Should you hate annuities? Yes, some types. Others? No, not if you believe the federal government, trusted academics or Ken Fisher himself.
Behind every successful marketing campaign, there’s a dirty secret. The case of Fisher Investments’ “Why I Hate Annuities And You Should Too” is no different. Here are six reasons why following the advice of his catchy ad campaign might be the wrong choice for you.
If you’ve seen Fisher Investments’ advertisements boldly proclaiming “I Hate Annuities®,” you might wonder what’s behind this strong sentiment Ken Fisher, the founder of Fisher Investments, has made no secret of his disdain for most annuity products, particularly variable annuities But why does a major investment firm take such a provocative stance against what many insurance agents present as secure retirement vehicles?
As someone who’s researched this topic thoroughly I’ve discovered that Fisher’s position isn’t just marketing shock value—it’s based on substantive concerns about how these complex financial products actually work versus how they’re often sold. Let’s dive into the reasons behind this hatred and what investors should know.
What Are Annuities Anyway?
Before we get into why Fisher Investments dislikes them so much, let’s clarify what annuities actually are.
Annuities are insurance contracts between you and an insurance company. You pay a premium (either as a lump sum or periodic payments), and in return, the insurance company promises you a guaranteed income stream at a specified time in the future. This might sound straightforward, but there’s much more to understand.
There are several types of annuities:
- Deferred annuities: You deposit money that grows tax-deferred until a future date defined in your contract
- Immediate annuities: You deposit a lump sum for an income stream that begins shortly after your initial investment
- Fixed annuities: These generally guarantee a certain interest rate with a fixed payout
- Variable annuities: Premiums are invested in subaccounts (similar to mutual funds) with payouts dependent on investment performance
It’s worth noting that annuity contracts are only as good as the insurance company behind them. If that company goes bankrupt, your contract could become worthless.
Ken Fisher’s Personal Stance on Annuities
Ken Fisher has been exceptionally clear about his feelings. In a 2014 Forbes article, he wrote: “You may have seen my firm’s ads screaming, ‘I Hate Annuities.’ Folks ask why we run them. Simple: Because I do.”
Fisher acknowledges that some “fixed” annuities are okay, but that’s where his approval ends. His criticism is particularly sharp regarding variable annuities, which he dramatically compares to “the cigarettes of the investment world.”
In his own words: “Variables are sold as low-risk sure things. As in, ‘Where else do you get a 6% guaranteed return for life?’ Anything that sounds too good to be true is. It’s not a return on capital. It’s a return of capital until the contract ends, you do, or it’s all gone.”
Why Fisher Investments Dislikes Most Annuities
Let’s break down the specific reasons Fisher Investments criticizes most annuity products:
1. Complex, Confusing Contracts
Fisher Investments points out that annuity contracts are “long, complex and confusing” to the point that even many insurance agents may not fully understand all the details they’re selling. The contracts are often so dense and filled with technical jargon that most consumers never read them thoroughly.
As Fisher bluntly puts it: “The contracts are huge, obtuse, confusing and hence rarely read.”
2. High Commissions and Conflicts of Interest
One of the biggest issues Fisher highlights is the commission structure. Annuity sales representatives often earn substantial commissions built into the policy, creating a potential conflict of interest.
Fisher writes that sales reps “sing false praises—because they’re paid hugely for a blind eye—that hide obscenely gargantuan commissions.” This incentive structure may lead representatives to recommend products that aren’t necessarily the best fit for a client’s financial situation.
3. Multiple, Hidden Fees
Unlike investments with a single, transparent fee, many annuities (especially variable ones) have multiple fees that can significantly impact returns over time. These might include:
- Annual administrative fees
- Annual mortality and expense risk fees
- Distribution fees
- Additional fees for riders like guaranteed minimum death benefits or lifetime withdrawal benefits
These small percentage points can add up to several percentage points annually, potentially “crippling your chances of meeting your longer-term financial goals,” according to Fisher Investments.
4. Restricted Access to Your Money
Many annuities require lengthy lock-up periods where you can’t access your funds without paying substantial penalties. These “surrender charges” may start at around 7% of the annuity’s value and slowly decrease over the surrender period, which can last up to 10 years.
Fisher Investments emphasizes that this lack of liquidity can be problematic during retirement years when you might face unexpected expenses.
5. Inflation Concerns
Another criticism is that annuity income typically doesn’t account for inflation. While a fixed payout might seem sufficient initially, the purchasing power of that income stream decreases over time as costs rise.
Some annuities do offer inflation-adjustment features, but these usually come with additional fees that further reduce real returns.
6. Misrepresentation of “Guaranteed Returns”
Fisher Investments argues that annuity salespeople often mislead investors by focusing on “guaranteed returns for life” without properly explaining that these aren’t returns on capital but returns OF capital.
As Fisher explains: “If you have a million bucks and like the sales rep so much, gift his kid half way through Harvard while buying good stocks and bonds (or indexes) and you’ll likely be better off.”
The Annuity Evaluation Program
Despite their strong stance against annuities, Fisher Investments recognizes that many investors already own these products. That’s why they offer an Annuity Evaluation Program for investors with portfolios of $1,000,000 or more.
This program provides:
- A free consultation about existing annuity contracts
- Analysis of potential risks you might have overlooked
- A second opinion that won’t lead to selling you “a better annuity”
According to their website, Fisher Investments even “often buys folks out of the humongous surrender fees that imprison them in variables—if they stay with us.”
The Controversy Around Fisher’s Position
Not everyone agrees with Fisher’s strong stance against annuities. The financial industry, particularly insurance companies and annuity providers, have criticized his position as overly simplified and self-serving.
Fisher acknowledges this criticism in his Forbes article: “Sanctimoniously thin-skinned industry shills will attack me online for this column, blathering their non sequiturs like ‘I hate Ken Fisher—nonsense, drivel, spin.'”
A 2024 ThinkAdvisor article titled “Ken Fisher Can’t Have It All” also suggests there’s ongoing debate about his approach to annuities and investment advice more generally.
Are There Any Good Annuities?
While Fisher Investments broadly dislikes most annuity products, they do acknowledge that some “fixed” types might be okay for certain investors. However, they maintain that for most people, there are better investment options available.
The firm’s position seems to be that if you’re considering an annuity, you should at least fully understand what you’re buying, including:
- All associated fees
- Surrender charges and lock-up periods
- How the “guaranteed” returns actually work
- The financial strength of the insurance company behind the contract
My Takeaway: Education Before Purchase
After reviewing all this information, I feel the most important thing for any investor considering annuities is thorough education and understanding before purchase. The complexity of these products means many buyers don’t fully grasp what they’re signing up for.
Whether you agree with Fisher’s strong anti-annuity stance or not, his criticism highlights the importance of asking tough questions before committing to any financial product—especially one that might lock up your money for a decade or more.
If you’re thinking about annuities, consider:
- Getting multiple opinions from advisors with different compensation structures
- Reading the entire contract (or having a financial attorney review it)
- Asking explicitly about all fees, commissions, and restrictions
- Comparing the potential returns against simpler investment alternatives
Fisher Investments’ “I Hate Annuities®” campaign might seem extreme, but it reflects genuine concerns about products that can significantly impact investors’ financial futures. Ken Fisher describes his firm’s stance as “a moral quest” rather than just a marketing tactic.
For those with existing annuities, especially variable ones, it might be worth getting a second opinion about whether these products truly align with your long-term financial goals. And for those considering annuities, Fisher’s criticisms serve as a reminder to approach these complex products with extreme caution and skepticism.
Remember, what sounds too good to be true usually is—especially in the world of investing. The guaranteed income might be appealing, but understanding what you’re giving up in exchange is essential for making truly informed financial decisions.
Whatever you decide, don’t just take Fisher’s word for it—or the word of an annuity salesperson. Do your homework, ask difficult questions, and make sure you fully understand any financial product before signing on the dotted line.
Would you like me to explain more about any specific aspect of Fisher Investments’ stance on annuities?
4 . Minimize Investment Fees
If you’re going to put your money in the market, there are much cheaper alternatives than Ken Fisher. At Vanguard, Betterment and Wealthfront, you’ll get charged a fraction of what you would get charged by Ken Fisher. In addition, these firms have very low or non-existent minimums. At Fisher Investments, the minimum is $500,000 in assets.
Takeaway 4: Fees matter when investing your money and there are much more cost-effective companies than Fisher Investments.
2 . Opt for Simplicity
As you age and your desire for guaranteed income increases, simple income annuities offer the most effective way to avoid outliving your money. Ken Fisher puts your money in actively managed mutual funds, the kinds that millions of Americans are fleeing. Check out his article describing the performance of his stock picks in 2015, which lagged the indices. Takeaway 2: Simple is important. Actively-managed funds like Ken Fisher’s are the kinds that investors are fleeing for passive index funds and ETFs.
Is Ken Fisher Wrong About Annuities?
FAQ
Are deferred annuities bogus?
But deferred annuities – “variables,” “indexed” and “deferred fixed” – are bogus. Here, you upfront cash for a contract that pays later. Meanwhile, your principal contract value supposedly grows. Looking for a free mini puzzle? Play the USA TODAY Quick Cross now.
What happened to Fisher Investments?
Fisher Investments, which managed about $600 million for Michigan’s pension fund and ended last year with $94 billion in assets, lost over $650 million when Michigan and Philadelphia pension funds withdrew their assets from the firm.
Should variable annuities be legal?
Fisher particularly hates variable annuities, which “should not be legal as they currently exist,” he says. What Fisher likes about annuities is his annuity conversion program, which buys folks out of their annuity surrender fees if they become long-term clients. The penalties incurred to liquidate are amortized against quarterly advisory fees.
Should fixed annuities be outlawed?
My opinion remains, regardless. All but simple immediate fixed annuities should be outlawed because buyers almost always misunderstand what they’re buying. It’s one step from fraud. Everyone deserves more transparent and flexible investments.
Are annuity salespeople making too-good-to-be-true promises?
More recently, Fisher has been incensed over what he calls too-good-to-be-true promises made by annuity salespeople. They mislead customers to believe they’re buying a smooth, high return on a “ safe” investment, but what they in fact receive in income stream is a return of their capital, Fisher maintains.
Are variable annuities a good investment?
Consider “variable” annuities, the slow-killer cigarettes of investing. First, fees are nose-bleed-high, almost always, combining upfront and hidden commissions. Firms pitch them as safe, high returns – capital preservation plus growth. Horsepucky! Variables buy stock and bond funds, fluctuating with volatile markets.
Why don’t Fisher investments like annuities?
High fees – A major issue we find with many annuities is they rarely have a single flat fee. Instead, they often have multiple fees that could add up over time to several percentage points, detracting from your money’s long-term return potential.
What is the downside of Fisher investments?
Cons of Fisher Investments:
No brokerage platform is available. The minimum investment portfolio is $500,000. Fees are higher than average.
What are the complaints against Fisher Capital?
As alleged, Fisher Capital solicited customers via high-pressure telephonic sales pitches that were permeated with material misrepresentations, misleading half-truths, and deceptive omissions designed to build trust with elderly customers; instill fear about the safety of traditional retirement and savings accounts; …
Why is an annuity not a good investment?
Generally annuities are a “bad” investment because they return less than market rates in exchange for lowering risk, allowing companies to invest in higher return ventures. In the long run you come out ahead by taking the risk and waiting it out.