Invest a rollover!
for fun-- please share an investment stategy for an avg 500k r/o invested for the avg 65 retiree in the 25% bracket who will not tap it for income in the foreseeable future and has a moderate risk tolerance, and hopes to have much of it to pass on if possible. Please do not attack the way the question is phrased; have not given it much thought.
Variable Annuity.
Its called rule 405...........
I agree with Frank. I would put a large portion in VA and the remainder in laddered CD’s for emergency spending.
Married? Children? Life insurance in place? LTC policy in place? Why doesn’t he need income now? If working, how much current income? How is health? Any other retirement income sources (pension, part time work)? How much income does client feel he needs? How many obligations does client have? When (foreseeable future in no specific enough)is client needing income for the rollover? Is client charitable? Which is more important, comfortable retirement or legacy gift? This is some of the information needed to to answer your question.
VA would be about the last place I'd consider putting an IRA Rollover.
[quote=BBQ]
VA would be about the last place I’d consider putting an IRA Rollover.
[/quote]Why?
[quote=BBQ]
VA would be about the last place I'd consider putting an IRA Rollover.
[/quote] Please do tell.I’ll tell,
How about: 1. 7 year surrender penalty 2. Limited investment choices 3. Average M&E expenses of 1.4% 4. Rider expenses averaging 0-1.5% 5. no access to CD's, individual bonds, individual stocks, money market, or any other investment other than the limited mutual fund choices allowed in the variable annuity. 6. considering the main reason annuities are justified is tax-deferred growth, buying a VA inside an IRA would be like putting two diapers on a baby. 7. Considering asset allocation is 90% of long-term investment success and this client has a significant time frame, the death benefit wouldn't be a good reason to buy a VA inside an IRA, especially since most VA hucksters flip these ever 5-7 years anyway. 8. Because the client will not be taking an income for the foreseeable future, a GMIB would not be a justification to buy a VA. 9. Increased regulatory scrutiny has made it extremely difficult to justify VA's inside IRA's, and regulators have touched just the tip of the iceburg on this one. If you want a couple more reasons, let me know.....I'll list them.oh well, I tried. OF COURSE I didn’t list every KYC particular. It’s just a friggin’ forum–have some fun
Not a criticism, I think it’s funny people are answering it.
[quote=rankstocks]I’ll tell,
How about: 1. 7 year surrender penalty 2. Limited investment choices 3. Average M&E expenses of 1.4% 4. Rider expenses averaging 0-1.5% 5. no access to CD's, individual bonds, individual stocks, money market, or any other investment other than the limited mutual fund choices allowed in the variable annuity. 6. considering the main reason annuities are justified is tax-deferred growth, buying a VA inside an IRA would be like putting two diapers on a baby. 7. Considering asset allocation is 90% of long-term investment success and this client has a significant time frame, the death benefit wouldn't be a good reason to buy a VA inside an IRA, especially since most VA hucksters flip these ever 5-7 years anyway. 8. Because the client will not be taking an income for the foreseeable future, a GMIB would not be a justification to buy a VA. 9. Increased regulatory scrutiny has made it extremely difficult to justify VA's inside IRA's, and regulators have touched just the tip of the iceburg on this one. If you want a couple more reasons, let me know.....I'll list them. [/quote] Rank, these are the same reasons that most out of touch senior advisors in wirehouses give against annuities. Some of your points are just dead wrong. Annuities are actually having more inflow into tax-deferred accounts than non-qualified these days, and it's for the same reasons that they used to be shunned in qualified accounts: tax treatment is the same. The purpose for buying most of today's annuities is for the living benefit. I do hope you understand how these riders work, both tangible and intangible. I'm sure you haven't read any of Moshe Milevsky's reports or Ibbotson's studies. I have not had any trouble from regulators or compliance about putting a VA in an qualified account. On the topic of regulators and VA's, we had FINRA in our office checking up on things. The FINRA person asked, "Why would you do a 1035 exchange of this client's annuity? Why would you create a taxable event? This client might have a huge tax liability". Obviously the regulators don't know what they are talking about. Another point, people aren't buying annuities for the death benefit anymore either. Again, it's for the living benefits that I'm sure you know very well. And while we're on the subject, if you want to talk about costs, let's go for it. How much do you charge? Do you charge a fee and wrap mutual funds? A shares? C shares? If you add on the fund expenses and trading costs of the fund, you're easily at 2%. Depending on the sub-accounts you use in the annuity, you can easily keep ALL expenses at 3% max. So it's only 1% more for an insurance guarantee of income. Like Primo, I'd enjoy your other reasons. I'd also like to know how some advisors still think annuities are the same as they were in the 1990's. And how they are doing right by their clients by not staying updated on these changes.Met Life offers a product which (i could be wrong but i dont think so) is only offered thru the wirehouse i am associated with.
It is no surrender charge, period, wide choice of fund families, about 3 1.4% all in, and asset allocation models that are reblanced automatically. As i've stated before, i am not a big fan of VA's for everyone, being mindful of the high expenses. But there are situations in which they are totally appropriate, and as snags said, with the living benefits, that goes for qualified money as well as non qual. With no surrender, easy in easy out, it almost comes down to a simple question of what is the clients risk tolerance and is he willing to pay the extra 1-1.25% for insurance.[quote=pratoman]Met Life offers a product which (i could be wrong but i dont think so) is only offered thru the wirehouse i am associated with.
It is no surrender charge, period, wide choice of fund families, about 3 1.4% all in, and asset allocation models that are reblanced automatically. As i've stated before, i am not a big fan of VA's for everyone, being mindful of the high expenses. But there are situations in which they are totally appropriate, and as snags said, with the living benefits, that goes for qualified money as well as non qual. With no surrender, easy in easy out, it almost comes down to a simple question of what is the clients risk tolerance and is he willing to pay the extra 1-1.25% for insurance.[/quote]How much does it pay YOU?
Snaggletooth stated, “The purpose for buying most of today’s annuities is for the living benefit. I do hope you understand how these riders work, both tangible and intangible. I’m sure you haven’t read any of Moshe Milevsky’s reports or Ibbotson’s studies.”
An exerpt from Milevsky's key study "The Titanic Option; Valuation of the Guaranteed Minimum Death Benefit in Variable Annuities and Mutual Funds", by Milevsky, Moshe and Steven Posner, as published in the Journal of Risk and Insurance, 2001, Vol. 68. No. 1, 91-126, Professor Milevsky thoroughly demonstrates the cost solely associated with the mortality guarantee (GMDB) is typically less than 15 basis points. Therefore, while the GMDB is worth only 15 basis points or less, the Mortality and Expense charged by the insurance company (M&E) is usually greater than one hundred basis points and is invariant to factors which affect mortality risk." Also, which living benefit's are you talking about? GMIB, GMWB, or GMAB. All are different, all but the GMAB are smoke and mirrors. You have to Annuitize to capture the GMIB, and the GMIB annuitization tables used for this calculation are significantly worse than a lump sum immediate annuitization using cash. GMWB's usually are offered at 4-5% annually unless you are over 65 or 70, at which point the chances of your account value going to 0 is almost non-existant. After all, if we're using fear tactics to sell these annuities, keep in mind that these guarantees (which are smoke and mirrors) are only as good as the company backing them........Of course GMIB rates are lower than an immediate annuitization. Of course, immediate ann does not have a death benefit or the possiblility of rising income. That might be why. Oh yeah, income benefits do not require annuitization in most contracts unless you run the value to zero, which you stated the chance are small (or did you say non-existant). And you haven’t looked at annuities lately, 65 yr old is pulling 6% and a 70 yr old is getting 7%.
Here’s the conversation I envision from a snake oil, I mean annuity salesman.
"What if your account value at that other firm goes to 0? We're probably in the next great depression! I don't want to see you run out of money before you die. You've seen the stock market the last year, I think it could go to zero, don't you want to guarantee an income and your principal? Do you wan't your money insured, or uninsured? Let's cash out of that investment strategy you've got and buy this great variable annuity with all these guarantees. Don't worry, there's no commission because the insurance company pays me for finding them business. Let's not discuss costs, because their irrelevant anyway, after all your money is guaranteed, and so is this income at a guaranteed rate of 7% annually compounded. You can take plenty of income out of this annuity at anytime, just try and keep it below 10% for a few years. You might not hear from me again for a while (5-7 years), but when I do talk to you again, all these guarantees will be bad because there will me much better ones available then. I know the choices seem somewhat limited, and I know you wanted some bonds and CD's, but trust me, that doesn't matter with the guarantees." .....If the client only knew that the chances of them needing to use the GMIB's or GMWB's was actually smaller than the chances of the insurance company going out of business and not being able to honor those same guarantees.[quote=rankstocks]Here’s the conversation I envision from a snake oil, I mean annuity salesman.
"What if your account value at that other firm goes to 0? We're probably in the next great depression! I don't want to see you run out of money before you die. You've seen the stock market the last year, I think it could go to zero, don't you want to guarantee an income and your principal? Do you wan't your money insured, or uninsured? Let's cash out of that investment strategy you've got and buy this great variable annuity with all these guarantees. Don't worry, there's no commission because the insurance company pays me for finding them business. Let's not discuss costs, because their irrelevant anyway, after all your money is guaranteed, and so is this income at a guaranteed rate of 7% annually compounded. You can take plenty of income out of this annuity at anytime, just try and keep it below 10% for a few years. You might not hear from me again for a while (5-7 years), but when I do talk to you again, all these guarantees will be bad because there will me much better ones available then. I know the choices seem somewhat limited, and I know you wanted some bonds and CD's, but trust me, that doesn't matter with the guarantees." .....If the client only knew that the chances of them needing to use the GMIB's or GMWB's was actually smaller than the chances of the insurance company going out of business and not being able to honor those same guarantees.[/quote]I'm sorry that you assume that people are stupid. Did you know that the best way to close a deal is to explain all the "bad" stuff up front? It makes people trust you immediately and they will do business with you.
So Rankstocks, having never sold a VA has a “vision” of how they are sold.
Me.....having been a EDJ rep for about 5 years , I don't need a "vision" to know how the company slams people into low rate long term bonds without explaining fully that the "call feature" is most likely never to be used. Most of the new brokers swallowed the EDJ story hook line and sinker and never questioned or even understood the relationship between a low interest rate long term bond and the likelyhood of it being called in a rising rate environment, much less the effect on the market price of that bond. Just call and "if you have some money available I think you should buy this bond TODAY!". Woo hooo Super Shamrock calling sessions!! Made me sick and was one of the main reasons I left. My clients know how the markets and interest rates work IF we buy a bond. They know just exactly the costs of a VA are . They also know how the various guarantees work before they commit to a VA and decide if they are valuable to them are not. VA's represent about 10% of my book of business and are mostly IRA and 401K Rollovers precisely for the income guarantees. No one in their right mind or who isn't in DIRE financial straits is planning to take a lump sum from qualified money and generally is looking for that supplimental income stream in retirement. My clients also clearly understand the concept of an "income pool" versus the actual contract value. If they forget, we go over it at their semi annual account reviews. Are there sleazy VA sales people out there? Of course. But they are the minority of our profession since most of us do more than just sell annuities and you can't keep your clients or get new ones if your reputation is garbage. So, Rank....until you stop having "visions" and know WTF you are talking about I suggest you discuss things you know.[quote=babbling looney]So Rankstocks, having never sold a VA has a “vision” of how they are sold.
Me.....having been a EDJ rep for about 5 years , I don't need a "vision" to know how the company slams people into low rate long term bonds without explaining fully that the "call feature" is most likely never to be used. Most of the new brokers swallowed the EDJ story hook line and sinker and never questioned or even understood the relationship between a low interest rate long term bond and the likelyhood of it being called in a rising rate environment, much less the effect on the market price of that bond. Just call and "if you have some money available I think you should buy this bond TODAY!". Woo hooo Super Shamrock calling sessions!! Made me sick and was one of the main reasons I left. My clients know how the markets and interest rates work IF we buy a bond. They know just exactly the costs of a VA are . They also know how the various guarantees work before they commit to a VA and decide if they are valuable to them are not. VA's represent about 10% of my book of business and are mostly IRA and 401K Rollovers precisely for the income guarantees. No one in their right mind or who isn't in DIRE financial straits is planning to take a lump sum from qualified money and generally is looking for that supplimental income stream in retirement. My clients also clearly understand the concept of an "income pool" versus the actual contract value. If they forget, we go over it at their semi annual account reviews. Are there sleazy VA sales people out there? Of course. But they are the minority of our profession since most of us do more than just sell annuities and you can't keep your clients or get new ones if your reputation is garbage. So, Rank....until you stop having "visions" and know WTF you are talking about I suggest you discuss things you know. [/quote]Rankstocks is an EDJ broker?
Either way, my statement about the unscrupulous EDJ bond sales and his total lack of understanding about VAs stands.
[quote=babbling looney]
Oh… Is he not? I thought he was from this statement about being on a Diversification Trip. Maybe other broker dealers call their prizes for selling Diversification Trips? Sorry everyone, I was out of the country on a Div Trip. Hammered out over 50 calls each of the last 2 days though.Either way, my statement about the unscrupulous EDJ bond sales and his total lack of understanding about VAs stands.[/quote]
I'm not arguing. I really didn't know that he was with EDJ. That explains a lot. Doesn't EDJ put a cap on annuity commissions to the broker, regardless of the GDC (haircut)?
[quote=Frank Marino] [quote=babbling looney]
Oh.... Is he not? I thought he was from this statement about being on a Diversification Trip. Maybe other broker dealers call their prizes for selling Diversification Trips? Sorry everyone, I was out of the country on a Div Trip. Hammered out over 50 calls each of the last 2 days though.Either way, my statement about the unscrupulous EDJ bond sales and his total lack of understanding about VAs stands.[/quote]
I'm not arguing. I really didn't know that he was with EDJ. That explains a lot. Doesn't EDJ put a cap on annuity commissions to the broker, regardless of the GDC (haircut)?
[/quote]
They did when I was there. Annuity at Jones =2.5 or 3% % commission vs same annuity outside of Jones 5 to 7%. I believe that Jones kept the difference in pay out. In addition they limited the sub accounts in some annuities to reflect the "prefered" funds. I lost a 2 million dollar 403B group annuity account because the Hartford Annuity that EDJ allowed me to present was pitiful next to the very same Hartford annuity presented by another broker. Maybe this has changed now, but possibly this is why Rank has such a dim view of VAs. He has only seen the shitty crippled ones that EDJ allows them to sell. Also the fixed annuities (not EIAs which were the devil's spawn) sucked big time. The rates were not competetive at all. I sold a couple of them and after going Indy have found out that they were a "special" annuity just for Jones and I couldn't be agent of records. Ah well... they are reaching maturity and nose diving to the minimum interest rate now. I've been licensed to sell insurance for about 20 years now and have some basis of comparison. EDJ insurance sucks. Annuities or life insurance.
[quote=rankstocks]Snaggletooth stated, “The purpose for buying most of today’s annuities is for the living benefit. I do hope you understand how these riders work, both tangible and intangible. I’m sure you haven’t read any of Moshe Milevsky’s reports or Ibbotson’s studies.”
An exerpt from Milevsky's key study "The Titanic Option; Valuation of the Guaranteed Minimum Death Benefit in Variable Annuities and Mutual Funds", by Milevsky, Moshe and Steven Posner, as published in the Journal of Risk and Insurance, 2001, Vol. 68. No. 1, 91-126, Professor Milevsky thoroughly demonstrates the cost solely associated with the mortality guarantee (GMDB) is typically less than 15 basis points. Therefore, while the GMDB is worth only 15 basis points or less, the Mortality and Expense charged by the insurance company (M&E) is usually greater than one hundred basis points and is invariant to factors which affect mortality risk." Also, which living benefit's are you talking about? GMIB, GMWB, or GMAB. All are different, all but the GMAB are smoke and mirrors. You have to Annuitize to capture the GMIB, and the GMIB annuitization tables used for this calculation are significantly worse than a lump sum immediate annuitization using cash. GMWB's usually are offered at 4-5% annually unless you are over 65 or 70, at which point the chances of your account value going to 0 is almost non-existant. After all, if we're using fear tactics to sell these annuities, keep in mind that these guarantees (which are smoke and mirrors) are only as good as the company backing them........[/quote] You are a little out of date. I do use GMWB riders which do not require annuitization as previously stated and guarantee income higher than what you said. Also, regarding Moshe Milevsky's article, maybe you should find "Confessions of a VA Critic", which is more current reading than what you have been doing. In it, he believes that some of the living benefits on the annuities might actually be undervalued. For the complete Ibbotson report, you might be able to google Ibbotson Morningstar Variable Annuity + GMWB and find it. You are missing out and will lose clients to advisors who do have this in their toolbox. I am utterly amazed that you have locked yourself up in a bomb shelter and have seemed to avoid civilization regarding annuities. Is it for selfish reasons in that you don't get paid as much on them?[quote=babbling looney]So Rankstocks, having never sold a VA has a “vision” of how they are sold.
Me.....having been a EDJ rep for about 5 years , I don't need a "vision" to know how the company slams people into low rate long term bonds without explaining fully that the "call feature" is most likely never to be used. Most of the new brokers swallowed the EDJ story hook line and sinker and never questioned or even understood the relationship between a low interest rate long term bond and the likelyhood of it being called in a rising rate environment, much less the effect on the market price of that bond. Just call and "if you have some money available I think you should buy this bond TODAY!". Woo hooo Super Shamrock calling sessions!! Made me sick and was one of the main reasons I left. My clients know how the markets and interest rates work IF we buy a bond. They know just exactly the costs of a VA are . They also know how the various guarantees work before they commit to a VA and decide if they are valuable to them are not. VA's represent about 10% of my book of business and are mostly IRA and 401K Rollovers precisely for the income guarantees. No one in their right mind or who isn't in DIRE financial straits is planning to take a lump sum from qualified money and generally is looking for that supplimental income stream in retirement. My clients also clearly understand the concept of an "income pool" versus the actual contract value. If they forget, we go over it at their semi annual account reviews. Are there sleazy VA sales people out there? Of course. But they are the minority of our profession since most of us do more than just sell annuities and you can't keep your clients or get new ones if your reputation is garbage. So, Rank....until you stop having "visions" and know WTF you are talking about I suggest you discuss things you know. [/quote] Babs, do you want to have my baby?I swear, these annuity salesman just don’t know when to quit.
I opened an email today from Raymond Ohlson in which he proclaims to possess a little-known annuity strategy. His latest scheme is to convince folks who own annuities that they are holding a "ticking tax bomb." *Keep in mind that this is coming from one of the biggest proponents of convincing people to buy annuities that exists. Here's a summary of his little-known strategy: 1. Sell annuities to as many people as possible by emphasizing all the woderful benefits of tax deferral, guarantees, income benefits, death benefits, etc. 2. Call those clients after a few years and explain to them that they are holding a ticking tax bomb, and upon their death, they will very likely bump their heirs into a higher tax bracket if they don't take immediate action. 3. Convince them to buy a single premium life policy with a 10% "upfront bonus" to help offset surrender penalties and taxes on the gains. 4. Get a fat commission for selling the life insurance policy. 5. Repeat over and over and over until you don't have to work anymore because flipping annuities has made you extremely wealthy. Just when you think you've seen it all...snaggletooth,
You stated, "You are a little out of date. I do use GMWB riders which do not require annuitization as previously stated and guarantee income higher than what you said." Of course GMWB's don't require annuitization. GMIB's generally do. So I really don't understand what you are trying to say. Babbling Looney: I will concede to your point that some advisors at Jones sell the call date on long term paper. I'm glad you disclose everything I have been talking about on VA's. If a few other advisors were selling the call and that was one of the main reasons you left Jones, it must not take much to set you off. Borker Boy: I've got a subscription to Annuity Monthly (or something like that, can't remember the exact title) that comes to my office. I literally feel like I need a shower after I skim through it. It's got more sleeze than Hustler magazine.[quote=rankstocks]snaggletooth,
You stated, "You are a little out of date. I do use GMWB riders which do not require annuitization as previously stated and guarantee income higher than what you said." Of course GMWB's don't require annuitization. GMIB's generally do. So I really don't understand what you are trying to say. [/quote] I was just saying that it seems you might be out of date a little bit based on some things you've said, and in regards to Milevsky's article, it isn't one of his more current writings. As far as GMWB, you had asked which living benefit I was talking about, and I said the GMWB is what I use.[quote=rankstocks]snaggletooth,
You stated, "You are a little out of date. I do use GMWB riders which do not require annuitization as previously stated and guarantee income higher than what you said." Of course GMWB's don't require annuitization. GMIB's generally do. So I really don't understand what you are trying to say. Babbling Looney: I will concede to your point that some advisors at Jones sell the call date on long term paper. I'm glad you disclose everything I have been talking about on VA's. If a few other advisors were selling the call and that was one of the main reasons you left Jones, it must not take much to set you off. Thank you. Will you also concede my point that the Variable annuities that Jones allows (allowed? maybe it has changed since I left Jones) were crippled and tailor made just for Jones? And that the reason you probably don't do VAs is that you haven't been educated or exposed to "good" products. Also that the fixed annuities were specially made for Jones and are non competetive in the real world. Again, VAs comprise only about 10% of my product mix so don't go thinking that I'm in "love" with the product and sell them at the expense of more suitable investments. It's just that as an advisor, it is incumbent upon you to be aware of and educated about ALL the available strategies and avenues for your clients. If you blindly refuse to be a well rounded advisor, you can be doing considerable harm . What ticked me off was the training of the new IRs by people who should have known better or who were deliberately deceptive. Encouraging the new IR who was a former beer truck driver or RV salesman to slam people into an investment WITHOUT even bothering to educate the IR of the consequences. It became abundantly clear to me that Jones itself, didn't give doo squat about the ramifications on the client or the IR's reputation or future when these investments were to go sour. The poor deluded but well meaning IR was just doing what he/she was trained to do. I met many very fine people while at Jones. Jones, the company, doesn't care how many IRs they burn out or really what happens to their clients. It's all about profit.......as it should be in any business. But puleeeeze......give up the holier than thou, sainthood pretense that EDJ cares more about its clients than others or even that it really cares about its employees. Borker Boy: I've got a subscription to Annuity Monthly (or something like that, can't remember the exact title) that comes to my office. I literally feel like I need a shower after I skim through it. It's got more sleeze than Hustler magazine. I have to agree here. The worst are the EIA salesmen and their publications. Again. It's all about being educated about all products and all of the techniques being used whether you use them or not.[/quote] Nobody ever learned anything with a closed mind.I am an EDJ advisor, and I love VA’s in qualified contracts for the Lifetime Income Guarantee. Believe me, it helps our clients sleep better at night. I always explain
they are sacrificing some performance, when compared to a Mutual fund due to the internal costs carried by the VA for the guarantees, but most people that I am talking with that are at the Retirement stage, when chosing between investing the equity portion of their portfolio in mutual funds vs VA's with Lifetime income guarantees are choosing the VA. It gives them more peace of mind in an uncertain and unstable world. Sure it costs something, but for many people the price is worth it.Does anyone have a good analogy for explaining the marketlock-like features of the different VAs, i.e., show one column as the “walk-away” amount and one column as the “pension” amount, etc.?
I've never developed a good analogy for the GMIB, and most folks glaze over 45 seconds into my presentation.[quote=Borker Boy]
…and most folks glaze over 45 seconds into my presentation.[/quote]Are you focusing too much on the numbers and too little on the emotions (client will never outlive their $$$)?
[quote=Borker Boy]Does anyone have a good analogy for explaining the marketlock-like features of the different VAs, i.e., show one column as the “walk-away” amount and one column as the “pension” amount, etc.?
I've never developed a good analogy for the GMIB, and most folks glaze over 45 seconds into my presentation.[/quote] We've already discussed multiple sales stories, analogies, etc. for the VA's living benefits on the more productive site, RegRepsDotCom. You should check those out. If people are glazing over in the first 45 seconds, you're talking at them and not finding their pain. Nick Murray says it best. "It's not a principle problem, it's an income problem". Get people to understand how income distribution works in accounts. Use dollars so they understand it. $50,000 means more to most people than 5%. If you use a hypothetical illustration, you can write "mutual funds" above the contract value column and "Pension" above the MGWB or whatever rider column. They need to know the contract value is their "take the money and run after surrender period" amount and they will get a $ figure for life from their pension side. If you're good enough to not use a hypothetical illustration, then draw it out on a piece of paper, or describe it using your hands (one hand is contract value, the other is the pension). Also, if you start by describing a worst case scenario, it makes it easier to understand how real returns factor into it.Rank - from one Jones guy to another, you need to have your AIG guy take you to lunch and have him explain the living benefits to you. They make total sense for a portion of your clients portfolio if they are taking income. Even if they aren’t taking it yet, that 7% step up, guaranteed for 15 years is a big benefit. Is there another investment we have access to that will GUARANTEE your clients can get an automatic raise? I can’t find one. They’re not for everyone. But you’ll lose clients to the bank or other advisors who your clients come into contact with. I lost a $1 mil referral to the bank last year because she was shopping for an advisor and he showed her one before I got the chance to. And it was a B share, not an A share. You talk to a prospect or client that has an old B share annuity and you can come awfully close to guaranteeing not just their death bene, but an income bene for the expense they are already paying.
I don't know that I have a large IRA that my client is using for income that we haven't had a discussion about living benefits. Some say no thanks, some say sign me up. All of them are thankful. And all of them have heard about it from me first. Think about it like the LTC discussion. You HAVE to talk to you clients about it or else their kids may haul your butt to arbitration. What if you have an strategy to GUARANTEE income for the rest of your clients life, but choose to use traditional funds instead. 20 years down the road, the worst case actually happens and that client is out of money. Now the kids have to use their retirment plans to supplement that income. Somehow they find out about annuities with living benefits and ask you why you didn't offer their parents one? You hem and haw, but at the end of the day you don't have a great answer other than you didn't think they were appropriate. Well, the next week you get a letter in the mail inviting you to an arbitration hearing. I'll bet it wouldn't go very well. Just my thoughts, but you might want to at least have lunch with one of our vendors (I'd recommend the AIG product) and get the details.I put a fair amount of qualified money into VA's. However, I don't try to sell VA's. Instead, they are just an option that I give to my clients. They have pluses and minuses. It makes no difference to me whether they buy one because I'm going to get paid regardless of the investment.
The worst case scenario with a VA is much better than the worst case scenario with mutual funds. The client needs to know this. On the other hand, the expenses can be a big drag on performance and the client also needs to know this. Present a fair picture of annuities and you'll make plenty of annuity sales.
It appears to be a no-win situation:
"You inappropriately sold my mother an annuity! We're going to arbitration!" -or- "You failed to sell my mother an annuity! We're going to arbitration!"I disagree. If it is sold appropriately, even if you are taken to arbitration, you'll have a legitimate case for why you did it. I think it's easier to argue "here's why I did it" than it is "here's why I didn't."
[quote=BBQ]
VA would be about the last place I'd consider putting an IRA Rollover.
[/quote] Let me explain why I said this a ways back, as I haven't been watching this thread: If I'm really trying to do what's best for my client, why would I put qualified money into another tax-deferred product? I wouldn't because of the loads! VAs main attraction is that they are tax deferred. They're tax deferred because they are "life insurance products." Life companies go to A LOT of expense and lobbying effort to keep these suckers (VAs) as life insurance, though we all know there is barely any life insurance in these contracts. It's really kinda of a sham life product that is allowed because of life insurers' powerful lobbists. Common sense would tell you that packaged products have to cost more. - The living benefits are just 'sizzle-features' that life companies put in there to sell people VAs...but they are costly options that few will ever collect on. For most people VAs are products that they shouldn't own because the costs are too high...and if the commissions were lower or tiered like mutual funds with breakpoints, you'd see VA production drop like the stock market! It's funny how higher commissions make salespeople find justifications to use these products, instead of lower cost and lower commission products, imho. Gee, maybe there's a correlation! I'd venture that the high costs wipe out any benefit of tax deferral for most people...versus just investing in similar mutual funds or ETFs...or individual bonds for income. But life companies know that people buy sizzle...not the steak!Actually, No I didn’t. You can tell because I did not put “quotes” around it!
I've been licensed for life insurance since before you were a sparkle in your daddy's eye. This is just common knowledge for anyone experienced in the life biz or anyone who looks beyond what their bd tells 'em.Let me pose a question to you, BBQ: Do you sell term life insurance? If so, you sell a product that is never used 99% of the time! Think about all the lost premiums! Of course there is a chance you’ll never use the living benefits of a VA, but had you needed them, you would be glad you had them.
[quote=BBQ][quote=BBQ]
VA would be about the last place I'd consider putting an IRA Rollover.
[/quote] Let me explain why I said this a ways back, as I haven't been watching this thread: If I'm really trying to do what's best for my client, why would I put qualified money into another tax-deferred product? I wouldn't because of the loads! VAs main attraction is that they are tax deferred. They're tax deferred because they are "life insurance products." Life companies go to A LOT of expense and lobbying effort to keep these suckers (VAs) as life insurance, though we all know there is barely any life insurance in these contracts. It's really kinda of a sham life product that is allowed because of life insurers' powerful lobbists. Common sense would tell you that packaged products have to cost more. - The living benefits are just 'sizzle-features' that life companies put in there to sell people VAs...but they are costly options that few will ever collect on. For most people VAs are products that they shouldn't own because the costs are too high...and if the commissions were lower or tiered like mutual funds with breakpoints, you'd see VA production drop like the stock market! It's funny how higher commissions make salespeople find justifications to use these products, instead of lower cost and lower commission products, imho. Gee, maybe there's a correlation! I'd venture that the high costs wipe out any benefit of tax deferral for most people...versus just investing in similar mutual funds or ETFs...or individual bonds for income. But life companies know that people buy sizzle...not the steak![/quote]Sounds like you've been losing some assets to VA's. Sucks to be you.
Actually VA Salesman, it sounds like this person isn’t in the business. It sounds like they’re regurgitating Suze/Ramsey bullshit like it’s gospel without having the foggiest about how stuff really works. But if BBQ is in the business, s/he probably is hemmoraging $ to VAs.
[quote=iceco1d][quote=BBQ]Actually, No I didn’t. You can tell because I did not put “quotes” around it!
I've been licensed for life insurance since before you were a sparkle in your daddy's eye. This is just common knowledge for anyone experienced in the life biz or anyone who looks beyond what their bd tells 'em. [/quote] Oh come on VA/deekay...you need to read his posts more thoroughly! There you have it...he's quite experienced, and ALWAYS tells the truth; just like he did about [not] stealing the sizzle quote. [/quote]It always cracks me up when some loser talks about how inappropriate it is to put retirement money into a product that is designed specifically for retirement.
VAs main attraction is that they are tax deferred.
I have read this and variants of this countless times. I've never read it from someone with expertise in the subject. It's usually written by journalists with a questionable amount of financial knowledge. Sometimes things get repeated so many times that this simple that act of repetition must make it true, so we have people like BBQ repeating it without bothering to use his ability to think. The majority of VA money is qualified money. Since the holdings in a qualified account (with few exceptions) get taxed in an identical manner regardless of the investment, it should be obvious that the main attraction CAN'T be that they grow tax deferred. Advisors don't sell qualified VA's for tax deferral. Clients don't buy qualified VA's for tax deferral. Everyone has their own reasons for buying and selling them, but tax-deferral is not only not the main attraction, in most cases, the tax deferral means nothing and sometimes is a negative.I’m afraid rankstocks doesn’t know what he’s talking about. Typical EJ Drone.
And once again Ice …thank you Hope the delivery arrived in working order? Time to hit the bricks
And then there is Genesee Lager @6.99 per 12 pack Have only one cool one today.
[quote=BBQ][quote=BBQ]
VA would be about the last place I'd consider putting an IRA Rollover.
[/quote] Let me explain why I said this a ways back, as I haven't been watching this thread: If I'm really trying to do what's best for my client, why would I put qualified money into another tax-deferred product? I wouldn't because of the loads! VAs main attraction is that they are tax deferred. They're tax deferred because they are "life insurance products." Life companies go to A LOT of expense and lobbying effort to keep these suckers (VAs) as life insurance, though we all know there is barely any life insurance in these contracts. It's really kinda of a sham life product that is allowed because of life insurers' powerful lobbists. Common sense would tell you that packaged products have to cost more. - The living benefits are just 'sizzle-features' that life companies put in there to sell people VAs...but they are costly options that few will ever collect on. For most people VAs are products that they shouldn't own because the costs are too high...and if the commissions were lower or tiered like mutual funds with breakpoints, you'd see VA production drop like the stock market! It's funny how higher commissions make salespeople find justifications to use these products, instead of lower cost and lower commission products, imho. Gee, maybe there's a correlation! I'd venture that the high costs wipe out any benefit of tax deferral for most people...versus just investing in similar mutual funds or ETFs...or individual bonds for income. But life companies know that people buy sizzle...not the steak![/quote] I asked you whether or not you sold term life insurance because of the bold comment. You say you don't sell VAs because they offer benefits few will ever collect on. However, 99% of all term policies do not pay out. Either they lapse or expire without a benefit being paid. The agent, however, makes a lot of money selling term insurance. My payout with most companies for term is in the range of 75-80% FYC. Pretty nice payout, would't you say? The insurance companies LOVE term policies because they know they'll almost never have to pay out. How do you feel about selling a product that probably will never pay out? Most people FTR don't buy VAs for tax-deferral. They buy them for the living and death benefits. If you compared, say, a mutual fund portfolio vs. a VA with similar subaccounts, the fund portfolio will outperform in a vacuum. However, we and our clients don't live in vacuums. They're emotional creatures and do stupid shit (i.e. buy high and sell low). If the living benefits avoid this, then the rider is worth it.Actually the sub accounts will outperform their like retail mutual fund. It’s a fact.
[quote=ezmoney]Actually the sub accounts will outperform their like retail mutual fund. It’s a fact.[/quote]
Care to back that up with some proof?
EZ - that is most defn NOT true - there is TONS of proof to the contrary. Sub accts always underperform; I can only assume you were joking.
[quote=joedabrkr] [quote=BBQ]
deekay, yes I sell term life...even some cash value life. You're missing my point, and the q is if the commission structure were not so attractive for VAs would anyone really be selling 'em, vs mutual funds or etf's? - My point is that they are heavily loaded products that benefit few of the clients, when other, 'cleaner' choices are available. As for the other comments, I'll ignore 'em. They're the ones who discourage people from posting on these boards. - I've been on other boards where people try to help others and discuss and analyze differing points of view, w/o all the elementary school insecurities these few posers exhibit. - speaking of which...ice, I absolutely wuv it when someone has to quote their educational credentials because it doesn't show in their writing...and the cutting and pasting class you took is finally paying off. good job! I'm duly impressed![/quote]Verily, thou dost remindeth me of the hindmost portion of a horse.
[/quote] Or....Nancy
[quote=newnew]EZ - that is most defn NOT true - there is TONS of proof to the contrary. Sub accts always underperform; I can only assume you were joking.[/quote]
How do you know this?
Brand new tool out there from a little known company called Morningstar. They actually allow you to run something called a hypothetical that shows you what your returns would have been if you had bought an investment sometime in the past!! They track stocks, mutual funds, and VA subaccounts among other things. I highly recommend this service, it is great.
I see no reason why the subaccounts would underperform. They often have lower expenses than their mutual fund brethren. For example, XYZ fund may have a 5.75% sales charge, but when purchased inside of a VA, it has no sales charge. However, the fact that the sub-account outperforms doesn't mean that the investment will outperform because there may be all sorts of expenses that are part of the investment, but outside of the subaccount.
Subaccounts may have similar expenses to their mutual fund counterparts, but once you wrap a subaccount with the M&E, it is going to underperform in most instances. Exceptions to this would be short time frames and A share mutual funds below any breakpoints. B share annuity contracts have higher internal expenses than A share annuity contracts. So the exceptions I listed almost never apply because of surrender charges and who puts $10m into an annuity? I do not claim to have run a hypo on every annuity subaccount compared to its MF counterpart, but every single one I have run, the subaccount underperformed. If anyone could give me a specific example showing the opposite, I would be very interested.
I put every single client in CD’s. That is because they are FDIC insured. LOL!
[quote=Primo]Subaccounts may have similar expenses to their mutual fund counterparts, but once you wrap a subaccount with the M&E, it is going to underperform in most instances. Exceptions to this would be short time frames and A share mutual funds below any breakpoints. B share annuity subaccounts have higher internal expenses than A share annuity subaccounts. So the exceptions I listed almost never apply because of surrender charges and who puts $10m into an annuity? I do not claim to have run a hypo on every annuity subaccount compared to its MF counterpart, but every single one I have run, the subaccount underperformed. If anyone could give me a specific example showing the opposite, I would be very interested.[/quote]
B share annuity subaccounts and A share annuity subaccounts? Do you have any clue as to how ignorant you have just proven yourself to be? Did I just ask a dumb question? Of course, you have no clue.
You are right, post was wrong. Change subaccount to contract. Nice catch. Now, wanna take a stab at a subaccount that outperforms its related mutual fund? It is amazing to me Bobby how you always post such bluster, but there is never any substance to back it up. Typical annuity slinger.
[quote=Primo]
You are right, post was wrong. Change subaccount to contract. Nice catch. Now, wanna take a stab at a subaccount that outperforms its related mutual fund? It is amazing to me Bobby how you always post such bluster, but there is never any substance to back it up. Typical annuity slinger.
[/quote]How can I show substance to someone who is unable to recognize it?
this is flowing pretty nicely into what nick murray calls investor performance vs. investment performance. is generating .5-1% per year over and above some arbitrary index going to guarantee any of our clients a successful PLAN? if they get a long term return of 7.8% and their neighbor gets 8.7% did they somehow lose the game? maybe some of these living benefits simply allow them to participate and get the 7.8% when they otherwise would have taken the latest “special rate” at the local bank, giving them the wonderful 5%. why is performance the ONLY thing we ever seem to care about (not everyone, but most anti-insurance people) anyone have clients who have done the most STUPID things ever at the wrong time, like 2-3 months ago? we all have those clients that no matter how many times we would show them charts and diagrams of long term market performance they will run for the hills in a down market.
my biggest concern is that the riders/benefits are not being priced properly and could cause problems down the road.I believe that’s why the majority of them have the ability to reprice that rider every contract anniversary. It would be horrible to see this living benefit situation turn into something akin to LTC providors. There were a lot of them that didn’t price things the right way and are now out of business. And their former clients are left to fend for themselves. While I don’t see that happening with the insurance companies, I can understand the concern.
Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.Let's see what happens when all those annuity income riders start coming due. The riders are great for the clients, as long as economic armeggedon doesn't come. I wonder if the insurance companies all ran hypotheticals on a prolonged bear market, (i.e. the 70's) to see what would happen if all these Baby Boomers tried to cash in on those guarantees. Don't get me wrong, they products are great. I just worry about the worst-case scenario. That's why insurance providor selection and diversification of providors is important. Many of the advisors I knwo that sell annuities are starting to use multiples providors just to defend against this. But I suppose if Hartford or Met or Lincoln or the other big ones fail due to over-redemption, we are likely all screwed anyway.I believe that’s why the majority of them have the ability to reprice that rider every contract anniversary. It would be horrible to see this living benefit situation turn into something akin to LTC providors. There were a lot of them that didn’t price things the right way and are now out of business. And their former clients are left to fend for themselves. While I don’t see that happening with the insurance companies, I can understand the concern.
[quote=Spaceman Spiff]I believe that’s why the majority of them have the ability to reprice that rider every contract anniversary. It would be horrible to see this living benefit situation turn into something akin to LTC providors. There were a lot of them that didn’t price things the right way and are now out of business. And their former clients are left to fend for themselves. While I don’t see that happening with the insurance companies, I can understand the concern. [/quote]
“Majority of them?” Do this…name ONE company that can reprice every contract anniversary.
[quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.Let's see what happens when all those annuity income riders start coming due. The riders are great for the clients, as long as economic armeggedon doesn't come. It's good to see that you see that annuities are great, with the qualification that we're able to stave off Armageddon. I wonder if the insurance companies all ran hypotheticals on a prolonged bear market, (i.e. the 70's) to see what would happen if all these Baby Boomers tried to cash in on those guarantees. Don't get me wrong, they products are great. I just worry about the worst-case scenario. That's why insurance providor selection and diversification of providors is important. Many of the advisors I knwo that sell annuities are starting to use multiples providors just to defend against this. But I suppose if Hartford or Met or Lincoln or the other big ones fail due to over-redemption, we are likely all screwed anyway.[/quote][quote=Spaceman Spiff]I believe that’s why the majority of them have the ability to reprice that rider every contract anniversary. It would be horrible to see this living benefit situation turn into something akin to LTC providors. There were a lot of them that didn’t price things the right way and are now out of business. And their former clients are left to fend for themselves. While I don’t see that happening with the insurance companies, I can understand the concern.
You do understand that not everybody will access the benefits at the same time, don't you? It doesn't sound like it.
[quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote]Do you understand that there are a LOT of people who are willing to sacrifice one thing to get another? It doesn't seem like you do. There are a LOT of people who are not interested in assuming enough risk to TRY to make a higher return when a guarantee outcome is offered to them.
No, I realize that. And I doubt this would even happen anyway. My point was if we entered financial “chaos” and the insurance companies had to start recording guarantee liabilites on their books above their internal market returns for extended periods, we would be in trouble. However, I am not sure what type of reserves they must maintain on the income guarantees, so I don’t actually know the likelihood of this happening. I liken it to what has happened with the sub-prime writedowns - all of a sudden all these financial companies are writing down their assets to the point of insolvency. This is what I am speculating could happen with income guarantees (again, I don’t know the likelihood).
I woudl be curious to know what type of re-insurance exists on these income riders. Sort of the insurance industry's version of FDIC.[quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote] You are correct. I was merely pointing out the reasons that subaccounts may very from retail funds. And I generally separate the insurance costs from the investment performance. I will say to people, "do you want the chance to earn 7%, or a guaranteed 7%, and it will cost you 1.5%". I am very clear that you are basically buying insurance on your investments. However, what if you take advantage of that guarantee when the market is in the toilet? What if your subaccounts lose 18% when you are taking income? Which one comes out ahead? I can tell you, during the income phase, variable annuities can absolutely outperform mutual funds, straight-up (including COI). Mind you, I am NOT a big annuity guy, but you can't just look at these things during bull-market accumulation years. You have to consider all market cycles and investor life cycles. And how many retirees would invest as aggressively OUTSIDE a VA? VA's give you the ability to invest more aggressively than you otherwise would. Lot to think about....[quote=VA Salesman] [quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote]Do you understand that there are a LOT of people who are willing to sacrifice one thing to get another? It doesn't seem like you do. There are a LOT of people who are not interested in assuming enough risk to TRY to make a higher return when a guarantee outcome is offered to them.
[/quote] I do understand and actually agree with your post save one word. LOT. Your opinion and my opinion differ on this. While I do 10% annuities, and you do 100% annuities, most likely I am underutilizing this investment and you are overutilizing annuities. I don't believe that 100% of anyones (assuming full service brokerage that have access to various investment choices) book should be in one type of investment, unless you can do no other type of business because of your b/d or you turn away a good portion of business that the investment is not appropriate for. As far as performance of SA vs. MF, my question was in response to an earlier post that said SA's outperform MF's. This is not a performance argument. I would just like an example of the previous claim.
[quote=B24]No, I realize that. And I doubt this would even happen anyway. My point was if we entered financial “chaos” and the insurance companies had to start recording guarantee liabilites on their books above their internal market returns for extended periods, we would be in trouble. However, I am not sure what type of reserves they must maintain on the income guarantees, so I don’t actually know the likelihood of this happening. I liken it to what has happened with the sub-prime writedowns - all of a sudden all these financial companies are writing down their assets to the point of insolvency. This is what I am speculating could happen with income guarantees (again, I don’t know the likelihood).
I woudl be curious to know what type of re-insurance exists on these income riders. Sort of the insurance industry's version of FDIC.[/quote]I don't think you're curious. I think you want to argue about something that you feel threatened by.
[quote=Primo][quote=VA Salesman] [quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote]Do you understand that there are a LOT of people who are willing to sacrifice one thing to get another? It doesn't seem like you do. There are a LOT of people who are not interested in assuming enough risk to TRY to make a higher return when a guarantee outcome is offered to them.
[/quote] I do understand and actually agree with your post save one word. LOT. Your opinion and my opinion differ on this. While I do 10% annuities, and you do 100% annuities, most likely I am underutilizing this investment and you are overutilizing annuities. I don't believe that 100% of anyones (assuming full service brokerage that have access to various investment choices) book should be in one type of investment, unless you can do no other type of business because of your b/d or you turn away a good portion of business that the investment is not appropriate for. As far as performance of SA vs. MF, my question was in response to an earlier post that said SA's outperform MF's. This is not a performance argument. I would just like an example of the previous claim.[/quote]
You seem to form a lot of opinions, based on assumptions that haven't been verified. This makes you look more stupid than you really are.
[quote=VA Salesman] [quote=Primo][quote=VA Salesman] [quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote]Do you understand that there are a LOT of people who are willing to sacrifice one thing to get another? It doesn't seem like you do. There are a LOT of people who are not interested in assuming enough risk to TRY to make a higher return when a guarantee outcome is offered to them.
[/quote] I do understand and actually agree with your post save one word. LOT. Your opinion and my opinion differ on this. While I do 10% annuities, and you do 100% annuities, most likely I am underutilizing this investment and you are overutilizing annuities. I don't believe that 100% of anyones (assuming full service brokerage that have access to various investment choices) book should be in one type of investment, unless you can do no other type of business because of your b/d or you turn away a good portion of business that the investment is not appropriate for. As far as performance of SA vs. MF, my question was in response to an earlier post that said SA's outperform MF's. This is not a performance argument. I would just like an example of the previous claim.[/quote]
You seem to form a lot of opinions, based on assumptions that haven't been verified. This makes you look more stupid than you really are. Again all bluster, no substance. Please explain assumptions that haven't been verified.
[/quote]
[quote=VA Salesman] [quote=B24]No, I realize that. And I doubt this would even happen anyway. My point was if we entered financial “chaos” and the insurance companies had to start recording guarantee liabilites on their books above their internal market returns for extended periods, we would be in trouble. However, I am not sure what type of reserves they must maintain on the income guarantees, so I don’t actually know the likelihood of this happening. I liken it to what has happened with the sub-prime writedowns - all of a sudden all these financial companies are writing down their assets to the point of insolvency. This is what I am speculating could happen with income guarantees (again, I don’t know the likelihood).
I woudl be curious to know what type of re-insurance exists on these income riders. Sort of the insurance industry's version of FDIC.[/quote]I don't think you're curious. I think you want to argue about something that you feel threatened by.
[/quote] ?? WTF does that mean? I know they have re-insurance, I am just curious how it would work in this case. If you actually read my threads, you'd see I am not really "threatened" at all. It was more of an academic conversation if anything. I highly doubt the probability of insurance failures, but I am interested in the "what-if" factor. As I said previously, I like a lot of the new income products out there, and have started using them. Not sure why you have to act like such a pr!ck about it.
[quote=Primo][quote=VA Salesman] [quote=Primo][quote=VA Salesman] [quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote]Do you understand that there are a LOT of people who are willing to sacrifice one thing to get another? It doesn't seem like you do. There are a LOT of people who are not interested in assuming enough risk to TRY to make a higher return when a guarantee outcome is offered to them.
[/quote] I do understand and actually agree with your post save one word. LOT. Your opinion and my opinion differ on this. While I do 10% annuities, and you do 100% annuities, most likely I am underutilizing this investment and you are overutilizing annuities. I don't believe that 100% of anyones (assuming full service brokerage that have access to various investment choices) book should be in one type of investment, unless you can do no other type of business because of your b/d or you turn away a good portion of business that the investment is not appropriate for. As far as performance of SA vs. MF, my question was in response to an earlier post that said SA's outperform MF's. This is not a performance argument. I would just like an example of the previous claim.[/quote]
You seem to form a lot of opinions, based on assumptions that haven't been verified. This makes you look more stupid than you really are. Again all bluster, no substance. Please explain assumptions that haven't been verified.
[/quote] [/quote]
How I conduct business would be a good start. You've been proven to know less than you think you know and YOU want to get in MY face? Go sling a mutual fund or something.
Just going off your own quote that you do 100% of your business in annuities. The only assumption I made was that you were being truthful. My mistake. Feel free to correct any assumptions I have made with substance, although I assume more bluster is to follow.
[quote=Primo]Just going off your own quote that you do 100% of your business in annuities. The only assumption I made was that you were being truthful. My mistake. Feel free to correct any assumptions I have made with substance, although I assume more bluster is to follow.[/quote]
Dude, you really are dumb. I sell annuities. You make assumptions about HOW I sell them. And don’t bother asking me about my business. I don’t care what you think and you’re not smart enough to understand it, obviously.
Do your cheeks hurt from blowing so hard? I’ve made no assumptions on how you do business. I wouldn’t expect you to care what I think. I am quite amused that the best description of what you do is “I sell annuities”.
[quote=Primo]Do your cheeks hurt from blowing so hard? I’ve made no assumptions on how you do business. I wouldn’t expect you to care what I think. I am quite amused that the best description of what you do is “I sell annuities”.[/quote]
What do YOU do? Do you have the guts, like me, to state what you do?
So now you want to know about my business? C'mon Bobby, you have been banned how many time under how many aliases? Is it really that important to you to keep coming back to call others dumb, while never adding any intelligent content to the conversation?
Yes.
[quote=Primo]
So now you want to know about my business? C’mon Bobby, you have been banned how many time under how many aliases? Is it really that important to you to keep coming back to call others dumb, while never adding any intelligent content to the conversation?
[/quote]I knew you were a coward.
We have different opinions on what constitutes cowardice. Mine is someone throwing insults instead pointed rebuttals in an argument to deflect the conversation off course due to lacking of debating skills or facts to back their case. Guess we will have to agree to disagree.
[quote=Primo]We have different opinions on what constitutes cowardice. Mine is someone throwing insults instead pointed rebuttals in an argument to deflect the conversation off course due to lacking of debating skills or facts to back their case. Guess we will have to agree to disagree. [/quote]
ONe thing that neither of us can deny is that you don’t have the guts to tell me what you do.
It is funny that you will duck and avoid direct questions, deflect the conversation back with insults, get defensive about your position, accuse others of questions they did not ask, and then demand answers to your questions and surprise, throw more insults to try and get an answer. I will tell you what I don’t do. I don’t get banned from a forum, start my own site, run everyone off that site, and have to go back to the original site under multiple aliases to vent my frustration. I don’t use one investment for everyone. Call me old school, using suitibility to determine reccomendations. Wierd. If you want to know what I do, use the search function. It’s all there.
[quote=Borker Boy]Does anyone have a good analogy for explaining the marketlock-like features of the different VAs, i.e., show one column as the “walk-away” amount and one column as the “pension” amount, etc.?
I've never developed a good analogy for the GMIB, and most folks glaze over 45 seconds into my presentation.[/quote] Maybe this gets addressed later in the thread, there are too many post for me to closely read them all. HOWEVER, this is one I got from a wholesaler a few months ago that seems to make sense. I'm not going to completely flesh it out, but here is the jist: Most clients own their house. Every year, they get an "assessed value" on their house from the local taxing authority. Occasionally it is close to what they can actually get for the house on the open market, but frequently it is either too high or too low. The "pension" amount is kind of like your "assessed value". It is a number that is used to calculate your income benefit, just like the assessed value is used to calculate your taxes. It is NOT a number that you can automatically cash in. It has some basis to the value of the account, but it could be much higher under certain cercumstances. etc, etc. I've used it a couple of times, with more success than usual getting some understanding from the client.Weren't there rule changes recently from FINRA that mandate quite a bit more disclosure on VA's? I don't know about the rest of you, but when I sell an annuity now the client gets a form that has several blanks, like surrender schedules, rider costs, M&E costs, etc. that we fill in. I disclosed this anyway, but now it is in black and white on a separate form. EIA's are a whole different deal, but at least on the VA's the argument that the broker/advisor is not disclosing fees, surrender periods, etc. seems to be an outdated argument.
I simply tell them that they have two account values.
1) The contract value will go up and down in value based on the underlying investments. 2) The Income Benefit is your guaranteed pension which locks in any gains every quarter. When you need money... You can either walk away with your contract value, or at the very least withdrawal 5% a year off of your Income Benefit for the rest of your life regardless of what the market does.[quote=Primo]It is funny that you will duck and avoid direct questions, deflect the conversation back with insults, get defensive about your position, accuse others of questions they did not ask, and then demand answers to your questions and surprise, throw more insults to try and get an answer. I will tell you what I don’t do. I don’t get banned from a forum, start my own site, run everyone off that site, and have to go back to the original site under multiple aliases to vent my frustration. I don’t use one investment for everyone. Call me old school, using suitibility to determine reccomendations. Wierd. If you want to know what I do, use the search function. It’s all there.[/quote]
Yawwwwwwwwwnnnnnnnnnnnn
[quote=Mike Damone]I simply tell them that they have two account values.
1) The contract value will go up and down in value based on the underlying investments. 2) The Income Benefit is your guaranteed pension which locks in any gains every quarter. When you need money... You can either walk away with your contract value, or at the very least withdrawal 5% a year off of your Income Benefit for the rest of your life regardless of what the market does.[/quote]3) Those extra fees that you've been paying your broker will be turned off, immediately.
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