VA within an IRA

before we get into a long winded VA vs mutual funds debate:

yes, I know they would be losing that "awesome" death benefit and guarantees.

thanks in advance

scrim

[quote=scrim67]Personally, I think having a VA within an IRA is almost always a bad idea.

That being said, if I have a client who is in this position i'm assuming there are no penalties and tax implications  if I do a trustee to trustee transfer and change his VA to some mutual funds.  I will wait until it's out of surrender but I just wanted to confirm the penalties and taxes are moot in this case.

Thanks in advance.

scrim[/quote]

There's a lot of hoopla about using a tax-deferred vehicle inside of a tax-deferred account, but I honestly feel like it is waaaaaaay overdone.  How many of your clients actually are attracted to VA's because of the tax deferral?!!!  I can honestly say that among folks I talk to, the tax deferral part isn't getting much attention from prospective purchasers...and I can't see any of the "cost" going toward "tax deferral".  In my world, people are solely focused on the guarantees...as in guarantee against loss of principal and a minimum guaranteed income for life.  They could not care less about "tax deferral" since it is at least partially a wash due to the unfavorable tax treatment when the funds actually do come out.  When people are not buying variable annuities for the tax deferral benefit, why is it such a big deal that it's an unnecessary benefit inside of an IRA?!!  If congress suddenly declared that the tax deferral benefit of annuities disappeared, do you think the price of annuities would suddenly drop?  I have my doubts, to be honest!

I will grant you that in a FIXED annuity, tax deferral is a more significant part of the selling benefits, since these often are used as CD substitutes, but honestly, I'm just not seeing anyone getting excited about tax deferral in a VA...it's the guarantees, baby!!!

OK...off the soapbox.  Yes, there's no tax liability for direct transfers from qualified annuities to a traditional IRA.

Now, I'd welcome a healthy debate about what is so doggoned bad about using a qualified VA for retirement funds when the client needs equity exposure/inflation protection, and cannot stomach risk of principal loss.

[quote=scrim67]

before we get into a long winded VA vs mutual funds debate:

yes, I know they would be losing that "awesome" death benefit and guarantees.

thanks in advance

scrim[/quote]

...and scrim, I'm not beating on you about the switch...I sincerely want to hear from someone about why qualified VAs are soooooo baaaaaad...I just don't see it.

...but just out of curiosity, what is the contract value vs. death benefit on the contract in question...and when does it expire?

My opinion is that they are too expensive.

I was talking more in general terms.    I occasionally do see VA's within IRA's but thank goodness not too often.

scrim

[quote=scrim67]My opinion is that they are too expensive.

I was talking more in general terms.    I occasionally do see VA's within IRA's but thank goodness not too often.

scrim[/quote]

As opposed to what? A mutual fund that the client is unwilling to accept?  A CD paying 5%?  I think you're focusing on the costs and ignoring the benefits.  I watched my clients' VAs return high singles to low double digits last year...with a guarantee against loss of principal...I'm struggling to see the downside here when a client can't hack the ups and downs of the market...

I guess it's all relative.    I sometimes question wrapping up their IRA's with a 1% advisory charge making total expenses around 1.75% annually.

for my "nervous" customers I just simply lower the equity allocation.

we can debate this all night..they are no wrong answers.

scrim

Agreed.  Again, this sin't really aimed at you, but I keep hearing about how regulators, etc. are really looking hard at qualified VAs, and I'm starting to wonder if they even understand why people buy them...anyone?!!

...and again, I don't do alot of annuities (I'm close to half in fee-based), but I've certainly found use for them among some in my client base.

yes, and one of my goals is to keep regulators off my back.

but, there will be a day when mutual fund wrap accounts are on the radar and I will have to defend my use of them.

scrim

Lowering equity allocation (example--below 100%) lowers expected returns.

So does keeping an (example) 100% equity allocation and incurring higher fees to get a guaranteed (insert favorite VA bell or whistle here).  People with insurance can take more risk--think how many mortgage loans would be made if there were no PMI...not as many, that's for sure.

If you can earn a 2% more return from the higher equity allocation over the long run, you can just about make up the cost difference, AND you can guarantee something.

But Scrim, didn't you beat this very topic into the ground with everyone just a few months ago....?!

[quote=Indyone]Now, I'd welcome a healthy debate about what is so doggoned bad about using a qualified VA for retirement funds when the client needs equity exposure/inflation protection, and cannot stomach risk of principal loss.[/quote]

I agree with everything you've stated in your posts.

That said, the answer to your question is:

Because the NASD says so.

And apparently because the NASD says that annuities inside of IRA's are now a no-no, or at least something to avoid, our compliance departments are now hyper-sensitive about this sort of thing. 

Bottom line, whenever selling a qualified annuity, I make sure that I put all over the suitability/transfer/replacement forms that tax deferral is NOT a feature that the client is looking for and I make sure that I also have in writing that the reason(s) for their purchase are the upside potential of the VA's subaccounts, the principle protection guarantee, and the guaranteed income rider benefits.  I figure all of that is plenty to cover my butt as well as my BD.

…and thus the regulators again keep us from doing what’s best for our clients…how retarded is that!!!

[quote=scrim67]

I guess it's all relative.    I sometimes question wrapping up their IRA's with a 1% advisory charge making total expenses around 1.75% annually.

the VA's my firm allows us to use when you factor in M&E, Fund expenses, guarantees of principal are all atleast 50% higher in costs compared to our MF wrap program.

scrim

[quote=Cowboy93]

But Scrim, didn't you beat this very topic into the ground with everyone just a few months ago....?!

[/quote]

Yes, that is why I prefaced my initial post the way I did.

scrim

[quote=scrim67]

the VA's my firm allows us to use when you factor in M&E, Fund expenses, guarantees of principal are all atleast 50% higher in costs compared to our MF wrap program.

scrim

[/quote]

Interesting... This isn't my experience.  We use VA's with M&E's between .75 and .95... add in a few miscellaneous costs and you are about equal with a MF wrap program

what about the fund fees?

those are usually atleast 1% in addition to the M&E

Bottom line about annuities/advisors: if annuities paid a broker a 1% commission (instead of 4-6%) they wouldn't be used nearly as often.

Simple enough.

[quote=The Judge]

Bottom line about annuities/advisors: if annuities paid a broker a 1% commission (instead of 4-6%) they wouldn't be used nearly as often.

Simple enough.

[/quote]

An annuity is a product that is sold to investors, not bought by investors.

They are rarely, if ever, the most appropriate choice.

NASD,

Again you show your lack of intelligence:

Here is a program for a conference I went to a couple of years ago, read the topics and the speakers.  Then ue your brain:

http://www.navanet.org/conf/pdf/NAVA-Prelim-May.pdf#search=' Variable%20annuities%20and%20NAVA%20and%20Professor%20CFP%20 JD'

[quote=NASD Newbie][quote=The Judge]

Bottom line about annuities/advisors: if annuities paid a broker a 1% commission (instead of 4-6%) they wouldn't be used nearly as often.

Simple enough.

[/quote]

An annuity is a product that is sold to investors, not bought by investors.

They are rarely, if ever, the most appropriate choice.

[/quote]

Everything we have is "sold", not bought by investors.... otherwise they would be going to discount brokers and doing trades online.  I don't get people beating down my door to buy unsolicited mutual funds or setup fee based money management accounts either.

As for VA's being appropriate, who are you to tell our clients that they can't pay for a some protection of their retirement funds and sleep easier at night?  Most retiree's in their 60's and 70's are more than happy to pay the extra expenses involved in a VA rather than get a very similar investment (sometimes the exact same funds or asset allocation) outside of a VA and be 100% at risk with no guarantees whatsoever.

Of course, long term, these funds in a VA have a very little chance of being less than where they started 7-10yrs earlier given the proper asset allocation models, which is why insurance companies can very easily add these guarantees to their policies.  Rarely will they every need to add money to a policy after that length of time to get it back to even and for VA's with riders that also add inflation protection to that principle, they just simply use the extra rider fees to buy puts and are covered that way.

I guess by your logic, you like to goto Best Buy on the weekend and beat up the poor sap walking out with his new $2500 HDTV and also paid for an overpriced $300 extended warranty that has very low odds of being used?  Who are you to tell that guy that he shouldn't buy it (even though I'd agree with you and never buy them personally)?  Some people are more than willing to pay for protection (even when it's statistically unneeded) for 100% piece of mind, VA's with riders are no different.

BTW, that's only covering one aspect of VA's vs MF's and their differences.  We're not even covering tax deferral, death benefits (with step up's), and avoiding probate.... often skimmed over benefits of annuities that are important to some.

[quote=scrim67]

the VA's my firm allows us to use when you factor in M&E, Fund expenses, guarantees of principal are all atleast 50% higher in costs compared to our MF wrap program.

scrim

[/quote]

and most 50- to 60-somethings will pay it (and a bit more) to guarantee all of their money will be paid back if an "event"  was to wipe their savings/investment out the year before they need it-

for those who cringe at the thought of being paid 7% on these things, look at the 0 CDSC models for your clients, they only pay the advisor 1 to 3%-

[quote=STL Indy]

Who are you to tell that guy that he shouldn't buy it (even though I'd agree with you and never buy them personally)?  Some people are more than willing to pay for protection (even when it's statistically unneeded) for 100% piece of mind, VA's with riders are no different.

[/quote]

Who are you to tell a guy he shouldn't buy it?  Damn that sounds so defensive that a cynic would swear that you're nothing but a whore screaming, "Who are you to tell me what I can sell?"

Why do you suppose the NASD, NASSA and the SEC are on annuity sales violations like white on rice?

[quote=TexasRep][quote=scrim67]

the VA's my firm allows us to use when you factor in M&E, Fund expenses, guarantees of principal are all atleast 50% higher in costs compared to our MF wrap program.

scrim

[/quote]

and most 50- to 60-somethings will pay it (and a bit more) to guarantee all of their money will be paid back if an "event"  was to wipe their savings/investment out the year before they need it-

for those who cringe at the thought of being paid 7% on these things, look at the 0 CDSC models for your clients, they only pay the advisor 1 to 3%-

[/quote]

If a client is properly diversified and allocated based on their risk tolerance and situation no event could ever wipe out their life savings.   

Again, there are no wrong answers here

scrim

[quote=NASD Newbie]

I am not licensed to sell annuities.

[/quote]

Fixed.

[quote=scrim67][quote=TexasRep][quote=scrim67]

the VA's my firm allows us to use when you factor in M&E, Fund expenses, guarantees of principal are all atleast 50% higher in costs compared to our MF wrap program.

scrim

[/quote]

and most 50- to 60-somethings will pay it (and a bit more) to guarantee all of their money will be paid back if an "event"  was to wipe their savings/investment out the year before they need it-

for those who cringe at the thought of being paid 7% on these things, look at the 0 CDSC models for your clients, they only pay the advisor 1 to 3%-

[/quote]

If a client is properly diversified and allocated based on their risk tolerance and situation no event could ever wipe out their life savings.   

Again, there are no wrong answers here

scrim

[/quote]

Oh reeeeaaallly!  No event could wipe out their life savings, says the cocksure 20 year old newbie.  Maybe a crash like the one in the 70's didn't exactly "wipe out" a person's portfolio but if they had been invested in the stock market they would have lost a significant chunk. 

Date Started: 1/11/1973
Date Ended: 12/06/1974

Total Days: 694
Starting DJIA: 1051.70
Ending DJIA: 577.60
Total Loss: -45.1%

If you think you are sooooo smart and that you can bulletproof a portfolio from external world events just by diversification, you probably think you can jump over tall buildings too.  

The person approaching retirement who has just watched his diversified portfolio take a 40 to 50% dump is not going to buy the diversification, Sharpe Ratio, alpha, beta explanation from you.  All he cares about is that he can't retire now and needs to continue to pull the plow for many more years.  The person who sees his VA take a similar dump and who purchased the GRIB rider is going to want to kiss your feet.

But hey.....it is your business and your client's money.  You do it your way. 

100 equities would not be proper allocation in my opinion.

Someone getting close to retirement a 50/50 allocation would be more appropriate.

In that case there losses would have been nowhere near 50%.

scrim

You don't think that bonds have market crashes too? 

Look up the bond market crashes of 1994 and 1987 and think about our current interest rate environment.  I presume you have clients who are currently holding long term bonds and are seeing the market value erode while the comprable interest rates on new issues are rising? 

Clueless..

I give up. 

[quote=babbling looney]

Clueless..

I give up. 

[/quote]

It really is like Dumb and Dumber come to life.

Years ago I was involved in dealing with a broker who wrote--yep, actually wrote--a letter to a client saying that since their bonds were guaranteed by the United States it was impossible for them to ever lose value.

I didn't say bond markets don't crash.

I'm just talking about asset allocation to smooth out the volatility.

When I said 50/50 I should have clarified that other 50% includes cash as well as bonds.

scrim

Plus my clients in bonds are in short or intermediate maturities which will not erode.

I have my most conservative/skittish clients in about 60% cash as the returns on cash are very similar to bonds right now without the fluctuation.

scrim

[quote=scrim67]

Plus my clients in bonds are in short or intermediate maturities which will not erode.

[/quote]

er, erode as much as longer term bonds

[quote=scrim67]

I didn't say bond markets don't crash.

I'm just talking about asset allocation to smooth out the volatility.

When I said 50/50 I should have clarified that other 50% includes cash as well as bonds.

scrim

[/quote]

I believe in asset allocation as well and am doing same bond swaps and converting long bonds to cash positions for the time being.  I'm not disagreeing with you about doing asset allocation strategies.

But the original point of this thread was the value of paying for a guaranteed income stream in a VA even if the VA is in an IRA.  Your idea that you can provide the same guarantee (or any level of guarantee) by just diversifying a portfolio is delusional.  If your clients don't require the added saftey net of a guaranteed income stream or death benefit...fine.  However, you are comparing apples to oranges. 

Your certainty that your superior asset allocation strategies are going to save the day is going to bite you in the butt someday.  It's all a big guessing game and there is no certain outcome in investing.........except.... if the client decides to buy an insurance rider in their VA. 

[quote=scrim67][quote=scrim67]

Plus my clients in bonds are in short or intermediate maturities which will not erode.

[/quote]

er, erode as much as longer term bonds

[/quote]

What do you suppose would be a reasonable amount of erosion to expect if the prime hits 15%?

[quote=NASD Newbie][quote=babbling looney]

Clueless..

I give up. 

[/quote]

It really is like Dumb and Dumber come to life.

Years ago I was involved in dealing with a broker who wrote--yep, actually wrote--a letter to a client saying that since their bonds were guaranteed by the United States it was impossible for them to ever lose value.

[/quote]

NASD, you really can be quite a jack@$$.  Is this done intentionally?

[quote=NASD Newbie][quote=scrim67][quote=scrim67]

Plus my clients in bonds are in short or intermediate maturities which will not erode.

[/quote]

er, erode as much as longer term bonds

[/quote]

What do you suppose would be a reasonable amount of erosion to expect if the prime hits 15%?

[/quote]

I have no idea.   All of this is a moving target.

[quote=scrim67][quote=NASD Newbie][quote=scrim67][quote=scrim67]

Plus my clients in bonds are in short or intermediate maturities which will not erode.

[/quote]

er, erode as much as longer term bonds

[/quote]

What do you suppose would be a reasonable amount of erosion to expect if the prime hits 15%?

[/quote]

I have no idea.   All of this is a moving target.

[/quote]

True, but your clients will blame you regardless.  Goes with the territory.

[quote=babbling looney][quote=scrim67][quote=TexasRep][quote=scrim67]

the VA's my firm allows us to use when you factor in M&E, Fund expenses, guarantees of principal are all atleast 50% higher in costs compared to our MF wrap program.

scrim

[/quote]

and most 50- to 60-somethings will pay it (and a bit more) to guarantee all of their money will be paid back if an "event"  was to wipe their savings/investment out the year before they need it-

for those who cringe at the thought of being paid 7% on these things, look at the 0 CDSC models for your clients, they only pay the advisor 1 to 3%-

[/quote]

If a client is properly diversified and allocated based on their risk tolerance and situation no event could ever wipe out their life savings.   

Again, there are no wrong answers here

scrim

[/quote]

Oh reeeeaaallly!  No event could wipe out their life savings, says the cocksure 20 year old newbie.  Maybe a crash like the one in the 70's didn't exactly "wipe out" a person's portfolio but if they had been invested in the stock market they would have lost a significant chunk. 

Date Started: 1/11/1973
Date Ended: 12/06/1974

Total Days: 694
Starting DJIA: 1051.70
Ending DJIA: 577.60
Total Loss: -45.1%

If you think you are sooooo smart and that you can bulletproof a portfolio from external world events just by diversification, you probably think you can jump over tall buildings too.  

The person approaching retirement who has just watched his diversified portfolio take a 40 to 50% dump is not going to buy the diversification, Sharpe Ratio, alpha, beta explanation from you.  All he cares about is that he can't retire now and needs to continue to pull the plow for many more years.  The person who sees his VA take a similar dump and who purchased the GRIB rider is going to want to kiss your feet.

But hey.....it is your business and your client's money.  You do it your way. 

[/quote]

Isn't it funny how the VA threads always start the biggest flame wars here? Well, I don't want to be in one, but here's my $.02  (and I do sell VAs)

Just two quick thoughts, BL ;

(1) The DJIA isn't "the market" and it isn't an example of a diversified portfolio, much less when the owner is a couple of years from retirement (as if they even needed every dollar of their retirement money on day one after the retirement party)

 (2) As bad as that down turn was, how was the client who had a portion of their portfolio represented by the DJIA in a year or two, or three after that downturn?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

[quote=bankrep1]

NASD,

Again you show your lack of intelligence:

Here is a program for a conference I went to a couple of years ago, read the topics and the speakers.  Then ue your brain:

http://www.navanet.org/conf/pdf/NAVA-Prelim-May.pdf#search=' Variable%20annuities%20and%20NAVA%20and%20Professor%20CFP%20 JD'

[/quote]

Wow, you mean an industry group is in favor of the industry? Well, that changes everything 

I know that the DJIA is not representative of the market or even of a real person’s portfolio. DOH! I wanted to give him some historical perspective when he is sure that there is no event that would wipe out someone’s life savings.  I agree that there wouldn’t be a wipe in a properly diversifed portfolio…but there could sure be some pain.  The point is that scrim seems to be cavalier and academic about the possibility of fluctuation a client’s life savings and thinks that diversification is “the” way to protect a client. It is “a” way.  He doesn’t want to consider that there could be value in other (and yes) costly methods.

And as bad as that downturn was, for those clients who stayed the course and remained invested, they did see a nice recovery.  However, many clients would and did panic at that point and pull their investments and those clients who needed access to their money THEN not in years to come were shell shocked. 

As advisors we can look dispassionately at these ups and downs in the market, but we need to look at it from the client's emotional viewpoint. 

True-- in a year or three the investment recouped, but for over a thousand days, that client was worried that it would not.

we look at 3 years differently than the 60-something who just took a 40% "correction"

I might be jaded since I'm a relative newbie in this industry.   To me, the last big downturn five years ago seemed pretty bad.

With the conservative investors here is what I found:

When I ran the actual performance as if I had known them then,    their portfolios would have dropped a total of around 10% from the highs in 2000 to the lows in 2003.

I explain this was pretty darn bad downturn and ask them if they would be ok with this bad scenario over a two year period or so.

Most say yes.

Is it possible it could be worse going forward, of course.

scrim  

[quote=scrim67]

Plus my clients in bonds are in short or intermediate maturities which will not erode.

I have my most conservative/skittish clients in about 60% cash as the returns on cash are very similar to bonds right now without the fluctuation.

scrim

[/quote]

Scrim,

For your clients in cashand fixed income...do you invest in cash and fixed income INSIDE your wrap account?  If so, you are as guilty as anyone of "being costly" as you are charging a fee for not doing anything.

It costs nothing to manage cash, and bond funds are the biggest rip off of all (especially in this environment).

[quote=BankFC][quote=scrim67]

Plus my clients in bonds are in short or intermediate maturities which will not erode.

I have my most conservative/skittish clients in about 60% cash as the returns on cash are very similar to bonds right now without the fluctuation.

scrim

[/quote]

Scrim,

For your clients in cashand fixed income...do you invest in cash and fixed income INSIDE your wrap account?  If so, you are as guilty as anyone of "being costly" as you are charging a fee for not doing anything.

It costs nothing to manage cash, and bond funds are the biggest rip off of all (especially in this environment).

[/quote]

Obviously they are paying the wrap fee.    I need to get paid for my services like we all do but that's another thread.   Yes, I agree they could manage their own financial affairs and save ALOT of money but my clients are willing to pay for my advice.       I have no sales assistants so i'm doing some other things which justifies the fee they are paying me in most cases.    I never lock up assets so they are free to leave if they don't find value in my services.

Money markets are inexpensive as well all know but they are not free.

scrim

[quote=babbling looney]

I know that the DJIA is not representative of the market or even of a real person's portfolio. DOH! I wanted to give him some historical perspective when he is sure that there is no event that would wipe out someone's life savings.  I agree that there wouldn't be a wipe in a properly diversifed portfolio...but there could sure be some pain.  The point is that scrim seems to be cavalier and academic about the possibility of fluctuation a client's life savings and thinks that diversification is "the" way to protect a client. It is "a" way.  He doesn't want to consider that there could be value in other (and yes) costly methods.

And as bad as that downturn was, for those clients who stayed the course and remained invested, they did see a nice recovery.  However, many clients would and did panic at that point and pull their investments and those clients who needed access to their money THEN not in years to come were shell shocked. 

As advisors we can look dispassionately at these ups and downs in the market, but we need to look at it from the client's emotional viewpoint. 

[/quote]

I'm not disagreeing with everything you've said, just pointing out that talking about a short-term dump in the DJIA and addressing this as if it's a pronouncement on AA just isn't fair. It simply isn’t a diversified portfolio, it ignores the fact that as the DJIA tanked the bond or mid-cap or small-cap or international percentage of the portfolio probably strengthened and it’s shown over a ridiculously short time horizon. If someone’s retirement plans have to be postponed because of a 45% downturn in the DJIA two or three years prior to the planned retirement date, that’s not a hit on AA, that’s a hit on the advisor that talked about AA but didn’t implement it.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Yes, clients get emotional, but I always thought that part of our job was to prepare them for possible bumps in the road and then to protect them from harming themselves because of their emotions when those bumps come. I just don’t see him as being cavalier.

I explain to clients that if they’re 60 when they begin drawing off this money they need to have a long (30 years or more) time horizon because they’re probably going to live longer than they thought and they shouldn’t care less if “the market” (as defined by the DJIA or the S&P 500 alone)  tanks during some short term timeframe. No one properly diversified in 1987 cared about that downturn in 1991, etc.. However, if they just can’t live with that “uncertainty” we can use an annuity, which imho is an unnecessary expense, but I one I won’t object to if that’s the only thing that will allow them to sleep at night.

[quote=TexasRep]

True-- in a year or three the investment recouped, but for over a thousand days, that client was worried that it would not.

we look at 3 years differently than the 60-something who just took a 40% "correction"

[/quote]

What retiree client really took a "40% "correction""?

[quote=mikebutler222][quote=TexasRep]

True-- in a year or three the investment recouped, but for over a thousand days, that client was worried that it would not.

we look at 3 years differently than the 60-something who just took a 40% "correction"

[/quote]

What retiree client really took a "40% "correction""?

[/quote]

The accounts that I'm ACATing took a 50% hit.  These retirees were 100% Large Cap Growth and over weighted on Telecommunications.

[quote=Mike Damone][quote=mikebutler222][quote=TexasRep]

True-- in a year or three the investment recouped, but for over a thousand days, that client was worried that it would not.

we look at 3 years differently than the 60-something who just took a 40% "correction"

[/quote]

What retiree client really took a "40% "correction""?

[/quote]

The accounts that I'm ACATing took a 50% hit.  These retirees were 100% Large Cap Growth and over weighted on Telecommunications.

[/quote]

That's my point, that's not a diversified portfolio by any standard.

[quote=scrim67][quote=BankFC][quote=scrim67]

Plus my clients in bonds are in short or intermediate maturities which will not erode.

I have my most conservative/skittish clients in about 60% cash as the returns on cash are very similar to bonds right now without the fluctuation.

scrim

[/quote]

Scrim,

For your clients in cashand fixed income...do you invest in cash and fixed income INSIDE your wrap account?  If so, you are as guilty as anyone of "being costly" as you are charging a fee for not doing anything.

It costs nothing to manage cash, and bond funds are the biggest rip off of all (especially in this environment).

[/quote]

Obviously they are paying the wrap fee.    I need to get paid for my services like we all do but that's another thread.   Yes, I agree they could manage their own financial affairs and save ALOT of money but my clients are willing to pay for my advice.       I have no sales assistants so i'm doing some other things which justifies the fee they are paying me in most cases.    I never lock up assets so they are free to leave if they don't find value in my services.

Money markets are inexpensive as well all know but they are not free.

scrim

[/quote]

Scrim,

Don't you see the slippery slope you are on?  You could get paid on the equity portion, and leave the cash and fixed income outside the wrap. 

That would be the BEST solution for the client who wants advice.

But you say you want to be paid, so you charge a wrap fee for cash and bonds...so why exactly are you here to say what's right and what's wrong????  If you really have conservative clients in 50% cash and bonds, you could save them alot in wrap fees, but you don't.

[quote=mikebutler222][quote=Mike Damone][quote=mikebutler222][quote=TexasRep]

True-- in a year or three the investment recouped, but for over a thousand days, that client was worried that it would not.

we look at 3 years differently than the 60-something who just took a 40% "correction"

[/quote]

What retiree client really took a "40% "correction""?

[/quote]

The accounts that I'm ACATing took a 50% hit.  These retirees were 100% Large Cap Growth and over weighted on Telecommunications.

[/quote]

That's my point, that's not a diversified portfolio by any standard.

[/quote]

Ahhh, gotcha.  I say we never ever bring up the VA inside of an IRA subject ever again.

[quote=Mike Damone]

Ahhh, gotcha.  I say we never ever bring up the VA inside of an IRA subject ever again.

[/quote]

How about muni bonds in an IRA, isn't that a great way to turn tax free interest into ordinary income?

That would be desireable, no?

You are a retard.

C'mon guys.  The benefit of having a VA inside of an IRA is the clients piece of mind.  Will it outperform MF's?  No way to tell until it's already happened.  Is it more expensive than a MF?  Some are, some aren't.  Is the tax deferral aspect of the VA worthless in this scenario?  It sure is.  If it makes the client more comfortable for a portion of their retirement assets to have the protections included in a VA than I say go for it.

Every product and investment has its time and place, and it's important for a client to have diversity in their portfolios.  The problem are advisors/reps who believe that the right client is the one sitting in front of them and the right product/investment is the only one they know how to sell. 

"I say we never ever bring up the VA inside of an IRA subject ever again."

I know what you're saying...we end up just going in circles.  I'd still like for someone to intelligently debate why qualified annuities are in and of themselves, bad.  I'm not arguing that they are not the cheapest alternative, and I'm not arguing that a tax-deferred vehicle inside a tax-deferred account is a good thing, but if that is the vehicle that keeps them in the market, provides a necessary inflation hedge, makes the highest return among acceptable customer options, and guarantees a minimum level of income higher than other acceptable alternatives, where is the problem? Regulation at it's finest...gaaaaaaaaaahhh!!!

[quote=NASD Newbie]How about muni bonds in an IRA, isn’t that a great way to turn tax free interest into ordinary income?

That would be desireable, no?[/quote]

There's a rather large and obvious difference between tax-free and tax-deferred.  The IRA does not adversly recharacterize the taxability of VA withdrawals, as it does the tax-free income of muni bonds in your scenario.  It's simply unnecessary, but at the same time, not why anybody with any sense uses a VA inside of an IRA.

You've been in the business too long for me to assume that you're doing anything other than yanking our collective chains...

[quote=Indyone]

You've been in the business too long for me to assume that you're doing anything other than yanking our collective chains...

[/quote]

Think so?

I saw something last week that made me sick!  A 23 year old with an annuity inside a Roth IRA!

[quote=iconsult100]

I saw something last week that made me sick!  A 23 year old with an annuity inside a Roth IRA!

[/quote]

Consult a doctor, you might be able to take something for that.