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10 Years Ago: Shootin' It Straight With Stan

Stan Haithcock
April 5, 2023
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Today's topic is if you'd have owned it 10 years ago. Now, if you've been to the bad chicken dinner seminar, the expensive steak dinner seminar, the marble office with the guy that says he has a too- good-to-be-true product and gives you upfront funds, market upside with no downside, unicorns chasing butterflies, and you're saying to yourself, wait a minute, that sounds too good to be true. And then they suddenly whip out this proposal that says, if you'd owned it 10 years ago. Mr. Jones, Chester, and Martha, if you'd owned this 10 years ago, look at these returns. Look at these fantastic returns on this Fixed Index Annuity or Index Variable Life, or whatever those life insurance policy things they sell with tax-free income. No, it's not tax-free income; it's a loan. Loans are all tax-free because it's a loan.

If you'd done sit-ups every day for the last 10 years. If you'd been nicer to everybody for the last 10 years. If you'd eaten better for the last 10 years. If you would've not drank some much alcohol there, Chester, sorry for the French, for the last 10 years. Hindsight's 2020, player. Correct? It is a mission of mine in life, other than to be a rockstar one day, but that's a whole different story, but to get rid of the back-tested numbers. The if you owned it 10 years ago numbers. In some states, it's illegal. Why? Because it should be illegal. It's garbage, especially with Index Universal Life, which I don't sell. I don't sell life insurance. I love life insurance. Best return on investment you'll never see. Why? Because you're dead. Nod your head. But when the agent really pushes this winded, if you'd owned it 10 years ago, Chester, it's Indexed Annuity sales pitches. And boy, are those numbers juiced. Unbelievable.

What they should have told you is that with the majority of Indexed Annuities, the carrier can change the rules on how the games are calculated. They also don't tell you that when it was introduced in 1995 as a category, I was around back then. I know you're saying, "There's no way, Stan. You're so young and vibrant, and there's no way you were around back in 1995." Well, I was, and they were designed to compete with CD returns. And spoiler alert, Indexed Annuities compete with CD returns. We have nothing against Indexed Annuities. What we have against them is how they're being sold, how they're being pitched, how they're being promised, how they're being shown, and how they're being fictitiously put in front of people, the back-tested numbers.

I had a good friend out of Portland, Oregon, one of the great cities of all time and a musical hub if you're into live music. He sent me an Indexed Annuity proposal with back-tested numbers that, you know, I about got on the plane and flew to Washington. It said, "Hey, Miss Yellen, just buy this. Look at this. Look at these back-tested 10 year numbers." The annuity industry needs to clean this up. Mutual funds at the top last year or the year before are crap going forward. I don't know why; it just happens. Not all the time, but most of the time. But for someone to say, well, you really should own this for market upside with an Indexed Annuity, that's nonsense because, A, it's not a market product. B, it's not a security. C, it's a Fixed Annuity. And then there are all kinds of D, E, F's, and G's.

Again, we have no problem with Indexed Annuities. We do sell them a bunch. How do we sell them? Good question. I'm glad you asked. You can attach what's called an Income Rider, an income benefit, at the time of the application for future lifetime income. It's a separate calculation. It rides on top of the policy. We use the Indexed Annuity as an efficient delivery system for that Income Rider guarantee. Don't come at me with, "You know, Stan, I'd be really happy with eight to 9%." Yeah, sure. They build statues of those people on Wall Street beside the bull. Doesn't happen. Get your mind aligned with reality; the bull market's over, player. You're going to start throwing some serious darts and need to be good at throwing darts to make money.

But the 10 year back-tested numbers are nonsense with the companies they're showing. My favorite is when they take indexes made up out of thin air. Like you never heard of it. It's called the Quirky Lorkey Morkey Index, and if you owned it 10 years ago, you would've averaged about 13.5% return, with no downside. Well, the Quirky Morky Florky Index was created about six weeks ago. How do you do a back- tested return over 10 years on something that hadn't been around but six weeks? The annuity industry could clean this crap up if they stopped that. Stop showing the hypothetical theoretical unicorns chasing the butterfly returns. And people, they're upset about it. Why? It doesn't turn out that way.

How about this? If I said, hey, with Indexed Annuities, would you be happy with a two to 4% or two to 5% return, no downside? Locked in every year that it locks in that gain if there's a gain? Would you be happy with that? I mean, it'd be rational. That's an Indexed Annuity. But to make decisions on 10 and 12, and 13, and maybe that unicorn chases a butterfly one year, but the blended return will never work like that. So, if someone says to you the following in some form or fashion, "If you'd owned it 10 years ago, look at the returns you could have made. Look at how it performed if you owned it 10 years ago." Give me a break. Put anything in front of "if you would've 10 years ago." A lot of us would want that, right?

It never comes true, and people fall for that for whatever reason. They fall for that in combination. Once the agent says, "Well, if you'd own it 10 years ago, Chester, you would have made a killing. And let me tell you something else, Chester, just because I like you, we're going to give you an upfront bonus. 25, 35, 32, 39%." Whatever the bonus is. Chester goes, "What?" Oh my gosh, it's duck season. It's commissioned duck hunting season. Come on. If you don't know who the sucker at the table is in Vegas, guess what? It's you. Don't be the rube. Don't be the sucker. Don't be the person that's hoping and dreaming and like, whoa, I found this. Look at this product. It's called an Indexed Annuity. It market returns, no downside. How about CD-type returns and no downside? Nothing wrong with that. How about CD-type returns and attaching an Income Rider for future income? How about Indexed Annuities with the rider with confinement care and enhanced benefit if you cannot qualify for long-term care as a last resort type coverage? How about that? Nothing is wrong with that. How about explaining the upfront bonus? There are 100 pennies in the dollar. There's not a philanthropist at the annuity company waking up in the morning going, "You know what? I really like humanity, and I think I'm going to give some money away today. We're just going to do it with an upfront bonus." No. There's a hundred billion dollars, and they're taking it from somewhere. It could be applied to the income account. It could work in your favor or not in your favor, but it's not free money, okay? It's just not.

We have to clean things up out here. I am screaming into a hurricane here in Florida. Do you know what that means? I mean, barely anyone hears you, but you try. Hopefully, one here, two there, 10 here, 20 people reading this blog, or hundreds of people reading this blog, I will save them from the 10-year back-tested sales pitch garbage, BS, crapola. Because that's what it is. And for any agents and advisors that are reading this, stop it. Please stop it. My gosh. Do you want to answer those questions when it doesn't come true? "Hey, Mr. Agent, you said 10 years ago I'd be getting 10 and 12 and 13 and seven and nine and eight, and I'm getting two and three and four and three, just like Stan the Annuity Man said." You don't want those calls. You want clients to be happy. You want clients to understand realistic return expectations. As the consumer out there, if it sounds too good to be true, it is. Every single time. If the 10 year back-tested numbers, if you'd owned it 10 years ago, if those numbers look too good to be true, it is every single time without exception. Make your buying decisions on the contractual guarantees of the policy because guess what? You're going to get a contract. We call it a policy, but it's a contract.

Annuities are for-profit businesses. I've written a book on Indexed Annuities. I know what I'm talking about. I've done hundreds of videos on all this stuff, Indexed Annuities, etc. I know what I'm talking about. I always joke that five people in the world truly understand Indexed Annuities, and I believe I know the other four. It's complicated. I had a guy the other day, and I'll close with this. He goes, "Well, you know, I asked for that specimen policy, that Indexed Annuity and I got it. Did you know, Stan, sometimes there are mathematical formulas with letters?" I said, "Yeah. You know what that is, Chester? That's called calculus. It's called advanced math." It's very, very complicated.

Nothing wrong with Indexed Annuities. They were put on the planet in 1995 to compete with CD returns, and that's precisely what they do. But if it sounds too good to be true, it is. So, if you owned it 10 years ago and someone asked, "Well, look what happens if you'd owned it 10 years ago," say, "Stop. Stop. Because if I'd have done 100 sit-ups 10 years ago, I'd have six-pack abs." With that being said, I don't have six-pack abs because I didn't do 100 sit-ups every day for the last 10 years. And you didn't either. Don't buy the dream because you're going to own the contractual reality.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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