My Mom has been retired for 5 years and during those years, she discovered something fascinating: there is an entire industry of salespeople trying to sell ‘special investments’ (*cough* annuities *cough*) specifically to retirees. Instead of sending the usual junk mail, they invite people to an expensive meal, which they then hold hostage until you’ve heard their pitch.
Never one to pass up free food, my Mom attended a few of these dinners and found them to be very interesting. Once I became financially literate and I no longer felt unease and confusion when financial topics were brought up, I found myself envious of these invitations. I’d be working in Seattle and my Mom would send me a picture of delicious looking filet mignon that she was eating at another investment dinner.
Attending these dinners (and not buying the snake oil they were selling) became a staple of her retirement and every time I heard she was attending another one, I was envious. I wanted to hear what they had to say and how they would try and shill a sub-par product to (I would imagine) a discerning audience.
Luckily while I was working from my parents’ house in Atlanta this summer, my wish was granted. My parents received an invitation to one of these dinners that would occur while I was there AND it featured a meal by the same fancy restaurant that provided the filet mignon she sent me a picture of previously. There was just one problem:
At my parents' house and they got another free investment dinner invite for a fancy restaurant WHILE I'M HERE, but the invite says it only allows "Attendees over 45"…think I can pull it off and sneak in👵🏾?!? I want to hear their ridiculous annuity claims live SO BAD!
— A Purple Life (@APurpleLifeBlog) August 1, 2019
Responses to that tweet provided a wide range of suggestions for getting me into the dinner, such as putting powder in my hair and declaring that I have an awesome skincare regimen. In the end, we went with the closest to the truth: “My daughter helps us make financial decisions so she’s coming with us.” The RSVP was sent and then I just had to wait patiently for the event. I must admit I was excited.
When the evening finally arrived, I happily closed my work laptop, put on pants (working from home means my uniform is pjs) and set out to discover what this scammer was selling. My Mom had prepared me for what was to come by sharing a formula she’s determined all of these presentations follow:
- Trust me – I have a family!
- Fear all – You’re going to lose everything!
- Buy my investment thing – Or else!
So I was prepped for what was to come and excited to see it unfold. However, my bubbly anticipation sprung a leak when we entered the room. I had imagined that this presentation would be in a restaurant, but instead we entered a drab conference room and waded our way through a sea of grey haired people.
They were staring at us as we entered 5 minutes before the presentation was set to start. The presenter, an older white man, was standing at the front of the room. I settled into my uncomfortable banquet chair and prepared my phone and note taking materials.
Then the presentation began and unsurprisingly the presenter basically followed my Mom’s outline to a tee. For a full play by play of what unfolded check out my live tweet thread of the event here:
Brace yourselves! I'm Live Tweeting my first investment dinner🍽️/annuity scam📉. It’s supposed to be for 45+ yo retirees only, but I snuck in. These dinners are one of my parents’ favorite activities because it's a free, fancy meal complete with entertainment. Let's do this!
— A Purple Life (@APurpleLifeBlog) August 13, 2019
For those that don’t feel like entering a tweet storm here are the ‘best’ quotes of the evening:
“By 2034 the social security trust will be depleted. They’ll have to increase the full retirement age to 70 and decrease future benefits.”
“My daughter is the body double for Scarlett Johansson. We met her – She’s gorgeous.”
“You’re skating on thin ice if you have more than 25% stocks. I lost $125K because I had more than that.”
“A woman’s husband bruised his calf and the next day he was dead!”
“As we saw in 2008, if your plan is based on asset allocation it’s a blind attempt to time the market!”
“I hate being behind people with food stamps in the grocery line. They take forever.”
“Asset allocation is an investment strategy. Income allocation [AKA an annuity] is a retirement strategy.”
If you’re feeling a little lost after that strange assortment of sentences you are not alone. After the presentation was over I felt a little stunned. I knew what to expect to an extent from my Mom, but in addition to trying to contain my laughter at several parts of the evening, I also felt serious anger at the misinformation being provided by this supposed finance professional – not to mention his weird, offhanded comments about the beauty of some women when discussing his daughter and expressing annoyance at people who use food stamps.
I was also pissed that someone would push a sub-par financial product to retirees, one of the groups that need to hold on to their money the most. It was a lot to take in and to make matters worse, as I was finishing up my meal, my stepdad somehow completely forgot that we were on a stealth mission and told someone at our table that I’m retiring next year at 30. That led to this final live tweet and a quick retreat:
Aaaand my stepdad just told someone I'm retiring in 13 months. I'm outed! Time to make a quick exit!!! pic.twitter.com/ddRiRwFs6g
— A Purple Life (@APurpleLifeBlog) August 14, 2019
Lessons Learned
Resist The Trust Appeal
It was abundantly clear by the end of this presentation that this presenter wanted us to trust him. If I had played a drinking game where I took a shot every time he or his client said “trust” I would have fallen out of my chair. He shared pictures and (weird) details about his family in the hope that it would make me see him as more than just a financial service person, but as a fellow human being and even a friend.
He was trying to manipulate our emotions so we instill our trust (oops I said it) in him. But just because someone tries to seem relatable by showing they have ‘normal’ shit like a family, doesn’t mean you should trust them with anything, including your money.
Fight Misinformation With Research
Listening to this man speak (seemingly out of his ass) for an hour, helped me reflect on how even numbers can be cherry picked to give a different result. For example, the gold-standard of annuity charts that is paraded around at every one of these dinners, shows how an annuity slightly beat the S&P 500 if you look at 1998-2016. This dinner happened in 2019 and updated figures for the S&P 500 (and I imagine their annuity given they claim to send monthly statements) are available, but not provided.
During the talk the presenter also tried to make it sound as if social security benefits will be slashed after 2034 when in fact if our government does nothing we would still be able to pay out 79% of projected benefits – that’s far from 0%. His client tried to say that owning stocks is risky because he sold in a down market and lost money. These twists of truth grated on me because I know that a few years ago I would have believed everything he said. I didn’t know any better and was wary of looking into something that I thought was beyond me.
Finance seems like a complicated black box, which in some cases is made intentionally confusing by financial institutions so we flock to these ‘trusted’ advisers since it seems too complicated to do ourselves. The main lesson I took from my college education was to be a little skeptical of everything – including items that confirm my preconceived notions. I believe doing my own research and analyzing who is providing what information and for what possible purpose, has helped me have a more fair view of the world. It’s definitely work, but it’s worth it.
Shut Off The Fear Fuel
One of the reasons I left the ad world is because of the often mentioned phrase “Hook them through fear.” We were encouraged to figure out what people fear most and play into that in order to sell a product. For example, if our client was a tech giant selling to businesses we would do our research and discover that those businesses (understandably) fear downtime and then use that as an anchor for our advertising. The whole practice made me sick to be honest and the same tactic was being used during this annuity presentation.
It is very difficult to control our reactions to fear. If someone is telling us that the social security we rely on is about to disappear or that they lost over a hundred thousand dollars in the (apparent) gambling table that is the stock market, it does make me shrink back a little. But I have also learned that making decisions solely based on fear is a losing proposition. With money in particular we need to keep a level head and evaluate all options before making decisions that will impact our future financial lives.
Conclusion
Overall I think attending this annuity dinner was a great exercise. When I jump into a new hobby, I usually go all in (personal finance included) and can often lose sight of what more ‘normal’ people are doing. I’ve been in the financial independence bubble for 5 years now and it was good to pop out and see what kind of fear mongering nonsense people are trying to peddle.
I’m realizing there is definitely still a lot of work to do to spread financial literacy in our world and I need to figure out how I can help. That might just entail providing advice when friends and family request it (as I have been) or something more. I’m not sure yet, but we as financially literate people need to spread the word.
Have you ever been to an annuity presentation? What did you learn from it?
I’ve not been to an annuity presentation, but I feel like I would get so angry I’d do something inappropriate. I hate to see vulnerable people taken advantage of, and misinformed, as you described. Thanks for sharing this experience!
Yeah I definitely had some mixed feelings coming out of it. Luckily I wasn’t spurred to do anything drastic. It did seem like several people were just there for a food – few signed up to talk to this dude and my parents recognized one couple from another annuity dinner they’d been to.
I went to 3 of these dinners even though I’m in my early 40s. First, in my 20s with my dad who wanted me to attend and learn something (I’m not sure how he got me in… perhaps that was before the age limit?). I left that annuity dinner with lots of questions and figured I need to learn a lot more. The second time was in my 30s with my mom after my dad passed and I had taken over the finances; the presenter was -so- nice that my level of suspicion went up. After all, how are they affording to pay for really nice dinners to such groups consistently? The 3rd time was with my hubby not too long ago, and for some reason there was no age limit. This time I went in very prepared with hundreds of hours of FIRE-related podcasts under my belt, and ready to listen carefully and ask questions. It was more salesy than anything, and you could tell that the presenter had it memorized. The facts in his graphs about the S&P were old, and there were many scary “facts” that were convincing even to me. His employees were going from person to person to schedule appointments with people, and we were very smoothly convinced into doing so. We agreed, but later called to cancel.
The older retirees who do RSVP for such events may not be used to such retirement vehicles, and are more trusting of so-called experts. It gets me angry when I think of people who are pulled into terribly performing vehicles because the person presenting is “nice” and an “expert.”
Thank you for writing about this topic!
That’s so interesting how you’ve been to several of these and your approach and take aways seemed to change each time. It’s awesome your suspicion was alerted when thinking about how they pay for all this 🙂 .
This dude also went from person to person asking to schedule appointments to which my stepdad replied “No thanks – we’re with Vanguard.” He is not subtle. It makes me angry to see that too, but I am hopeful that we can continue to spread financial knowledge so people don’t fall into these traps.
Great write up! I can’t imagine how hard it was to see most of the people in the room just believing every word from the salesman.
I didn’t discover until too late that my parents had 4 different annuity contracts for their retirement savings.
When my dad passed away last year, it voided his contracts so I was able to help my mom move those into Traditional IRA’s at Vanguard that she has full control of.
She still has two small annuities, but since she turned 70 last year, we’re taking all her RMD’s out of those to deplete them faster than the 10 years left on the contract.
There definitely needs to be more education around annuities, but it seems most of that “education” comes from salespeople selling annuities.
Thank you! It was definitely a strange experience. I would have thought people that are retired would be more discerning with their investments, but my own parents retired early and weren’t so I should let that assumption go.
And 4 different annuities?! Wow. That’s the most I’ve ever heard of. Awesome job helping your mom move most of them to IRAs. I’m sorry so for your loss.
My parents always used annuity as a synonym for “scam”, but I’m starting to learn that might be the exception instead of the rule. There definitely needs to be more education given by people whose job is not to sell that product.
Oh man – I’m super impressed (or maybe disappointed? ha) that you didn’t unleash the purple fury on this nonsense. My sister got hooked up with a similarly bad financial advisor scam and I had to sit down and explain why they’re full of shit. (Any product they’re going to sell you is going to have a high expense ratio because they will make a commission on it and, as the data clearly shows, are highly unlikely to beat a simple index fund over a 30 year time period. This stuff really boils my blood because they’re taking advantage of the elderly, telling them false information, and bilking a profit off of it. Bicycle man mad!
As Antonio Centeno, founder of Real Men, Real Style, told me, selling is basically solving a problem. I think that is a legit thing to do. But selling through fear is creating the disease then conveniently supplying the cure. As you point out, it’s super sleazy.
I’ll close with a story. When I was in my early 20s and ran a store in a mall, I made a lot of friends with other employees and managers of other stores, mostly women. One night they were all going to this partylite (SP?) multi-level marketing scam. I didn’t know much about it and wasn’t really interested but I thought it would be fun to go with all my work friends, so I went along. So here is their tactic. They give anyone not in the cult… scam… sales platform a balloon. They then tell you that any time you want to join, just pop your balloon. THEN, they tell you that no one in the history of Partylite has ever not popped their balloon.
At the end of the night, as the organizers frowned at me, I sat proudly with a shit-eating grin and a fully inflated balloon.
Ha – feel free to be disappointed. My takedown approach was pretty subtle between live tweeting what was happening and talking to the people at my table about index funds, Vanguard and (once my stepdad let the cat out of the bag) retiring at 30.
That’s awesome you sat your sister down to show her the numbers. It seriously pisses me off too. Bicycle man has a right to be mad! “But selling through fear is creating the disease then conveniently supplying the cure” – YES! Exactly this. Also that’s the smoothest name dropping I’ve ever read so awesome job there 😉 .
Now THAT is an awesome story. And what a tactic – yuck! The only way to make it even better would be to go to another of those MLM scams and when they say everyone has always popped the balloon to interject “THAT’S FALSE!”
Ahahaha. I love this, and also my entire educational career has been one god awful annuity pitch. Sadly, no free food! So glad you can advocate for people who don’t know better!
Haha – glad you enjoyed it! Oh my goodness – I didn’t even think to connect all the bad investments that are peddled to everyone in our education system. Ugh! And there isn’t even free food?!? Come on – pass some of that commission money around 😉 . I’m sorry you have to deal with that, but am also happy you’re there to help spread some knowledge.
At every point in our financial lives someone is out to part us from our hard earned money, that is for sure!
However, annuities can be utilized to actually INCREASE the amount of money one has in retirement and in a guaranteed fashion to boot! (This is in comparison to using the much vaunted 4% rule.) However, the sales tactics like you describe certainly leave the impression that they are a scam. (And no, I don’t sell annuities, I’ve just been doing a lot of reading on them for some knowledge and possible use for some older folks in my life.)
If you are really interested learning about annuities I’d get Wade Pfau’s excellent new book: https://retirementresearcher.com/what-is-a-safety-first-retirement-plan/
There’s a link to the book in that article.
He’s also done a lot of research on safe withdrawl rates. It ain’t 4%!!
And lots of other research that is unbiased and just trying to get to what is the best solution for a financial problem, regardless of it mode.
David Stein actually discussed the book on a recent podcast. (Lots easier to get the general idea than a 300 page book.)
https://moneyfortherestofus.com/279-income-annuity/
Here is a link if you want to do a quick check for a SPIA (single premium immediate annuity), i.e. you give the insurance company a lump sum and they guarantee a payout as long as you (and your spouse if you so choose) live. I put in a joint survivor quote for two 65 year olds and the payout is the equivalent to getting 5.14% for BOTH people lives. Even age 55 with the same parameters one gets an equivalent of 4.4% for as long as they both live. If it was just on a single life that is male (they die earlier!) the payout 6%. And that is guaranteed for life!
https://www.schwab.com/public/schwab/investing/accounts_products/investment/annuities/income_annuity/fixed_income_annuity_calculator
So you can see where annuities can actually play a powerful role in mitigating sequence of returns risk, investment risk, and most of all, longevity risk, i.e. running out of money. One key thought that has stuck with me is that it isn’t an all or nothing proposition, i.e. just annualizing a portion of you assets is certainly an option. Having guaranteed income for the base level of expenses is a powerful concept. I’m sure the guy that was nice enough to offer up a “free” dinner probably advised that most of folks money be put into annuities, and probably not just SPIA’s. It is a minefield out there!
Thank you for sharing these resources. From everything I’ve read previously all annuities seem sub-par compared to the other options we have now with some annuities being worse than others. I’ve read a bunch of Wade Pfau on the 4% rule of thumb before and enjoyed his work. Thanks for sharing your thoughts with awesome back up info!