Ken Fischer Part II- debunking "Debunkery"

It is clear that Ken Fisher dislikes annuities.  It is also clear why:  they make him unnecessary.
What is unclear is, "Then why do investors love them??"  Well because of:

• Protection of principal
• Predictable future minimum values
• Lack of market risk
• Guaranteed lifetime income
• Leveraged death benefits for heirs
• Inflation protection

I'm not saying one can have all of these features at once in the same annuity but it is possible to accomplish all these goals with an annuity portfolio or "laddered" annuities.  But that's not what this post is about.  I wanted to make just one quick comment about chapter 15 in "Debunkery".

Chapter 15 trashes Variable Annuities (VAs), which they mostly deserve.  But the chapter contained such a glaring error that it warrants examination.  The author (we don't really know if it's Ken Fisher) states that the annuity subaccounts or separate accounts are subject to the financial risk of the insurance company, which is not true.  That's why they are called "separate" accounts.  The insurance company can go bankrupt but your subaccounts will not go with them.
Plus, the vast majority of these annuities- to the credit of the advisers who sell them -are set up with one or more principal, growth or income guarantees.  I don't use VAs anymore because of the high fees necessary to avoid the volatility of the separate accounts.

Is Wall Street Guru Ken Fisher Losing It?

The most dangerous books are those with a lot of truths mixed with a lot of falsehoods.  The ironically named newly published "Debunkery" is one of those books.  Let me focus on just Chapter 16 for which I have particular abhorrence because it contains so much false information that should have been easily researched.  The chapter deals with Equity Indexed Annuities (EIAs) which I love.
1. Annuities are a tough sale "(that's why they pay such big commissions to salespeople!)" he chortles.  "Big" compared to what?  Yes, EIAs are such a tough sale that Wall Street lost over $60 billion to them in the last two years.  If Ken Fisher manages your money over a ten year period you will pay him far more in commissions.  Far more.  And you will pay it whether you gain or lose.  And his commissions will come out of your money, not his company's.  This is not only a false argument, it is irrelevant.  The key is, do EIAs deliver anything important?  $60 billion dollars think so.
2. The account value of EIAs "fluctuates up and down with the market like any other investment, albeit with much higher fees".  TOTALLY FALSE!  Your account value can never go backwards unless you make withdrawals.  I'll say it again:  Your account value can never go backwards unless you make withdrawals.  Which drives stock brokers like Ken Fisher crazy because they cannot make such a promise.
3. The best EIAs offer guaranteed lifetime income.  This is true.  But Fisher goes on to say, "The income base doesn't really apply unless you decide to surrender ownership of the account in return for regular distributions . . ."  Well actually it really does apply.  And you DO NOT SURRENDER OWNERSHIP OF THE ACCOUNT!  That was true maybe ten years ago Kenny.
4. "Participate in the stock market's upside with no downside risk!"  This is sort of true.  But actually you participate in a market index such as the S&P 500 or Russell 2000.  And yes, returns are "capped" or participation rates are limited.  But this fact is never "hidden in the details".  Never.  EIAs are not intended to compete with the gambler's greed that drives the stock market, they are intended to protect people FROM the market.
5. Finally, Ken goes on to describe a "very wretched" tactic of EIAs:  not including dividends in the S&P 500 index performance.  Well don't blame the annuity, blame the index which of course does not include dividends because it tracks only stock values.  To get dividends you have to actually own the stocks in the index.  EIAs don't put your money in stocks.  That's why they are safe!

Well, it was fun to debunk at least this one chapter.  But this is the most self-serving book of lies I've read in a long time.