Wrap Fees on Indexed Annuities Are 'Ridiculous,' Stan the Annuity Man Says

Advisors are “being forced” to offer annuities “because all the baby boomers turning 65 need income or principal protection, or both. Any advisor who doesn’t at least discuss the positives of annuities with … clients is kidding themself,” argues Stan Haithcock, aka “Stan the Annuity Man,” in an interview with ThinkAdvisor.

Licensed in every state, he says he is the top independent annuity agent in the country.

Much of the annuity business is booming thanks largely to interest rate hikes.

The Life Insurance Marketing and Research Association (LIMRA) forecasted record-breaking sales of multiyear guaranteed annuities for the first quarter of this year.

These are fixed annuities that function like CDs, Haithcock explains. “Ever since the guarantee went over 5% last October … there has been overwhelming demand” for them. “It’s a demographic tidal wave of [baby boomers],” says the annuity expert, who recommends only fixed annuities, never variables.

In the interview, the founder and owner of Stan the Annuity Man, based in Las Vegas and with a second office in Florida, unpacks how annuities can be used to fill a gap in retirement income and why he sees no reason for annuity-selling RIAs to charge a management fee for them. He calls that “ridiculous.”

Haithcock, with his humorous and blunt style, is a wellspring of reliable information about annuities: He generates videos — new ones are posted Monday through Friday on his Stan the Annuity Man YouTube channel, he has “The Annuity Man” podcast and he’s penned seven books on the subject.

Before venturing on his own, Stan the Annuity Man was a wirehouse man, having worked at Dean Witter, Morgan Stanley, PaineWebber and UBS.

ThinkAdvisor recently interviewed Haithcock, speaking by phone from Las Vegas.

Named for a great baseball hitter, “Stan the Man” Musial, Haithcock grew up poor in North Carolina.

In the interview, he explains how that background led him to a career in financial services and why investors should work with an advisor whose childhood was marked by a scarcity of money.

Here are highlights of our interview.

THINKADVISOR: Why should more financial advisors offer annuities?

STAN HAITHCOCK: They’re being forced to because all the baby boomers turning 65 need income or principal protection, or both. There’s only one product that will pay you as long as you’re breathing, and that’s an annuity.

So any advisor who doesn’t at least discuss the positives of annuities with every one of their clients is kidding themself. Period.

How are the indexed annuities that are designed for RIAs doing?

Any RIA that’s charging a wrap fee — management fee — for an indexed annuity is ridiculous. It shouldn’t be allowed. It’s garbage.

Indexed annuities reset annually, so there’s nothing to manage and nothing to charge a fee for.

I’m going to get all kinds of hate mail on that. But bring it on. I’m right.

Why did LIMRA [Life Insurance Marketing and Research Association] forecast record-breaking sales of multiyear guaranteed annuities for the first quarter of this year?

Those are the annuities that everyone’s buying. Ever since the guarantee went over 5% last October, there’s been unbelievable demand. Carriers have been inundated with applications.

Multi-year guarantee annuities are fixed annuities, but they function like CDs. You give the annuity company money, never touch the principal and you get interest.

People haven’t seen interest rate guarantees like this for a long time.

Are carriers meeting the demand?

There’s been a capacity issue for the last four or five months. It’s hard for the companies to process all the applications. So the turnaround time has been longer than normal.

It can be a two-to-four-week process, and sometimes four weeks is too long for [consumers] to wait — they get frustrated.

But processing a contract — an annuity is a contract — takes a while.

What’s the significance of these soaring annuity sales?

All of the overwhelming demand is a positive for the annuity industry [especially since] there have been so many idiots out there saying, “I hate all annuities.”