Ok, don't kill the newbie for the stupid question but who is Wade Pfau?

[brewer12345]

In my head they are always "Faw" (rhymes with saw) and "Kit says" (rhymes with hit- fez)

I believe I have at one time or another heard them interviewed and heard their names pronounced either by themselves or the interviewer.


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Funny, in my head Pfau is pronounced "Fraud."

 

[foxfirev5]

Just remember nobody knows nothin'. You really need to figure it out for yourself. Beyond the failure of Dr Bernstein to keep his clients invested, John Bogle even stated that when you can't lose any more you've got to get out (paraphased), in March of '09. Talk about poor timing. Thankfully I did NOT follow his advice. Love the Vanguard model, but I realize the future is uncertain at best.

 

[daylatedollarshort]

I think there's a limit to how much truly novel work one can do around SWR strategies and much of the low hanging fruit has already been picked. We talk an incredible amount about AA and withdrawal rules but these have a minimal impact compared to just lowering your withdrawal percentage.

+1. I am not sure one more study of the past will discern anything brand spanking new about future results. As Elroy Dimson phrased it, while a country has only one past, it has many possible futures. My personal focus has been on optimizing our retirement expenses, as we can control those, but we can't control future interest rates or stock market returns.

 

[Svensk Anga]

He is an annuity salesman with an increasingly thin veneer of academic respectability.

I think this is too harsh. Academics in finance have a long history of finding annuities the best solution to the retirement funding problem. Pfau is another in this line. I understand the field has a good bit of research looking into why annuities aren't as popular as the theory suggests they should be.

As I see it, an annuity is approximately like a bond, earning bond interest rates, but with mortality credits being added and insurance company fees being subtracted. If you buy them late enough in life and live long enough, the mortality credits are more important than the fees, so better than bonds. The approximation breaks down when the bond matures or the annuitant dies. In the first case, the heirs get the inflation-depleted principle (coupons having been spent), in the second, nada. If there are no heirs, annuity wins. If you beat the mortality tables by a wide enough margin, you could still be spending your annuity proceeds well after you would have cashed in your last bond.

 

[brewer12345]

I think this is too harsh. Academics in finance have a long history of finding annuities the best solution to the retirement funding problem. Pfau is another in this line. I understand the field has a good bit of research looking into why annuities aren't as popular as the theory suggests they should be.

As I see it, an annuity is approximately like a bond, earning bond interest rates, but with mortality credits being added and insurance company fees being subtracted. If you buy them late enough in life and live long enough, the mortality credits are more important than the fees, so better than bonds. The approximation breaks down when the bond matures or the annuitant dies. In the first case, the heirs get the inflation-depleted principle (coupons having been spent), in the second, nada. If there are no heirs, annuity wins. If you beat the mortality tables by a wide enough margin, you could still be spending your annuity proceeds well after you would have cashed in your last bond.

The problem is that Dr. Pfraud starts out with the premise that the answer is an annuity of some kind. What was the question again?

 

[Hermit]

He is an annuity salesman with an increasingly thin veneer of academic respectability.

+1

The "college" is owned and operated for the investment industry.

 

[bmcgonig]

I am not sure why the Evil Dr. Pfau is taken seriously as an academic. He is free to say or publish whatever he likes, but to regard him as a scholar? Please. Annuity salesman who isn't smart enough to make sure he gets commissions on any sale.

Not sure about that. In fact on one of the Bogleheads threads when asked what he would wish for in retirement he mentioned Tontines because they would omit the insurance companies as middlemen. Also, if we see something in his work that shows that he is skewing then we should all point it out. But I haven't seen anyone do that yet. He seems to show all his work. He only recommends SPIAs. Not the evil variable annuities. Silly reason to dog him if you ask me.


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[RetireAge50]

Don't know who Pfau is either. Rely on my own brain.

 

[bmcgonig]

The problem is that Dr. Pfraud starts out with the premise that the answer is an annuity of some kind. What was the question again?

Actually no. Its really only an annuity of one kind, an S/DPIA, not some kind. Kitces also recommends them. So does Milevsky. They all show their work, so it's up to us to show their fraudulence. If we can. He post frequently on Bogleheads so I'm sure that anyone that considers him fraudulent can prove that to his face. If they can. He responds anytime his name is mentioned, it seems.


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[brewer12345]

Actually no. Its really only an annuity of one kind, an S/DPIA, not some kind. Kitces also recommends them. So does Milevsky. They all show their work, so it's up to us to show their fraudulence. If we can.


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If you want to follow the Pfied Pfiper, knock yourself out.

 

[bmcgonig]

If you want to follow the Pfied Pfiper, knock yourself out.

Seems Ike you can call him a fraud but don't seem to have the wherewithal to go anywhere after that.


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[brewer12345]

Seems Ike you can call him a fraud but don't seem to have the wherewithal to go anywhere after that.


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If Pfau's ramblings went anywhere other than to annuities (even some of the time), I might be inclined to give him a listen. But he is a shill for the industry, so that is where he lands.

I'd hardly be the one to argue that annuitization is never a good idea. I will likely annuitize a chunk of my assets at some point if it makes sense. But they are not the Holy Grail, especially when we are at a historically low level of interest rates. YMMV.

 

[bmcgonig]

If Pfau's ramblings went anywhere other than to annuities (even some of the time), I might be inclined to give him a listen. But he is a shill for the industry, so that is where he lands.

I'd hardly be the one to argue that annuitization is never a good idea. I will likely annuitize a chunk of my assets at some point if it makes sense. But they are not the Holy Grail, especially when we are at a historically low level of interest rates. YMMV.

I think he never recommends more than a chunk for annuities.

So to sum up your position, he's a fraud but you agree with his conclusions


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[brewer12345]

I think he never recommends more than a chunk for annuities.

So to sum up your position, he's a fraud but you agree with his conclusions ��


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Nope. I think he is a fraud as an academic. Full stop.

What is the signature line I have seen here? "I either want less corruption or more opportunity to participate in it."

 

[nun]

Theres a lot of opinion being cast as claims of fraudulence and I think we should be careful. Fraud in research is a serious matter and should be backed up with evidence, not just a predisposition against a result.

Pfau, and a series of other professionals, have recommended that SPIAs might be better than a bond allocation allocation and have published their assumptions about returns and the results. The thing to do is to argue with the assumptions and methodology rather than making accusations of fraud.

 

[W2R]

If Pfau's ramblings went anywhere other than to annuities (even some of the time), I might be inclined to give him a listen. But he is a shill for the industry, so that is where he lands.

I'd hardly be the one to argue that annuitization is never a good idea. I will likely annuitize a chunk of my assets at some point if it makes sense. But they are not the Holy Grail, especially when we are at a historically low level of interest rates. YMMV.

+1

It always amazes me that anyone could actually read Pfau's stuff and come to any other conclusion. I guess that is why we have discussions, but gosh. Nothing about him inspires me to even discuss.

 

[REWahoo]

His predisposition towards recommending annuities does make me question his objectivity. Whenever I hear the name Wade Pfau the following song immediately pops into my mind:

 

[samclem]

Our brush may be a little broad here. I, too, have called out Pfau for his "emphasis" on annuities and also for his assertion that traditional WRs needed to be cut back--largely because he inserted a big advisory fee into his calcs. But he has also written papers that don't push annuities, and which don't have an obvious push toward products that generate commissions/fees. For example, his papers on use of PE10 to adjust portfolio allocations have been informative and handy. (see this paper and this previous discussion here).

So, as with other authors, I read each of Pfau's contributions to learn what I can from it, and remain aware of the author's frame of reference/vested interests.

 

[brewer12345]

The thing to do is to argue with the assumptions and methodology rather than making accusations of fraud.

Feel free. Personally, when I find out that someone has pissed into a well, I generally choose to go find another source of drinking water rather than making 3 flavors of Kool Aid with the tainted water and try to decide which one tastes best.

 

[nun]

Feel free.

I think you need to be pointing out the holes in the research if you think it's wrong. Personally I like Pfau's use of lower than historical bond rates and a 0.5% fee as they seem to be sensible assumptions given todays bond rate and most people's less than fanatical quest to keep fees down.

Personally, when I find out that someone has pissed into a well, I generally choose to go find another source of drinking water rather than making 3 flavors of Kool Aid with the tainted water and try to decide which one tastes best.

And that's perfectly fine. Call him out for recommending annuities, say they are terrible, question his assumptions about returns and fees, pick holes in the methodology....all those are valid reasons for not liking the work of Wade Pfau, but please stop short of the allegations of fraud without evidence. There is a big difference between an advertorial or puff piece in Forbes or USA Today that is sponsored by the Insurance industry where someone pushes annuities....that's sleazy, but not illegal. However, to say that someone publishes research that comes to an incorrect conclusion from the data or assumptions used because of a relationship with an industry sponsor is a serious allegation.

 

[nun]

It would be very interesting to see the personal portfolios and AAs of all these financial gurus. Then we'd see if they practice what they preach. I tend to believe that Bogle's portfolio is just as he describes it.

Me and My Money: Jack Bogle | Reuters

 

[Hermit]

Not sure about that. In fact on one of the Bogleheads threads when asked what he would wish for in retirement he mentioned Tontines because they would omit the insurance companies as middlemen. Also, if we see something in his work that shows that he is skewing then we should all point it out. But I haven't seen anyone do that yet. He seems to show all his work. He only recommends SPIAs. Not the evil variable annuities. Silly reason to dog him if you ask me.


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If you do a little research on the "college" you will find it is operated strictly for the investment industry. The accrediting agency name sounds like one of the standard college accrediting institutions, but it is not. Probably took me all of 10 minutes to track that info down. I wouldn't have a problem with him if he and his 'college' were up front on what they do and where they get their money.

 

[brewer12345]

I think you need to be pointing out the holes in the research if you think it's wrong. Personally I like Pfau's use of lower than historical bond rates and a 0.5% fee as they seem to be sensible assumptions given todays bond rate and most people's less than fanatical quest to keep fees down.



And that's perfectly fine. Call him out for recommending annuities, say they are terrible, question his assumptions about returns and fees, pick holes in the methodology....all those are valid reasons for not liking the work of Wade Pfau, but please stop short of the allegations of fraud without evidence. There is a big difference between an advertorial or puff piece in Forbes or USA Today that is sponsored by the Insurance industry where someone pushes annuities....that's sleazy, but not illegal. However, to say that someone publishes research that comes to an incorrect conclusion from the data or assumptions used because of a relationship with an industry sponsor is a serious allegation.

So do you prefer the fruit punch or grape flavor?

 

[jfn111]

The problem is that Dr. Pfraud starts out with the premise that the answer is an annuity of some kind. What was the question again?

I think you've made your point.

 

[nun]

If you do a little research on the "college" you will find it is operated strictly for the investment industry. The accrediting agency name sounds like one of the standard college accrediting institutions, but it is not. Probably took me all of 10 minutes to track that info down. I wouldn't have a problem with him if he and his 'college' were up front on what they do and where they get their money.

Pfau is upfront about his affiliations and does not claim to be self employed. The funding of the College is right there on the first page of the website. He seems to do a lot of contract research and the white papers are done for clients so you have to approach them with the understanding that they might be limited in their analysis or comparisons. He is also employed by a financial planning company. The peer reviewed publications acknowledge funding and are far more rigorous. Given his assumptions, methodology and the peer review process I'm ok taking the results of those papers at face value....the white papers not so much as they can often be closer to advertising than research.