Yeske Buie in the Media: Annuities and the Advisory World

According to a recent CNBC article, annuities are near the top of the list of financial products that fiduciary advisors hate. The article shares that the reasons for this are plentiful, ranging from cost, to complexity, to their reputation for not acting in a Client’s best interest. Dave spoke with the reporter for this article, Andrew Osterland, to share his thoughts on the declining use of annuities among advisors and his reasons for not recommending annuities for Yeske Buie Clients.

In regards to the declining use of annuities among fiduciary advisors, the article shares, “David Yeske, managing director of registered investment advisory firm Yeske Buie, said that variable annuities have fallen out of favor with the fee-based advisors he regularly surveys for the Financial Planning Association. ‘The use of variable annuities has been declining for years, and that’s probably representative of the fiduciary side of the advisory world,’ said Yeske.”

When it comes to using annuities for Yeske Buie’s Clients, the article quotes Dave saying the following:

For his part, Yeske is not categorically against fixed or immediate annuities that guarantee income streams for investors, but he has never used them for his own clients. He thinks the adverse tax treatment of variable annuities — the gains in all distributions from the contracts are taxed as ordinary income — makes them a bad idea for savers.

“Variable annuities are a perfect machine for converting capital gains to ordinary income,” he said. While the gains within a variable annuity portfolio are tax-deferred, they are ultimately taxed at up to 39.6 percent, versus the 15 percent capital gains tax rate. “It’s hard to find scenarios where the benefits of tax deferral justify getting taxed at the higher rate.”

The full article titled “Despite what you’ve heard, annuities aren’t all bad” can be found here.