We have all seen it. The big advertisement from Fisher Investments “I Hate Annuities and You Should Too!” – Ken Fisher is making a splash with this but as is typical with this kind of promo his “Special Report” is one-sided, very poorly researched and limited in scope. In addition, his “Annuity Conversion Program” is misleading in that his reps tell annuity clients that Fisher Investments will “pay for your annuity surrender charges” if you surrender your annuity and move it to Fisher Investments. I ran into this recently with several clients of mine and looked into it. As I suspected it was not what it seemed.
Here is the claim from Fisher Investments:
“If you determine your annuity may not be the best option for your financial goals…we may compensate you for some or all of the annuity surrender fees incurred when liquidating your annuity.*”
Sounds pretty straight forward yes? But lets look at the fine print…or the * above:
* Annuity Surrender Fee Terms and Conditions
1. Limited Time Offer- The offer is available for a limited time only. Fisher Investments reserves the right to cancel, suspend or modify the offer at any time and for any reason without notice.
2. Eligibility- The offer is valid only to qualified investors who become Private Client Group clients of Fisher Investments and who surrender an annuity and transfer the proceeds to be managed by Fisher Investments. Nothing in the offer infers any right on any person to become a client of Fisher Investments. Fisher Investments reserves the right to refuse or terminate any person or client for any reason. Any request to participate in the offer is subject to acceptance by Fisher Investments.
a. The maximum surrender cost that Fisher may agree to pay will depend on the actual surrender cost of the annuity (excluding capital gains and other taxes) and the value of the portfolio transferred for management by Fisher Investments. Any portfolio already managed by Fisher Investments will be excluded for the purpose of determining the maximum surrender cost to be paid.
b. Any surrender cost that Fisher Investments may agree to pay will be payable in equal quarterly installments over several years. Installments are subject to adjustment based on withdrawal of assets from Fisher Investments management. All payments obligations will cease if the client relationship with Fisher Investments is terminated before the end of the payment period and no further installments will be paid..
4. Risks- There is no guarantee that any annuity proceeds managed by Fisher Investments will achieve any specified level of performance, or that performance will be any higher than what could be achieved within an annuity. Investing in securities involves the risk of loss. Past performance is no guarantee of future returns.
I have had several clients who have asked me about this program. I took a hard look at what the offer is. Fisher Investment will pay the surrender charges over time. But it is paid with a “reduction in fees” on a quarterly basis. In other words as they manage your portfolio they charge you fees. They will charge you less fees if you surrender the annuity and move it to them. Their fees for management are high to begin with so a reduction in fees merely brings them back to the rest of the Money Management world.
Also- if you look at the fine print, you must stay with Fisher to receive the reduction in fees. If you leave their obligation to pay for your surrender charges is lost. So let me get this straight…if you leave Fisher you lose your right to getting back the surrender charges…funny, to me that sounds like a surrender penalty for leaving Fisher Investments. Ironic isn’t it?