People Either Love Them Or Hate Them, But It Shouldn’t Be So Clear Cut

It’s the end of May, so although summer doesn’t officially start for a few weeks, it’s summer in my books.  And summer for football fans signals the beginning of serious football chatter as teams start practicing and getting ready for the fall.  Stan Haithcock wrote an interesting article for Marketwatch tying football to annuities called “Separated at birth: Tim Tebow and annuities.”  I know the basics about Tim Tebow; good college player, the stance, very religious, somewhat controversial.  That last bit of knowledge immediately screams to annuities and the love/hate relationship that consumers have with these insurance products.

Since Stan lives where Tim Tebow went to high school, he constantly hears people either criticizing or doting on the NFL player.  He’s also known as “Stan the Annuity Man,” so he certainly hears a lot of good and a lot of bad about the perception of annuities.  Tebow’s critics don’t like his throwing motion or his inability to read defenses.  Critics of annuities always bring up high fees, complex products, or missed opportunities as if they are consistent across all annuities.  They aren’t.  Fans of Tebow proclaim him a “winner” and say that warrants an NFL quarterback job, much like some annuity promoters and lock-step agents advertise the word hybrid to promote fixed indexed annuities as a product suitable for everyone.  There are no annuity products suitable for everyone because we all have individualized needs and situations.

Critics tend to point out a string of negative facts and run with them as if there is no potential for an upside.  For Tebow, it is his low quarterback ratings and his low percentage of completions.  When it comes to annuities, they point specifically to higher than average variable annuity fees and indexed annuity returns of 3.27% over the most recent 5-year period.  We all know the last five years have been tough financially and that many people have not even seen returns.  Perhaps the most frustrating thing on both accounts is that people won’t even listen to an argument for what they are against.  After making up their minds about Tebow or annuity products in general, sometimes based on false information, they won’t hear facts about the other side of the argument.

Stan’s final comparison is of the media circus associated with both “products.”  He says that at least locally, there are stories daily about Tebow and people pondering why every NFL team is not beating down his door.  When it comes to annuities, the 10,000 people retiring daily can be inundated with information online, on TV, and in their magazines and newspapers.  Not all of this information is legitimate.  Just as Tebow will work out best with an offense that can help him thrive with his skills, annuities are best used when you have a specific situation or goal for which you are using them.  While both products are good and important for their individual situation, they can be oversold by those who really believe in their products, some with good intentions and some not so much.

This is an interesting comparison between Tim Tebow and annuity products.  If you are looking at annuities, you really have to look at the transfer of risk you are receiving and compare your benefits and costs.  Know the guarantees you will receive and base your decision on your individual situation and not on outside “noise”, as Stan calls it.  Unless you own an NFL team, you don’t really have to worry about whether or not Tebow will get a job, but the risk balancing is similar to that of purchasing an annuity.  Anyone ready for football season yet?

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