What’s scarier, an annuity pitch or Lasik?
The decisions to buy an annuity income rider or have Lasik surgery are eerily similar when it comes to the selling process and determining if the product is right for you.
Recently, I have been contemplating my official declaration against the aging process by looking into the possibility of Lasik surgery so I can get rid of my glasses while holding on to the delusion of youth. As I went through every step of the process to see if I was a “viable” candidate, the similarities to the typical annuity high pressure sales process sent me into a state of shock and horror. I now know how the person feels who Google’s annuity keywords, and subsequently signs up to watch a video or receive the latest annuity study. I’m sure that they end up being a “viable” candidate for an annuity as well.
Both are in their infancy
An income rider is an attached benefit that you can add to a deferred annuity policy and has a guaranteed growth percentage that can be used for income. They have been around for about 10 years on variable annuities, and the indexed annuity world starting offering them soon after that. Income riders solve for income later or target date income planning, but do have their limitations from a contractual standpoint. Even with a raging bull stock market, many variable annuity carriers are trying to buy back these living benefits to lessen their portfolio risk, and because some have mispriced them to the customer. Pretty scary if you have planned on one of these income riders to provide a transfer of risk lifetime income stream. For the record, there are no good answers to whether you should accept the buyback offer or keep the benefit. There are good arguments for both.
Lasik surgery is also in its infancy from a procedural standpoint as well, and there are some disturbing stories of constant dry eye or “seeing rings” that have prevented people like me from moving forward. In addition, the phrase “elective surgery” always seems like I might be creating my own problem by trying to drink from the fountain of youth.
Advertising does work
The Lasik specialists that eventually roped me into their office did so through a constant barrage of local radio and television ads that seemed too good to be true. Person after person gave their Lasik testimonial of how it has changed their life, and questioning why they waited so long. I never once saw the person that now has to constantly squint, or with involuntary tears running down their face. It all seemed so perfect.
The same type of velvet advertising hammer works just as effectively with annuities and their wonderfully high percentage income riders. Phrases like “earn 7% guaranteed” flow over the airwaves across America targeting the uneducated and unsophisticated to believe that they can somehow lock in a high interest rate just like they did in the 1970s. Income rider calculations are monopoly money unless used for income, and the legal rubber will meet the annuity road when enough uninformed policy owners figure that out. Not one radio, TV, or Internet ad pushing income riders or hybrid annuities (I now call them “hype-brids”) ever talk about carriers possibly trying to buy back the future lifetime income dream you purchased.
Do your own homework
As I finally got to meet the actual doctor who would be the one performing the Lasik surgery on me, and it was easy to predict the subtle closing technique that took place. “Stan, you are the perfect candidate for Lasik. This is a no-brainer. When can we get you scheduled.” Nice assumptive close, but I quickly diverted the Lasik train and started asking about specific horror stories and what could go wrong. Although the answers of “the exception case” was probably true, it didn’t quell my fears and all I could think of was that I would probably be the next exception. The meeting ended with me asking for a pair of contacts that would replicate my vision if I would have the surgery, and to let me try that first. To say that Doc was not pleased that I wasn’t on his time frame is an understatement.
Annuity income rider closing techniques come with similar assumptions. “Wouldn’t you like to earn 7% on your money? We need to get this done as soon as possible before the annuity company lowers the rate.” In other words, pull the trigger on this before you miss out on the deal of the century. There is never an urgency to buy an annuity product, and you need to fully understand the upside, downside, and limitations of the strategy before you can make an informed decision. In other words, do your own homework and don’t allow someone to do that homework for you.
At the end of the day, I have temporarily decided to just wear the contact lenses and avoid the possible self inflicted wounds of “elective surgery.” Yes, I am sure that I would be the exception example of what can go wrong. When I called the Lasik office to inform them of my decision, one last closing swipe was made in vain as I’m sure I heard a distant click deleting my name from their database. The reality is that I just need more time to do my own research and ask more questions.
It’s always a good idea to make your annuity agent go the extra mile to fully explain the product and income rider benefit in detail, and provide all the information that you need to make a good decision. That might mean seeing a specimen policy or calling the company direct. Whatever it takes to make you feel comfortable with the decision. Like lasik surgery, annuity income riders aren’t perfect for everyone. Always weigh the risk and reward before signing that annuity application.
Originally published 10.15.13 by MarketWatch.com – http://www.marketwatch.com/story/whats-scarier-an-annuity-pitch-or-lasik-2013-10-15