Rekenthaler Report

Why Buy Annuities?

John Rekenthaler

Beyond Marketing
Tuesday’s column, "Making Annuities More Attractive," addressed how annuities are marketed. I advised that they be renamed as “guaranteed income” offerings (“annuity” being a term that only an actuary could love); that they calculate and publish their expense ratios; and that the cacophony of state regulations be simplified into a single, national code. These recommendations, of course, are unsullied by expertise. I did not commission a market-research study on the subject.

That said, I think those proposals are on track. In particular, annuity providers need to address the deep distrust that they have instilled among the most-informed buyers. A business school professor emails: “The two words that always come to my mind when I think of annuities are 'rip off.' I don’t think that providers will ever publicize an expense ratio because their jig will be up.” As word-of-mouth advertising goes, it is hard to do much worse than that.