“There is no risk to the consumer...it is all upside, no downside.”

Re: “‘Guaranteed Growth Rate.’ Hmm,” City Lights, January 14

Don Bauder, now in his 80s, has had an illustrious career reporting on financial scams over the years. It is unfortunate that after all these years he cannot discern truth from fiction. Or perhaps he didn’t try?

Mr. Bauder was given detailed written descriptions of modern annuity contracts by this respondent, sold by rock solid, multibillion-dollar strong (and one over two trillion strong) legal reserve-backed life insurance companies, along with research from the Wharton School of Business, GAO (Government Accounting Office) Fortune 500 magazine, and the Wall Street Journal, to cite a few sources provided.

He apparently has been convinced that it is a better for the average investor to gamble in the stock market rather than investing in a new generation of indexed annuity savings instruments that provide absolute safety of principal, upside growth only, and significant upfront cash deposit bonuses for new accounts. Even former fed chairman Ben Bernanke has put his own savings into these new generation savings accounts with insurance companies. These new savings instruments do not have to be annuitized, have liquidity — some even via checkbook draw on insurance company bank accounts.

Since my two short conversations with Mr. Bauder in December, the stock market has fallen well over 10%, while several insurance company savings accounts now available have upfront cash deposit bonuses as high as 10%, with 6.5% guaranteed growth in spendable money over time, with as much as 90% market upside participation averaged over two to three years, with no participation in any negative returns or any loss of principal.

That’s 20% or more difference to the positive over the Wall Street-based “gambling house” that savers would have lost significantly since Mr. Bauder and I started speaking (he called me under false pretenses). So, who has the long fucking nose, Don?

Some insurance companies have offered, and continue to offer, variable annuity contracts. These variable annuities are totally dependent on the stock market gains or losses and many investors lost their principal with them. At no time in history has Exalt nor any predecessor dealt with stock-based, risk of loss, variable accounts that are regulated by the SEC, which many feel is akin to a fox guarding the hen house.

After the crash of 2008, insurance companies (who suffered no losses in the market downturn) came up with improved savings contracts for indexed annuities that improved upfront deposit bonus money, completely eliminated any risk of loss of principal, some limiting upside cash gains, and some allowing upside market participation (if any) in cash accounts as high as 90% over a three-year average. A six percent or more compound growth in spendable income for life, in our aging society, with ever-increasing life spans, is providing for an absolute safe and secure retirement income.

The tradeoff in upfront bonus money and guaranteed growth that now exceeds six times what banks pay is decreased liquidity. However, penalty-free liquidity of 10% per year of amount deposited is an industry standard. Mr. Bauder has either a lack of understanding or is just flat-out misstating fact in this area.

Mr. Bauder has attempted to further confuse “no risk of loss of principal,” which is 100% accurate, with inflation, which are two entirely different subjects. The insurance industry saving’s programs have historically stayed one to three percent ahead of inflation for the past 30 years.

Our firm and its predecessor has designed and implemented thousands of pension savings accounts for business owners and doctors. Not once in 40 years, has a business owner or doctor taken all of their retirement out in one year and spent it, making 10%-a-year penalty-free liquidity most appropriate. If a consumer should suffer a disability and need all their funds back, there is no penalty for such a full withdrawal. One company has a 100% penalty-free liquid feature as well at any time — 100% penalty-free withdrawal of all funds deposited — very different than a bank CD. Mr. Bauder did not mention this either.

The purpose and intent of savings accounts and pensions is to provide lifelong income. Those with 401(k)s in Wall Street accounts lost almost 50% in the 2008 market downturn, which took many years to come back to, even while losing six percent or better upside growth during those recovery years. The current correction in progress is anyone’s guess as to how low it will go.

The safety and security of these insurance industry savings programs prompted congress to enact favorable pension contribution levels almost double prior times subsequent to EGTRRA (Economic Growth , Tax Reconciliation and Recovery Act) allowing business owners to drastically increase pretax contributions if safe, secure, no risk of loss insurance industry savings accounts were used as funding vehicles for private pensions, that were decimated in the 90s in the dot com crash.

We live in a free economic system where hard work and knowledge utilized in a productive way is typically rewarded via fees or commissions. I have not seen the numbers Mr. Bauder cites in his story. However, I suspect his background and input may be coming from Wall Street competitors. One astute CPA/attorney friend, who will remain anonymous, shared with me his knowledge that Mr. Bauder has been “anti-annuity,” anti-insurance industry and pro Wall Street for his entire past carrier.

It is interesting to hear presidential candidates spin on the press of late, and how opinions, statements, and views dating back as far as four decades are brought into current time, as if there is somehow relevance to what a candidate favored or said 20, 30, or 40 years ago. Just like Ben Carson, I had a previous carrier in healthcare. As a pioneer in several areas, I took my share of arrows in my back. Does anyone really still believe what alleged regulatory bodies with political agendas say?

I believe Mr. Bauder means well. However, he is terribly misinformed, is full on Wall Street enamored, and simply did not take the time to read and understand what I personally provided him, his being rather emphatic about possible future inflation and a statement of “no losses of principal,” I fail to see the connection between the two?

One of the great economists of our generation, and advisor to several presidents, Mr. Eliot Janeway, recently passed away. He had many great comments and criticisms in the field of economics in our county. One of the questions he posed was, “Is an insurance company savings account really an investment if there is no risk associated with it?” These simple safe savings made Babe Ruth a rich man. Same goes for many others in the 1929 Depression era. The insurance companies were the only safe haven that survived the economic calamity of that era. Could history be repeating itself again? Time will tell.

Mr. Bauder told me he was enjoying retirement in small town in Colorado, outside of Denver. I certainly wish him well and hope that he may consider using his talents and former prestige to help people prevent loss of their savings instead of marching the drum roll of Wall Street that has inherent risk of severe losses for our aging population, that once out of the workforce, would not have the time to recover significant economic losses during their retirement years. That would indeed be a shame for all concerned.

— Dr. Bob Mansueto

The point of of the column was that Mansueto’s ads in the Union-Tribune are misleading, because they suggest that he is advertising bank savings account with extremely high yields. A second point of the column was that his personal integrity and his advertising were challenged by the Dental Board of California, which revoked his license. The worthiness of annuities as an investment, which Mansueto emphasizes here, was not the major point of the column.

Best,
Don Bauder