Tell clients to consider the source when it comes to negative press about annuities

By Dave Scranton

Advisors Academy


We all know annuities have been in the news a lot lately, sparking debate for a variety of reasons both within our industry and beyond. If you’re an advisor who works with annuities, you already know it’s inevitable that your clients are going to come across bad press about annuities from time to time.

For myself, I try to proactively manage that reality by explaining where annuities fit in the broader scheme of investment options, and why some of the negative press out there may not be entirely objective. I explain it this way:

Essentially there are three types of institutions vying for your money. The first type includes brokerage houses and mutual funds — both basically stock market-based. The second is insurance companies, and the third, banks. As long as the Fed keeps interest rates at or near zero, banks are pretty much out of the running at the moment, so that leaves brokerage houses and insurance companies.

Now in terms of the financial press, you have to think about where some of the information you read in it comes from. The reality is most articles written in financial publications aren’t written by financial advisors or money experts; they’re contributed by professional writers.

A particular writer might have a resume that includes everything from athlete interviews for Sports Illustrated to travel articles for National Geographic, but this month he’s writing a feature on annuities for a top financial magazine. Of course, not being an expert, he has to write his story with the aid of a lot of outside research. He could do basic research on his own, or he could turn to a more convenient source.

Who might be the easiest source to work with? Well, probably someone who advertises with the magazine.

And just who are those advertisers? Very often they’re Wall Street firms and mutual funds. So when the writer calls one of these friendly sources, of course they are more than happy to put their spin on the subject of annuities — a spin that will probably be more favorable to the sale of their products.

In the end, this seems like a great system. After all, everyone is happy. The writer is happy because he got his story. The advertiser is happy because he was quoted and got some extra free publicity. The publication is happy because the advertiser (a big revenue source) is happy.

But the end result for readers/investors, is, again, a story that may not be as objective as it seems, and may ultimately amount to little more than anti-annuity rhetoric. In other words, when it comes to any news about annuities, I make sure my clients understand that it’s important to consider the source.