With the recent drama in Washington, the idea of holding something that could benefit from a dysfunctional government has appeal. With many people on both ends of the political spectrum concerned, gold will get a lot of touting as a smart play for safety.

You probably won’t get very far by pointing out that gold has no projected earnings stream, does not, and never will, produce anything. Afterall, that’s true of commodities generally and many rational portfolios have some exposure to commodities nonetheless. The fact that gold has been far more volatile than mainstream financial products probably won’t influence a fearful client that is sure economic disaster is imminent either.

What has helped clients take pause is a direct common-sense rebuttal of the main pitch. Gold is pitched as a "diversifier"—some form of protection against economic harm. Specifically, it is lauded as a hedge against inflation and currency devaluation. After all, gold has been used on and off as money through history.

If you have a client that is sure the folks in DC will turn the national debt into a dollar collapse or lays out a similar argument of doom, be sure to ask them how confident they are this will happen and when it will happen. The gold salespeople are telling them it is inevitable and imminent, so they should buy NOW. If they repeat that urgency ask, “If the dollar is so bad and the collapse is both probable and imminent, why would the gold firm trade their great gold for your lousy dollars?”

If that doesn’t slow them down, they may be too wound up to accept objective advice.

Deferred Annuities

When markets decline, any pitch with the word, "guarantee” can get a client’s attention. It is hard to find an annuity that doesn’t tout a guarantee.

In the consumer press, the discussion about annuities usually revolves around high cost products and shady sales techniques. Guaranteed income or withdrawal riders and equity indexed annuities do indeed tend to have high costs. Many agents do pitch annuities improperly. A thorough exam of the products typically results in guarantees that are less enticing than those presented.

Those criticisms are valid but I’m not going to rehash all that. There are low priced annuity products and ethical agents out there. The problem I have with annuities is that most clients end up creating more issues for themselves by buying any deferred annuity. Buying a bad one just makes things worse. Before deciding if a particular product is any good, the wisdom of using an annuity at all should be evaluated.

With IRAs and retirement accounts, the tax deferral element of an annuity is moot. By using these contracts in these accounts, you greatly restrict what clients can be invested in and add in a layer of complexity that is unnecessary and often problematic.