Break-ups are hard. They are sad. They are disappointing. They are uncomfortable. They also end with hurt feelings and blame being slung at each party involved. No one likes to experience a break-up. In the famous song by Neil Sedaka, he says, “Breaking up is hard to do.”
Obviously, you are not reading this newsletter for romantic relationship advice, so why am I talking about what your ex would say when you break up with them? I have been in this business for quite a while now and it’s never pretty when a client breaks up with their current advisor.
I have seen it plenty of times and it amazes me the desperation and clinging some advisors display when a person decides to do the smart thing with their retirement assets and protect a portion of it from market losses. Usually, when my client comes back and tells me what their advisors told them about their decision to protect their money, I am astounded by either the blatant ignorance that their advisor has shown about the annuity world, or the fact that they flat out lied to try and keep the client’s money under their management. Either way it’s appalling and pathetic.
Let’s jump into this week’s newsletter and look at some of the most common statements you will hear from your ex-advisor to try and talk you out of protecting your money.
Don’t get me wrong, there a lot of good advisors out there that have your best interest at heart, and I’ve had some that encouraged their clients to use my products. When you start to run into problems is when an advisor is willing to display his ignorance about annuities, and just starts parroting a prewritten script that was given to him by his bosses in the event a client wants to move their money. When it’s all said and done, they are not concerned about what’s best for your money. They are concerned that they are about to take a pay cut.
Typically, when your money is being managed by a brokerage firm, or an individual advisor, you are being charged a percentage based on your AUM, or Assets Under Management. The typical fee for an advisor is around 1%, and that is what people think they are paying. But there are up to 16 different fees that are in managed funds, and you are most likely paying 2% or more on your managed money. I will write a newsletter in the near future about the different fees.
Have you ever heard an advisor say, “I hate annuities”, or “I’d rather go to hell than sell an annuity”? I have, but I don’t believe them. They love annuities! Because YOU are THEIR annuity. As long as they can convince you to keep risking your money, they keep getting paid. Every year. Year after year. No matter if they make you money, or they lose your money.
And please, always keep in mind, it is YOUR MONEY! You do not have to ask permission from these people to do something that you have vetted and feel is the best choice for you and your family. IT IS YOUR MONEY. Never forget that.
Let me jump off my soap box and get back to the original point of this newsletter of what your ex-advisor will say, and the information you need to internalize so you can feel confident that you are making the right decision.
1. “I have a product just like that.”
No, they don’t. If they do, it is most likely a variable annuity (see my report on variable annuities), a Registered Indexed Linked Annuity (RILA or “Buffered Annuity) which you can give all of your gains back and actually lose a portion of your money. Or, it is some substandard Fixed Indexed Annuity. The majority of advisors do not have access to the products I have, and that’s because it comes down to what their overlords will allow them to represent. And of course, that comes down to money and how much they can make.
But, even if they do have the best product for your situation — one that has no-to-low fees and guaranteed income, and/or protection from market losses – why are they only telling you about it now that you’re bringing it up? Is it a ridiculous idea to think they are only acting in your best interest now that they are about to lose your business?
2. “There are a bunch of hidden fees in those products.”
No, there are not. They would be referring to a variable annuity which has an average fee of approximately 3.75%. Plus, if I recommend a product that has an expense attached to it, it is because that is what your situation calls for and I do not make any extra money because of it. The average Fixed Income Annuity Income Rider has an expense of 1% and that ensures that you will never run out of income, even if you run out of money.
I always tell my clients, it’s not the expense that you should be overly concerned with. It’s what are you getting in exchange for that expense? With an income rider, you get guaranteed lifetime income. With a managed money fee, you get no guarantees whatsoever.
3. “You don’t get all of the market gains in those types of products.”
True, but you don’t get any of the losses either. Have you ever wondered how much of a return you need to recoup a 50% loss? The first natural answer is, 50%. But you actually need a 100% return (double the money) just to get back to even. And that’s before any fees have been charged.
However, there are Fixed Indexed Annuities that will give you 100% participation, or greater, in a stock market index. But let’s just say you only get 50%, and the trade-off is that you will never lose a penny due to a market downturn. Your worst-case scenario is a 0% gain, but never a loss.
If you walked into a casino and sat at a blackjack table and the dealer said, “I’ll tell you what. Since we are so appreciative that you decided to spend your time and money with us tonight, I’m going to make you a deal. Every hand that you win, you get to keep half of the pot. But every hand that you lose, I’ll let you take your bet off of the table after you know the outcome. Deal?”
You would be crazy not to take that offer. Plus, if you knew you could not lose, how much would you bet?
4. “The loss you had is only a paper loss.
Really? What an insensitive thing to say to someone who’s hard-earned money just disappeared from a market downturn. Did they ever tell you that, “your gain is only a paper gain”? What an idiotic thing to say.
When you are in retirement, or nearing retirement, you cannot afford losses unless you are extremely wealthy, or you have a portion of your money and/or income protected in an asset class such as an annuity.
5. “You don’t want to tie up your money for long periods of time.”
Except for the money you are spending on a day-to-day basis, the rest of your money is always in some sort of holding pattern. The question is, “where is it, and is it safe?”
Annuities come in all different lengths of agreement periods and as long as they are set up the right way, the portion that will be accessible to you will be part of an overall retirement spending plan. Plus, there are emergency provisions that will free up 100% of your money with no penalties if needed. Do not let the “annuities tie up all your money” excuse keep you from learning how to implement this fantastic strategy.
6. “It sounds too good to be true.”
Really? Someone saying that they can magically predict the future of the market sounds “too good to be true.” To me, anyways. The fact is annuities can be traced back to the Roman Empire and have a 200-year history in the United States. And just like with most products and services, they have gotten better with time.
Just because someone does not know about annuities, or understand them, does not make them “too good to be true.”
7. “If this is so good, why aren’t more people doing it.”
The fact is, they are! In 2020 alone, American’s made the wise decision to move $219 Billion into annuities to protect their money, and/or provide guaranteed income. The 1st Quarter of 2021 alone has seen a 9% increase from the 1st Quarter of 2020, according to Secure Retirement Institute.
The Annuity Industry is seeing a resurgence of people understanding the importance of protecting their money. Unfortunately, the reality is the majority of the financial services industry is dominated by fee-based advisors who will not tell you about these products because they will not be able to charge you recurring fees. So, there is no incentive for them to tell you about annuities.
8. “I’ve been your advisor for decades.”
Oh please! This is a pathetic attempt at manipulating people out of a good decision by using guilt and shame. What you, dear reader, and your advisor, need to keep in mind is that this is not personal. Just because you want to protect a portion of your money does not mean that anyone did something wrong. A different stage of life calls for a different strategy.
It is no different than the vehicle you drive. When you were young and single, you probably drove something fun and fast. Then you were married with children, and you probably had a van or an SUV. Then, the kids left, and you probably went to a sedan or something that offered some luxury, because you had the extra money freed up, and you were no longer worried about having soda spilled on your seats or finding 3-year-old French fries under the floor mats.
What you need and/or want today is simply different than what you needed and/or wanted 20-30 years ago. And maybe that person cannot provide it for you. It’s nothing personal. It’s what’s in the best interest of you and your family, and true professional should be able to understand that.
These statements are just some of the many that you will possibly hear when make the decision to protect a portion of your assets using an Atlas Annuity Strategy. To find out why the Annuity Industry is seeing such huge increases in recent years, click the button below to get on my calendar so we can have a short phone conversation to see how an Atlas Annuity Strategy can work for you.
All the best,