Are You Plankton?

Risk trickles down to the people who are least equipped to handle it. You need a defensive posture.
Fixed Indexed Annuities (FIA) make a defensive posture affordable.
Let’s break this down into thirds and take one statement at a time. First, why does risk seem to find its
most vulnerable participant? The short answer is that retired people who haven’t accumulated a
retirement fund large enough to provide a life sustaining income flow generated by reasonable or
available low risk investments, climb up the proverbial investment pyramid in search of higher yields.
They forget, or are not told by Wall Street brokers, that the higher the potential yield, the greater the
risk. The question arises, if people need to take on unsustainable risk to generate adequate income
flows, then what will they do if and when the anticipated gain not only fails to materialize but instead
generates an actual loss of principal?
The more fundamental answer is that this dynamic is in the nature of the system. This concept is best
articulated by Canadian billionaire Eric Sprott, founder of Sprott, Inc., a Toronto based asset
management firm. Mr. Sprott is fond of saying that the small investor (typical individuals or couples as
opposed to accredited investors, institutions, hedge funds, public pension funds and the like) is the
plankton of the financial services industry. An arresting statement, indeed. What does he mean?
The word plankton comes from the Greek, meaning “drifter” or “wanderer” – an organism that is carried
by the tides and currents, and cannot swim well enough to move against these forces. What could be
worse than being in an eco-system where you don’t have the strength to operate in your own best
interests and are tossed about by larger forces? How about serving as the base food supply for stronger
life forms?
So it is with the small investor who hands over their $1 million retirement account, much of their life
savings, to a Wall Street broker who then sends it to any number of management companies, specific
stocks, or bonds – in short, into products that the investor couldn’t explain if asked. Yet that’s where
their money resides. The analogy between the small investor and plankton couldn’t be more accurate.
Secondly, it’s been said that offense wins games but defense wins championships. People who have
accumulated substantial retirement account balances through dint of hard work, over many years, with
the help of the easy money monetary policy of the Federal Reserve these past years, no longer need to
focus and building wealth – they already have it. They now need to turn their attention to retaining it by
assuming a defensive posture.
Third and lastly, Fixed Indexed Annuities make this shift affordable. No longer is it necessary to climb up
the investment period chasing after higher yields while assuming ever increasing risk. The FIA will do the
climbing for you when and where there is an opportunity to do so, without taking any market risk.

Leave a Reply

Your email address will not be published. Required fields are marked *