The fourth quarter of 2024 was marked by significant volatility across global markets, as reflected by the performance of the MSCI All Country World Index. We navigated through a landscape shaped by a major shift to the right in US politics, higher inflation, and a stronger US dollar. The Federal Reserve signaled fewer rate cuts on the horizon which led to a subdued finale to what otherwise was a very strong year in the markets…
The Three-Legged Chicken of Investments: Why Guaranteed Products Aren't Always What They Seem
Have you heard the tale of a three-legged chicken? It serves as an apt metaphor for the "too good to be true" products marketed to unsuspecting investors. Recently, a client of mine was reminded of this tale when dealing with a complex Guaranteed Minimum Withdrawal Benefit (GMWB) variable annuity. Sold by a "friend" years ago, this annuity promised guaranteed income and stock market growth. Unfortunately, it turned out to be more of a cautionary tale than a golden goose.
Years later, the underlying investment value hadn't grown significantly. My client had been paying high annual fees—over 2%—which steadily eroded returns. When he wanted to move the account, he faced hefty surrender penalties, as high as 7%. Thankfully, we found a solution that helped him preserve his investment, but it underscored the dangers of chasing unrealistic guarantees.
For anyone considering "guaranteed" products, let me share a story about a chicken...