For Rankstocks - A Discussion
OK - I’m want to open up the discussion a bit more about variable annuities and fixed index annuities.
You say you don't think your clients will need the guarantees. You say they're not worth the extra you pay for said guarantees. You say you're upset that insurance companies and reps make money off the sale of these products. I agree: clients don't need the guarantees. But they want them. I say the extra you pay is only worth it if the living benefits make a client a better investor (i.e. not being tempted to buy high and sell low). I say that, given the complex nature of what we do, I have no guilt getting paid large commissions for the sale of complex insurance products. If a client ever asked me how much, I would hold my head high and tell them. Otherwise, it is none of their concern. Although, if I were in a pissing contest with a fee-based advisor or a trader, I would list out the potential future commissions I would be missing out on by not doing a fee-based or trading account. I have never sold an FIA. I have no problems with them. For many people, a guaranteed fixed rate of return, coupled with the opportunity to have a better growth rate than a CD is attractive. Moreover, it is a prudent investment strategy. Observe: $100k investment - I will average a client 25% R/O/R over four years. Year one: Up 100%, the account balance is $200k Year two: Down 50%, the account balance is $100k Year three: Up 100%, the account balance is $200k Year four: Down 50%, the account balance is $100k Volatility is a huge player in how well an investor does. FIAs look a hell of a lot better now, don't you think? Granted, withdrawals are taxed at income rather than LTCG rates, but what about a qualified plan? Who cares how withdrawals are taxed then? Even in a taxable account, is it safe to say tax-deferral combined with the ability to NEVER LOSE MONEY could outperform net of taxes at withdrawal? Maybe, maybe not. But unlike you, I'm not about to throw blanket statements in order to ignorantly bash one strategy and praise another. I hold myself accountable. I need to prove strategies to my clients. I have stated before that my main focus is not VAs and FIAs. I know, however, when an argument is valid and when one is full of half-truths and opinions. And I'll fight for the right of other producers to practice they way they want, given it is in the best interest of their clients. Your turn. Good luck. You'll need it.Listen…rankstocks is an idiot. He would argue medicine with a doctor. The truth is that he is losing clients to annuities and he’s not smart enough to realize that they only way to make money in sales it to find out what people want to buy and sell it to them. I sell lots of annuities, but if I find out that people would rather have life settlements, then I will be in the life settlement business. I’m a smart SOB, but I have no clue about how to fight the masses.
[quote=deekay]OK - I’m want to open up the discussion a bit more about variable annuities and fixed index annuities.
You say you don't think your clients will need the guarantees. You say they're not worth the extra you pay for said guarantees. You say you're upset that insurance companies and reps make money off the sale of these products. I agree: clients don't need the guarantees. But they want them. I say the extra you pay is only worth it if the living benefits make a client a better investor (i.e. not being tempted to buy high and sell low). I say that, given the complex nature of what we do, I have no guilt getting paid large commissions for the sale of complex insurance products. I'm afraid you'd be shocked at the number of salesmen who can't answer extremely basic questions about FIAs. I've had some interesting discussions with a few local guys who sell them, and I was appalled at how little they knew about the product. You're correct, they are certainly complex insurance products. If a client ever asked me how much, I would hold my head high and tell them. Otherwise, it is none of their concern. Although, if I were in a pissing contest with a fee-based advisor or a trader, I would list out the potential future commissions I would be missing out on by not doing a fee-based or trading account. I have never sold an FIA. I have no problems with them. For many people, a guaranteed fixed rate of return, coupled with the opportunity to have a better growth rate than a CD is attractive. Moreover, it is a prudent investment strategy. Observe: $100k investment - I will average a client 25% R/O/R over four years. Year one: Up 100%, the account balance is $200k Year two: Down 50%, the account balance is $100k Year three: Up 100%, the account balance is $200k Year four: Down 50%, the account balance is $100k Volatility is a huge player in how well an investor does. FIAs look a hell of a lot better now, don't you think? Granted, withdrawals are taxed at income rather than LTCG rates, but what about a qualified plan? Who cares how withdrawals are taxed then? Even in a taxable account, is it safe to say tax-deferral combined with the ability to NEVER LOSE MONEY could outperform net of taxes at withdrawal? Maybe, maybe not. But unlike you, I'm not about to throw blanket statements in order to ignorantly bash one strategy and praise another. I hold myself accountable. I need to prove strategies to my clients. I have stated before that my main focus is not VAs and FIAs. I know, however, when an argument is valid and when one is full of half-truths and opinions. And I'll fight for the right of other producers to practice they way they want, given it is in the best interest of their clients. My issue with sale of FIAs and "bonus" fixed annuities is not so much the products themselves but rather the common practice of churning. The fictitious bonus was created by insurance companies to provide the illusion that the client is overcoming the surrender fees when taking a salesman's advice to 1035 into a "better" annuity. I see this going on constantly, and it's just wrong. Your turn. Good luck. You'll need it.[/quote]Borker BOY, how is it that you SEE this going on constantly? How do you do that and still find the time to work? Are you lying to us?
I have an annuity churning factory in my town, and their clients come in constantly and ask me to help them get out of their “investment.” I SEE this going on by looking at their statements and SEEING that their original investment has been 1035’d 7-8 times over the course of 10 years.
Obvioulsy, I don't get paid for telling folks they've been taken advantage of and there's nothing I can do to help, but I would consider it to be a part of my job, i.e., WORK.[quote=Borker Boy]I have an annuity churning factory in my town, and their clients come in constantly and ask me to help them get out of their “investment.” I SEE this going on by looking at their statements and SEEING that their original investment has been 1035’d 7-8 times over the course of 10 years.
Obvioulsy, I don't get paid for telling folks they've been taken advantage of and there's nothing I can do to help, but I would consider it to be a part of my job, i.e., WORK. [/quote]You're a damned liar.
Holly Hobby,
We have a team in my town that just moved from AGE to SB. That was their M.O. They have to "renew" their variable annuity contracts that "mature" every four years or so. That's practically all they sell. The AGE BOM basically forced them out. I know because I know the BOM. He was so concerned about what they do with their annuities, that they were given an ultimatum. So they left. They are now with their 3rd B/D in less than 7 years. I give them less than 1 year with their SB. It happens.[quote=B24]Holly Hobby,
We have a team in my town that just moved from AGE to SB. That was their M.O. They have to "renew" their variable annuity contracts that "mature" every four years or so. That's practically all they sell. The AGE BOM basically forced them out. I know because I know the BOM. He was so concerned about what they do with their annuities, that they were given an ultimatum. So they left. They are now with their 3rd B/D in less than 7 years. I give them less than 1 year with their SB. It happens.[/quote]...and, naturally, all of their clients have, coincidentally, made their way to you to show you what happened to them. Why don't you PM their names to me, so I can look these scoundrels up?
I don’t have any reason to lie to you. I don’t know you, you don’t know me, and I’d assume that 99.9% of potential investors don’t even know this forum exists–so I’m in no position to sway a prospective annuity buyer’s opinion. I’m just telling you what I’ve seen with my own eyes and have been shown by CPAs who do the taxes for the vicitims of these guys.
If I trusted you, which I don't, I'd be glad to forward several statements to you (with names removed, of course) that prove exactly what I'm talking about. I'm actually glad that you think I'm lying. Maybe that means that the practice of churning annuities isn't as pervasive as I think it is. With regard to the AGE/SB team, I've not witnessed this going on in wirehouses. I've only seen it in the independent channels where there's no supervision by a BOM.[quote=Borker Boy]I don’t have any reason to lie to you. I don’t know you, you don’t know me, and I’d assume that 99.9% of potential investors don’t even know this forum exists–so I’m in no position to sway a prospective annuity buyer’s opinion. I’m just telling you what I’ve seen with my own eyes and have been shown by CPAs who do the taxes for the vicitims of these guys.
If I trusted you, which I don't, I'd be glad to forward several statements to you (with names removed, of course) that prove exactly what I'm talking about. I'm actually glad that you think I'm lying. Maybe that means that the practice of churning annuities isn't as pervasive as I think it is. With regard to the AGE/SB team, I've not witnessed this going on in wirehouses. I've only seen it in the independent channels where there's no supervision by a BOM.[/quote]Caught in another lie. AGE is not in the independent channel.
No supervision? We ARE BOM's. I know that you think that we won't figure out how naive you are, but you're wrong. I KNOW that you are relatively new in the business. You're losing clients because you are using C-Shares and Asset based fee accounts. It's easy to steal from guys like you with annuities. "Mr. Prospect, the first thing we're gonna do is turn off that EXTRA fee that they're charging you...."
[quote=Hobby Bull] [quote=B24]Holly Hobby,
We have a team in my town that just moved from AGE to SB. That was their M.O. They have to "renew" their variable annuity contracts that "mature" every four years or so. That's practically all they sell. The AGE BOM basically forced them out. I know because I know the BOM. He was so concerned about what they do with their annuities, that they were given an ultimatum. So they left. They are now with their 3rd B/D in less than 7 years. I give them less than 1 year with their SB. It happens.[/quote]...and, naturally, all of their clients have, coincidentally, made their way to you to show you what happened to them. Why don't you PM their names to me, so I can look these scoundrels up?
[/quote] Boy, that would be helpful.
[quote=Hobby Bull] [quote=Borker Boy]I don’t have any reason to lie to you. I don’t know you, you don’t know me, and I’d assume that 99.9% of potential investors don’t even know this forum exists–so I’m in no position to sway a prospective annuity buyer’s opinion. I’m just telling you what I’ve seen with my own eyes and have been shown by CPAs who do the taxes for the vicitims of these guys.
If I trusted you, which I don't, I'd be glad to forward several statements to you (with names removed, of course) that prove exactly what I'm talking about. I'm actually glad that you think I'm lying. Maybe that means that the practice of churning annuities isn't as pervasive as I think it is. With regard to the AGE/SB team, I've not witnessed this going on in wirehouses. I've only seen it in the independent channels where there's no supervision by a BOM.[/quote]Caught in another lie. AGE is not in the independent channel.
No supervision? We ARE BOM's. I know that you think that we won't figure out how naive you are, but you're wrong. I KNOW that you are relatively new in the business. You're losing clients because you are using C-Shares and Asset based fee accounts. It's easy to steal from guys like you with annuities. "Mr. Prospect, the first thing we're gonna do is turn off that EXTRA fee that they're charging you...."
[/quote] Re-read my statement. I didn't say AGE was in the independent channel. I said that I've not witnessed annuity churning going on in wirehouses, i.e., at firms like AGE or SB. I've only seen it in the independent channels.
[quote=Hobby Bull] [quote=Borker Boy]I don’t have any reason to lie to you. I don’t know you, you don’t know me, and I’d assume that 99.9% of potential investors don’t even know this forum exists–so I’m in no position to sway a prospective annuity buyer’s opinion. I’m just telling you what I’ve seen with my own eyes and have been shown by CPAs who do the taxes for the vicitims of these guys.
If I trusted you, which I don't, I'd be glad to forward several statements to you (with names removed, of course) that prove exactly what I'm talking about. I'm actually glad that you think I'm lying. Maybe that means that the practice of churning annuities isn't as pervasive as I think it is. With regard to the AGE/SB team, I've not witnessed this going on in wirehouses. I've only seen it in the independent channels where there's no supervision by a BOM.[/quote]Caught in another lie. AGE is not in the independent channel.
No supervision? We ARE BOM's. And that's what's so wrong, and terrifying, about independent annuity salesmen. Thanks for making my point. I know that you think that we won't figure out how naive you are, but you're wrong. I KNOW that you are relatively new in the business. You're losing clients because you are using C-Shares and Asset based fee accounts. It's easy to steal from guys like you with annuities. "Mr. Prospect, the first thing we're gonna do is turn off that EXTRA fee that they're charging you...."
[/quote]
Just because HB doesn’t have a BOM in his office doesn’t mean there isn’t any supervision. He has to have an OSJ to approve all trades.
Yeah, I’m indy and do annuities and have a compliance department which reviews them very carefully.
Unfortunately churning of annuities happens everywhere, not just with the independant guys. There are a ton of advisors who call their clients every 7 years when their B share annuity is out of surrender offering them the next best thing. Or just flat out telling them that they are maturing and they need to do something else. We had an FA in our region that did that frequently. Probably $5-10K gross/month just on his annuity churning. Pitiful. Now, to his credit when he 1035’d them he would usually move them to an A share annuity. So, no more annuity flipping.
[quote=Spaceman Spiff]Unfortunately churning of annuities happens everywhere, not just with the independant guys. There are a ton of advisors who call their clients every 7 years when their B share annuity is out of surrender offering them the next best thing. Or just flat out telling them that they are maturing and they need to do something else. We had an FA in our region that did that frequently. Probably $5-10K gross/month just on his annuity churning. Pitiful. Now, to his credit when he 1035’d them he would usually move them to an A share annuity. So, no more annuity flipping. [/quote]
Really, Queef? An annuity with NO surrender charge is harder to flip? There are a ton of advisors who have no clue as to what they’re talking about. You are one of them.
There are a ton of advisors who call their clients every 7 years when their B share annuity is out of surrender offering them the next best thing
I don't see a problem with moving a client from an older annuity that is out of surrender to a new annuity with better features, better guarantees, better fund selection if it is a variable annuity, better interest rate if it is a fixed annuity As long as the client is aware of the new surrender charges and isn't in need of his/her principal in the near future, what's the problem? Often you have no choice BUT to move to another annuity if you want to better their situation because of the deferred gains. If you have a client in a stock or a mutual fund in an asset class that has played out, don't you recommend making a change in their portfolio to take advantage of the gains and try to get repositioned for more growth?What a joke
in general, I find that many brokers (esp at banks), while they can legally and technically say that they explained it all and gave a prospectus (big deal), actually “spin” it to get the sale and the commision. Then later the client either 1. believes what he thinks he heard and is blissfully ignorant or 2. realizes (too late! Gotcha w/the CDSC!) that in fact the principal is dependent on the stock market to some degree and is now dropping. No 6% “return”.
Many, many angry people when I explain it with no spin. If you do not need/take the income, there is no 6% return, no princ guar, etc. In fact, your princ drops FASTER due the cost (that GMWB is being charged even though you do not need income! Then there is this cost and that cost....) My annuity is all in for less than half. I take 50bps only, with Vanguard subaccounts (25 bps), no CDSC, a 55 bp M & E, and a GMWB that is FREE unless activated. But now with falling principals back to about the amount invested, we can just cash out instead of 1035.[quote=newnew] in general, I find that many brokers (esp at banks), while they can legally and technically say that they explained it all and gave a prospectus (big deal), actually “spin” it to get the sale and the commision. Then later the client either 1. believes what he thinks he heard and is blissfully ignorant or 2. realizes (too late! Gotcha w/the CDSC!) that in fact the principal is dependent on the stock market to some degree and is now dropping. No 6% “return”.
Many, many angry people when I explain it with no spin. If you do not need/take the income, there is no 6% return, no princ guar, etc. In fact, your princ drops FASTER due the cost (that GMWB is being charged even though you do not need income! Then there is this cost and that cost....) My annuity is all in for less than half. I take 50bps only, with Vanguard subaccounts (25 bps), no CDSC, a 55 bp M & E, and a GMWB that is FREE unless activated. But now with falling principals back to about the amount invested, we can just cash out instead of 1035.[/quote]I'm sorry that the only way for you to add value is to use low priced crap. If you ever really do get a prospect with an annuity, you probably won't close the deal by pointing out that you think that they got screwed. People don't like to feel stupid and will usually avoid the guy that "told" them that they screwed up.
Why do you cash out of annuities? Need another commission?
Nice, and I was just beginning to think you had a brain. You completely missed the point of the conversation. Here's how I envision it going in YOUR office: Holly Hobby: Mr. Schmuck, this his Holly with Gonna Screw You Investments. Yeah, that guy. It has been a long time. Seven years in fact. You know that annuity that I bought for you 7 years ago, well, it's come due and it's time to do something different with that money. Now, I know you like it, and it's just now where you can get to your money without a surrender penalty, but the investment world has changed drastically since we last spoke. Yes, seven years does make a huge difference in the annuity world. So, I have this new annuity product that was just launched. It's light years ahead of what you currently have and I think I'm just gonna switch it over there. That OK with you. No, you don't need to do anything other than sign the papers. I'll take care of the rest. Yes, just like the last one it's only good for 7 years. After that we'll have to do something different again. No, there's no cost to you. The annuity company pays me to help you. No, the expenses are similar too. So, you really won't see much of a change, just a different name on your statement. But I promise it'll be better. Yes, the market is down right now. I have this other product you should look at. You can get market like returns with absolutely no risk of a down year. We should talk about that too. That emergency fund you have would be perfect for it. We'll talk about it when you come by to sign your life away. Am I close? The actual point with an A share annuity is that you lose the ability to give them a timeframe that the annuity is good for. Thus, no flipping phone call. You probably could 1035 them as you like, but I'd guess your compliance officer, assuming you have one, wouldn't take that very well. I know mine wouldn't.[quote=Spaceman Spiff]Unfortunately churning of annuities happens everywhere, not just with the independant guys. There are a ton of advisors who call their clients every 7 years when their B share annuity is out of surrender offering them the next best thing. Or just flat out telling them that they are maturing and they need to do something else. We had an FA in our region that did that frequently. Probably $5-10K gross/month just on his annuity churning. Pitiful. Now, to his credit when he 1035’d them he would usually move them to an A share annuity. So, no more annuity flipping. [/quote]
Really, Queef? An annuity with NO surrender charge is harder to flip? There are a ton of advisors who have no clue as to what they’re talking about. You are one of them.
[quote=Spaceman Spiff]
Here's how I envision it going in YOUR office: Holly Hobby: Mr. Schmuck, this his Holly with Gonna Screw You Investments. Yeah, that guy. It has been a long time. Seven years in fact. You know that annuity that I bought for you 7 years ago, well, it's come due and it's time to do something different with that money. Now, I know you like it, and it's just now where you can get to your money without a surrender penalty, but the investment world has changed drastically since we last spoke. Yes, seven years does make a huge difference in the annuity world. So, I have this new annuity product that was just launched. It's light years ahead of what you currently have and I think I'm just gonna switch it over there. That OK with you. No, you don't need to do anything other than sign the papers. I'll take care of the rest. Yes, just like the last one it's only good for 7 years. After that we'll have to do something different again. No, there's no cost to you. The annuity company pays me to help you. No, the expenses are similar too. So, you really won't see much of a change, just a different name on your statement. But I promise it'll be better. Yes, the market is down right now. I have this other product you should look at. You can get market like returns with absolutely no risk of a down year. We should talk about that too. That emergency fund you have would be perfect for it. We'll talk about it when you come by to sign your life away. [/quote] Spiff, Annuities 7 years ago didn't have living benefits at all. Not even close, but none at all, like today's. Case in point, I have a newer client that had an annuity with no living benefits, nothing at all. His surrender was up in March. I 1035'd the annuity into one with an MGWB rider. He is 57 and looking to retire next year. When I first transferred in his annuity, it was worth, $350k. By the time I was able to 1035 it, it was worth $318k. Had he been in one with living benefits from the beginning, his $350k would be locked in, plus he'll have income for life. So how is this scenario different from any other? It was the right thing to do for this client. A lot of things change in 7 years. Do you still drive a car with manual windows? Cassette deck? Do you still have a typewriter? Do you still have a TV with antennae? Do you still use AOL 1.0? Point is things are updated. 7 years is a long time to hold anything without it changing. By the way, I would defend HB, that he doesn't say the annuities "mature" or "come due". I'm sure some guys do that, but I would feel safe to say that he doesn't conduct business like that.Nice, and I was just beginning to think you had a brain. You completely missed the point of the conversation. Here's how I envision it going in YOUR office: Holly Hobby: Mr. Schmuck, this his Holly with Gonna Screw You Investments. Yeah, that guy. It has been a long time. Seven years in fact. You know that annuity that I bought for you 7 years ago, well, it's come due and it's time to do something different with that money. Now, I know you like it, and it's just now where you can get to your money without a surrender penalty, but the investment world has changed drastically since we last spoke. Yes, seven years does make a huge difference in the annuity world. So, I have this new annuity product that was just launched. It's light years ahead of what you currently have and I think I'm just gonna switch it over there. That OK with you. No, you don't need to do anything other than sign the papers. I'll take care of the rest. Yes, just like the last one it's only good for 7 years. After that we'll have to do something different again. No, there's no cost to you. The annuity company pays me to help you. No, the expenses are similar too. So, you really won't see much of a change, just a different name on your statement. But I promise it'll be better. Yes, the market is down right now. I have this other product you should look at. You can get market like returns with absolutely no risk of a down year. We should talk about that too. That emergency fund you have would be perfect for it. We'll talk about it when you come by to sign your life away. Am I close? The actual point with an A share annuity is that you lose the ability to give them a timeframe that the annuity is good for. Thus, no flipping phone call. You probably could 1035 them as you like, but I'd guess your compliance officer, assuming you have one, wouldn't take that very well. I know mine wouldn't. [/quote][quote=Hobby Bull] [quote=Spaceman Spiff]Unfortunately churning of annuities happens everywhere, not just with the independant guys. There are a ton of advisors who call their clients every 7 years when their B share annuity is out of surrender offering them the next best thing. Or just flat out telling them that they are maturing and they need to do something else. We had an FA in our region that did that frequently. Probably $5-10K gross/month just on his annuity churning. Pitiful. Now, to his credit when he 1035’d them he would usually move them to an A share annuity. So, no more annuity flipping. [/quote]
Really, Queef? An annuity with NO surrender charge is harder to flip? There are a ton of advisors who have no clue as to what they’re talking about. You are one of them.
That's exactly how it works.
I don’t cash out for a commission Bobby cuz I never take commissions. I am not a broker and have no B/D. Also, I do not tell 'em they were stupid, either-only the facts; including the taxation to the next generation.
As to costs- I agree not as big a deal IF IT"S ABOUT INCOME. But, yeah, costs ARE a huge deal if it's about GROWTH and annuities are NOT the way to go in that case generally IMHO.[quote=newnew]I don’t cash out for a commission Bobby cuz I never take commissions. I am not a broker and have no B/D. Also, I do not tell 'em they were stupid, either-only the facts; including the taxation to the next generation.
As to costs- I agree not as big a deal IF IT"S ABOUT INCOME. But, yeah, costs ARE a huge deal if it's about GROWTH and annuities are NOT the way to go in that case generally IMHO.[/quote]Why are you hanging out on a forum for REGISTERED REPS, criticizing the REGISTERED REPS, if you're not a REGISTERED REP? No wonder you hate annuities! YOU can't get PAID for them! Why don't you leave us alone and go hang out at www.illnevermakemorethansixtythousanddollarsperyear.com/forum?
[quote=newnew]I don’t cash out for a commission Bobby cuz I never take commissions. I am not a broker and have no B/D. Also, I do not tell 'em they were stupid, either-only the facts; including the taxation to the next generation.
As to costs- I agree not as big a deal IF IT"S ABOUT INCOME. But, yeah, costs ARE a huge deal if it's about GROWTH and annuities are NOT the way to go in that case generally IMHO.[/quote]WTF?!?. Why don't you shut up then if you aren't licensed to be a financial advisor or financial representative? What DO you DO for a living newnew. if I may ask? Do you work for H&R Block and know how run a computer program? Are you an auto mechanic? I assumed you were a washed out EDJ broker by your name.
Seriously why are you here wasting our time?
How is it that you are offering a VA if you are not licensed? You can't offer ANY VA without the proper registration or SUPERVISION. Who is watching you?. How is it (unless you have a CFP or CPA) that you are giving people financial advice in the first place if you are not licensed.
So, what I gather is that you are talking to people about products about which you have no knowledge and for which you are not licensed and you are getting them to quote: just cash out instead of 1035. What are you suggesting people do with the money that they just cashed out? Hmmmmmm. And you call us szeazy.
exactly icecold. I make my living with an RIA firm, and we custody with Schwab. Registered Rep magazine has RIAs on the cover of the mag this month. Do the rest of you find this odd? Did you not know that there are many RIAs in the world? And on this forum? That read this magazine? I was very successful at Ed Jones, but went indy. Wow- get a grip folks.
I have no problems with someone doing a 1035 exchange on an annuity, if there is some benefit to doing so. Something like a lower M&E, some living bene that wasn't available 7 years ago, a multi manager product vs a single manager product. The problem comes in when it is assumed that simply because someone is out of the surrender penatly phase, that they need to switch to something new. To make a call to say that an annuity (unless it is a fixed annuity) has come due is criminal. Variable annuities don't come due. They NEVER have to be 1035'd. There are legitimate reasons why you would, but one of them is not because there is no longer a surrender charge.
The way Babs and snags said they do it is the same way I work with my annuity clients. There has to be a benefit to making the switch.[quote=Spaceman Spiff]
I have no problems with someone doing a 1035 exchange on an annuity, if there is some benefit to doing so. Something like a lower M&E, some living bene that wasn't available 7 years ago, a multi manager product vs a single manager product. The problem comes in when it is assumed that simply because someone is out of the surrender penatly phase, that they need to switch to something new. To make a call to say that an annuity (unless it is a fixed annuity) has come due is criminal. Variable annuities don't come due. They NEVER have to be 1035'd. There are legitimate reasons why you would, but one of them is not because there is no longer a surrender charge.
The way Babs and snags said they do it is the same way I work with my annuity clients. There has to be a benefit to making the switch. [/quote] Spiff, I agree with you. But, no regular poster on this forum calls their clients and tells them their VA is due or has matured. That stuff is reserved for those guys seen on Dateline. The thing with the legitimate reasons to 1035 after 7 years is that pretty much every 7 year period has seen some sort of advancement in annuities. So in that sense, there is most likely a benefit in any 1035 after 7 years.So, are we not counting Mr. Bull as a regular poster? Cause I certainly would guess that he’s one of those Dateline kind of guys.
No way. There's nothing wrong with specializing in annuities. In fact there are a lot of people that make a ton of money doing that. It's like Bill Gross specializing in bonds, or someone specializing in covering estate taxes with a SPIA and permanent insurance. Guys who specialize in annuities present their case and the client will say yes or no. There has been nothing anyone has said here that would signify they call their clients and say their VA has matured or come due. The sad fact of the matter is that there are times when we know what is best for the client and they won't do it or they delay and delay. There are other times when the only way to get somebody to do something is to give them what they want. If you don't, they'll find someone that will. A lot of people right now want a guarantee. And I'll further that by saying a lot of people need to transfer their retirement income risk to someone else. Besides, you have one guy that is adamently against annuities...doesn't even present them. You have another guy who believes in them, and presents what he believes in, if it doesn't work, good luck to you. Who's to say which of these guys is right vs. wrong? There are a million ways to run your business. And speaking of running our business, we need referrals. If anyone on here was that legitimately corrupt, there is no way they would get referrals. In fact, something would catch up to them and FINRA would be all over it. It's a simple call to make. "Hey Mr. Client, we're out of surrender and a lot has changed in the market place. Come on in and we'll take a look at your options and see what makes sense". I don't know who you're running into that says the VA has matured or come due, but I would put my money on it that HB/BH isn't one of them. One last point: People often times don't know what's good for them. They think they do because they read it in Money Magazine, or heard it on Cramer or Suze Orman, or heard it from a friend, but some people really have no clue. Don't know how this ties into anything, but it was on my mind.So, are we not counting Mr. Bull as a regular poster? Cause I certainly would guess that he’s one of those Dateline kind of guys.
[quote=Spaceman Spiff]
I have no problems with someone doing a 1035 exchange on an annuity, if there is some benefit to doing so. Something like a lower M&E, some living bene that wasn’t available 7 years ago, a multi manager product vs a single manager product. The problem comes in when it is assumed that simply because someone is out of the surrender penatly phase, that they need to switch to something new. To make a call to say that an annuity (unless it is a fixed annuity) has come due is criminal. Variable annuities don’t come due. They NEVER have to be 1035’d. There are legitimate reasons why you would, but one of them is not because there is no longer a surrender charge.
The way Babs and snags said they do it is the same way I work with my annuity clients. There has to be a benefit to making the switch. [/quote]How do you feel about 1035'ing qualified annuities?
I don’t have a problem with 1035 exchanges, qualified or otherwise. But there has to be a benefit to do it. But, then again, I’m a know nothing queef and you’re the most brilliant annuity salesman in the world.
[quote=Spaceman Spiff]I don’t have a problem with 1035 exchanges, qualified or otherwise. But there has to be a benefit to do it. But, then again, I’m a know nothing queef and you’re the most brilliant annuity salesman in the world. [/quote]
You’re proven, one more time, that you know nothing. You can’t 1035 qualified money.
You know what he meant: liquidate and transfer. Same result: cash into a new annuity. Can’t you just post your own experience Bobby without the constant bitchin’? PLEASE GO BACK
[quote=rankstocks]
Sorry everyone, I was out of the country on a Div Trip. Hammered out over 50 calls each of the last 2 days though. This topic makes me feel like I'm stuck in a Hamster wheel. So I am going to change my angle a little. Let me start that an annuity does have its place, occationally. When you run across a 10-35 because of a garbage annuity, a client that has a need for a pension with potential for rising income (GMIB's), clients that aren't planning to use the money and are in relatively poor health (death benefit), clients that want to unwind tax consequences (period certain immediate annuitizations), nursing home patients that want to qualify for medicaid (immediate annuitizations), and a couple other legitimate reasons. These concessions probably make deekay feel rosey inside. deekay said, "I have never sold an FIA. I have no problems with them. For many people, a guaranteed fixed rate of return, coupled with the opportunity to have a better growth rate than a CD is attractive. Moreover, it is a prudent investment strategy." I don't really know why you would argue this point if you have never sold an EIA. If the strategy was so prudent, why not recommend it? Your point seemes counterintuitive. As far as overall returns of EIA's I have three comments. 1. First why not use this as a strategy....For a 100k purchase, buy a AAA-rated munizero with a 10 year maturity A 10 year surrender period? That's a long time.for around 60k at today's yields and buy the SPX with the other 40k. Not only is the tax efficiency around 95%, your principal will get returned after 10 years and the SPX will most likely have grown nicely for the client as well. 2. Second, a study came out last year, I cut it out of the Investment News weekly publication, that showed a backtesting of EIA's would have outperformed the actual market in less than 5% of all 10 year periods.
EIA's are not designed to outperform the market. They are designed to be a good alternative to CD's and fixed annuities. Since you're naive, I will point out that MANY people are quite happy to make 5-7% with no risk to principal. These tend to be big tickets.
3. Third, with most EIA's have low participation rates, caps on returns, long surrender penalties, ordinary income rates on withdrawals, and not even factoring dividends in the index's return (an extra 2%), I just can't see how anyone could justify this garbage.
Of course you can't see it. See above.
I will finish off on some extremely unethical practices going on out their (did you look for more unethical behavior while you were out of the country?)when it comes to annuities, another reason I consider most annuity salesmen sellers of snakeoil in a smoke and mirrors industry: (I'm sorry that you can't compete with them.)
1. Last year came across an annuity with a perpetual 6% surrender penalty (that's right, it never goes away) yielding 3.8% for the client. I doubt it.
2. Annuities purchased 1999 and before that have a dollar-for-dollar death benefit reduction with a high death benefit and a low current value because of poor diversification that get fully 10-35ed even though the client could do a partial withdrawal and retain the death benefit as a quazi life insurance policy. DB's are a feature. They are not a reason to buy an annuity. Life insurance does a better job.
3. Clients sold a "guaranteed 6% rate of return on their annuity" only to have me explain that they must either die or annuitize the contract to get that money out of it. I'm not surprised that someone as desperate as you would lie to people to try to get the business.
4. I'm actually boring myself here, so I will stop. But if you would like another 10 examples, please let me know. Bring them on.
deekay, I'm glad you "hold yourself accountable", but most annuity slingsters don't. This industry needs cleaned up, badly. I'd run the taskforce myself if they asked me. It sounds like you're already running one.
[/quote]
OK, good for you. You got me on the semantics. I know that's a big word for your under developed brain so I'll post this to help you understand it: http://en.wikipedia.org/wiki/Semantics[quote=Spaceman Spiff]I don’t have a problem with 1035 exchanges, qualified or otherwise. But there has to be a benefit to do it. But, then again, I’m a know nothing queef and you’re the most brilliant annuity salesman in the world. [/quote]
You’re proven, one more time, that you know nothing. You can’t 1035 qualified money.
OK, good for you. You got me on the semantics. I know that's a big word for your under developed brain so I'll post this to help you understand it: http://en.wikipedia.org/wiki/Semantics[/quote][quote=Hobby Bull] [quote=Spaceman Spiff]I don’t have a problem with 1035 exchanges, qualified or otherwise. But there has to be a benefit to do it. But, then again, I’m a know nothing queef and you’re the most brilliant annuity salesman in the world. [/quote]
You’re proven, one more time, that you know nothing. You can’t 1035 qualified money.
What you dismiss as "semantics" could trigger a taxable event.
Oh, you too? I had this big long paragraph ready to post as a response to your comment. However, it's just not worth it. It's Friday. I don't really want to work that hard. So, I'll just say this: I know the difference between a transfer and a 1035 exchange. And if we're playing the semantics game, the word you should have used is will, not could.
BTW, if Rankstocks is out of the country on a Div Trip, that means he's not desparate for anything. It also means he can not only compete with the snake oil salesmen, but he can show their clients the things said salesmen DIDN'T tell them.[quote=rankstocks]
Sorry everyone, I was out of the country on a Div Trip. Hammered out over 50 calls each of the last 2 days though. This topic makes me feel like I'm stuck in a Hamster wheel. So I am going to change my angle a little. Let me start that an annuity does have its place, occationally. When you run across a 10-35 because of a garbage annuity, a client that has a need for a pension with potential for rising income (GMIB's), clients that aren't planning to use the money and are in relatively poor health (death benefit), clients that want to unwind tax consequences (period certain immediate annuitizations), nursing home patients that want to qualify for medicaid (immediate annuitizations), and a couple other legitimate reasons. These concessions probably make deekay feel rosey inside. deekay said, "I have never sold an FIA. I have no problems with them. For many people, a guaranteed fixed rate of return, coupled with the opportunity to have a better growth rate than a CD is attractive. Moreover, it is a prudent investment strategy." I don't really know why you would argue this point if you have never sold an EIA. If the strategy was so prudent, why not recommend it? Your point seemes counterintuitive. I don't sell them because my B/D won't allow it. I stated that already. As far as overall returns of EIA's I have three comments. 1. First why not use this as a strategy....For a 100k purchase, buy a AAA-rated munizero with a 10 year maturity for around 60k at today's yields and buy the SPX with the other 40k. Not only is the tax efficiency around 95%, your principal will get returned after 10 years and the SPX will most likely have grown nicely for the client as well. I'm sure it would work as well. Maybe better than the EIA. Maybe not. I cannot predict the future, and neither can you. 2. Second, a study came out last year, I cut it out of the Investment News weekly publication, that showed a backtesting of EIA's would have outperformed the actual market in less than 5% of all 10 year periods. Of course it's gonna underperform the market. It's not designed to replicated the market. EIAs are for fixed annuity buyers who want the potential for a better ROR than a traditional fixed annuity will provide. 3. Third, with most EIA's have low participation rates, caps on returns, long surrender penalties, ordinary income rates on withdrawals, and not even factoring dividends in the index's return (an extra 2%), I just can't see how anyone could justify this garbage. So, some EIAs have high participation rates, no caps, short surrenders, and what not. What's your point? If money is held in a qualified plan, taxation doesn't change. Of course you don't get dividends - you're not investing in the market! You've proven yet again you have no fucking clue what you're talking about. I will finish off on some extremely unethical practices going on out their when it comes to annuities, another reason I consider most annuity salesmen sellers of snakeoil in a smoke and mirrors industry: 1. Last year came across an annuity with a perpetual 6% surrender penalty (that's right, it never goes away) yielding 3.8% for the client. 2. Annuities purchased 1999 and before that have a dollar-for-dollar death benefit reduction with a high death benefit and a low current value because of poor diversification that get fully 10-35ed even though the client could do a partial withdrawal and retain the death benefit as a quazi life insurance policy. 3. Clients sold a "guaranteed 6% rate of return on their annuity" only to have me explain that they must either die or annuitize the contract to get that money out of it. 4. I'm actually boring myself here, so I will stop. But if you would like another 10 examples, please let me know. deekay, I'm glad you "hold yourself accountable", but most annuity slingsters don't. This industry needs cleaned up, badly. I'd run the taskforce myself if they asked me.[/quote] Prove that all EIAs are bad and are inappropriate. All you've done is stated cases where they were sold inappropriately. Until then, get off your high horse. You're doing your clients a disservice by spewing mistruths and partial information.[quote=]
2. Second, a study came out last year, I cut it out of the Investment News weekly publication, that showed a backtesting of EIA's would have outperformed the actual market in less than 5% of all 10 year periods.EIA's are not designed to outperform the market. They are designed to be a good alternative to CD's and fixed annuities. Since you're naive, I will point out that MANY people are quite happy to make 5-7% with no risk to principal. These tend to be big tickets.
[/quote] This is correct. EIAs are not designed to outperform the market. They're designed to fund the retirements of the crooks who are selling them.
[quote=Borker Boy][quote=]
2. Second, a study came out last year, I cut it out of the Investment News weekly publication, that showed a backtesting of EIA's would have outperformed the actual market in less than 5% of all 10 year periods.EIA's are not designed to outperform the market. They are designed to be a good alternative to CD's and fixed annuities. Since you're naive, I will point out that MANY people are quite happy to make 5-7% with no risk to principal. These tend to be big tickets.
[/quote] This is correct. EIAs are not designed to outperform the market. They're designed to fund the retirements of the crooks who are selling them.[/quote] Yes, some EIA's are not sold with full disclosure as has been discussed on here to no end. That being said, they do have their place. Case in point, if you have a client that has saved $2 million for retirement and wants little risk and reduced volatility, what are you going to do? He doesn't need stock market returns. He doesn't want to lose purchasing power on his money either. He's already saved enough money to live the way he wants in retirement, now he doesn't want to lose it. So what are your options? We all know what the stock market has done, and he wouldn't have been happy. Bonds fix the income and could also lose value. CD's real return is negative. So what do you do for this guy? An EIA may fit the bill for a portion of his money, wouldn't you say? FYI, I've never sold one but I can see its place and I wouldn't make blanket statements saying that it's bad for everyone. You can get EIA's with 5 year surrender periods, so that's not as much an issue.
Gee, I don’t know. What did advisors do for this type of client before these magic elixirs were developed?
Were conservative investors doomed to either losing purchasing power or sustaining huge losses in the market before EIAs finally came along and saved the day?[quote=Borker Boy]Gee, I don’t know. What did advisors do for this type of client before these magic elixirs were developed?
Were conservative investors doomed to either losing purchasing power or sustaining huge losses in the market before EIAs finally came along and saved the day?[/quote] Gee, I don't know. Did advisors have to plan for 30 year retirements and the fact their clients didn't have company pensions?I’ve never seen an EIA that was designed to distribute income over a period of time, but I’m certainly not saying I’ve seen them all.
The contracts I've looked at would allow the usual 10% annual withdrawal, but the customer would lose all interest that had been earned on that portion of the money. Are there EIAs that will allow a person to invest their 401(k), etc., and then begin taking distributions every year?Troll stated,
"As far as overall returns of EIA's I have three comments. 1. First why not use this as a strategy....For a 100k purchase, buy a AAA-rated munizero with a 10 year maturity A 10 year surrender period? That's a long time. "Troll, fill me in on how a munizero has a 10-year surrender period. I didn't realize munizeros had surrender charges? Oh, wait a second, they don't. You can sell them in the secondary market any business day. This exemplify's the reason why it takes an I.Q. of a monkey to sell annuities. Most that pitch snake oil don't even know any of the other investments available to someone with more than a week long class to get their insurance license.
What’s the point of 1035ing contracts or constantly transferring them when we lose ALL the income/withdraw benefits?
Example: Year 1: Account Value is 100k/Income Base is 100k Year 10: Account Value is 200k/Income Base is 300k (because of market locks and compounding features inside a VA) Brokers kept transferring these clients after years and years of accumulating their income bases because "new & better things" come out. Why not just go into a conservative fund or even a CD for that matter and then buy a SPIA when the client is ready to retire? You would of saved 3-5% a year for the past 10 years. Yes I said 5%, (as account values fluctuate and go lower your expenses go higher). Fee of riders are based off income bases, not account values.Chris, are you the same person who started a thread and wanted to have an intelligent conversation about VAs? Geez, this post of yours is really bad.
Let's look at your example: Year 1: Account Value is 100k/Income Base is 100k Year 10: Account Value is 200k/Income Base is 300k (because of market locks and compounding features inside a VA) You are trying to use this as an example of how someone would be better off doing something conservative??? 1) Let's assume that the CD/conservative investment increased by 5% a year. The CD after 10 years would be worth $162,000. The annuity is worth $200,000. Last that I checked, $200,000 is worth more than $162,000. If one then purchases a SPIA, the payout would then be 25% higher or it can be "cash and carry". 2)I don't know of any GMIB value that would go up by 200% in 10 years while the contract value goes up 100%. If one works like this, it would have incredibly low annuitization rates. The $300,000 would annuitize for a lower amount than the $200,000. 3) With most GMIBs, if the account value is doubling in 10 years, the GMIB value is trailing the account value. This means that the costs of the contract are decreasing and not increasing. 4) Brokers keep transferring because it usually makes sense to do it. In most cases, when a contract gets transferred the contract value is above the GMIB value. Even if the contract value isn't above the GMIB value, it still makes sense to transfer when the contract value can be annuitized for a greater amount than the guarantees of the GMIB. Again we should never think of the GMIB having a value. It has a monthly income figure. So, in your example, the annuity kicks butt over the alternative, but your example makes no sense. If a broker is transferring when it doesn't make sense, that is an example of a bad broker, but says nothing about the merits of the investment.[quote=anonymous]Chris, are you the same person who started a thread and wanted to have an intelligent conversation about VAs? Geez, this post of yours is really bad.
Let's look at your example: Year 1: Account Value is 100k/Income Base is 100k Year 10: Account Value is 200k/Income Base is 300k (because of market locks and compounding features inside a VA) You are trying to use this as an example of how someone would be better off doing something conservative??? 1) Let's assume that the CD/conservative investment increased by 5% a year. The CD after 10 years would be worth $162,000. The annuity is worth $200,000. Last that I checked, $200,000 is worth more than $162,000. If one then purchases a SPIA, the payout would then be 25% higher or it can be "cash and carry". Of course, but this is of course when a client is not taking withdraws allowing both the account value and the income bases to double. If the client starts taking out withdraws, then the account value would deplete at the withdraw rate while the fees continue to increase. But yes, you are correct, if the performance of the VAs are going to be there, then it would definitely beat the CD. 2)I don't know of any GMIB value that would go up by 200% in 10 years while the contract value goes up 100%. If one works like this, it would have incredibly low annuitization rates. The $300,000 would annuitize for a lower amount than the $200,000. Tons of them actually (all stock capital insurance companies). AIG Sunamerica, AXA, ING, Jackson, Met, Hartford, Lincoln (all of them as long as they have some kind of ratchet/step up because the market can fluctuate in returns) 3) With most GMIBs, if the account value is doubling in 10 years, the GMIB value is trailing the account value. This means that the costs of the contract are decreasing and not increasing. Correct, I'm not sure which annuities you use, but most of the mainstream stock capital insurance companies have ratchets, therefore the income base should never be lower than the account value. It should always be higher or leveled (until a certain age). 4) Brokers keep transferring because it usually makes sense to do it. In most cases, when a contract gets transferred the contract value is above the GMIB value. Even if the contract value isn't above the GMIB value, it still makes sense to transfer when the contract value can be annuitized for a greater amount than the guarantees of the GMIB. Again we should never think of the GMIB having a value. It has a monthly income figure. I completely agree, 100%. So, in your example, the annuity kicks butt over the alternative, but your example makes no sense. If a broker is transferring when it doesn't make sense, that is an example of a bad broker, but says nothing about the merits of the investment. Correct, I apologize if I did not clarify myself. I shouldn't of said VAs are a bad investment vehicle, they are just complicated products used by BAD BROKERS who don't understand them. Thank you to everyone who has been patient with my points and have provided responses, greatly appreciated! [/quote]Source URL:https://www.wealthmanagement.com/forums/insurance/rankstocks-discussion