What Samuel Adams Knows

First, when you say, an entire product class is flawed, bad, or inappropriate, like variable annuities, then what are you saying about the regulators who approved the sale of these products? Aren't you indirectly saying that you, brilliant you, knows more and knows better than every single insurance commissioner, in every state, for every year the product has been approved? No. Okay then, maybe instead of saying they're all too stupid to see how bad the product is, you're saying they're all too corrupt to care? Is that it? What else could you be saying?

Saying this is stupid, and so are you if you believe that. (I thought about rescinding that last line, but I determined anyone that dumb probably is illiterate.)

Back to the point before I offended closed-minded individuals: If you believe in financial products and services, then what are you saying to the consumers when you condemn a product or service they purchased?

Look at it from their perspective. They at least partially liked the person who sold them the product and at least partially thought they were making a wise decision. It's unlikely they thought the seller was a total jerk and that the product was total crap. Therefore, if you're telling them, "Sorry, but you were duped, your instincts failed you, and your intellect was insufficient," then how can they trust themselves to accurately vet you and your recommendations? They can't. You proved that to them. Way to go.

The second reason you shouldn't universally dismiss a product category is that, even though buying a particular product might not have been a wise decision when it was purchased, that may not necessarily preclude keeping it from being a wise decision now. For example, paying a one-time commission of 50% for a product is a really bad idea, but, if the ongoing fees are reasonable, then why wouldn't you keep it now? Or, what about life insurance with a high cost per dollar of coverage? That policy might have been uncompetitive at issue, but, due to a change in the policyholder's health, that might be the only coverage the policyholder can now qualify for. The policyholder should keep the coverage.

Even high-cost annuities can have a place. A while back I was at a conference, where the presenter was showing the audience a VA he had replaced. He hammered on its high costs. (It was expensive). And then things went south.

I'll save you the back and forth, but the short of it was, an attendee (no, it wasn't me — not yet) — asked the presenter if he was aware of the benefits of the annuity he had replaced. It became clear that he did not. Instead, he had universally accepted the proposition that all VAs should be replaced. It was then that I did something stupid. I don't know if you've ever jumped into a fight that wasn't yours… but I have, and I did. With both feet this time. I pointed out that the exact reasons he gave for replacement were exactly the benefits he gave up in the existing, high-cost VA, and that his client was worse off for it. It was at that time that the moderator had us take an unscheduled break. Interestingly, we never revisited that case study.

High-cost products aren't inherently bad. Luxury autos are expensive. Are they bad? Highly touted school districts are expensive to live in. Are they bad? Kids are really expensive. Are they bad? No, the answer lies in utility. Does the consumer receive enough utility to offset the expense?

Not too long ago, since I always fly the same airline (shout out to United), I signed up for one of those proprietary, airline-specific credit cards. I used my trusty Blackberry, which, thanks to John Chen, is thriving (yes, thriving!) and completed the application. Not more than a few weeks later, I got my card and explanation of benefits, but it was not what I thought I had signed up for.

This card had an outrageous, nosebleed annual fee of $400. You've got to be kidding me. Not going to happen, I thought, so, I called customer service. The lady was nice enough, she said it happens all the time. Smartly, she didn't blame me or my highly sophisticated piece of handheld technology. She said that she could fix it, but that she had to read me all the things I was going to give up. I thought, good luck lady, I'm still going to switch.

She explained that this card came with free flight upgrades, free bags for two (that's up to $120 each way) and free access to the United lounge with, complimentary wine, beer and small plates. Wait, did she just say, free beer…? Yes, she did! Last year, I flew somewhere at least once every month but two. The overpriced, you-must-be-a-dope-to-keep-it credit card was worth it, for me. Not for most, but for some.

Could it be that, possibly, even a high-cost financial product, when used properly, for those who it was designed for, can also have positive results?

Insurance is about the way it makes you feel. Insurance is protection. Some consumers want more protection than others. Simply, protection provides comfort, and comfort comes with a cost. It's more costly to divest more risk, but some people require this.

I wish we understood what Samuel Adams understands: The more consumers we get consuming any of our products, the better off we all are. And in this case, the better off the consumer is. Cheers!

— Read 8 More Dave Ramsey Myths Debunked on ThinkAdvisor.

Michael Jay Markey Jr. is a co-founder and owner of Legacy Financial Network and its associated companies. He has been a member of the Million Dollar Round Table member and a winner of Court of the Table and Top of the Table honors.