“When your program ended last week I left the radio on and heard the first few minutes of one of the Safe Money (annuity) shows. In his monologue, the host said that the reason fee for service money managers don’t like annuities is because they don’t receive future ongoing income from them year after year.
He tried to minimize the scandalous commissions he receives on annuities by making it sound like a small once and done event while fee for service managers continue to make money off you for years.
His argument conveniently omits several key facts. A fee for service money manager has an incentive to make my portfolio grow because it will help his income as well. I can look at my brokerage account and know its true value at any time by looking at my statement. If I want to move my funds to another money manager it is a simple operation that I can undertake without selling my security and taking a bath.
Facts are stubborn things.”
Thank you for listening and thank you for your thoughtful comments.
Putting numbers to the facts, many of the annuities sold as ‘no fee’ provide the salesman (hardly a financial advisor) with 8, 9, even 10% commissions for an hour or two of ‘work’.
On a $100,000 investment that would be up to $10,000 of pay for two hours of work.
In order for a fee for service financial advisor to earn that same income, he or she would have to successfully serve the needs of the very same client for 7, 8, or 9 years.
During all those years, this client must be happy with the results (investment advice, tax advice, estate advice, and much more) they are receiving or they may – at no cost – leave and go elsewhere.
And, to put a bow on this comparison, most quality financial advisors can provide Fixed Index Annuities to their clients when they fit the clients’ needs.
Two hours of sales or ten years of service – pretty easy decision.
If you have questions or comments, please send them to Gene@AskMtM.com