Be careful at the 'Bad Chicken Dinner Annuity Event'
The Annuity Man
If you live in semi-nice neighborhood, there is a 99% chance you will receive an invitation to a local restaurant to hear an annuity sales pitch in exchange for a free meal. I refer to this as “bad chicken dinner seminar marketing.” I’ve recently upgraded that saying to “expensive steak dinner seminar marketing,” which is a reflection of the high commissions attached to the annuity being pitched.
The free steak or chicken dinner might be what gets you in the door, but there are really 5 major items being served to get you to buy that annuity (typically a FIA-Fixed Index Annuity) your agent/presenter is so fond of. It’s important to know the “factual ingredients” behind each one of the 5 pieces of the sales pitch pie.
FEAR. Market losses or the next “market crash” is something no one wants to be a part of. If you have ever been through a true market correction, that’s a permanent scar you will always have. Agents tap into this fear with the misleading “market upside with no downside” pitch.
Factual Ingredients: The truth is that FIAs are fixed annuities that are designed to deliver CD returns. Those are the historical returns. Period. That's not a bad thing, just a fact you need to know.
GREED. Stock market type returns while protecting your principal is a perfect combination…if it were true. It’s not. Everyone wants to have their cake and eat it too, right? In addition, agents will promise “free money” with an upfront signing bonus and guaranteed long term care coverage. The perfect product?
Factual Ingredients: FIAs are enhanced CD products, and the bonus is just part of the overall contractual guarantee calculation. The LTC promise is actually a confinement care type benefit that “when you get sicker, you get your money back quicker.” Not a bad deal if you can't qualify for real LTC coverage, but not too good to be true.
HOPE. When the sales pitch sounds too good to be true, you are hoping that it actually is. Market participation with no losses, free bonus money, and guaranteed LTC coverage sounds great not knowing the details.
Factual Ingredients: As they say in the south, “Hope don’t pay the bills.” FIAs are contracts. Own the contractual realities, not the hopeful non-guaranteed agent presentation. Never buy an annuity of any type based on back-tested return scenarios or up-front bonuses.
TRUST. The agent that's pitching while you are chewing wants you to fully trust what they are saying. Why wouldn’t you?…he just bought your meal!
Factual Ingredients: Don’t trust anyone. Trust the contract, because that is what you are buying and that it what you are going to own. My advice is to write down the sales pitch exactly how you heard it and understand it. Then sign and date it at the bottom of the page and have the agent sign and date it as well. Either that pen is going to weigh 1,000 pounds, or they are telling the truth. That's truly the only protection the annuity consumer has in my opinion.
ARROGANCE. That agent is really hoping to tap into your arrogance. The arrogance of you thinking that you have found the perfect product or that you have something your neighbor doesn’t have. They want you to think that you are smarter than everyone else that doesn’t know about this FIA “too good to be true” stratgey.
Factual Ingredients: Come down off of your financial high horse and realize that there is nothing new with Fixed Index Annuities (FIAs). They have been around since 1995 and are life insurance products/fixed annuities that provide CD returns with some benefits that you can add (and pay for) to the policy.
By the way, I don’t hate Fixed Index Annuities (FIAs) at all, but I do hate how too many of them are sold. They do have their place in some portfolios as principal protection products or if you want to add an Income Rider for future lifetime income guarantees. Under those two contractual scenarios, FIAs work well.
So I encourage you to go to as many of these seminars as possible to cut down on your monthly food bill. Free food is good. And as they say in Vegas, “Don’t be the sucker at the table”….and remember to only swallow the food, not the over-hyped sales pitch.