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Retirement Expert Rants: The Annuity Industry Needs to Focus On Guarantees

Stan Haithcock
November 14, 2024
Retirement-Expert-Rants:-The-Annuity-Industry-Needs-to-Focus-On-Guarantees

Hi, my name is Stan The Annuity Man, America's annuity agent, licensed in all 50 states, and I'm here today to rant a little bit. I do this occasionally when things hit me the wrong way. This is a rant that I wish the annuity industry itself would go to all the CEOs and all the grand poohbahs that create the products, etc. And what upsets me is what upset me from day one when I came out to the annuity world. No one plans to become Stan The Annuity Man. I'll have to tell you that story in another episode.

But what kills me about the annuity industry is annuities are contracts. Life insurance companies issue annuities, and they primarily solve for four things: principal protection, income for life, legacy, and long-term care. That's the PILL acronym that I always use.

They're contractual. You should own them for the contractual guarantees. You own an annuity for what it will do, not what it might do. And the will do is the contractual guarantees. But under that premise of will do, not might do, the annuity industry for some reason focuses solely on the might do, the hypothetical, theoretical, backtested, projected, hopeful, pie in the sky, unicorns chasing the butterfly return scenarios that agent will pitch to get the sale.

Annuity Types

Now, the fortunate part of the annuity world is that most annuities are contractually guaranteed. Single Premium Immediate Annuities, Qualified Longevity Annuity Contracts, Deferred Income Annuities, and Multi-Year Guarantee Annuities are contractual. There's no wiggle room, there's no pie in the sky, there's no backtested. You're going to get what the contract tells you.

There are some other types that have attachments to the markets, or some indexes like an Index Annuity have attachments to a call index. And those are sold for hypotheticals and theoreticals.

The unfortunate part with the annuity industry is they need to include the biggest marketing opportunity of all time. It will be studied in business schools for decades to come. And you're saying, "Wait a minute, Stan. What are you even talking about?" What I'm talking about is when annuities were first put on the planet in Roman times as a gift, a pension gift, a lifetime income stream gift for the dutiful Roman soldiers and their families, they got what's called an ANNUA payment, an annual payment, which is the root word of today's word annuity. Those were pensions.

Lifetime Income

Everybody in the country already owns the best inflation annuity on the planet. They might not know it. It's called Social Security. Pensions are annuities. Annuities are the only product on the planet in the financial world that provides a lifetime income guarantee. Lifetime income equals annuities. Annuities equal lifetime income. Why isn't that the ad? Or we could do the "Got Milk?" ad, where it was "Got Milk?" Got Guarantees? Annuities have a monopoly on lifetime income. That should be the only thing we talk about. Yes, there are other products, and they do other things, but that should be the only thing we talk about.

Why would that make sense? Well, we're all kind of scratching our heads going, "Well, I wonder if Social Security is even going to be there, or are they going to means test it or are they going to change the rules? Will I even get it? Will they even increase it anymore?" If that's the case, and you have a monopoly on lifetime income, wouldn't you promote lifetime income to the masses?

Right now, annuity equals hate. Hate equals annuity. People are running out saying, "I hate all annuities." Advisors are saying, "Oh, you should never buy an annuity because the annuity company is going to keep the money." That's complete and utter garbage. That's only one of 35 ways to structure a lifetime income stream. But there are people out there that go, "I've never bought an annuity, Stan, because the annuity company is going to keep the money." That's so misinformed and uneducated, I can't see straight.

For whatever reason, the annuity industry has made this decision. "Let's compete with stocks. Let's compete with ETFs. Let's compete with mutual funds. Let's compete with all those things we can't compete with, but let's compete with them." That'd be like me saying, "You know what? I'm going to train for the Olympics 100-yard dash or the high hurdles." That's stupid. That's not what I do.

What does the annuity industry do? We do lifetime income and transfer risk. You're transferring the risk for the annuity company to pay you for the rest of your life. I always tell people, "There's no return on investment. There's no ROI until you die. Why? Because you've transferred the risk. You could live to 150." People go, "What if I lived to 160?" They're going to pay. What if there's a medical breakthrough with your lifetime income stream? Are they going to pay? Yes. It's a contract.

Why, as an industry, are we not promoting that? Let me tell you who is.  The number one agent in the country, America's Annuity agent. I'm promoting that, The Annuity Man. I can get that for you. I can shop all carriers for you, period.

Commissions

Now, this could all be solved by the annuity industry in two ways. They could either make the cogent decision to say, "You know what? Stan The Annuity Man is right. We should only talk about lifetime income." Or they could work on the commissions, which, by the way, all annuity commissions are hidden. It's built into the product. You don't see it. It comes out of the reserves. But if they made the commissions low and the same on every product, problem solved. Problem solved because agents wouldn't be steering you or pushing you to their product of choice that pays 7%, 9%, or 6% commission. They would be pointing you to the product that makes the most sense because they're going to get paid the same anyway.

Embrace the Monopoly

Wait a minute. That made too much sense even to implement. Of course, it does. It's common sense. But the annuity industry needs to get off of market growth. I know that it's a sexy sell. I know that they get invited to those cocktail parties on Wall Street. I know they want to be with the big boys, the Gordon Gekkos, the hedge funds, and the private equity people. Trust me, they're laughing at you, industry. You're not them. You don't want to be them. You have a monopoly on a product. You have a monopoly on lifetime income that you should promote. Because, by the way, most of the people that I talk to need additional income. Most of them need income down the road if inflation hits. Most of them want contractual guarantees. Most of them want to set their partner up with a lifetime income stream so that when they die, that income stream will continue uninterrupted and unchanged.

I'm assuming that's you. Even if you're Gordon Gekko, even if you're the baddest dude on the planet when it comes to markets or you're a female trader, the baddest dudette on the market, I guarantee your spouse could care less, male or female. I guarantee you. There's one of you who could care less about the volatility index and all kinds of PE ratios. I guarantee all they care about is either going to see their family or their grandkids. That's my wife. She could give a rip about the stock market.

So, what am I telling the annuity industry to do? Embrace the monopoly that you have. I can't believe I'm saying this. You have a monopoly. It's lifetime income. Take it, embrace it, and promote it. Promote it. Tell the masses, "If you want lifetime income, you can get it through annuities. If you want lifetime income, you can customize the contract so that it works exactly like you want it with annuities." Tell them that. Run the ads. Or I'll just continue to run the ads. The problem is, I don't have the money that you guys have. But if you let me keep doing this, I will because you're not taking advantage of the opportunity.

And as a consumer out there, remember this. Lifetime income equals annuities. Annuities equal lifetime income. It's the only product on the planet that can contractually guarantee you a lifetime income stream that you can never outlive. And with that, I encourage you to go to The Annuity Man and schedule a call with us. It will be brutally factual. It will be the best conversation you'll ever have about annuities. And if you choose to work with us, we'll be the best advisor on the planet when it comes to annuities. I won't be your friend, but I'll be your factual expert when it comes to annuities. I'll see you on the next Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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