Annuity IQ

These guys are relentless with their misinformation, especially on annuities. It is a miracle that they are still in business, especially with all of the bad advice they give. In their recent article titled “Are Annuities Ever Not Stupid?” they really show their stupidity.

First, they say: “An annuity is a contract between you and (usually) an insurance company”, emphasis added. The last time we checked all annuities were issued by an insurance company. We know we are going out on a limb here, but since all we do is annuity work, we are pretty sure that statement is just plain wrong. The thing is they mention Fidelity and Vanguard as Annuity options at the end of the article, are they suggesting that their annuities are not issued by insurance companies? They are by the way.

Second, they recommend all equity stocks as a reasonable alternative to an annuity. Talk about comparing apples-to-oranges stocks and annuities should NEVER be compared as a similar investment. variable annuities do offer equity investments, but they are mutual funds, generally speaking, and diversified while stocks are not unless you buy many different stocks.

Third, they say equity indexed annuities are ugly, well we kind of agree with them, but the facts are still a bit dubious in their statement as they lay into fees on indexed annuities. Generally, there are no fees, perhaps an asset charge or a spread, but most offer straight participation rates.

Fourth, variable annuities are bad! There is a shocking statement for you. Here is what I find interesting, before they said that they had this blurb: “You’d think investors would avoid these products. Yet no less an eminence than retirement whiz John Greaney, a regular Fool contributor and former engineer who successfully retired at age 38, has said repeatedly that under some circumstances, one type of annuity can be a useful component of your overall retirement strategy. Writing in the March 2005 issue of the Fool’s Rule Your Retirement newsletter, Greaney showed how adding a lifetime income Annuity to your retirement portfolio can help ensure that you don’t outlive your retirement savings.”

Now, first off the day we listen to an engineer about retirement is the day we should all start letting our pets drive us to work, come on that is just plain stupid. If we were building a bridge then I may consult with John, but not when we are investing our money. Second, right in this statement they illustrate a variable annuity. An equity investment with a lifetime income component, what do you think living benefits are with equity sub-accounts? Thats right an equity portfolio with a lifetime income component.

Finally, lifetime income annuities sometimes make sense, i.e. immediate annuities. While immediate annuities do make sense for many investors, they do have significant drawbacks which the author so blatantly glossed over. He then recommends Fidelity and Vanguard, not that they are bad annuities, but what is the deal, did T. Rowe Price not buy enough advertising to get mentioned by the Fool? For a website that says to always shop around they certainly do make the same annuity recommendations rather frequently, therefore their recommendations have to be dismissed as they are hypocritical.

If you are going to bash a product at least know something about them, do not use sound bites from a decade ago. Worst of all they described a variable annuity in one portion, a more risky version individual equities and and immediate annuity, and then said they stink in the next. If you do not understand what or how a product works then do not talk about it. Otherwise you simply sound, well, foolish.

I am sure you have seen the news or at least heard about what is going on. It appears that oil has appreciated over the past year at an astounding rate. Well there is nothing like beating a dead horse so we figured we would talk about what is going on and the impact it will have on our economy.

Those who think that prices are going to come back down, I am sorry but you will be waiting for a long time. The problem is not so much supply and demand as it is speculators who are driving up the price of oil because of the weak dollar and increased demand. To think that demand will stay the same is absolutely ridiculous. According to the experts we are at the breaking point for the consumer, or close to it. Many experts predicted that consumers cannot handle $4.15 a gallon fuel…and they are right.

Americans are people who build themselves upon debt. We get big expensive cars, houses and electronic toys. Unfortunately no one actually pays with cash and more, they charge it. When someone charges their fuel or expensive toy they rarely think of the bill that is coming next, from the credit card company. What does this have to do with the price of oil, plenty. Americans are now charging the gas that they use in their big SUV’s for the demanding terrain of New York City. With the credit mess still in full swing, and it is, this is the next big thing to hit the economy.

While the Fed can print money to their hearts delights what they cannot do, for the consumer at least, is create more credit. As home equity loans sputter out borrowers will continue to use their credit for purchasing power, but a larger chunk of that purchasing power will go towards fuel. As credit lines are reached we will then see demand come down even more than it has already.

The other major problem we have is the fundamental demand for oil is high, but the supply is exceeding demand in most cases. OPEC is planning a meeting with consumer nations to make this point, OPEC for crying out loud. These are the guys making a trillion dollars a year on oil and they are saying this isn’t right? By no means am I a rocket scientist, but that tells me that the price is unwarranted.

Unfortunately $150 a barrel oil is coming and prices will never be below $3 a gallon again. Once oil companies get a taste of these obscene profits they tend to like them. Plus with China and India following in the USA’s mistakes by building an oil based economy we will see future demand spike even higher. Sadly if some of the oil projections are correct we could see the supply of oil dwindle in our lifetime - it is projected that by 2013 oil production will plateau and then decline - and $4 gallons will be the good old days. The increased demand from China and India will dwarf our reduction in oil consumption and will drive prices higher.

My point is things will not change because the industry has broken us in to higher gas prices, since Katrina. We went from saying; “$2.50 a gallon! Are you Nuts!” to “$2.50 a gallon is a STEAL!” and that number has moved, now $3 a gallon is a steal and a recent memory to. So, I foresee a double whammy coming in the near future, higher gas prices and the credit crisis spreading directly to the consumers because of their credit card debt. Makes you wonder if the Fed will give us 2% loans to make it….oh yeah thats only for the people that matter, big business. Think smaller cars and happy thoughts and it just may all go away.

Annuity IQ has been put in an awkward position since we launched nearly 3 years ago. We are committed to not sell annuities to the public, but we are inundated with consumer requests for annuity quotes. After much debate and discussion we decided to continue to not sell annuity products. However, to help consumers we have teamed up with a firm that will provide annuity quotes to those interested. The page can be found here: Free annuity and life insurance quotes

While we are not in any way connected with the firm providing the quotes it is a better way for consumers to compare and shop for annuity products. The firm we have teamed up with is also there to help financial advisers in their quest to grow their business. advisers can now receive qualified leads to help grow their business and improve the lives of investors. To sign-up and start receiving leads financial consultants should go here: Annuity Leads

The goal is to help both the consumer and the financial adviser and lessen our burden of turning would be annuity buyers and lead seeking advisers away. Through our new relationship we can help both parties and continue doing what we do best, review and rate variable annuity contracts. However, we are in the process of launching our very own trusted adviser network were financial professionals can go through a rigorous review and list their services and website from Annuity IQ. The projected launch date for the directory is 5 days, if not sooner, more to come in the near future.

ING decided to make some changes to its LifePay Plus living benefit after a recent upgrade just issued last summer. The new benefit was revamped last week and Annuity IQ is working on updating the information as soon as we receive the prospectus.

This is just one reason why we exist as the industry constantly upgrades and changes its benefits and contract information. It is next to impossible for advisers to keep on top of these changes and consumers stand little or no chance of ever understanding how these benefits work.

Through Annuity IQ we have helped well over 1500 people to understand and compare living benefits on variable annuity contracts. We continue to serve advisers and the public and are in the process of updating our site and the way our information is presented. Keep checking back!

For years The Hartford’s Director variable annuity was the rock of the variable annuity industry. For almost a decade it was the best selling broker sold variable Annuity product, behind TIAA-CREF. Last week that legacy came to an end as the Director variable annuity ceased to exist for new investors and was folded into the Hartford Leaders product.

The Hartford’s Planco division once boasted that the Director product will always be the best selling variable annuity with the Leaders product a close second. Sadly, they were the last to see that the writing was on the walls years ago and single managed variable annuity products were irrelevant. In 2005 they tried to turn the ill fated Director Annuity around by introducing a multi-managed approach, they added some 55 different sub-accounts from various managers.

What they did not count on was that their success with the Hartford Leaders product would undo what they were trying to accomplish. The Leaders variable annuity had 4 main fund families that went deep, offering many sub-accounts from each manager. All of the fund families were top shelf names, American Funds, Franklin, MFS and AIM which are among the top selling fund families in the advisor arena. The Director annuity though went for the shallow and wide, offering many Hartford sub-accounts but only a smattering of other money managers.

The Leaders annuity saw huge growth, from nothing in 2000 to $10 billion or so in recent years. That success, in our opinion, tainted the efforts of the Director product. Also, the other issue was saturation of the marketplace with both the Leaders and the Director wholesalers covering the same advisors. It was total overkill.

It was no surprise that the Director failed, it was too little too late.