When it comes to retirement investments, annuities have had a checkered past. Over the years critics have called them too expensive, too restrictive and a favorite of commission-hungry insurance reps. But these days, when there s an argument, people in favor of the pension-like products have the ultimate trump card: an authoritative report penned by experts from the University of Pennsylvania s prestigious Wharton School. In it, finance professors call the annuities market very competitive. They address seven common annuity questions as myths, knocking each one down in turn, and say that experts from Germany to New Zealand have decided they re the best way to go. They even use the words of George Bernard Shaw to help make the case: If you laid all the economists end to end, they still wouldn t reach a conclusion except, the authors say, with annuities, which they call compelling.

The study says one more thing: According to small, pale print on the cover page, it s cosponsored that is, paid for by New York Life, one of the nation s biggest sellers of income annuities. Stephen Levy, project manager of Wharton s Financial Institutions Center, says the center itself does not accept research money from companies and that professors can be paid independently. The study s lead author, David Babbel, a Wharton professor of insurance and finance, says he was not influenced in any way. Once New York Life commissioned the study, they didn t know what we were going to come up with, says Babbel. That s just how it is.

For decades financial-services firms have relied mostly on their own public-relations prowess to win over advisers and persuade a skeptical public to buy investing products. But in recent years they ve found a new tool to drum up support: the academic study. Once the province of tweedy economic theorists unveiling complex statistics at university conferences, these papers are finding new life beyond the ivory tower, echoing the widely used and controversial medical research funded by Big Pharma to back new drugs and devices. Only now the studies run the gamut of investing topics, including how best to pick funds, set up a retirement plan or boost portfolio returns. One study by a professor who has consulted for a derivatives-trading firm called economic derivatives exciting new risk diversification opportunities for individual investors, despite concern over their complexity and suitability for retail investors. (Some derivatives were later blamed for contributing to the market crash.)

The universities hosting these studies and the professors writing them say they don t allow sponsor companies which typically pay anywhere from $5,000 to $50,000, and sometimes higher, for research to do any meddling and that academic freedom is always maintained. Without such relationships, they say, they wouldn t have access to a lot of corporate data on important business trends. Companies make their own case for putting professors on the payroll, saying they re trying to attract attention to important financial issues. We thought this would be an interesting way to bring a new dimension to the conversation, says Bruce Wolfe, a managing director of Allianz, a global financial-services company that recently sponsored a study about retirement-planning decisions.

But some critics howl over the idea of the financial sector tapping into academia to create market-driven research, whether it s designed to help lobby government agencies and shape national debate over financial reform or influence brokers and advisers who recommend financial products to millions of clients. It s about the equivalent of the cigarette companies promoting smoking as a healthy lifestyle, says Brian Breidenbach, a Louisville, Ky. based adviser who manages nearly $400 million in assets and says he receives a steady stream of studies that read like marketing brochures. Frequently, critics say, sponsorship of such studies are disclosed only in pint-size print or sometimes not at all. (New York Life, which says the study underwent rigorous peer review, thanked SmartMoney for pointing out that its Web site s references to pro-annuity research did not mention the company s sponsorship and promised to update the pages.) What s more, professors say less-than-favorable findings can often be essentially squelched because some companies ask them to sign nondisclosure agreements. Academics need to be more concerned, says George Loewenstein, a professor of economics and psychology at Carnegie Mellon University who has published studies about conflicts of interest. Business schools are way behind.

It was the medical profession, of course, that sparked the first real public outcry over corporate-funded research. As recently as a decade ago, according to one study, up to two-thirds of scholars and institutions conducting research on new drugs and treatments actually had a financial stake in the medical company behind them. After regulators discovered doctored data that in some cases favored companies, oversight tightened. Many medical schools now ban faculty from accepting gifts, and some require them to disclose industry ties, from research support to consulting deals. A formal national registry was also created to make certain clinical trials involving humans, for example, readily accessible regardless of their findings. In medicine or science, if people step over the line, it ends up being a big brouhaha, says James O Toole, professor of business ethics at the University of Denver.

But business schools say keeping the corporate world at arm s length would run counter to their core mission of providing students a window into the world of commerce. Many not only allow but encourage professors to work as consultants and conduct research about, and for, companies. And the schools themselves are not shy about working with firms. Vanderbilt University, for one, has an industry-funded center to study the financial markets, where a spokesperson says it allows high-level sponsors to give advice on the activities and research direction of the center, while the University of Michigan Ross School of Business awards one instructor a year-long, company-funded scholarship. The title? NBD Bancorp Assistant Professorship in Business Administration. A Ross School spokesperson says, while the money is used to support the faculty member s research, the bank and those that have since taken it over gets nothing in return. Hans Stoll, director of Vanderbilt s Financial Markets Research Center, says business schools have actually been accused of not being close enough to the real world. I think the connection to business is desirable. I don t think we want to sever that on the altar of conflict of interest.

Still, in such an environment, ethics experts say they hardly know where to begin to complain about appearance issues alone, both for the schools and the researchers. Over the years research for hire has defended not only some of the industry s most controversial products, including subprime mortgages, but in one case was used by a start-up that wanted to let Main Street investors dabble in the little-known world of binary options. (Considered highly risky, binaries are essentially a bet on the financial outcome of a future event.) At Columbia University s business school, one of the highest ranked in the country, professor Sheena Iyengar has stuck to less controversial research but makes no secret of the source of much of it, devoting a page of her personal Web site to corporate logos and thanking the firms for their participation. In an interview, she says some of her best work was done in collaboration with industry and that she rarely approaches companies for money, only data. You go to the company for access, and it just so happens they might give you money, says Iyengar. (The school says it has a conflict-of-interest policy and is aware of her work.)

The lines can become more blurred, of course, when employees at financial firms keep a foot in academia as well. After a long teaching stint, for example, Brian Jacobsen became the full-time chief portfolio strategist at Wells Fargo Funds Management while maintaining his part-time associate professorship at Wisconsin Lutheran College. He says he is given the freedom to write what he wants, but in his papers, he s defended a variety of business practices that are aligned with Wells Fargo s, including trumpeting the advantages of actively managed portfolios and fund-marketing fees that are passed on to consumers. ( Sometimes you get what you pay for, he says in one study.) School officials say they re comfortable with the arrangement, and Wells Fargo says it is simply encouraging different investment perspectives. There s a huge opportunity to help consumers and investors, says Shlomo Benartzi, a behavioral-finance professor at the University of California, Los Angeles, who has worked with some 50 major financial institutions, but also from a business perspective to make some money.

The question, of course, is, how much money? Last year alone, annuities were a $300 billion business, while the fees for actively managed mutual funds exceeded $54 billion. To be sure, few Main Street investors will likely see any of this research, much less know it exists. But companies sponsoring it do send the results to financial advisers and brokers, who recommend products to millions of clients or quote them liberally in their marketing materials to confer an extra level of gravitas. For many advisers, the concern is less what findings they are seeing and more the ones they re not. Many firms require authors of sponsored work to sign confidentiality agreements, a practice that can limit negative research and make it harder to find scholarly journals to consider it. It also puts authors in a thorny dilemma: If you have a big company funding research and the results can go either way, says Ronald Duska, director of the Center for Ethics in Financial Services at the American College, there s a temptation to go the way of the company.

With Washington undergoing a wave of financial reform affecting everything from target-date funds to derivatives trading, legislators are seeing an abundance of company-backed research these days even dubbing some of it Astroturf (think: no grass roots). Allianz, a global financial-services firm with some $9 billion in U.S. annuities contracts, credits its own paid-for study with helping its top brass win an audience with Treasury Department officials. Once in the door, they say they discussed not only their findings on how individuals make financial decisions, but ways of expanding the market for retirement products. (Allianz says the research is neutral; a Treasury spokesperson calls the conversations private. ) Meanwhile, Jonathan Johnson, president of discount retailer Overstock.com, who says he s been to the Securities and Exchange Commission numerous times to push for regulating the abusive short-selling of stocks, says the agency encourages corporate petitioners to include scholarly backup. They weigh that stuff pretty heavily, he says. A spokesperson for the SEC says the public comment process is for everyone, citizens and businesses alike: We can t exclude anyone.

For now, consumer advocates say, what sponsored research needs most is more transparency from the schools, the professors and the companies. I don t think you can ban it, says Ed Mierzwinski, consumer-program director for the U.S. Public Interest Research Group, of the corporate-funded research. But you should be able to expose it. Most business schools say they require professors to fill out annual conflict-disclosure forms, but critics say it s not enough. In Nevada, a Democratic state senator, Terry John Care, has even weighed in, trying to force public universities to make those forms (currently considered private personnel records) available to anyone, since taxpayers are, in theory, paying their salaries. Why shouldn t it be a public document for all to see? says Care.

Jingzhi Huang, a finance professor at Penn State University, says he hasn t accepted any corporate money for his studies on credit-risk models, although he s had interest from hedge fund managers, who have burned up his phone lines hoping to replicate his models and encouraging him to update his research. But Huang probably won t be worrying about conflicts of interest any time soon: Since he recently published research critical of certain funds, he says, companies have stopped calling.