Ideas Needed
Client is rolling $300K into his IRA from 401k plan.
Guy wants safety and growth (who doesn't?). We are ready to go with $200K into an EIA but need ideas for the rest. I've shown him ST bond funds and he's not crazy about it because of principal fluctuation. CDs pay zilch. MM even less. Thinking maybe a shorter term corporate? Ideas appreciated.Contact your compliance officer and start writing your complaint rebuttal.
Why not do all of it into the EIA? Seems like he likes the idea of it. And without knowing the specifics, it seems like an appropriate account.
Be a little creative with the guy. Put 80-85k in a fixed asset (or ELCD like ageman said) and after five or six years he’ll have made 12-15k. Take the remaining 15k and put it div stocks. Worse case, if the stocks went to zero(ya right), he wouldn’t lose any principle. a side bonus is he can brag to his buddies that he’s playing the markets.
[quote=etj4588]Client is rolling $300K into his IRA from 401k plan.
Guy wants safety and growth (who doesn't?). We are ready to go with $200K into an EIA but need ideas for the rest. I've shown him ST bond funds and he's not crazy about it because of principal fluctuation. CDs pay zilch. MM even less. Thinking maybe a shorter term corporate? Ideas appreciated.[/quote] How old is he? Does he need growth every year or just growth over a certain number of years?He’s 65, doesn’t need the income. Just views this as his retirement nestegg and wants to keep it safe. Had it in a MM for 5 years before he rolled it.
Would love to do all of it in the EIA (relax Sometimes, his net worth is about $800K), but he’s one of those guys that likes to spread it around.
2nd the equity linked CD option. High quality principal protected note is another option.
I sometimes use VAs for this type of situation. I would use a 10 year GMAB. He can invest the money aggressively and his absolute worst case scenario is that he'll get 100% of his money back (no annuitization required). The best case scenario is that he'll get market returns less a couple of points for expenses.
Just make sure to get an idea of what him RMD's will be and don't use any money that will be needed for them.is he going to need this money for income down the road? Why not take a look at a deferred immediate annuity equal to the fixed monthly expenses he is looking at incurring. AT that point, it is guaranteed.
aeromaks, can you elighten me with the definition of “deferred immediate annuity”.
Of course you agree since that is the only thing you do![/quote] I don't sell any EIAs. Does this make my recommendation any more or less valid?[quote=BioFreeze] [quote=deekay]Why not do all of it into the EIA? Seems like he likes the idea of it. And without knowing the specifics, it seems like an appropriate account.[/quote]
I completely agree.
[quote=anonymous]
I sometimes use VAs for this type of situation. I would use a 10 year GMAB. He can invest the money aggressively and his absolute worst case scenario is that he’ll get 100% of his money back (no annuitization required). The best case scenario is that he’ll get market returns less a couple of points for expenses.
Just make sure to get an idea of what him RMD’s will be and don’t use any money that will be needed for them.[/quote]
I agree with the GMAB rider on a VA. If he gets nervous about his account fluctuating in value, you could put him primarily in short term bonds using the sub accounts.
However is he is really that conservative and If he was ok with earning next to nothing in a mm and just wants a little bit of interest each month, he might be a fixed annuity client. Find the best rate and sell it to him. Call him in 7 years when it’s out of surrender.
A VA, primarily invested in short term bonds??? Mmmm ...
Combine a fixed annuity with a GI MF, split evenly. Any hypo will show he'll at least make his money back even if the MF goes to zero. I'd probably combine it with a BR Global Allocation, depending on the EIA's you're using.Do not use a Hypo! There it is again… selling past performance the EDJ way. “Any hypo will show he’ll…” No, any hypo will show what happened in the past with hand picked funds that just happen to look good in retrospect! Also, the VA is a horrible idea- he just said that even the std dev of ST bond fund is unacceptable. Which means: very few options. He is a saver not an investor! You’re asking for uncompensated headaches. Of course, any of us could explain to him the error of his ways long-term, but the minute the thing fluctuates downward…
newnew, please explain why the VA is a terrible idea. I’ve put savers in them. They NEVER pull their money out when the market goes down because they know that it it’s guaranteed to go back up.
What part of the VA is “guaranteed to go back up”? Certainly not his cash. This is not the prospect for a product that is often difficult for the avg saver to comprehend. They often hear “6% annual ratchet for 10 years” or “5% payout for life” as meaning something similar to a 5-6% RETURN. There may be NO return on his CASH. My guess: return on his cash is what he cares about most after principle preservation. So a VA is a horrible idea- after all, this guy was nervous about the fluctuation of a short term bond fd!
“What part of the VA is “guaranteed to go back up”? Certainly not his cash.”
Yes, his cash. Please don't tell me that I'm arguing with someone who doesn't understand the basics of a GMAB rider.I do see your point if he was really willing to “invest” for the GMAB period. Maybe he is. I just get nervous with this type of prospect- one who will call up in a few months and want to access his “return” when markets are down, or constantly fret about the account value flux on the monthly statements. What is his view of “cash”: he has been in mmkt for years and will not do a bond fund. Why is that? So we do a VA? To me, a horrible idea based on the little I know of him.
A VA is out of the question for this guy.
Do not use a Hypo! There it is again… selling past performance the EDJ way. “Any hypo will show he’ll…” No, any hypo will show what happened in the past with hand picked funds…
You don't need hand-picked funds. The combination of growth and income, large cap mutual funds in a 50-50 mix with fixed annuities are nearly universally successful, particularly if the income from the annuities are reinvested into the mf. On the whole, there's about a 90% chance that any GI mf, over rolling 10 year periods will be profitable. So you'll have to excuse me for calling you out on this. I don't need to hand pick, and I never do.
Don't fall into the trap to believe that because when you used hypos at Jones you used them incorrectly, we all do.
I'm not arguing, but why is a VA with a GMAB out of the question for this guy? The worst case scenario is a 0% return. The best case scenario is double digit returns.A VA is out of the question for this guy.
What I don’t get is, if 2/3rds of the account is in an EIA, what is the problem with putting the other 1/3rd in it?
[quote=etj4588]Client is rolling $300K into his IRA from 401k plan.
Guy wants safety and growth (who doesn't?). We are ready to go with $200K into an EIA but need ideas for the rest. I've shown him ST bond funds and he's not crazy about it because of principal fluctuation. CDs pay zilch. MM even less. Thinking maybe a shorter term corporate? Ideas appreciated.[/quote] I don't see a concern for liquidity in OP's post. Besides, most EIAs will allow 10% (or more) penalty-free. IRAs have a lack of liquidity until age 59 1/2. Does that make QP contributions unsuitable? Keep digging. You'll hit something eventually.anon- your view of the V A that the “cash will go up” makes it seem he has all this “walk-away money”. He does not and it could really bite you. Variable is variable is Variable and this is not a Variable kinda guy based onn iinfo provided.
Lock- my complaint was based on what i heard ALOT of at Jones. I did NOT use hypos- most others did. My problem is your language: “any hypo will show he WILL…” . No- you cannot go forward with a hypo only backward. The only way i know of to use a hypo “correctly” is to explain over and over again how irrelevent it is moving forward!
That is because he does have all of this walk-away money. If it's a 10 year GMAB, he has all of this walk-away money in 10 years. If it's not money that is needed until then, that can be fine.anon- your view of the V A that the “cash will go up” makes it seem he has all this “walk-away money”. He does not and it could really bite you. Variable is variable is Variable and this is not a Variable kinda guy based onn iinfo provided.
So after 10 years, he has a Benefit Base from the GMAB that is way above what the actual market returns are, and he can take that entire Benefit Base as cash all at once and put it in the bank (surrender contract for the Benefit Base Amount)?
Correct. That is why it is a gmAb and not a gmIb.
Coolio. In fact, I literally make that part of my presentation. While looking backward, I walk forward into a wall.Lock- my complaint was based on what i heard ALOT of at Jones. I did NOT use hypos- most others did. My problem is your language: “any hypo will show he WILL…” . No- you cannot go forward with a hypo only backward. The only way i know of to use a hypo “correctly” is to explain over and over again how irrelevent it is moving forward!
[quote=SometimesNowhere] Contact your compliance officer and start writing your complaint rebuttal.
[/quote]
funny
[quote=dividend_and_conquer]
2nd the equity linked CD option. High quality principal protected note is another option.
[/quote]
WTF is this witch hazel bullshti?
“high quality principal protected note” WTF
dont sell this crap to your peeps.
THERE IS NO FREE LUNCH IN THIS BUSINESS.
You want a great rule in this biz?
If we get our hands on something and it takes more then a page to explain it, your client WILL get screwed. (the grand daddy of them all? CDO’s we ALMOST destroyed the free world)
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