Should We Hate Ken Fisher?
While my most popular article of all time is: Is Dave Ramsey an Idiot?, I think this article has potential to become my most popular ever. To read a 17 page white paper on what’s wrong with Dave Ramsey, click on the following link:
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 fixed and fixed indexed annuities (FIAs) for the right client. I believe in stock market risk mitigation and fixed and FIAs can provide that for a segment of a client’s money (and they have the industry’s best income riders). To learn about an FIA with a “stackable” income rider (one that can really increase the guaranteed income benefit), click on the following link:
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.
What my research leads me to conclude is that Ken Fisher is a marketing genius that appears to be recommending that clients use a mix of investments that I would deem are far too risky to help them accomplish their financial planning goal (my opinion).
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.
In the same article he 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.
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 for them in retirement?
Stocks-Ken seems to really like stocks (dividend paying or growth). He seems to like the dividend but also like 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 what I’ve read it seems he doesn’t like the potential return from bonds as compared to the risks associated with bonds.
REITs? 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 RIETs underperform the market (meaning to me that he’d rather see clients in stocks).
Master Limited Partnerships (MLPs)-I read the MLP part of Ken’s “Definitive Guide to Retirement Income” a few times and I came away with the conclusion that Ken really likes MLPs. That certainly raised my eyebrow a bit.
To suggest that MLPs should be used in any major manner for a client either looking to build wealth for retirement or create income in retirement is insane.
I found an article from 2015 titled: 3 Ultra-Safe Master Limited Partnerships to Own. Look at their OnPointe Risk scores and drawdown losses that occurred one year later in 2016: ETE (100 risk score with 78% drawdown), EPD (68 risk score with 38% drawdown), MMP (67 risk score with a 27% drawdown).
At the bottom of the page on MLPs in Ken Fisher’s “Definitive Guide to Retirement Income” it says the following:
Some of the sources of income we’ve just covered likely have a place in your
portfolio, but it can be overwhelming to figure out which is right for you.
That’s where a skilled professional adviser can help.
I had to chuckle at the above statement. It sounds like something a con artist would say, not something an advisor looking to present the best/unbiased/prudent financial plan for a client would say (I’m not saying Ken Fisher is a con artist. I’ve not gotten to know him well enough to make that statement yet).
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.”
WTF is Ken saying? What I think he’s saying and posturing for is the concept that investment risk, as we traditionally think of it, doesn’t matter. It doesn’t matter if the investments Ken recommends are super 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 clients 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 have to laugh to myself when reading the above title. What I can say is that if I were to recommend to clients (especially those 55 and older) that their biggest worry is not getting enough yield out of their investments and to invest primarily in stocks and MLPs, I’d be very thankful that the market is on a historic bull run.
Whether the advisor is Ken Fisher or anyone else, not doing real risk mitigation, especially as clients are near or are in retirement, and relying on growth stocks, MLPs, etc. is a train wreck waiting to happen (it’s not being a pioneer with a new way of thinking).
While there is nothing new about what I read in Ken’s “Definitive Guide to Retirement Income,” it did scare the S-H-I-T out of me and I fear for his clients when the next big market downturn comes.
Roccy DeFrancesco, JD