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Ken Fisher, famous annuity hater, invested in annuity companies

Mr. Fisher's company formerly held tens of millions of dollars in the stock of major companies selling indexed and variable annuities

Aug 31, 2018 @ 1:00 pm

By Greg Iacurci

Ken Fisher, founder and executive chairman of Fisher Investments, has been an ardent critic of annuities for years.

In fact, Mr. Fisher's vitriol toward annuities is probably one of his most identifiable characteristics in the public sphere. Print ads with Mr. Fisher's face blare, "I HATE Annuities. And you should too." More recently, in a video ad for Fisher Investments, he says, "I would die and go to hell before I would sell an annuity."

However, Mr. Fisher's company, among the largest financial advice firms in the country, was simultaneously investing in insurance companies with significant annuity business. And some of the stakes were quite large.

Specifically, Fisher Asset Management — the legal name for Fisher Investments — held several million shares of stock in American Equity Investment Life Holding Co., one of the biggest sellers of indexed annuities, and Prudential, the parent company of Jackson National Life Insurance Co., which for years has been the top seller of variable annuities.

Fisher Asset Management, which manages $96 billion for individuals and institutions, invested in these companies between 2013 and 2015, according to filings with the Securities and Exchange Commission.

Fisher held 2.91 million shares of American Equity stock valued at $85 million as of the end of 2014, the year in which Fisher's holding in the insurer was his largest. That same year, Mr. Fisher authored a column in Forbes calling annuities "scumbag products." While it's unclear how large that holding was relative to other investors at the time, the position today would make him American Equity's fifth-largest investor.

Fisher's position in the London-based Prudential plc, the parent company of Jackson National Life Insurance Co., was even larger when it peaked in 2015 — 2.88 million shares worth $129.7 million. Jackson National has for years been the industry's overall top seller of individual annuities, as well as the No. 1 seller of variable annuities. It's not clear how big Fisher's position was relative to other investors.

Fisher Asset Management appears to have sold out of both positions by the end of 2016, according to SEC filings. But some annuity experts question why Ken Fisher, who is also co-chief investment officer at Fisher Investments, would invest in companies whose products he was excoriating in public at the same time.

"Does he really hate annuities?" asked Sheryl Moore, founder of Moore Market Intelligence, a market research firm. "If he hates them so bad, why does he have so much money invested in companies that sell annuities?"

Mr. Fisher was not available to comment for this story, but a Fisher Investments spokesman views the annuity company investments as a non-issue.

"Fisher Investments owned a couple of annuity stocks a couple of years ago representing a minuscule percent of our holdings — out of hundreds of stocks," said John Dillard, a spokesman for the company. "You're concerned about that? What's the relevance? Because Ken Fisher hates annuities?"

Some experts don't believe Fisher Investments' holdings in these insurers necessarily run counter to Mr. Fisher's public philosophy on annuities.

"I don't see it as a double standard," said Steven Saltzman, principal of Saltzman Associates. "You may have people who aren't big fans of alcohol or tobacco, but from an investment standpoint if you ignore those you might be missing out on good investment opportunities."

Ken Fisher's strong public stance on annuities — variable annuities, largely — appears to help drive business to Fisher Investments. The RIA operates an annuity buy-out program, whereby the firm pays investors' fees to surrender a variable-annuity contract as long as they then become a client of Fisher Investments.

"My firm often buys folks out of the humongous surrender fees that imprison them in variables — if they stay with us," Mr. Fisher wrote in the Forbes column titled "Why I hate annuities" in 2014. "So my advice is conflicted. But we're simple, open and honest about it."

"Few would up-front that capital," he added. "It's a moral quest."

Jackson National, Prudential plc's U.S. affiliate, represents 36% of its parent company's profit before tax. In 2015, when Fisher's holding was largest in its parent, Jackson was the biggest annuity company in the industry, with 94% of its $24.5 billion in individual annuity sales coming from variable annuities. (Prudential plc is not affiliated with Prudential Financial Inc., another insurer.)

American Equity's sole business is annuities. It manages $50 billion for annuity policyholders; 96% of that is from indexed annuities, the remainder from fixed-rate annuities. In 2013-15, when Fisher held its stock, American Equity was among the top three largest indexed-annuity providers.

Fisher Asset Management also held much smaller positions in Prudential Financial, American International Group and Ameriprise Financial Inc. — which also sell variable annuities — in 2014, according to filings.

It's not clear why Fisher Investments, which is the second-largest registered investment adviser in the country behind Financial Engines Advisors, decided to invest in American Equity and Prudential plc, or why it sold out.

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