Lou Glutz Wants To Sell You An Annuity!

I saw National Lampoon's Vacation in a theater. The car scene was one of my favorite parts of the movie. I immediately thought of Lou Glutz (the Eugene Levy character) when I stumbled into two articles about annuities. One was at Barron's and another from Advisor Hub.

My standard preamble when talking about annuities is that I am not licensed to sell annuities. I had my insurance license ages ago for one job but never sold an insurance product. The typical annuity is very expensive and very complex. I am aware of one inexpensive annuity product from Vanguard. I've never looked into it but where there is at least one that is cheap maybe there are some others?

The Advisor Hub article is about the possibility/probability that the fiduciary standard will soon be applied to annuities and the extent to which brokerage firms are trying to fight that. The Barron's article takes a positive stance noting that higher interest rates make annuities "more attractive" and that "experts say annuities have become more consumer friendly in recent years as insurers lessened fees."

I have a bias here against annuities. The typical annuities just seems like a cringe money grab for the person selling the annuity. Agree with me, don't agree with me, either way but regardless of my bias, that doesn't invalidate the idea of annuitizing some portion of your assets. Many people view Social Security as an annuity of sorts with an inflation rider. 

There are plenty of people who would benefit from creating a guaranteed stream of income from a portion of their assets realizing they may or may not benefit from the longevity pool aspect of the concept. Annuities have high payouts because some portion of annuity buyers won't live to an very old age and they surrender their annuity assets when they die. There are exceptions but those exceptions cost more money. 

It seems logical then that this space will evolve to become simpler and go from insanely expensive to merely not cheap. We looked at one new idea a couple of weeks ago from Stone Ridge. They have a suite of mutual funds that turn into tontines at age 80. You can sell before 80 but at 80, you're locked in. 

I can't envision the scenario where I will think someone should buy an annuity as we now know them, insanely expensive and very complex, but there is no reason not to stay on top of how the idea of annuitizing assets evolves, if it evolves. Creating a guaranteed income stream where you might benefit from good health habits for the cost of a mutual fund seems like it could help a lot of people. The Stone Ridge suite notwithstanding, I don't think we are there yet for reasons I outlined in that other post but again I am convinced this will evolve favorably. 

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