that.” And I’ve seen now that the populous has become a little more educated about annuities; a little more understanding us out there; I’m seeing less of these negative articles showing up.
Eric: Well, I wish I could say I see less of that. Maybe I’m drawn to… it’s like everybody has a newspaper article or blog like to pick on it. The topic of this one, “Angry annuity client seek damages.” Now, that does not say “you know, really…” If you look at proportion, it’s not nearly as bad as the people with stocks that are three, four or five times as many complaints. It’s people…. the highlights….
Dick: It crabs attention and it sells advertising; and this is part of the industry. And folks, really, when you get down to why annuities are so popular and why they have so few complaints? It is because they actually do the opposite of what the market does; they make your money safe.
Eric: Right. Safety first.
Dick: It’s right.
Eric: And that’s why i always qrench when I see people that have newspaper articles – I’m not going to mention their names because they don’t deserve the heck. They’re like ohh, I like the brokers advice until they recommended an index annuity.
Dick: You would not be thinking about Malcolm Berko.
Eric: Yes, I would. I’m thinking of him too. It gives us bad names because we are in the index annuity world; we understand how they work, we understand where the benefits are and unfortunately, people that don’t live in our world…
Dick: And if you’re just, as Bill O’Reilly says “fair and balance”, there are ways that annuities can be used wrong, ways that are used correctly; they’re just simply a financial tool.
Eric: That’s exactly right. Annuities are great way to make sure you don’t live too long. It’s longevity, it’s guarding against outliving your money and we talked about that being the strength in the cornerstone.
Dick: The principle of protection; protecting what you’ve put into an annuity in terms of premium and you know that you’ll never go backwards – we’re talking about fixed annuity – and obviously, the variable is.
Eric: And we have some issues of the variable annuities^# ourselves because we don’t like to loose money and we don’t like for our clients to loose money.
Dick: Yes, we don’t like for our clients to loose money. So, are they on the rise or it depends on rather you’re talking about which type of annuity?
Eric: It depends if you’re in our office because in our office, not so much.
Dick: The complaints are under control.
Eric: That’s right.
Dick: Thank you.

The post Are Annuity Complaints on the Rise? appeared first on Annuity Guys®.

Unfortunately, their best in class annuities may do more harm than help.

Annuity Guys® – Dick and Eric, evaluate Barron’s Top 50 annuity article and their best in class annuity selections.

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

Don’t get us wrong, we are grateful that this publication largely dedicated to investing in stocks and bonds or other securities has dedicated some time to cover a financial instrument that should be considered for at least a portion of most retirement portfolios that need safety, income and modest growth. However, consumers hoping to find answers about the top annuities will only know a small part of the story. Their hypothetical examples only apply to a very tiny segment of the annuity buying population.

While we hate sounding like a broken record, you should know that with annuities there is not a “one-size fits all” model. Sure you can use a list like the one found in Barron’s to ask for a comparison, but an expert advisor who specializes in income and retirement planning will be more likely to come up with better annuity choices when your specific scenario is fairly considered.

Here is an excerpt from the Barron’s article that made us shake our heads sideways.

Top 50 Annuities By Karen Hube

The once-dominant variable annuity^# is getting a bit of competition from cheaper iterations. These stripped-down products offer some surprising advantages, though.

Armand Baughman, 71, a retired Continental Airlines pilot of Valley View, Texas, has always viewed annuities as too complex, illiquid, and expensive to warrant his consideration. But last year, he socked $200,000 into a tax-deferred variable annuity^#, calling it “the best thing since Cracker Jacks.”

What changed? As part of an effort to lift sagging profits after years of challenging market conditions, firms are giving the oft-maligned annuity a makeover: an ultralow-cost, variable annuity^# that offers a broad array of alternative investments, including hedge funds, currency funds, managed futures, and other strategies.

Annuity companies are trying to make a comeback after years of struggling to remain financially sound under the cloud of low interest rates and high stock-market volatility. With annuity sales down 8.4% last year, to $211.8 billion, the lowest level since 2005, annuity providers are aggressively designing and marketing annuities that — like the low-cost variable annuities^# — appeal to very specific investor goals or needs.

“For years, companies offered products that tried to do everything at once — give the highest rates, best liquidity, best income **guarantees, and benefits,” says Ken Nuss, founder of AnnuityAdvantage.com, which has free listings of fixed index and income annuities. “But that’s over. They’re getting better at fulfilling a specific goal more effectively.”

To help sort through a breadth of products, Barron’s surveyed annuity companies and industry experts to come up with the 50 most competitive contracts in popular annuity categories. The results, based on common investor assumptions and goals, are detailed in the table, right.

Low-cost variable annuities^# with alternative investments earned a new category entry in the top-50 survey this year, thanks to the growing number of these contracts and their potential benefits to investors.

ANNUITIES, WHICH ARE TAX-DEFERRED INVESTMENT vehicles that allow you to turn on an income stream either immediately or years from now, come in two basic categories: Variable annuities have payouts that fluctuate along with their underlying investments; fixed annuities offer a **guaranteed interest rate for a specified number of years. [Read the full article at Barron’s]

Transcription:

Dick: Hello, I’m Dick.

Eric: And I’m Eric and we’re the annuity guys. Today Dick, we’re going to look at best in class annuities. Now, that sounds awfully high pollutant there. What’s best in class mean? Sounds like a horse racing term.

Dick: Well, Eric, one of the problems that we’ve had in our videos and we’ve been criticized at times; we had folks say…

Eric: No.

Dick: Why don’t you guys tell us what a company; which annuity and that type of thing? Well, let’s just give some disclosure here. Folks were in the most tightly regulated, most highly compliant industry; and if we start mentioning company’s names, we actually have to go out to get their approval first.

Eric: We need a lot more leave time to be able to tell you what the company name is.

Dick: Before we can do a video.

Eric: We have to get approved by the company and then they take about six weeks to banter back and forth; and then they come back, they usually say, no.

Dick: And then there’s another problem, if we start mentioning companies Eric…

Eric: Because it’s wrong as soon as we say it.

Dick: After we’ve said it, it’s wrong the next day. And that’s because the best in class annuities; Eric and I have certain annuities that we tend to favor or better than others, and certain companies…

Eric: It’s based off of historical performance that typically is better than others

Dick: But we may have a client one week that’s pretty similar to a client two or three weeks later; and we have to use a different product because some things either change with that annuity or that person’s situation is just a little bit different.

Eric: That’s right. It can be as simple as one is male, one is female. You would think there would not be that much difference?

Dick: So, what got us going on this subject today?

Eric: Well, It varies. I love them, but I hate them right now. You know it’s nice of an investment kind of publication that we typically think up to feature annuities in the top fifty annuities on the cover of that…

Dick: Well, they’re so biased. A lot of times they won’t even talk about annuities.

Eric: That’s right. So, we love the fact that they’ve decided talking about you which are the top fifty annuities. Now, I’ll have you know, they’re wrong.

Dick: Take it with a grain of salt and read it with a critical eye.

Eric: That’s right because as soon as I look at their list, I said “oh no!” Now, they had to make assumptions. They assume within their first section here that everybody two hundred thousand dollars exactly.

Dick: They’re all sixty years old.

Eric: Six-years-old and male. So, this list is probably very good for the time the article was written if you’re sixty and had two hundred thousand dollars. Now, if you’re 63 and female, the list is wrong.

Dick: Or all you have is two hundred thousand in your name; or what if you had a million to your name? All those variables change. Suddenly, that isn’t the right annuity because there’s other reasons you’d be doing this.

Eric: So, it did address some of the issues in the different pieces but we would tell you that when you first look at this, don’t assume everything here is going to apply to your situation. There’s typically not just one best annuity.

Dick: No! And then when you start talking about working with an advisor that really gets it, they’re going to take a much more sophisticated approach and it’s good not going to be one best in class annuity; it’s going to be three or four or five; and they’re going to have to all work together.

Eric: Right. It’s a balancing act of usually giving you an option. Maybe this one is lower rated but has a slightly better pay out for what your intention is.

Dick: Yes, yes.

Eric: This one has a higher rating but maybe slightly lower or may have to hold it a little bit longer…

Dick: This piece over here works well in a tax-free environment for growth and there’s the maybe starting a portfolio out of a good immediate annuity might make sense out there. So, again, being able to structure this properly, I would say to get best in class annuities, there’s no substitute for working with an expert.

Eric: And that’s where you rely on somebody in their expertise to define for you, what fits your situation. I know I sat down and run numbers and I’ve had what I thought was going to be the best one going in. And all of a sudden I said I run numbers and for this particular unique situation it had to be somebody that was exactly this year old and got to hold it for this long, one specific annuity all of a sudden jumps out of package you never expect. Nothing pay’s to go back and look at the analysis and…

Dick: Exactly. And it doesn’t hurt folks; never, never think that Eric and I are saying “don’t do your own research.” Look at the company’s ratings; get in our rate vault and look at all of the different annuities and the different features, and ratings, that type of thing; and do some comparison. But then, there comes a point where you do get involved with a an expert, an agent that works with these on a regular basis; and they’ll be able to look at the subtleties, the real differences and that’s where you really can find the best in class annuities.

Eric: And as we’ve spoken, there’s no reason why you can’t pull out a list like this and say “hey, what about company X here? I see that they were best in class on variance. What’s that look like?” The advisor can then run the numbers give you the idea of why what they’re proposing may be better or you know…

Dick: Eric, even with our expertise, we’ve had situations where somebody’s come to us and said “you know I was reading about this or that or whatever”; and maybe we haven’t even opened our eyes to something that they brought to us. And then we started utilizing it for other clients because it looks like they were right. You know, I’d like to think that we have a lock on all the knowledge but it’s working with people on a regular basis that keeps us on our toes and keeps us at the top of our game.

Eric: So if I’m looking for best in class annuity, where do I go?

Dick: You go first of all to our website…

Eric: Which you are here for a long time…

Dick: And you begin your research; and then you work with an expert advisor.

Eric: Yes and that’s the key; it’s getting the facts from somebody that works in this area all the time.

Dick: That’s right!

The post How do you Choose the Best in Class Annuity? appeared first on Annuity Guys®.