If you invest with Zurich International or Friends Provident, the odds are good that you own a Variable Annuity product. Popular with salespeople but comparatively devastating for investors, Variable Annuity products are sold widely throughout the world.
Try to find a financial academic, however, suggesting that they’re a good deal, and you might as well be panning for gold in your bathtub. These products are defended by the folks who sell them, but they’re the ire of investors who do the math.
The high fees of these products zap investment profits, but they munificently pad the coffers of salespeople.
In the United States, they’re considered an inflexible deal because they charge up to 9% of the portfolio’s value if you want to withdraw your money early.
If only Zurich International, Friends Provident and an array of international providers would be so generous. With them, fees for withdrawing early can be five times higher than that. And the insurance benefit is too often a paltry joke wrapped in the cloak of a convincing salesperson.
Variable annuity products appear to be better in the U.S. (fees are lower) but they are still an abomination in the eyes of the financial academic community. They’re often unfairly sold by commission hungry sharpies–and usually misunderstood by the investors who walk into these chain-shackling lairs.
For the breakdown of a product sample, check out my post, Zurich International and Friends Provident, Should You Invest With Them? Note the comments of misfortune by real investors who were sold on the salesperson’s dream.
To read more about less devilish variable annuity products, you can check out the following articles. Even with these American plans, you’ll find financial academics and journalists lambasting them, but salespeople supporting them. Any wonder why?
Three Reasons To Buy An Annuity–The Motley Fool
Variable Annuities, Buyer Beware - CNN Money
Variable Annuities, Greed At Work - USA News
Variable Annuities Are A Bad Deal - Scott Burns, Dallas News
Five Reasons to Avoid Variable Annuities – Larry Swedroe, CBS MarketWatch
What’s Wrong With Variable Annuities? - SmartMoney.com (SmartMoney Magazine)
Variable Annuities Don’t Belong in Retirement Plans - Forbes Magazine
Variable Annuities—Lifelong Income, High Cost - Businessweek Magazine
Stay Away From Variable Annuities–Suze Orman (youtube)
When I google “Variable Annuities Are A Good Investment” I can find a couple of articles weighing the pros and cons. But the pros generally come from a salesperson, not a financial academic or an objective journalist. Here’s an example:
Are Variable Annuities A Good Investment? – The Wall Street Journal
If you must buy a variable annuity, please buy one through Vanguard or TIAA Cref. Their costs are significantly lower, and they tend to be more flexible. Don’t buy one from a Friends Provident or Zurich International rep.