Should We Hate Ken Fisher?
I was motivated to write this article after I sat down and read the Ken Fisher “Definitive Guide to Retirement Income.” My discussion below is about the content in this guide.
And let me state for the record that I am a fan of annuities (fixed and fixed indexed annuities (FIAs)) for the right client. I believe in stock market risk mitigation, and fixed annuities and FIAs can provide that for a segment of a client’s money.
I HATE ANNUITIES-if you watch TV or listen to the radio, you know that Ken Fisher hates annuities. He will “NEVER sell” an annuity to a client.
You can’t make this stuff up—in Ken’s Forbes December 2014 article titled: Ken Fisher: Why I Hate Annuities, he bashed annuities and then said, “So what am I bullish on? Start with Biogen Idec (BIIB).” The OnPointe Investment Risk Software* score for BIIB is 100 (on a risk scale of 1-100). Guess what happened to BIIB in 2016? It had a drawdown of -44%. Its max drawdown is -89% going back to date of inception.**
*Financial industry software that scores the risk of investments and portfolios.
In the same article Ken reminded readers that he “urged diving directly into Chinese meltdown fears. So buy Agricultural Bank of China (ACGBY).” ACGBY has an OnPointe Risk Score of 100; in 2016 it had a drawdown of -38% and a maximum drawdown of -46% historically**.
**Numbers derived from the OnPointe Risk Software.
Why does Ken Fisher hate annuities? Well…, if I was a cynic, I’d say he hates them because it makes for great marketing and doing so will help him pick up hundreds of millions of dollars in AUM (Assets Under Management). He says he hates them because:
“Annuities are complex insurance vehicles that don’t always provide the simple safety they often promise. They typically have high costs, complex restrictions and other risks that could offset the potential benefits. While annuities may not seem risky at first glance, they may not be the best way to limit the risk of losing money. Fisher Investments doesn’t sell or advocate annuities.”
What does Ken Fisher recommend to clients to help them grow wealth and create cash flow in retirement?
Stocks-Ken seems to really like stocks (dividend paying or growth). He seems to like the dividend but also likes the idea of just selling stocks as needed for cash flow in retirement. He calls the selling of stock to generate cash flow “homegrown dividends.”
Bonds? Ken talks about bonds, but from what I’ve read it seems he doesn’t like the potential return from bonds as compared to the risks associated with bonds.
REITs (Real Estate Investment Trusts)? In the “Definitive Guide to Retirement Income” Ken talks about REITs and at first I thought he liked them, but it seems not. He indicates that REITs underperform in the market (presumably meaning to me that he’d rather see clients in stocks).
One last telling comment…In Ken’s “Definitive Guide to Retirement Income” he states the following:
“If you’re worried about having safe investments, consider the greatest danger lies in running out of money because of a low rate of return over the lifetime of your investments.”
What? What it seems Ken is saying and posturing for is the concept that investment risk, as we traditionally think of it, doesn’t really matter. It doesn’t matter if investments are risky because Ken is saying that the biggest risk isn’t that you will lose money on investments, it’s that the investments won’t generate a high enough yield over time.
If you’re into the psychology of selling you have to admire Ken for what appears to be his attempt to flip in a 180-degree manner how many people think of investment risk and how to invest for retirement.
Gone is the concept of real risk management (making sure your investments don’t tank and thereby totally screwing up your retirement plans).
Instead, the real risk is not finding enough growth in your investment with the actual risk of those investments being a minor/trivial issue.
Is Ken a pioneer or a train wreck waiting to happen?
I suppose only time will tell (like what happens to Ken’s clients during the next major stock market crash).
Whether the advisor is Ken Fisher or anyone else, not doing real risk mitigation, especially as clients are near or are in retirement, can be dangerous.
Why I like annuities
I like certain type of annuities because they can have the following features:
1) No risk of loss due to downturns in the stock market
2) Gains are locked in annually
3) Some come with a guaranteed income for life rider
4) Some come with a LTC benefit
If you’d like to learn more about the annuities I like and that can be used as protective wealth building tools, feel free to email me and we can set up a time for a phone call or an in-person visit.
Francis Baker
F. Baker Advisors
134 University Suite 203A
Rochester, MI 48304
(248) 334-2380
frank@fbakera.com