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An Open Letter to Ken Fisher

*Inspired by Reagan’s 1987 challenge to Gorbachev at the Berlin Wall

Illustration by Mark Hill

Have you heard the news? Ken Fisher hates annuities.

In the oft-repeated words of the billionaire owner of Fisher Investments: “I would rather die and go to hell before selling an annuity.” Ouch. But that got me thinking.

When you announce that you hate annuities, are you effectively throwing out the baby with the bathwater? How should we feel about that? Is it misleading? Does it help financial literacy in our country?

Annuities, in the generic sense, are a basic building block of all economics and finance. An annuity is simply a financial instrument for paying out a fixed payment stream. Yes; fixed index and variable annuities can be hard-to-decipher products. But Social Security, a source of income that 63 million Americans rely on, is an annuity too.

Do you remember the good old days of traditional defined benefit pensions that pay out a regular stream of income for the rest of your life? Those are also annuities. Leases and mortgages are annuities; they just flow the other way. They are obligations to make steady payments to those on the other end of the transaction. It’s no exaggeration to say that we all experience annuities in our lives in one form or another.

Your clients do too. Like most financial advisors, you annually deduct 1 to 1.5% of their assets under your management. That is the case in good years and bad. Do you truly believe that all annuities are awful?

If not, what does a good annuity look like? I happen to agree with you that commissions on some of the complex annuities that retirees might consider are too high. But what about simple income annuities? You’ve said before that those kinds of annuities “can be ok, done right.” Tell us- what does that look like? We would be happy to be part of that conversation.

Sincerely,

Ramsey D. Smith
Founder, ALEX.fyi