Fee vs Transaction Based

in my wrap program my client also gets:

and most importantly myself as their financial quarterback.    Is that worth an extra 1-1.5% annually as opposed to doing it themselves? 

scrim

Besides the things mentioned by Scrim, it's not hard to put a hypo together using funds from several (more than three) fund families and show better performance (even with the wrap fee), better asset class representation and less overlap.

Plus, when I need to swap a fund out, there's no load charged.  If you want to ride that fund list without changes for the next twenty years, it's your choice, but if I were your clients, if that's all I was getting, I'd research some good no-loads and skip you altogether.

Butkus, have you looked at the amount of overlap in the funds that you’ve mentioned?  I’d hesitate to call what you suggest a properly diversified portfolio.

I have a tough time asking someone to pay a load upfront.  I do solely managed money and mutual fund wrap. 

Although the fund families you mentioned are good now, they may not always be.  A wrap program allows you to be flexible without additional costs to the client.  It also puts you on the same side of the table with that client.

Ask yourself this... if you put 300k into those funds and get your upfront money, are you still going to rebalance the portfolio and meet with that client regularly 4 years from now, when that client is generating no revenue for you?  I doubt it.  And if you do, you'll be in sales mode to generate more revenue.

I firmly believe in "pay as you go."

I love variable annuities. You get a nice upfront commission, with the ability to automatically rebalance and exchange fund families, without a load, and you don't have to injure the client with an extra 1.5% fee, in perpetuity, to do it.

No, depending on the variable annuity, you get to “injure the client” with a fee much more in the ballpark of 1.75 to 2 depending on the riders you choose. 

[quote=mrad]No, depending on the variable annuity, you get to "injure the client" with a fee much more in the ballpark of 1.75 to 2 depending on the riders you choose.  [/quote]

With all due respect mrad, you should look at some other, better, annuity contracts. 

Also,

With fee based accounts, you don't limit yourself and your client to mutual funds to solve all the issues.  There are a lot more investment vehicles out there than the Preferred 8 that provide much more for clients.  One of the best points raised I agree whole heartedly with is that you as the advisor take on the consultant role providing much greater reporting and analysis with the client.  When you slam them into the cookie cutter portfolio you describe and subscribe to, you trade it and forget it.  When that's the only value added you bring to the table then you right, A share is all the works and you should only get that measly .25bps for pay (minus 60%).

I should have said - " When that’s the only value added you bring to the table then YOUR right, A SHARES are all THAT works and you should only get the measly 25bps for pay (minus 60%)."

Fee Based advisory account-

Create the appropriate allocation (growth, growth and income, and aggressive growth is not asset allocation) and select the very best fund in each asset class.  NO BIASED APPROACH.  Very simple to us, but extremely difficult to the client.  2 of the "gowth and income" funds from Van Kampen are the same fund, only one holds bonds. Anyone from Jones just doesn't understand the fee based method, you're brainwashed not to.   

[quote=csmelnix]I should have said - " When that's the only value added you bring to the table then YOUR right, A SHARES are all THAT works and you should only get the measly 25bps for pay (minus 60%)."[/quote]

No, what you should have said is "YOU'RE".  Its a contraction of "you are".

You're; I'm sorry may be I am stupid?

I have a fairly contraversial attitude towards this question of fee v.s. commission.  before I give my 2 cents I'll say upfront that I have done mostly fee based mutual fund and SMA wrap invesments.

I am beginning to believe that charging a fee (in the range of 1 to 1.5% or more) is only appropriate where an advisor is taking an active, personal role in the management of the portfolio or financial affairs of the client (outside of just hiring and firing money managers or "automated" bill pay systems, reviews, basic finacial planning etc...).  Whether that means they are using a tactical approach to weighting the portfolio asset classes, picking individual securities or handling "value added" services akin to family office type activities.

There are several foundations I base this perspective on: 

1)  We should be paid for the value we add (which I understand can be somewhat subjective)

2)  Adding value is a result of expertise applied and services rendered

3)  If the clients had a clear understanding of what we do behind the scenes (which they don't), What would their perceptions of "fair value" be?

My experience with most wrap programs is that they are a plug 'n play product with similar amounts of expected work as an A share mutual fund.  Yet we end up getting paid more (over time), for essentially sitting on the assets, oh sure we send out birthday cards and take the customer's out for dinner, call them to talk with them about their kids and "update their financial plans"

Of all the professionals out there (attorneys, cpa's, doctors) that we are trying to identify our profession with, not one gets paid like we do for the amount of work we do (not considering the marketing aspect of our work which can be vicious). 

My stand is that if you are a securities "salesperson" (which most people selling fee based products and financial planning are) than you should be paid like a salesperson.  If you are a money manager (clear definion being: taking an active day to day role in the investment of your clients $$) You should be paid like a money manager.  If you are a true blue wholistic wealth manager (not just by title or marketing gimmick) then you should be paid like a wholistic wealth manager.

When management consultants get hired to solve a problem for a company (which I think is comparable to solving financial problems fo r clients) they get paid a one time fee.  If they have to revisit the company multiple times to track progress and oversee results, they get paid a fee for the work done, not an ongoing % (other than maybe a retainer which is different than a % fee) based on the value of the company. 

My contention is that a huge majority of the people in our business like to imagine themselves as something they truly are not and put up a convincing image to the public (it's what Wall Street is famous for).  This is why there is so much legislation dealing with our industry.

Do I have a perfect solution, no.  Do I think it's of value to have a candid and open discussion on the issues and alternatives, yes.

dude, I understand your thoughts.  I have "sold" both concepts in my few years doing this...and relatively well (I think...).  If I was a client, I'd feel that the way in which I compensated a person was far less important than the total long term cost, and what I got for my $.  You are right that many less-than-wonderfully qualified people want to make lots of $ for dumping people into an allocation model (theirs or someone else's) and not much else.

When looking the pros and cons, I think I personally would pick a fee-based approach to hedge my bets with the advisor--what if he/she gets run over, retires, decides to become a buddhist monk, etc. before I've gotten my service out of that upfront chunk?  And maybe as importantly, I know that people pay attention when I'm paying them, so I might prefer to pay them a little each year, which adds up to more over time, to ensure they keep paying attention.  Plus all the benefits already stated about manager selection, etc.

I think the fee-only folks will continue to gain market share--I can't imagine paying A share loads if I could pay someone a flat fee to develop an allocation and go buy the funds no-load for close to $0 at Schwab or wherever.  I agree with you--if you set and forget (or don't "add value"), an hourly/flat fee approach will bury the fee-based guy.  I've somewhat tried to use the myriad of client-confusing cost approaches to my advantage, just by explaining them.  Of course, that in itself confuses some, but at least they feel like I'm trying to tell them how the game is played and that I know what I'm talking about.  As for me, I vote for fee-based as it seems "cleaner" in the long term...as someone mentioned--now a 300k retired client is someone I need to really keep in touch with vs. a somewhat revenue-dead account.  Luckily, market forces will continue to evolve to tell which is "better."

One random thought--how come mutual funds get to always be "fee based"?  It doesn't cost twice as much to manage my $100,000 as my $50,000, so how come they take 2x out of the fund's assets?!

Cowboy,

Your last comment strikes at the heart of my concerns.  It doesn't take any more work for me to manage $500k vs $100k, yet I get paid 4 to 5 times as much.  Am I getting paid for adding value, when I'm not really managing the money?  As far as the fee based model for money managers, I tend to think that their compensation being tied to the account value is a good thing, although a tiered system of declining fee as assets go up is probably most appropriate.  I think this (a tiered fee system) would be difficult (if not impossible) for a mutual fund to do.

OK, I guess I was saying “me too” w/regard to funds/money mgrs–if they can charge it, then I can too.  We have a workable compromise–I can live with a tiered scale being “right”, and most fee-based platforms do scale down, but usually at pretty large accounts it seems ($1m+).  I think the main problem with fee-based is not the concept, but the level of fees…paying 1.25% on top of mf seems crazy…I think 100bps should be the absolute top, but until people get educated enough to realize what they really pay, fees will still be higher than they “should” or could be.  Again, I say this is a way to differentiate–explain all the fees and then keep yours below market for protetction when they do get squeezed.  ETFs can help keep the total pretty reasonable.  NOW, go debate me on the training vs. product thread where I tried to stir you up as well…

This whole issue is quite the slippery slope, no?

If I always found the least expensive route for my clients I would have to drop out of this profession.    I've asked this before, "What is a financial advisor worth?"   

In the long term our clients will be the ones to tell us if our services are worth it.

scrim

As far as arguments that commission makes an advisors advice biased, I say B.S.

If a client of mine has A shares and wants to  buy property and asks my advise: No great harm to me since .25 bps is a relatively small hit to my income, if it makes sense I tell him to do it.

Now, if I'm fee based, I'm much more BIASED to advising the client to keep his $$$ with me.

I'm not saying that fee based is a bad model.  Just the way it has been marketed and implemented.  The vast majority of fee based Wrap programs I have seen are plug 'n play static (stragtegic is the marketing hype) allocations.  I also believe that the "manager oversight" that an advisor supposedly offers is another marketing gimmick that generallly offers little value. 

Here's what's really funny about the whole thing is that the science supporting ibbottson (and most allocation model approaches) is that the markets are efficient (markowitz's theory is based on the efficient market hypothosis), therefore indicating that it's impossible to add value through security selection.  In addition the Brinson and Associates study (92% of returns come from allocation 6% from security selection and 2% timing) is used to support this approach and yet the advisor puts forth that he/she is adding value through managing managers (a.k.a. "security selection") or tactical allocation (a.k.a. "market timing").  What gets me thinking is that one has to use conflicting and contradictory market attitudes to sell the product.

So in essence it seems that if one believes in the foundations that make up Modern Portfolio Theory, they are having two faces to say that they are adding value through security selection, or market timing (a.k.a manager selection, tacticall allocation).  If the science one uses supports the concepts of Efficient Market Hypothosis, how can you then use active managment (mutual funds, money managers etc..) to populate the asset classes without being hippocritical?  Also all of the "standard features" of wrap programs: auto rebalancing, performance reporting etc.... are usually "automatic" and done by the back office, is this really adding value?

Dude,

Fee based advice used to be primarily offered through independent registered investment advisors many of whom are classic indexer's MPT guys.  The bear market opened the wirehouses eyes that there is a more predictable level of growth, hence the move toward fee based accounts predictable revenue streams etc.

As far as active/passive ETF's and index funds don't offer revenue sharing or marketing support for seminars and the like.  You do the math... 

[quote=dude]

So in essence it seems that if one believes in the foundations that make up Modern Portfolio Theory, they are having two faces to say that they are adding value through security selection, or market timing (a.k.a manager selection, tacticall allocation).  If the science one uses supports the concepts of Efficient Market Hypothosis, how can you then use active managment (mutual funds, money managers etc..) to populate the asset classes without being hippocritical? 

[/quote]

This assumes that everyone buys MPT 100%, and that's simply not correct. There's a spectrum of adherence in the theory that makes it possible.

[quote=dude]

Also all of the "standard features" of wrap programs: auto rebalancing, performance reporting etc.... are usually "automatic" and done by the back office, is this really adding value?

[/quote]

It is if it's your back office, or do you figure everything the firm does that the broker doesn't do personally should be free? 

[quote=dude]

My experience with most wrap programs is that they are a plug 'n play product with similar amounts of expected work as an A share mutual fund.  Yet we end up getting paid more (over time), for essentially sitting on the assets, ...

[/quote]

That's not even remotely true in my experience....

Look,  I appreciate the subjective nature of this topic as well as the value that we offer our clients. 

My experience is based on being at a Morgan office w/ 40 plus brokers, being at a bank program and although not offering wrap accounts per se had many allocation funds that were a mirror image of the portfolio architect and fund solution (morgan stanley fund wrap accts) programs and AGE where we have what seems to be 10 different variations on the smae essential theme (static or tactical allocations, 8 to 10 asset classes, auto rebalancing, auto this, auto that, offered in SMA, ETF or Fund flavors).  Also add to that my various friends and contacts (in addition to former and current coworkers) who all LOVE the idea of getting paid to sit on the assets.  Maybe I'm way out of line here but it seems to me that there is some validity to my observations. 

I'm not necessarily making an impassioned argument for one side, just bringing up some of what I percieve to be some of the downfalls of a fee based approach.  Maybe this discussion will help shore up those cracks, maybe not.  Thanks for the civil and mature responses guys.

Why are we even having this conversation? Didn't we all get in this business so we could do what we want to do and get paid however we want to get paid? Asset-based fees are not my cup of tea, but I don't give a crap if other people like to do that. If it's bad for people, the free market will shake it out.

I like getting paid up front commissions. It's MY preference. It's an option that is perfectly LEGAL and available to me. It is MY choice. It takes a lot of work to get an account. Why would I want to risk people leaving in a year or two after only making a couple of points? Frankly, I like commissions because clients tend to stay with me. They're not likely to get stolen by some piker who wants to charge them an annual fee.

If some people like earning annual fees, have at it. It's no more or less legal than what I do. Just don't friggin' criticize me for running MY business MY way.

Why are we having any coversations at all Dirk?

Maybe because this is a forum?  Maybe because there are issues that affect our industry?  Maybe because some of us have questions?  Maybe because some of us have answers?  Maybe some of us just like to come here and stroke our ego’s?

Cowboy said:

OK, I guess I was saying "me too" w/regard to funds/money mgrs--if they can charge it, then I can too.  We have a workable compromise--I can live with a tiered scale being "right", and most fee-based platforms do scale down, but usually at pretty large accounts it seems ($1m+).  I think the main problem with fee-based is not the concept, but the level of fees....paying 1.25% on top of mf seems crazy...I think 100bps should be the absolute top, but until people get educated enough to realize what they really pay, fees will still be higher than they "should" or could be.  Again, I say this is a way to differentiate--explain all the fees and then keep yours below market for protetction when they do get squeezed.  ETFs can help keep the total pretty reasonable.  NOW, go debate me on the training vs. product thread where I tried to stir you up as well...

Reply:

Damn, this post (as well as the one prior)is one of the most balanced attitudes I have heard on this subject.  I think you are right on target when it comes to this issue.  Thanks for the dialogue.

[quote=dude]

.....who all LOVE the idea of getting paid to sit on the assets. 

[/quote]

"Sitting on assets"? Is it really your experience that brokers open these accounts and never look back? Really? I've seen that with guys who hammer small accounts into B shares, but not with guys working with SMAs, much less brokers who work with real money, most all of which is run in this fashion.

[quote=dude]

I think the main problem with fee-based is not the concept, but the level of fees....paying 1.25% on top of mf seems crazy...

[/quote]

That's one of the reasons I don't like wrap fund programs. Now that fully balanced SMA programs can start $60k, I don't know why anyone uses them.

[quote=dude]I think 100bps should be the absolute top, [/quote]

You do have that authority, right?

[quote=Dirk Diggler]

I love variable annuities. You get a nice upfront commission, with the ability to automatically rebalance and exchange fund families, without a load, and you don't have to injure the client with an extra 1.5% fee, in perpetuity, to do it.

[/quote]

And Mr. Client, the money I make you will be taxed as ordinary income instead of the low 15% capital gains tax.  And im going to charge you 2% or more for bells and whistles, but you have to die to collect them...  Sound Good? 

Who are you looking out for?  You or your client?  I think it's pretty obvious.

[quote=iconsult100][quote=Dirk Diggler]

I love variable annuities. You get a nice upfront commission, with the ability to automatically rebalance and exchange fund families, without a load, and you don't have to injure the client with an extra 1.5% fee, in perpetuity, to do it.

[/quote]

And Mr. Client, the money I make you will be taxed as ordinary income instead of the low 15% capital gains tax.  And im going to charge you 2% or more for bells and whistles, but you have to die to collect them...  Sound Good? 

Who are you looking out for?  You or your client?  I think it's pretty obvious.

[/quote]

You know what, son? I'll bet that if your firm didn't haircut annuities, so you only get to share in 4% of the 7.5% GDC, paid at your miniscule rate, you'd sell annuities, too. If I sell a $100,000 annuity, I make $6,750. If you sell one, you only make $1600 at a 40% payout, and I'm probably being generous with the 40%.

If I were you, I'd hate me too.

dude, thanks for the props...I've done a lot of thinking in the shower the last few years.  Usually I try to apply my general skepticism as a consumer against myself as an advisor--it makes my head hurt.  I think the key point is to develop a philosophy, stick to it, explain it to your clients without bashing the alternatives--more like "..but I like this way better because...", always thinking of the golden rule thing (now we use cool words like fiduciary instead).  My problem is I haven't completely settled which road to go down, and perhaps there is some benefit to have multiple approaches depending on the client's background.

Butlermunch--to answer your ? above--no jackass, what I meant was...."that's where I think the market will settle (100bps) over the many years I'll be doing this, so that's where I'm setting the ceiling in my business."  SMA=tricked up mutual fund in my opinion, for most people...who don't take the time and effort to customize and/or are dealing largely w/qualified money.  Some tax benefits, but that's only a great benefit vs. high turnover stuff...lower turnover funds can make a difference too.

But whatever floats your boat...the 100bps I'm referring to is for the piece where we pick managers and then occasionally rebalance, but do other planning, hand-holding, reviews, etc.  That goes for SMAs too, where I would guess MS's cut is 100bps, but of course I could be wrong.

The appeal of indexing to me is that it eliminates arguments like this....someone KNOWS they won't be #1 in their asset class, but at least they can be pretty confident they'll be close to the 75th percentile or so over a long period of time (in liquid, more "efficient" markets, eg large cap US, etc).  In a way it lowers risk--call it "underperformance risk."  Then you and I can go spend time do more personalized stuff for people.  All that said, I haven't used a lot of passive stuff yet.

[quote=Cowboy93]

Butlermunch--to answer your ? above--no jackass, what I meant was...."that's where I think the market will settle (100bps) over the many years I'll be doing this, so that's where I'm setting the ceiling in my business." 

[/quote]

Is that directed at me? I don't understand it and I haven't spoken with you. Perhaps you meant someone else. When dude brought up 100 bps I asked him if he can't already do that. I know I can lower a mutual fund wrap to 1% if I care to, I wondered if he could.  BTW, I can't imagine the "market" of advisors working for 100 bps on small accounts. Hell, Vanguard gets 45 bps to clone an index, surely we deserve more for bringing a client to realize their financial goals.

[quote=Cowboy93]

SMA=tricked up mutual fund in my opinion, for most people...who don't take the time and effort to customize and/or are dealing largely w/qualified money.  Some tax benefits, but that's only a great benefit vs. high turnover stuff...lower turnover funds can make a difference too.

[/quote]

I couldn't disagree more. An SMA versus a mutual fund wrap eliminates an entire layer of fees, makes your holdings more visable, allows you to control cash levels (instead of holding mutual funds that each hold some indeterminate level of cash) and gets you out of the herd in the mutual fund that will be pulling out funds (and forcing the manager to liquidate) when they should be adding and avoids overlap. Additionally, you'll be able to know and define SMA managers far better than any fund.

[quote=Cowboy93]

But whatever floats your boat...the 100bps I'm referring to is for the piece where we pick managers and then occasionally rebalance, but do other planning, hand-holding, reviews, etc.  That goes for SMAs too, where I would guess MS's cut is 100bps, but of course I could be wrong.

[/quote]

You want 100 bps all in including the manager's fee? How is the due diligence, trading, custody, reporting, etc, all paid for, not to mention your time and attention? If it's 100 bps all in the manager gets 45 to 55 bps and the balance is supposed to pay for everything else?

[quote=Cowboy93]

The appeal of indexing to me is that it eliminates arguments like this....someone KNOWS they won't be #1 in their asset class, but at least they can be pretty confident they'll be close to the 75th percentile or so over a long period of time (in liquid, more "efficient" markets, eg large cap US, etc).  In a way it lowers risk--call it "underperformance risk."  Then you and I can go spend time do more personalized stuff for people.  All that said, I haven't used a lot of passive stuff yet.

[/quote]

I don't know why I'd want to go a route that I'm very, very confident underperforms what I'm already doing.

[quote=Cowboy93]

Butlermunch--to answer your ? above....[/quote]

Ahhhh, I see the confusion. The way dude had formated his post I skipped over that he was quoting you.

[quote=Dirk Diggler][quote=iconsult100][quote=Dirk Diggler]

I love variable annuities. You get a nice upfront commission, with the ability to automatically rebalance and exchange fund families, without a load, and you don't have to injure the client with an extra 1.5% fee, in perpetuity, to do it.

[/quote]

And Mr. Client, the money I make you will be taxed as ordinary income instead of the low 15% capital gains tax.  And im going to charge you 2% or more for bells and whistles, but you have to die to collect them...  Sound Good? 

Who are you looking out for?  You or your client?  I think it's pretty obvious.

[/quote]

You know what, son? I'll bet that if your firm didn't haircut annuities, so you only get to share in 4% of the 7.5% GDC, paid at your miniscule rate, you'd sell annuities, too. If I sell a $100,000 annuity, I make $6,750. If you sell one, you only make $1600 at a 40% payout, and I'm probably being generous with the 40%.

If I were you, I'd hate me too.

[/quote]

9 out of 10 clients who have an annuity don't even know why they have it.  It was sold to them with little regard for their circumstances.  As for the payout.... I just don't care upfront money, I've built a business for the long term, I dont have to find a way to generate revenue from the same client year over year.  I don't have to give them the big tax bill when they take the money out.  I don't have to lock up their money for 8 years.  The list goes on and on.

Annuities have their place, but they are not an alternative for an SMA or mutual fund wrap. 

[quote=iconsult100][quote=Dirk Diggler][quote=iconsult100][quote=Dirk Diggler]

I love variable annuities. You get a nice upfront commission, with the ability to automatically rebalance and exchange fund families, without a load, and you don't have to injure the client with an extra 1.5% fee, in perpetuity, to do it.

[/quote]

And Mr. Client, the money I make you will be taxed as ordinary income instead of the low 15% capital gains tax.  And im going to charge you 2% or more for bells and whistles, but you have to die to collect them...  Sound Good? 

Who are you looking out for?  You or your client?  I think it's pretty obvious.

[/quote]

You know what, son? I'll bet that if your firm didn't haircut annuities, so you only get to share in 4% of the 7.5% GDC, paid at your miniscule rate, you'd sell annuities, too. If I sell a $100,000 annuity, I make $6,750. If you sell one, you only make $1600 at a 40% payout, and I'm probably being generous with the 40%.

If I were you, I'd hate me too.

[/quote]

9 out of 10 clients who have an annuity don't even know why they have it.  It was sold to them with little regard for their circumstances.  As for the payout.... I just don't care upfront money, I've built a business for the long term, I dont have to find a way to generate revenue from the same client year over year.  I don't have to give them the big tax bill when they take the money out.  I don't have to lock up their money for 8 years.  The list goes on and on.

Annuities have their place, but they are not an alternative for an SMA or mutual fund wrap. 

[/quote]

Is it not possible that the annuities that I sell are the one's that have "their place"?

[quote=dude]

Look,  I appreciate the subjective nature of this topic as well as the value that we offer our clients. 

My experience is based on being at a Morgan office w/ 40 plus brokers, being at a bank program and although not offering wrap accounts per se had many allocation funds that were a mirror image of the portfolio architect and fund solution (morgan stanley fund wrap accts) programs and AGE where we have what seems to be 10 different variations on the smae essential theme (static or tactical allocations, 8 to 10 asset classes, auto rebalancing, auto this, auto that, offered in SMA, ETF or Fund flavors).  Also add to that my various friends and contacts (in addition to former and current coworkers) who all LOVE the idea of getting paid to sit on the assets.  Maybe I'm way out of line here but it seems to me that there is some validity to my observations. 

I'm not necessarily making an impassioned argument for one side, just bringing up some of what I percieve to be some of the downfalls of a fee based approach.  Maybe this discussion will help shore up those cracks, maybe not.  Thanks for the civil and mature responses guys.

[/quote]

You know, dude, I think this is an interesting subject ad you make some valid points, but, you seem to have completely glossed over the other side of the "what's a fair price" equation. All you've considered to this point is what would the client like to pay. (What other business considers that factor first, and pays no attention to the pricing power of competitive forces?) You haven’t considered what services have to be priced at in order to cover every expense to the firm, including paying you.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

When Porsche builds a car, they consider what their costs are,(from engineering, production and marketing to servicing) what return on their efforts they can live with, what buyers are willing to pay, and what force their competitors will have on those prices. Why should we be any different? Shouldn’t market forces determine what we charge, and not some “what does the client want to pay, what’s “fair” and besides, we don’t really do much anyway” equation?

[quote=mikebutler222][quote=dude]

Look,  I appreciate the subjective nature of this topic as well as the value that we offer our clients. 

My experience is based on being at a Morgan office w/ 40 plus brokers, being at a bank program and although not offering wrap accounts per se had many allocation funds that were a mirror image of the portfolio architect and fund solution (morgan stanley fund wrap accts) programs and AGE where we have what seems to be 10 different variations on the smae essential theme (static or tactical allocations, 8 to 10 asset classes, auto rebalancing, auto this, auto that, offered in SMA, ETF or Fund flavors).  Also add to that my various friends and contacts (in addition to former and current coworkers) who all LOVE the idea of getting paid to sit on the assets.  Maybe I'm way out of line here but it seems to me that there is some validity to my observations. 

I'm not necessarily making an impassioned argument for one side, just bringing up some of what I percieve to be some of the downfalls of a fee based approach.  Maybe this discussion will help shore up those cracks, maybe not.  Thanks for the civil and mature responses guys.

[/quote]

You know, dude, I think this is an interesting subject ad you make some valid points, but, you seem to have completely glossed over the other side of the "what's a fair price" equation. All you've considered to this point is what would the client like to pay. (What other business considers that factor first, and pays no attention to the pricing power of competitive forces?) You haven’t considered what services have to be priced at in order to cover every expense to the firm, including paying you.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

When Porsche builds a car, they consider what their costs are,(from engineering, production and marketing to servicing) what return on their efforts they can live with, what buyers are willing to pay, and what force their competitors will have on those prices. Why should we be any different? Shouldn’t market forces determine what we charge, and not some “what does the client want to pay, what’s “fair” and besides, we don’t really do much anyway” equation?

[/quote]

mike has hit the nail on the head. also, if you price yourself low, like everyone else, you have presented yourself as a commodity. people associate high prices with high quality. why not be more expensive than everyone else? it sends a strong message.

[quote=mikebutler222]

You know, dude, I think this is an interesting subject ad you make some valid points, but, you seem to have completely glossed over the other side of the "what's a fair price" equation. All you've considered to this point is what would the client like to pay. (What other business considers that factor first, and pays no attention to the pricing power of competitive forces?) You haven’t considered what services have to be priced at in order to cover every expense to the firm, including paying you.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

When Porsche builds a car, they consider what their costs are,(from engineering, production and marketing to servicing) what return on their efforts they can live with, what buyers are willing to pay, and what force their competitors will have on those prices. Why should we be any different? Shouldn’t market forces determine what we charge, and not some “what does the client want to pay, what’s “fair” and besides, we don’t really do much anyway” equation?

[/quote]

Amen!

I also agree with whoever said that SMA are NOT the same as MF's.  Every SMA that I have worked with has kicked MF porfolio's butt in all but one occassion.

We should look at our business the same way we look at portfolio's.  Diversify!  Diversify! Diversify! 

I agree with Dirk that annuities are appropriate for some people.  If I get paid for it then good for me.  They can get guaranteed income for Nperiod certain- good for them.  Who cares if there is an 8 or 10 year hold if they are 50yrs old and aren't retiring for another 15yrs?  Can I give guaranteed income with a death benefit with MF's or stocks?

Some clients I can get big commissions now and they will be happy and some clients slow drip and they will be happy.  Bottom line- I get paid they are happy.  If they aren't- they leave.  Does it mean I'm a bad person?  No, just not a good match.

As mentioned earlier if we were to be sooo dirt cheap and undevalue ourselves too much we'd be out of business.  Fee's also have to cover our ticket charges.

[quote=Dirk Diggler][quote=mikebutler222][quote=dude]

Look,  I appreciate the subjective nature of this topic as well as the value that we offer our clients. 

My experience is based on being at a Morgan office w/ 40 plus brokers, being at a bank program and although not offering wrap accounts per se had many allocation funds that were a mirror image of the portfolio architect and fund solution (morgan stanley fund wrap accts) programs and AGE where we have what seems to be 10 different variations on the smae essential theme (static or tactical allocations, 8 to 10 asset classes, auto rebalancing, auto this, auto that, offered in SMA, ETF or Fund flavors).  Also add to that my various friends and contacts (in addition to former and current coworkers) who all LOVE the idea of getting paid to sit on the assets.  Maybe I'm way out of line here but it seems to me that there is some validity to my observations. 

I'm not necessarily making an impassioned argument for one side, just bringing up some of what I percieve to be some of the downfalls of a fee based approach.  Maybe this discussion will help shore up those cracks, maybe not.  Thanks for the civil and mature responses guys.

[/quote]

You know, dude, I think this is an interesting subject ad you make some valid points, but, you seem to have completely glossed over the other side of the "what's a fair price" equation. All you've considered to this point is what would the client like to pay. (What other business considers that factor first, and pays no attention to the pricing power of competitive forces?) You haven’t considered what services have to be priced at in order to cover every expense to the firm, including paying you.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

When Porsche builds a car, they consider what their costs are,(from engineering, production and marketing to servicing) what return on their efforts they can live with, what buyers are willing to pay, and what force their competitors will have on those prices. Why should we be any different? Shouldn’t market forces determine what we charge, and not some “what does the client want to pay, what’s “fair” and besides, we don’t really do much anyway” equation?

[/quote]

mike has hit the nail on the head. also, if you price yourself low, like everyone else, you have presented yourself as a commodity. people associate high prices with high quality. why not be more expensive than everyone else? it sends a strong message.

[/quote]

Hear Hear.  I charge fees that are slightly above average with a commitment to the client for utmost integrity, superior service, and innovative thinking.  I've rarely had anyone complain about my fees or ask for a discount.  Usually, too, I refuse the discount request unless they plan on adding more assets to the relationship or sending me referrals in return.  One of the best moves I ever made was to refuse to take an account from this stupid old skinflint lady who wanted me to charge her only 1% on a discretionary equity account because "I've met with your competition(a rookie at Merrill) and I know that is the going rate."  I explained politely that I provided a level of service, expertise, and experience that was beyond the industry norm, and if she expected me to work for the 'going rate', we were going to have a problem.  Closed my notepad and waited for her reply.  She said she had to think it over and walked away, but when she said good bye she reminded me to call her if I ever changed my mind on the discount issue.

I felt great for standing up for my pricing, and it was one of the most memorable meetings I've ever had....and a great decision.  If price was the real important issue with her, let her go ahead and torture someone else.  I've had clients like her and all they end up being is one big headache.

Just my 2 cents...

[quote=Dirk Diggler]

mike has hit the nail on the head. also, if you price yourself low, like everyone else, you have presented yourself as a commodity. people associate high prices with high quality. why not be more expensive than everyone else? it sends a strong message.

[/quote]

I agree with your point, but how is that accomplished positioning a variable annuity, when all the fees and charges are embedded?

Dude, I have been impressed with you in the past . . but I think you are really underestimating your value.

From my experience, fair, expert, unbiased advice AND servicing the client's financial needs is worth a wrap fee.  Honestly, do you see people out there doing things with client focus?  Look at the yahoos on this forum.

I just took on a 35 year old customer who not only was sold annuities that were wrong for her THEY CHARGED HER EXTRA and put them in an IRA.

Once I get all of her assets here, I am going to do an in depth review of everything she has.  That takes time and skill.  Then I will put together a plan for her and we will monitor it together.

PLUS, I am a Financial Advisor.  I have a fiduciary responsibility to do the best for my customer.  There is liability in that.  There is value in that for the customer.  I am NOT a broker, which is a salesperson.

So, yes, I usually use a managed account.  I refund the 12-b-1 fees back to the customer.  But, I am here for them.  I care.  I am good.  I give them peace of mind.

It is like Nick Murray says.  I save 1% in time for you.  1% in worry, then I make at least 1% more than you could.  So that is 3% and I am charging you 1.5%.

Dude, I think you are good.  Just don't discount what you are worth.  And what we are all worth.

Mike Butler wrote:

You know, dude, I think this is an interesting subject ad you make some valid points, but, you seem to have completely glossed over the other side of the "what's a fair price" equation. All you've considered to this point is what would the client like to pay. (What other business considers that factor first, and pays no attention to the pricing power of competitive forces?) You haven’t considered what services have to be priced at in order to cover every expense to the firm, including paying you.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><?:NAMESPACE PREFIX = O />

When Porsche builds a car, they consider what their costs are,(from engineering, production and marketing to servicing) what return on their efforts they can live with, what buyers are willing to pay, and what force their competitors will have on those prices. Why should we be any different? Shouldn’t market forces determine what we charge, and not some “what does the client want to pay, what’s “fair” and besides, we don’t really do much anyway” equation?

Reply:

I'm not making a case for being cheap, nor am I trying to undercut the value we bring to our clients.  I believe in getting paid what I'm worth and almost never discount my fee.   

You are wrong that businesses don't consider what a customer is willing to pay first.  In fact most companies will do extensive market research to determine efficient pricing before committing to full production.  If I remember economics correctly it has something to do with the "utility curve"?

I think cowboy93 said it right when he pointed out that the problem we are facing is charging for a PRODUCT when we're really selling ADVICE.  It is the packaging that causes me some questions. 

Maybeeee wrote:

Dude, I have been impressed with you in the past . . but I think you are really underestimating your value.

From my experience, fair, expert, unbiased advice AND servicing the client's financial needs is worth a wrap fee.  Honestly, do you see people out there doing things with client focus?  Look at the yahoos on this forum.

I just took on a 35 year old customer who not only was sold annuities that were wrong for her THEY CHARGED HER EXTRA and put them in an IRA.

Once I get all of her assets here, I am going to do an in depth review of everything she has.  That takes time and skill.  Then I will put together a plan for her and we will monitor it together.

PLUS, I am a Financial Advisor.  I have a fiduciary responsibility to do the best for my customer.  There is liability in that.  There is value in that for the customer.  I am NOT a broker, which is a salesperson.

So, yes, I usually use a managed account.  I refund the 12-b-1 fees back to the customer.  But, I am here for them.  I care.  I am good.  I give them peace of mind.

It is like Nick Murray says.  I save 1% in time for you.  1% in worry, then I make at least 1% more than you could.  So that is 3% and I am charging you 1.5%.

Dude, I think you are good.  Just don't discount what you are worth.  And what we are all worth.

Reply:

Thanks for the input.  I'm not challenging anybody's value here.  Like I said, I understand the subjective nature of this topic.  I'm hoping to fuel a discussion about the relative merits and downfalls of our different compensation models from a very critical standpoint.  It's my contention that if we are all uncomfortably honest about these issues it can only help to create greater confidence in the compensation model we choose to implement. 

I often wonder that if I were to leave the business and 5 years from now seek out a financial advisor (assuming I didn't want to handle it myself), knowing what I know about the different aspects of this business, what would I think is a fair price or compensation package.  

How much would I feel comfortable paying someone to manage my $500,000 (imaginary # here), if they were going to "wrap" it up.  I don't think I'd pay someone $10,000 (or even $5,000 for that matter) a year to "manage managers".  I'd pay $10,000 a year to someone who took direct management of the funds and had a well defined, successful investment strategy.  Of course I would only own stocks, since fundamentally I don't believe in bonds (neither soes Nick Murray) and would understand the volatility of the strategy.

When we charge for the product (a fee as a % of assets) as opposed to a flat (retainer type) fee; it seems to me that it implys the value creation is in the oversight and managing of the assets not the handholding, financial planning etc.......

I'm making a distinction between asset allocation, financial planning and investment policy type services (which to me are under the category of ADVICE) and the direct management of invesments (which to me are under the the category of SERVICE).

Here's how I would prefer to pay an advisor:

A flat fee for work done on a financial plan (by the hour at perhaps $300 to $500 an hour depending on the advisors expertise)

A retainer (not based as a % of assets) for manager selection, monitoring, education and ongoing services, priced based on actual work performed (plus accounting for the advisor's profit, which is well deserved)

A fee as % of asset for direct money management.

Do I think this is the ideal solution, NO.  Do I think it's a start to challenge us to better justify our value, MAYBE. Do I think that I will learn something valuable from all of you (maybe even Mr.10% ), DEFINITELY.  Maybe y'all will learn something in the process?

[quote=dude]

You are wrong that businesses don't consider what a customer is willing to pay first. 

[/quote]

I never said businesses don't consider that. My point is that's all you're considering in your equation. There's no space in your model for covering the costs involved, including having you, to deliver those services. It's as if the only determiner of price is what the customer thinks is "fair". I think I'll go in the local Porsche dealership and tell them I think $35k for a new 911 is "fair". Wish me luck. 

[quote=dude]

I think cowboy93 said it right when he pointed out that the problem we are facing is charging for a PRODUCT when we're really selling ADVICE.  

[/quote]

I honestly don't know just what that means. We sell financial solutions and a relationship to make it work. If someone wants to simply pay for the time required to be told what mutual funds to buy, they already have that option in most every CFP's office in their town. Few, if any, want that pricing model.

[quote=dude] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Here's how I would prefer to pay an advisor:

A flat fee for work done on a financial plan (by the hour at perhaps $300 to $500 an hour depending on the advisors expertise)

[/quote]

Already available, even at most wirehouses.... if not by the hour, by the plan, total.

[quote=dude]

A retainer (not based as a % of assets) for manager selection, monitoring, education and ongoing services, priced based on actual work performed (plus accounting for the advisor's profit, which is well deserved)

[/quote]

I assume "work performed" isn't just things the broker does personally, but everything the firm provides the client. If not based on assets under management, how's this retainer figured? If by some rate not associated with asset size, you're asking the lower sized accounts to subsidize the fees of larger accounts. The liability in dollar figures is greater for larger accounts, they're often more complex, and they usually demand more attention. They shouldn’t pay for those things? I’d like to see you further flesh out this retainer idea.

[quote=dude]

A fee as % of asset for direct money management.

[/quote]

And if they provide SMAs? What then? What does the client pay to have access to managers they other wouldn’t have large enough assets to open an account with?

[quote=dude]

….Do I think it's a start to challenge us to better justify our value….

[/quote]

I honestly haven’t found this to be an issue with clients. They either see my value and employ me, or they don’t, and I don’t have to worry about them. As to my own view of what I provide, not only am I convinced I bring value, I’m certain I’m a bargain in the process.

Value and pricing is obviously somewhat relative.  For example, I've heard from some reps in the northeast that the "going rate" for SMA business there is closer to 1.5% or so, so regardless of what one promises to deliver in value it's tough to get an account from an informed investor if you're charging 2% or more.  Providing the same services in the South or other areas of the country might encounter no investor resistance in charging 2-2.5% or so.

And, no matter what value you can represent to a client for fee-based business, regardless of price, it isn't worth anything unless you deliver on it.  Many reps who get on the fee-based bandwagon simply view it as a way to capture assets and get an annuitized income -- not necessarily always their own fault, because b/ds often promote it that way.  They fail to continue to service those clients, have quarterly reviews, etc., and clients begin to wonder what it is they're paying for, while their rep is out gathering more assets to "manage". 

When the market tanked after the dotcom bust, many reps who never experienced a bear market stuck their heads in the sand as they were afraid to call clients, yet that's the time when client contact should be the highest.  As a result, many of these clients left in droves.  But reps that continued to deliver value through client contact, hand-holding, and continued monitoring, rebalancing & reviews, for the most part were able to maintain their clients because they continued to deliver value.  These same reps were able to have a hayday in winning all those lost accounts from the clients who paid fees, but never heard from their rep.

Re discounting (fees or commissions), as several have already said, we must charge for what we're worth.  If we win a new client because of low fees/commissions, chances are we'll lose that same client when the next guy who's focusing more on price comes along with a lower price. 

[quote=skeedaddy2][quote=Dirk Diggler]

mike has hit the nail on the head. also, if you price yourself low, like everyone else, you have presented yourself as a commodity. people associate high prices with high quality. why not be more expensive than everyone else? it sends a strong message.

[/quote]

I agree with your point, but how is that accomplished positioning a variable annuity, when all the fees and charges are embedded?

[/quote]

It's not.

[quote=maybeeeeeeee]

Dude, I have been impressed with you in the past . . but I think you are really underestimating your value.

From my experience, fair, expert, unbiased advice AND servicing the client's financial needs is worth a wrap fee.  Honestly, do you see people out there doing things with client focus?  Look at the yahoos on this forum.

I just took on a 35 year old customer who not only was sold annuities that were wrong for her THEY CHARGED HER EXTRA and put them in an IRA.

Why were the annuities wrong?

Once I get all of her assets here, I am going to do an in depth review of everything she has.  That takes time and skill.  Then I will put together a plan for her and we will monitor it together.

How sweet of you!

PLUS, I am a Financial Advisor.  I have a fiduciary responsibility to do the best for my customer.  There is liability in that.  There is value in that for the customer.  I am NOT a broker, which is a salesperson.

Salesmen are good. If you take away all the salesmen, the economy comes to a screaching halt.

So, yes, I usually use a managed account.  I refund the 12-b-1 fees back to the customer.  But, I am here for them.  I care.  I am good.  I give them peace of mind.

I feel a little weepy.

It is like Nick Murray says.  I save 1% in time for you.  1% in worry, then I make at least 1% more than you could.  So that is 3% and I am charging you 1.5%.

He used to say some good things about commissions, too. Will  you still quote him when he changes his spots again?

Dude, I think you are good.  Just don't discount what you are worth.  And what we are all worth.

I agree.

You know what's really fun? When I tell a prospect that I'm gonna turn off the "broker meter" (annual fee) when he moves his account. They grin when they hear that. They like saving money. Get's 'em every time.

Me: How much are you paying?

Prospect: 1.5% per year.

Me: Would if make you mad if I turned off the broker meter and didn't charge you an additional fee?

Prospect: Golly, no, Dirk. You can do that?

Me: Yepper. What's your social security number?

Dude,

Do you have clients?  Honestly, i am not trying to sound rude, it's just that you completely forget about all the servicing, paperwork, distributions, cost basis, etc that many advisors handle for their clients.

Will the one time fee guy do all that for free?  No.

Will the fee-based guy do that?  Sure, he'll have his employees do it since he's too busy watching stocks.  Good thing you meet his $500,000 minimum (it has to be high to pay his employees to do all the stuff brokers used to do while he does the stuff money managers used to do  ). 

So what about those folks with $250,000...they get to go to the one time fee guy, then try to figure out their RMD theirselves?  Or call him up and pay him every single time they need something or have a question?  Or do you expect him to work for free?

You senarios don't work.  People have to pay for services rendered. 

[quote=BankFC]

Dude,

Do you have clients?  Honestly, i am not trying to sound rude, it's just that you completely forget about all the servicing, paperwork, distributions, cost basis, etc that many advisors handle for their clients.

Will the one time fee guy do all that for free?  No.

Are you serious? What a stupid question! I get paid a buttload of money because of my clients. Of course I do all that stuff "for free." Why the hell wouldn't I? Just because YOU lack the moral compass to help people "for free", doesn't mean that I do. Is that what they teach you during your saturday training sessions?

Will the fee-based guy do that?  Sure, he'll have his employees do it since he's too busy watching stocks.  Good thing you meet his $500,000 minimum (it has to be high to pay his employees to do all the stuff brokers used to do while he does the stuff money managers used to do  ). 

So what about those folks with $250,000...they get to go to the one time fee guy, then try to figure out their RMD theirselves?  Or call him up and pay him every single time they need something or have a question?  Or do you expect him to work for free?

You senarios don't work.  People have to pay for services rendered. 

You're a frickin' moron. Period.  

Actually Dirk, YOU ARE THE MORON.  If you had any reading comprehension skills at all, you'd realize I addressed the post to Dude, and I was referring to his post, as seen below:

[quote=dude]

Here's how I would prefer to pay an advisor:

A flat fee for work done on a financial plan (by the hour at perhaps $300 to $500 an hour depending on the advisors expertise)

A retainer (not based as a % of assets) for manager selection, monitoring, education and ongoing services, priced based on actual work performed (plus accounting for the advisor's profit, which is well deserved)

A fee as % of asset for direct money management.

Do I think this is the ideal solution, NO.  Do I think it's a start to challenge us to better justify our value, MAYBE. Do I think that I will learn something valuable from all of you (maybe even Mr.10% ), DEFINITELY.  Maybe y'all will learn something in the process?

[/quote]

We all know you don't work for free, you work "for free."  As do I most of the time.  And if you didn't have the intellectual capacity of a retarded slug, I was saying that is how it should be.  My post was PRO- COMMISSION, PRO FEES. 

But obviously you are far too stupid to realize that.

You are TRULY a MORON.        

Managing over 100 million AUM, having built my business from ZERO and coming from Jones (ten years) where fee based didn't exist, and now being indy I can offer the following perspective on this discussion:

There is not one right way to run a practice--I explain both fee based and commission based accounts to clients.  I explain in dollars what the cost will be over time and if changes are made what that will cost will likely be as well.  Most clients will choose fee based--end of discussion.  It's a value added service where the least amount of conflict of interest exists.

BankFC:

Do you truly spend an enormous amount of time doing RMD's (a very simple calculation by the way, does not require much effort at all)

Paperwork?  That's right, you work at a bank (not intended as an insult).  Much different story on the brokerage side (a lot less paperwork).  Not much paperwork other than account openning docs and ACATs, mostly a one time deal (not including a risk questionaire, if you consider that paperwork, I consider it profiling).  

Account Servicing?  This is a vague term, what exactly do you mean?  Looking at their account and telling the client they are up or down by x%?  Calling them up to wish them a happy birthday?  Asking them if anything major has changed?  Taking them out to dinner to tell them they're up or down by X% and telling them about their investments (as their eyes glaze over).  Sending them a check when they want it? 

This stuff has never taken up much of my time.  It's all pretty much automated. 

Zacko, thanks for the perspective.  You deserve respect for your sucess.

Dude,

I love your uneducated repsonses about banks.  To open a retail account at my present location I need 1 form.  At ML I needed 2 (acct app and CRA).  2 is more than 1.  Many brokerages also require a 1099...we do not. 

Do not generalize on subjects you are ignorant of (not meant derogatory), taking time to correct you takes away from the discussion.    

If you really don't think you are worth what you get paid, for pete's sake go do something else.

Here is a perspective: 



Someone starts a thread that focuses on fees and it runs for pages.  For as much as we focus on fees, is it any wonder why we have to forever face these discussions with clients and prospects?  “I can get that managed for 1.0% over there, why are your fee’s so high?” 



As a profession we have to focus on quality, service, and education
(ours) instead of fees, commissions, and fighting our
competitors. 



Someone has a question about getting some education via a CFP program and we get 5 pages of reasons NOT
for him or her to get the education.  The industry has to raise
its game, and it starts with all of us, it starts with being better at
what we do…then we can be proud and not appologize for what we
charge…whichever format that may be.

Rightway:  Great Post

Dirk:  You're still a moron.

BankFC:  My experiences at the bank I worked for were that I had about 8 times as much paperwork per account.  I have heard this from other guys that work at different banks as well.

Also, if the paperwork isn't a lot of work, why do you use it as justification for your fee?

Anyway......

I guess the consensus here is that there is no value to taking a critical look at our compensation.  It is an untouchable subject apparently. 

I guess I'll leave it alone.  Too many assumptions about me are being made without understanding the tone of my posts (which is hard when all  you have is the typed word).  This has definitely not gone in the direction I was hoping it would. 

I am a very self scrutinizing person.  It is how I have grown as a person and as a professional.  I try not to take anything for granted and am almost always open to constructive crisism (other than days where I haven't had my coffee fix).  Anyway thanks for the discussion.

 @ BankFC

Quote Rightway: then we can be proud and not appologize for what we charge...

Amen to that.  I have two associates that came up through the business with me that both had different views, ideas, and concepts.  This ran from how to run the business to fees to marketing.  The three of us are all doing well and we all have our clients best interest at heart.  So we don't argue and call each other moron's, idiots, or even stupid.  We just notice how the stupid one's fall out of the picture on their own.

Now I have to go find that post about not getting a CFP 

Don't worry Dude.  Sometimes when I go back to read my posts they come off meaner than what I want.

The bottom line is this.  If you feel you can charge enough to cover the costs of running your business and still make a profit then do it. 

Here's an interesting story paraphrased; A company had a huge machine that was down.  It had stopped production and this meant no profits.  The mechanics on duty had no clue as to what the problem was and could not fix it.  The manager on duty decided to call up one of the engineers that had retired recently to see if he would look at it.  The engineer came in with a little tool box and fixed the problem in less than 5 minutes.  He was praised and given many thanks.  The company recieved a bill for $50,000 for his services.  The president was miffed and couldn't understand why it was so much for such a short amount of time.  The engineers response?  "I fixed it and now it runs"

If he spread that out over the next ten years or charged $45,000 upfront.  They are both happy.

[quote=Dirk Diggler]You know what’s really fun? When I tell a prospect that I’m gonna turn off the “broker meter” (annual fee) when he moves his account. They grin when they hear that. They like saving money. Get’s 'em every time.

Me: How much are you paying?

Prospect: 1.5% per year.

Me: Would if make you mad if I turned off the broker meter and didn't charge you an additional fee?[/quote]

That's an interesting, if not entirely honest approach to the sale.  If I am on the other side of the equation, I would be laying all your contract expenses next to my fee-based charges and expenses to see how they really compared.  The way you phrase the discussion, a prospect would be under the impression that you are 150 bps cheaper each year and you and I know that isn't even close to true.  They may like saving money, but they're not.

[quote=BankFC]

Actually Dirk, YOU ARE THE MORON.  If you had any reading comprehension skills at all, you'd realize I addressed the post to Dude, and I was referring to his post, as seen below:

[quote=dude]

Here's how I would prefer to pay an advisor:

A flat fee for work done on a financial plan (by the hour at perhaps $300 to $500 an hour depending on the advisors expertise)

A retainer (not based as a % of assets) for manager selection, monitoring, education and ongoing services, priced based on actual work performed (plus accounting for the advisor's profit, which is well deserved)

A fee as % of asset for direct money management.

Do I think this is the ideal solution, NO.  Do I think it's a start to challenge us to better justify our value, MAYBE. Do I think that I will learn something valuable from all of you (maybe even Mr.10% ), DEFINITELY.  Maybe y'all will learn something in the process?

[/quote]

We all know you don't work for free, you work "for free."  As do I most of the time.  And if you didn't have the intellectual capacity of a retarded slug, I was saying that is how it should be.  My post was PRO- COMMISSION, PRO FEES. 

But obviously you are far too stupid to realize that.

You are TRULY a MORON.        

[/quote]

Sorry. I'm just so used to getting it from all angles on this board that I'm a little sensitive. I guess my inner child got the best of me, but I'm all better now.

 Dirk,

Just when I want to hate on you, you make me laugh and I find it in me to appreciate your tasteful sarcasm.  Although I don't agree with you on somethings (mainly EIA's and sh*tting on others) your humor and thick skin are redeeming factors.

[quote=Indyone][quote=Dirk Diggler]You know what’s really fun? When I tell a prospect that I’m gonna turn off the “broker meter” (annual fee) when he moves his account. They grin when they hear that. They like saving money. Get’s 'em every time.

Me: How much are you paying?

Prospect: 1.5% per year.

Me: Would if make you mad if I turned off the broker meter and didn't charge you an additional fee?[/quote]

That's an interesting, if not entirely honest approach to the sale.  If I am on the other side of the equation, I would be laying all your contract expenses next to my fee-based charges and expenses to see how they really compared.  The way you phrase the discussion, a prospect would be under the impression that you are 150 bps cheaper each year and you and I know that isn't even close to true.  They may like saving money, but they're not.

[/quote]

Wow! You mean you include a guarantee with your fee? The VA that I use has M&E of 1.25% and subaccount fees of 68-70bps. If you're using mutual funds or managed money, you can't come close to the VA's total expenses. We can get rid of you and replace you with a guarantee, not to mention outperform the market on a consistent basis, by a wide margin. Call me crazy, but YOU have just become a little less important.

Argue all you want, but that doesn't change the fact that it's easy to steal business from fee chargers like this. I do it all the time.

Dirk, do you tell them its all backed by the FDIC too?

[quote=skeedaddy]Dirk, do you tell them its all backed by the FDIC too?[/quote]

I guess I'd say something stupid like that, myself, if I couldn't argue the facts.

Actually those dumb farts [investors] at the bank are pretty smart after all.

They are in VAs backed by the full faith and credit of the banks they buy

them from. Everyone knows that if the account drops in value, they can

complain to bank management and are made whole…or they threaten to go

to an attorney/press.

[quote=Dirk Diggler]

[quote=skeedaddy]Dirk, do you tell them its all

backed by the FDIC too?[/quote]

I guess I’d say something stupid like that, myself, if I

couldn’t argue the facts.

[quote=skeedaddy]Actually those dumb farts [investors] at the bank are pretty smart after all.
They are in VAs backed by the full faith and credit of the banks they buy
them from. Everyone knows that if the account drops in value, they can
complain to bank management and are made whole...or they threaten to go
to an attorney/press. [/quote]

We both have 177 posts.

[quote=skeedaddy] [quote=Dirk Diggler]

[quote=skeedaddy]Dirk, do you tell them its all
backed by the FDIC too?[/quote]

I guess I'd say something stupid like that, myself, if I
couldn't argue the facts.

[/quote]

Do you think they'll be alive long enough to see the guarantee (10 years), oh
that's right they have to die first, right?[/quote]

The gurantees are incidental. Do you think that people on a cruise ship spend all day worrying that the life boats are ugly?

I’m trying not to piss in my shorts…turn your broker meter off a moment…

[quote=Dirk Diggler][quote=Indyone][quote=Dirk Diggler]You know what’s really fun? When I tell a prospect that I’m gonna turn off the “broker meter” (annual fee) when he moves his account. They grin when they hear that. They like saving money. Get’s 'em every time.

Me: How much are you paying?

Prospect: 1.5% per year.

Me: Would if make you mad if I turned off the broker meter and didn't charge you an additional fee?[/quote]

That's an interesting, if not entirely honest approach to the sale.  If I am on the other side of the equation, I would be laying all your contract expenses next to my fee-based charges and expenses to see how they really compared.  The way you phrase the discussion, a prospect would be under the impression that you are 150 bps cheaper each year and you and I know that isn't even close to true.  They may like saving money, but they're not.

[/quote]

Wow! You mean you include a guarantee with your fee? The VA that I use has M&E of 1.25% and subaccount fees of 68-70bps. If you're using mutual funds or managed money, you can't come close to the VA's total expenses. We can get rid of you and replace you with a guarantee, not to mention outperform the market on a consistent basis, by a wide margin. Call me crazy, but YOU have just become a little less important.

Argue all you want, but that doesn't change the fact that it's easy to steal business from fee chargers like this. I do it all the time.[/quote]

You can say anything on these boards but that doesn't mean that I have to believe you.  If you're so sure you have a superior solution, tell us what VA you are using and we'll see just how well it really stacks up.

[quote=Dirk Diggler][quote=BankFC]

Actually Dirk, YOU ARE THE MORON.  If you had any reading comprehension skills at all, you'd realize I addressed the post to Dude, and I was referring to his post, as seen below:

[quote=dude]

Here's how I would prefer to pay an advisor:

A flat fee for work done on a financial plan (by the hour at perhaps $300 to $500 an hour depending on the advisors expertise)

A retainer (not based as a % of assets) for manager selection, monitoring, education and ongoing services, priced based on actual work performed (plus accounting for the advisor's profit, which is well deserved)

A fee as % of asset for direct money management.

Do I think this is the ideal solution, NO.  Do I think it's a start to challenge us to better justify our value, MAYBE. Do I think that I will learn something valuable from all of you (maybe even Mr.10% ), DEFINITELY.  Maybe y'all will learn something in the process?

[/quote]

We all know you don't work for free, you work "for free."  As do I most of the time.  And if you didn't have the intellectual capacity of a retarded slug, I was saying that is how it should be.  My post was PRO- COMMISSION, PRO FEES. 

But obviously you are far too stupid to realize that.

You are TRULY a MORON.        

[/quote]

Sorry. I'm just so used to getting it from all angles on this board that I'm a little sensitive. I guess my inner child got the best of me, but I'm all better now.

[/quote]

See?  I told you guys about 6 pages ago to calm down before someone's inner child got bruised.....

[quote=Dirk Diggler]Wow! You mean you include a guarantee with your fee? The VA that I use has M&E of 1.25% and subaccount fees of 68-70bps. If you’re using mutual funds or managed money, you can’t come close to the VA’s total expenses. We can get rid of you and replace you with a guarantee, not to mention outperform the market on a consistent basis, by a wide margin. Call me crazy, but YOU have just become a little less important.

Argue all you want, but that doesn't change the fact that it's easy to steal business from fee chargers like this. I do it all the time.

[/quote]

You backpeddle faster than anyone on this board...  I want proof.  Actual numbers.  Not the B.S. you are trying to throw around.  Based on your comments, I doubt you come anywhere close to full disclosure.  You're 1 NASD inquiry away from selling cars at the local Chevy Dealership.

[quote=Indyone] [quote=Dirk Diggler][quote=Indyone][quote=Dirk

Diggler]You know what’s really fun? When I tell a

prospect that I’m gonna turn off the “broker meter” (annual fee) when he

moves his account. They grin when they hear that. They like saving

money. Get’s 'em every time.

Me: How much are you paying?

Prospect: 1.5% per year.

Me: Would if make you mad if I turned off the broker

meter and didn’t charge you an additional fee?[/quote]

That’s an interesting, if not entirely honest approach to the sale. If I

am on the other side of the equation, I would be laying all your contract

expenses next to my fee-based charges and expenses to see how they

really compared. The way you phrase the discussion, a prospect would

be under the impression that you are 150 bps cheaper each year and you

and I know that isn’t even close to true. They may like saving money, but

they’re not.

[/quote]

Wow! You mean you include a guarantee with your

fee? The VA that I use has M&E of 1.25% and subaccount fees of 68

-70bps. If you’re using mutual funds or managed money, you can’t come

close to the VA’s total expenses. We can get rid of you and replace you

with a guarantee, not to mention outperform the market on a consistent

basis, by a wide margin. Call me crazy, but YOU have just become a little

less important.

Argue all you want, but that doesn’t change the fact

that it’s easy to steal business from fee chargers like this. I do it all the

time.[/quote]

You can say anything on these boards but that doesn’t mean that I have

to believe you. If you’re so sure you have a superior solution, tell us what

VA you are using and we’ll see just how well it really stacks up.

[quote=Indyone][quote=Dirk Diggler][quote=Indyone][quote=Dirk Diggler]You know what’s really fun? When I tell a prospect that I’m gonna turn off the “broker meter” (annual fee) when he moves his account. They grin when they hear that. They like saving money. Get’s 'em every time.

Me: How much are you paying?

Prospect: 1.5% per year.

Me: Would if make you mad if I turned off the broker meter and didn't charge you an additional fee?[/quote]

That's an interesting, if not entirely honest approach to the sale.  If I am on the other side of the equation, I would be laying all your contract expenses next to my fee-based charges and expenses to see how they really compared.  The way you phrase the discussion, a prospect would be under the impression that you are 150 bps cheaper each year and you and I know that isn't even close to true.  They may like saving money, but they're not.

[/quote]

Wow! You mean you include a guarantee with your fee? The VA that I use has M&E of 1.25% and subaccount fees of 68-70bps. If you're using mutual funds or managed money, you can't come close to the VA's total expenses. We can get rid of you and replace you with a guarantee, not to mention outperform the market on a consistent basis, by a wide margin. Call me crazy, but YOU have just become a little less important.

Argue all you want, but that doesn't change the fact that it's easy to steal business from fee chargers like this. I do it all the time.[/quote]

You can say anything on these boards but that doesn't mean that I have to believe you.  If you're so sure you have a superior solution, tell us what VA you are using and we'll see just how well it really stacks up.

[/quote]

I think we've just identified the problem. You want to believe me and I don't care whether or not you believe me.

[quote=iconsult100][quote=Dirk Diggler]Wow! You mean you include a guarantee with your fee? The VA that I use has M&E of 1.25% and subaccount fees of 68-70bps. If you’re using mutual funds or managed money, you can’t come close to the VA’s total expenses. We can get rid of you and replace you with a guarantee, not to mention outperform the market on a consistent basis, by a wide margin. Call me crazy, but YOU have just become a little less important.

Argue all you want, but that doesn't change the fact that it's easy to steal business from fee chargers like this. I do it all the time.

[/quote]

You backpeddle faster than anyone on this board...  I want proof.  Actual numbers.  Not the B.S. you are trying to throw around.  Based on your comments, I doubt you come anywhere close to full disclosure.  You're 1 NASD inquiry away from selling cars at the local Chevy Dealership.

[/quote]

How does it feel to want?

I have to say that a hartford VA w/principal protection and 5 yr step up is as cheap as managed money or a wrap. When you think about it objectively it’s pretty tough competition.

I have to say that any low fee VA is very expensive if you can't make a lot of money with it.

Most of you seem to think that cheap is better. If you're competing on fees, you don't have much to offer. Doesn't it make sense to consider the amount that's left in your pocket, after fees?

When people see the net performance of my annuities, they don't say a WORD about fees. Don't believe me? I don't care.

The performance is pretty darn good as well. Competitive with SMA’s or wraps. Too bad my bank limits the use, otherwise I’d use them more often. The Hartfor VA is a good product

[quote=ezmoney]The performance is pretty darn good as well. Competitive with SMA's or wraps. Too bad my bank limits the use, otherwise I'd use them more often. The Hartfor VA is a good product[/quote]

Why do they limit them?

becuase they’re dumb bankers and scared.

[quote=ezmoney]becuase they're dumb bankers and scared.[/quote]

That sorta sums it all up in about six words, doesn't it?  THAT, my friend, is why I'm indy, not because of payout.  Bankers and many folks in the management infrastructure at wirehouses(particularly compliance and product management) simply don't understand markets or the risk tolerances of individual investors.  They can't, because they've almost never spent any time in the trenches with real clients.....plus if they were so smart they'd be brokers because they would make a lot more $$$$

[quote=ezmoney]The performance is pretty darn good as well. Competitive with SMA's or wraps. Too bad my bank limits the use, otherwise I'd use them more often. The Hartfor VA is a good product[/quote]

I really don't see that. I have a few inherited Hartford annuities and between their charges and the fact most of their best sub-accounts are closed, I see it as NBD.

[quote=mikebutler222]

[quote=ezmoney]The performance is pretty darn good as well. Competitive with SMA's or wraps. Too bad my bank limits the use, otherwise I'd use them more often. The Hartfor VA is a good product[/quote]

I really don't see that. I have a few inherited Hartford annuities and between their charges and the fact most of their best sub-accounts are closed, I see it as NBD.

[/quote]

lol....I'm following you....get to work!

[quote=mikebutler222]

[quote=ezmoney]The performance is pretty darn good as well. Competitive with SMA's or wraps. Too bad my bank limits the use, otherwise I'd use them more often. The Hartfor VA is a good product[/quote]

I really don't see that. I have a few inherited Hartford annuities and between their charges and the fact most of their best sub-accounts are closed, I see it as NBD.

[/quote]

You should switch them into new annuities.

[quote=Dirk Diggler][quote=mikebutler222]

[quote=ezmoney]The performance is pretty darn good as well. Competitive with SMA's or wraps. Too bad my bank limits the use, otherwise I'd use them more often. The Hartfor VA is a good product[/quote]

I really don't see that. I have a few inherited Hartford annuities and between their charges and the fact most of their best sub-accounts are closed, I see it as NBD.

[/quote]

You should switch them into new annuities.

[/quote]

Yeah, lol, that's the solution. BTW, I didn't want to jump in on the thread with the "fee guys" comment. But when I run into someone that's been told they can avoid a fee by buying a an annuity, I simply show the client the MorningStar on the annuity they've been shown. When MorningStar shows them an all-in fee of 2-3.5%, they turn white as a sheet. 

[quote=mikebutler222][quote=Dirk Diggler][quote=mikebutler222]

[quote=ezmoney]The performance is pretty darn good as well. Competitive with SMA's or wraps. Too bad my bank limits the use, otherwise I'd use them more often. The Hartfor VA is a good product[/quote]

I really don't see that. I have a few inherited Hartford annuities and between their charges and the fact most of their best sub-accounts are closed, I see it as NBD.

[/quote]

You should switch them into new annuities.

[/quote]

Yeah, lol, that's the solution. BTW, I didn't want to jump in on the thread with the "fee guys" comment. But when I run into someone that's been told they can avoid a fee by buying a an annuity, I simply show the client the MorningStar on the annuity they've been shown. When MorningStar shows them an all-in fee of 2-3.5%, they turn white as a sheet. 

[/quote]

Not as white as when I show them the true cost of ownership of their mutual funds on personalfund.com, on top of the broker meter. An all-in fee of 4-6%. This is when the little light goes off in their heads and they really see the reason why their performance sucks.

Mike, do you also show them the compounding effect of the tax advantage in the annuity?

It's not how much you make that's important, it's how much of it you keep.

[quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler][quote=mikebutler222]

[quote=ezmoney]The performance is pretty darn good as well. Competitive with SMA's or wraps. Too bad my bank limits the use, otherwise I'd use them more often. The Hartfor VA is a good product[/quote]

I really don't see that. I have a few inherited Hartford annuities and between their charges and the fact most of their best sub-accounts are closed, I see it as NBD.

[/quote]

You should switch them into new annuities.

[/quote]

Yeah, lol, that's the solution. BTW, I didn't want to jump in on the thread with the "fee guys" comment. But when I run into someone that's been told they can avoid a fee by buying a an annuity, I simply show the client the MorningStar on the annuity they've been shown. When MorningStar shows them an all-in fee of 2-3.5%, they turn white as a sheet. 

[/quote]

Not as white as when I show them the true cost of ownership of their mutual funds on personalfund.com, on top of the broker meter. An all-in fee of 4-6%. This is when the little light goes off in their heads and they really see the reason why their performance sucks.

[/quote]

Good point, but the subaccounts of the annuity carry the very same costs PLUS there's that pesky M&E and the riders... it still boils down to the client realizing the "I can spare you fees" guy lied to them.

You guys are talking apples and oranges when you discuss a fee based account vs a variable annuity.

First of all Zacko has it right. You analyse each client's trading patterns and determine which would be the most beneficial for the client....not your pocket.  The clients appreciate this service and recognize that you are thinking of their best interests and will be a client for life. Lower the dorsal fins once in a while guys   If the client has a bond portfolio why would they want to pay you an annual fee. On the other hand if they have an active stock, ETF, UIT, and mutual fund portfolio. Then they are probably fee based candidate.  One size doesn't fit all.

Comparing VAs and fee based is just, to use Dirks favorite phrase, retarded. What about those clients who have stock portfolios.  Do you just not handle them?  Dirk has already stated that he doesn't want to bother with quoting stock prices and worrying about that stuff.  Comparing the fees between loaded funds and VAs may be be applicable, but it doesn't work when we are discussing no loads, and exchange traded equities.  I have quite a few clients who have extensive stock portfolios (over a million dollars in stocks and other equities).  Those clients take a lot of my time and energy not only with the stock portfolio but in advising them on estate issues, wealth transfer, retirement planning etc..... should be fee based.  Other clients who have mutual funds only or minimal holdings....not. IMNSHO

As to Philo's glib comment about the compounding effect of the tax advantaged annuity: Do you also explain that the variable annuity capital gains which are currently taxed at a 15% level will be taxed at the client's ordinary income tax rate which is considerably higher  (or should be since a person in a 15% tax bracket is probably not a good annuity candidate) and that if they want to take a lump sum all gain is taxed first which would push them into an even higher tax bracket.  How is this an advantage????   I mean to the customer....not to the broker who gets 7.5 to 10% on the sale.   

Don't get me wrong. I do sell VAs and even an EIA or two and there is nothing wrong with those products. But not as the major portion of the client's portfolio.  The guarantees of the VA and the EIA will sometimes be more important to the client than anything else.  So be it, as long as they are fully informed.

Our time is worth a lot and as some of you may remember I told Pennypch that same thing.  Just how much?  Good question.

[quote=Philo Kvetch]

Mike, do you also show them the compounding effect of the tax advantage in the annuity?

It's not how much you make that's important, it's how much of it you keep.

[/quote]

Good point. Then again, in an IRA, that's not an issue. I also show them the affect of paying taxes as capital gains versus regular income, and the lack of step-up in annuity versus that in other investments. Given them the whole picture let them decide.

I didn't mean to bash annuities (that's been done to death) as bash the "You can avoid fees with my annuity" line which is so easily exposed as dishonest.

[quote=babbling looney]

 Do you also explain that the variable annuity capital gains which are currently taxed at a 15% level will be taxed at the client's ordinary income tax rate which is considerably higher  [/quote]

Thank you.  I'd rather pay taxes off the gains from $100,000 portfolio as opposed to taxes of a $500,000 portfolio (after my great tax deferral program).  There's a proposal gaining momentum that will eliminate capital gains taxes on mutual funds if the dividends are re-invested in the same account.

Here's the problem with everyone's criticism of me. You guys are assuming that I'm getting mediocre returns like you are. If that were true, you guys would be absolutely right. Annuities would suck. In general, almost ALL annuities suck in  my opinion.

However, you guys are wrong. The benefits FAR outweigh the costs, in my case. I know how most brokers did last year. I see lots  of statements. I have yet to see one that can even sniff in the same neighborhood of my returns.

You guys may not understand this, but most clients are willing to overlook costs when the net, after tax dollars put more money in their pockets than what they've already experienced.

Here's a conversation I had today:

Me: I was just reviewing the annuity statements this week. Have you looked at yours?

Client: It came about a week ago. Not too bad.

Me: I'm pretty happy, too. On January 1, you had a little over $600,000. Now, you're north of $710,000. If you had invested in the S&P 500, you would be at about $620,000. A lot of people didn't even do THAT well. Let's add another $250,000 to the annuity?

Client: We can add money to it?

Me: Yep

Client: I'd like to, but I can only part with $175,000.

Me:That's no big deal. Do you have it in your checking account right now?

Client: Yes.

Me: Great. I'll have a courier stop by in a couple of hours to pick it up. Does that work for you?

Client: Yes. I really appreciate you.

Me: Me too. I really appreciate your business and friendship. I'll call you when your money hits the account. Say hi to Sally for me.

$175,000 * 7.5% * 90% = $11,812.50

5 minute phone call = $2,362.50 per minute

THAT is what happens when you make people money. I LOVE this business.

I didn’t say compare cap gains vs ordinary income taxes…I said the compounding effect of the tax advantage.  I’ll debate that with y’all, but not with strawman arguments such as babbling looney’s contention.

[quote=Philo Kvetch]I didn't say compare cap gains vs ordinary income taxes....I said the compounding effect of the tax advantage.  I'll debate that with y'all, but not with strawman arguments such as babbling looney's contention.[/quote]

Oh, I see. You want to debate the facts. How are you going to do that when you and I are the only one's with the facts?

[quote=Philo Kvetch]I didn't say compare cap gains vs ordinary income taxes....I said the compounding effect of the tax advantage.  I'll debate that with y'all, but not with strawman arguments such as babbling looney's contention.[/quote]

The compounding effect of the "tax advantage" means jack s--t if you have to pay it all out in income taxes when you either take the money or when your heirs get it with no step up in value.  Again, to make myself perfectly clear to the comprehension challenged......

Comparing a VA to other investment strategies is apples and oranges.  There is nothing wrong with annuities....unless that is the only investment vehicle you schlock to your clients and misrepresent the fees by making invalid comparisons.

BL, you poor, benighted child.

Let me explain this to you in simple terms.  When an investment pays a dividend or a cap gain, tax must be paid on that amount in the same tax year.  When the gain is in an annuity or other tax sheltered vehicle, that amount is left in the vehicle to gain further gains.  This is called compounding.

Have you ever heard the story about the magic penny?  If not, it goes like this....Would you rather have a million dollars today, or a magic penny that doubles every day for one month?  The answer, of course, is the magic penny.  Now, try taking 27% out of the gain every day and see what you've got at the end of the month.

Get it?

Dirk,

I know your client acheive above average gains because you have the crystal ball but aren't the same options offered outside of a VA considering your usin UIT's?

BL,

Those First Trust UIT's are so risky you NEED the guarantee.  I did an analyses on the rolling returns of each of the "target" strategy UIT's based on ACTUALLY issued trusts (the performance charts go back 20 years based on a hypo of the strategy, the oldest target trusts go back maybe 5 years), needless to say my findings were shocking.

Where the 5 year performance (based on the hypothetical) should have been up 5% annually, ACTUAL performance was down 5% annually based on buying a trust and rolling it every 15 months.  In fact one of the trusts that advertises the greatest gain was down over 70% during the bear market!!

I always get real skeptical when a strategy uses "hypothetical" returns to advertise a backtested strategy.  Almost all backtested strategies end up failing in the long run because of data mining.

You would have done great (really great) with some of the target trusts if you had bought early in 2005, but anytime after april to june and your clients would have been hammered. 

Also a VA would be the better way to use these vehicles because of the nasty tax situation of having your whole portfolio cashed in every 15 months (not to mention the need for a guarantee on this type of roller coaster).

[quote=Philo Kvetch]

BL, you poor, benighted child.

Let me explain this to you in simple terms.  When an investment pays a dividend or a cap gain, tax must be paid on that amount in the same tax year.  When the gain is in an annuity or other tax sheltered vehicle, that amount is left in the vehicle to gain further gains.  This is called compounding.

Have you ever heard the story about the magic penny?  If not, it goes like this....Would you rather have a million dollars today, or a magic penny that doubles every day for one month?  The answer, of course, is the magic penny.  Now, try taking 27% out of the gain every day and see what you've got at the end of the month.

Get it?

[/quote]

Listen up idiot.  The capital gains that are generated in a variable annuity from growth of the underlying investment NOT the cap gains that are paid out each year, are what I am talking about.  Capital gains are taxed at 15% now, not 27%.  I assume that you expect the underlying investment in the mutual funds to appreciate at some time? 

Let me make a veeeeery simple example for you.  If you have access to some hypo software you can get more accurate figures.  But again this is a simple example.

Assume that the VA is invested in growth funds that pay no interest income.  Your initial investment is 50,000.  Over the course of 10 years your initial principal has grown to 120,000. Lets be really generous and say that 20,000 of it was due to annual capital gains which you didn't have to pay 15% taxes on.  Now....follow along here.  That leaves 50,000 of capital gains that have also not been taxed because of the annuities sheltering.   When the client takes out that 50,000 it is taxed as ordinary income which is higher than 15% for most people (or should be otherwise why are they in an annuity anyway).  The 20,000 of cap gains received over the years has also been denied the favorable tax treatment of cap gains.  That is 70,000 taxed at say 27% instead of 15%. A difference of $8,500 additional paid in taxes.  Not to mention the additional fees within the VA that have reduced the potential yield by additional 2% or more.  We can run hypos on this too to show how much over the 10 years the client lost due to the M&E costs and benefit riders.  It is pretty substantial.

I can hear your argument now....but they may be in a lower tax bracket when they take the money out.  Maybe......maybe not....income taxes and cap gains are very very low now compared to the past. Google it. Oooh ooooh.  They plan to take the money out over an extended time frame and spread the tax over years.  Maybe....what if they need to liquidate a large chunk of the annuity?  Screwed!

Now lets look at the effect on transfering this asset to the heirs.  Most of the time, that is what the clients intend.  If the money was not in a VA the beneficary would get a step up in value and owe NO TAXES.  In the VA there is no step up in value so the kids will owe income taxes on 70,000.

You can use all the cute little phrases you want on your clients, but believe me you can't run that magic penny bull crap past me when you are ignorant of long term vs short term cap gains and estate issues such as step up in value.  Don't try to teach your grandmother to suck eggs. 

http://idioms.thefreedictionary.com/teach+grandmother+to+suc k+eggs

Dude..... I have already stated that I sell VAs and EIAs and there is nothing wrong with the products. And I have sold them to those risk adverse clients who feel they need a safety net and are illing to pay for it.  What is wrong is not understanding the ramifications of the product, the tax consequences, the estate issues and not explaining it fully to the client.

I don't know what you mean about First Trust UITs?? My few clients who do have unit trusts, brought them over from elsewhere and have owned for quite a few years. We are just waiting for them to end in a year or so.  Unless they were bond UITs they have done pretty well.  Not as good as a well managed mutual fund or stock portfolio, but no losses. 

Life insurance is for transferring wealth to subsequent generations, not annuities.

Gee, you REALLY don't understand this business.

Oh, well.  Machts nixt.

[quote=babbling looney][quote=Philo Kvetch]

BL, you poor, benighted child.

Let me explain this to you in simple terms.  When an investment pays a dividend or a cap gain, tax must be paid on that amount in the same tax year.  When the gain is in an annuity or other tax sheltered vehicle, that amount is left in the vehicle to gain further gains.  This is called compounding.

Have you ever heard the story about the magic penny?  If not, it goes like this....Would you rather have a million dollars today, or a magic penny that doubles every day for one month?  The answer, of course, is the magic penny.  Now, try taking 27% out of the gain every day and see what you've got at the end of the month.

Get it?

[/quote]

Listen up idiot.  The capital gains that are generated in a variable annuity from growth of the underlying investment NOT the cap gains that are paid out each year, are what I am talking about.  Capital gains are taxed at 15% now, not 27%.  I assume that you expect the underlying investment in the mutual funds to appreciate at some time? 

Let me make a veeeeery simple example for you.  If you have access to some hypo software you can get more accurate figures.  But again this is a simple example.

Assume that the VA is invested in growth funds that pay no interest income.  Your initial investment is 50,000.  Over the course of 10 years your initial principal has grown to 120,000. Lets be really generous and say that 20,000 of it was due to annual capital gains which you didn't have to pay 15% taxes on.  Now....follow along here.  That leaves 50,000 of capital gains that have also not been taxed because of the annuities sheltering.   When the client takes out that 50,000 it is taxed as ordinary income which is higher than 15% for most people (or should be otherwise why are they in an annuity anyway).  The 20,000 of cap gains received over the years has also been denied the favorable tax treatment of cap gains.  That is 70,000 taxed at say 27% instead of 15%. A difference of $8,500 additional paid in taxes.  Not to mention the additional fees within the VA that have reduced the potential yield by additional 2% or more.  We can run hypos on this too to show how much over the 10 years the client lost due to the M&E costs and benefit riders.  It is pretty substantial.

I can hear your argument now....but they may be in a lower tax bracket when they take the money out.  Maybe......maybe not....income taxes and cap gains are very very low now compared to the past. Google it. Oooh ooooh.  They plan to take the money out over an extended time frame and spread the tax over years.  Maybe....what if they need to liquidate a large chunk of the annuity?  Screwed!

Now lets look at the effect on transfering this asset to the heirs.  Most of the time, that is what the clients intend.  If the money was not in a VA the beneficary would get a step up in value and owe NO TAXES.  In the VA there is no step up in value so the kids will owe income taxes on 70,000.

You can use all the cute little phrases you want on your clients, but believe me you can't run that magic penny bull crap past me when you are ignorant of long term vs short term cap gains and estate issues such as step up in value.  Don't try to teach your grandmother to suck eggs. 

http://idioms.thefreedictionary.com/teach+grandmother+to+suc k+eggs

[/quote]

Excellent post BL.

[quote=Philo Kvetch]

Life insurance is for transferring wealth to subsequent generations, not annuities.

[/quote]

DUH!  Calling you an idiot was too kind.  You are really severely reading and comprehension challenged.  Why do you think I brought up the lack of step up in value?  I'm sure you cover this aspect of annuities when you sell one.....riiiiiight.  No we talk about magic pennies and dancing penguins.

[quote=babbling looney]

Dude..... I have already stated that I sell VAs and EIAs and there is nothing wrong with the products. And I have sold them to those risk adverse clients who feel they need a safety net and are illing to pay for it.  What is wrong is not understanding the ramifications of the product, the tax consequences, the estate issues and not explaining it fully to the client.

I don't know what you mean about First Trust UITs?? My few clients who do have unit trusts, brought them over from elsewhere and have owned for quite a few years. We are just waiting for them to end in a year or so.  Unless they were bond UITs they have done pretty well.  Not as good as a well managed mutual fund or stock portfolio, but no losses. 

[/quote]

These are the investments within the annuity (First Trust, Target series trusts, check out their website www.ftportfolios.com)  that Dirk uses which has supposedly produced the extraordinary returns (20% plus) he claims (and as I said if he put the $'s in towards the beginning of the year this may be true).  My point is that they (the target UIT's) are VEEERYY volatile and this is one situation where a guarantee might come in handy.

I personally will not present to clients something I know they will never understand no matter how many ways we explain it.

Just my opinions that VA's fall under this category.

It's not right or wrong.  

Just my way of doing business.

It is my conviction that my clients are not "missing out" on anything special, in matter of fact I might be doing them a favor.

scrim

[quote=bankrep1]

Dirk,

I know your client acheive above average gains because you have the crystal ball but aren't the same options offered outside of a VA considering your usin UIT's?

[/quote]

Yes. They're more expensive, offer no guarantee, and are taxable every year.

You've sure spent a lot of time trying to jam me up. Why don't you tell me what YOU do with people's money. I'd like to knock you around for a while. Do you have the guts? If it's not perfect, I'm gonna rip it to shreds. So, let's have it big boy!

[quote=babbling looney]

Dude..... I have already stated that I sell VAs and EIAs and there is nothing wrong with the products. And I have sold them to those risk adverse clients who feel they need a safety net and are illing to pay for it.  What is wrong is not understanding the ramifications of the product, the tax consequences, the estate issues and not explaining it fully to the client.

I don't know what you mean about First Trust UITs?? My few clients who do have unit trusts, brought them over from elsewhere and have owned for quite a few years. We are just waiting for them to end in a year or so.  Unless they were bond UITs they have done pretty well.  Not as good as a well managed mutual fund or stock portfolio, but no losses. 

[/quote]

What do YOU do with people's money? Be specific. Do you have the guts to share it with the class? I doubt it.

[quote=dude]

BL,

Those First Trust UIT's are so risky you NEED the guarantee.  I did an analyses on the rolling returns of each of the "target" strategy UIT's based on ACTUALLY issued trusts (the performance charts go back 20 years based on a hypo of the strategy, the oldest target trusts go back maybe 5 years), needless to say my findings were shocking.

Where the 5 year performance (based on the hypothetical) should have been up 5% annually, ACTUAL performance was down 5% annually based on buying a trust and rolling it every 15 months.  In fact one of the trusts that advertises the greatest gain was down over 70% during the bear market!!

I always get real skeptical when a strategy uses "hypothetical" returns to advertise a backtested strategy.  Almost all backtested strategies end up failing in the long run because of data mining.

You would have done great (really great) with some of the target trusts if you had bought early in 2005, but anytime after april to june and your clients would have been hammered. 

Also a VA would be the better way to use these vehicles because of the nasty tax situation of having your whole portfolio cashed in every 15 months (not to mention the need for a guarantee on this type of roller coaster).

[/quote]

What do YOU do with people's money? Be specific. Do you have the guts to share it with the class? I doubt it.

[quote=dude][quote=babbling looney]

Dude..... I have already stated that I sell VAs and EIAs and there is nothing wrong with the products. And I have sold them to those risk adverse clients who feel they need a safety net and are illing to pay for it.  What is wrong is not understanding the ramifications of the product, the tax consequences, the estate issues and not explaining it fully to the client.

I don't know what you mean about First Trust UITs?? My few clients who do have unit trusts, brought them over from elsewhere and have owned for quite a few years. We are just waiting for them to end in a year or so.  Unless they were bond UITs they have done pretty well.  Not as good as a well managed mutual fund or stock portfolio, but no losses. 

[/quote]

These are the investments within the annuity (First Trust, Target series trusts, check out their website www.ftportfolios.com)  that Dirk uses which has supposedly produced the extraordinary returns (20% plus) he claims (and as I said if he put the $'s in towards the beginning of the year this may be true).  My point is that they (the target UIT's) are VEEERYY volatile and this is one situation where a guarantee might come in handy.

[/quote]

What do YOU do with people's money? Be specific. Do you have the guts to share it with the class? I doubt it.

This has become quite boring. I hope you guys keep doing what you're doing, so guys like me can steal your clients from you. Don't doubt for a minute that I have a problem closing business with real returns from real annuities over the last 3.25 real years. My first annuity is up an average annual of 19.37 over this period. A cumulative of 78%. That's how I steal business.

So, you just stick to your guns and try to save the world from bad guys like me, while I save them from the financial mediocrity that you closed minded people have to offer.

Now, I'm curious to see who has the guts to tell ME what YOU are doing with your clients money. Don't forget to include the fees, methods, and returns.

[quote=Dirk Diggler]

Now, I'm curious to see who has the guts to tell ME what YOU are doing with your clients money. Don't forget to include the fees, methods, and returns.

[/quote]

Are they going to be allowed to pull numbers out of thin air w/o supporting evidence, like you did?

[quote=Dirk Diggler][quote=bankrep1]

Dirk,

I know your client acheive above average gains because you have the crystal ball but aren't the same options offered outside of a VA considering your usin UIT's?

[/quote]

Yes. They're more expensive, offer no guarantee, and are taxable every year.

You've sure spent a lot of time trying to jam me up. Why don't you tell me what YOU do with people's money. I'd like to knock you around for a while. Do you have the guts? If it's not perfect, I'm gonna rip it to shreds. So, let's have it big boy!

[/quote]

Yes they are taxable every year, at the minimum capital gains rate, and then only if they actually generate a profit.  Not like mutual funds which can throw of cap gains dividends even in a losing year.

[quote=dude]

BL,

Those First Trust UIT's are so risky you NEED the guarantee.  I did an analyses on the rolling returns of each of the "target" strategy UIT's based on ACTUALLY issued trusts (the performance charts go back 20 years based on a hypo of the strategy, the oldest target trusts go back maybe 5 years), needless to say my findings were shocking.

Where the 5 year performance (based on the hypothetical) should have been up 5% annually, ACTUAL performance was down 5% annually based on buying a trust and rolling it every 15 months.  In fact one of the trusts that advertises the greatest gain was down over 70% during the bear market!!

I always get real skeptical when a strategy uses "hypothetical" returns to advertise a backtested strategy.  Almost all backtested strategies end up failing in the long run because of data mining.

You would have done great (really great) with some of the target trusts if you had bought early in 2005, but anytime after april to june and your clients would have been hammered. 

Also a VA would be the better way to use these vehicles because of the nasty tax situation of having your whole portfolio cashed in every 15 months (not to mention the need for a guarantee on this type of roller coaster).

[/quote]

Dude-

I have used the First Trust UIT's for about 10 years now, and I have rarely seen the sort of volatility you describe.  Could be because I've used them as part of a diversified portfolio and rarely if ever use just one trust.  I usually use a combination of their strategies and rebalance between them every year.

My clients have experienced some very handsome returns, to say the least.

True they did get knocked around a bit during the 2000-200? bear market, but that is because they are fully invested portfolios with no cash whatsoever.  They also recovered VERY nicely when the market bounced back.  Volatility in and of itself is not necessarily evil-it can work both ways.

Just today I was on the phone with one of the senior partners at First Trust who is a friend.  He tells me that their assets under management have doubled in the last five years.  Tell me any other asset manager who can make that claim!!  They must be doing something right.

Truthfully, though, I've always sorta liked it that no every one 'gets it' when it comes to their products.  Gives me an edge because it's something unique I can show to clients.

[quote=Dirk Diggler][quote=babbling looney]

Dude..... I have already stated that I sell VAs and EIAs and there is nothing wrong with the products. And I have sold them to those risk adverse clients who feel they need a safety net and are illing to pay for it.  What is wrong is not understanding the ramifications of the product, the tax consequences, the estate issues and not explaining it fully to the client.

I don't know what you mean about First Trust UITs?? My few clients who do have unit trusts, brought them over from elsewhere and have owned for quite a few years. We are just waiting for them to end in a year or so.  Unless they were bond UITs they have done pretty well.  Not as good as a well managed mutual fund or stock portfolio, but no losses. 

[/quote]

What do YOU do with people's money? Be specific. Do you have the guts to share it with the class? I doubt it.

[quote=rightway] [quote=Dirk Diggler][quote=babbling looney]

Dude..... I have already stated that I sell VAs and EIAs and there is nothing wrong with the products. And I have sold them to those risk adverse clients who feel they need a safety net and are illing to pay for it.  What is wrong is not understanding the ramifications of the product, the tax consequences, the estate issues and not explaining it fully to the client.

I don't know what you mean about First Trust UITs?? My few clients who do have unit trusts, brought them over from elsewhere and have owned for quite a few years. We are just waiting for them to end in a year or so.  Unless they were bond UITs they have done pretty well.  Not as good as a well managed mutual fund or stock portfolio, but no losses. 

[/quote]

What do YOU do with people's money? Be specific. Do you have the guts to share it with the class? I doubt it.

[/quote]

Dirk- You have been asked several times how you generate the 9% comssissions and returns but you fail to disclose.  Can't YOU share with the class?
[/quote]

How do I generate commissions? I'd be glad to answer that. First, you find something that you really like to sell. Second, you call people and ask them to buy it. Finally, I get ink on the paperwork.

[quote=mikebutler222][quote=Dirk Diggler]

Now, I'm curious to see who has the guts to tell ME what YOU are doing with your clients money. Don't forget to include the fees, methods, and returns.

[/quote]

Are they going to be allowed to pull numbers out of thin air w/o supporting evidence, like you did?

[/quote]

Jobhopper, what  would be an example of supporting evidence and how would I present it?

[quote=babbling looney][quote=Philo Kvetch]

BL, you poor, benighted child.

Let me explain this to you in simple terms.  When an investment pays a dividend or a cap gain, tax must be paid on that amount in the same tax year.  When the gain is in an annuity or other tax sheltered vehicle, that amount is left in the vehicle to gain further gains.  This is called compounding.

Have you ever heard the story about the magic penny?  If not, it goes like this....Would you rather have a million dollars today, or a magic penny that doubles every day for one month?  The answer, of course, is the magic penny.  Now, try taking 27% out of the gain every day and see what you've got at the end of the month.

Get it?

[/quote]

Listen up idiot.  The capital gains that are generated in a variable annuity from growth of the underlying investment NOT the cap gains that are paid out each year, are what I am talking about.  Capital gains are taxed at 15% now, not 27%.  I assume that you expect the underlying investment in the mutual funds to appreciate at some time? 

Let me make a veeeeery simple example for you.  If you have access to some hypo software you can get more accurate figures.  But again this is a simple example.

Assume that the VA is invested in growth funds that pay no interest income.  Your initial investment is 50,000.  Over the course of 10 years your initial principal has grown to 120,000. Lets be really generous and say that 20,000 of it was due to annual capital gains which you didn't have to pay 15% taxes on.  Now....follow along here.  That leaves 50,000 of capital gains that have also not been taxed because of the annuities sheltering.   When the client takes out that 50,000 it is taxed as ordinary income which is higher than 15% for most people (or should be otherwise why are they in an annuity anyway).  The 20,000 of cap gains received over the years has also been denied the favorable tax treatment of cap gains.  That is 70,000 taxed at say 27% instead of 15%. A difference of $8,500 additional paid in taxes.  Not to mention the additional fees within the VA that have reduced the potential yield by additional 2% or more.  We can run hypos on this too to show how much over the 10 years the client lost due to the M&E costs and benefit riders.  It is pretty substantial.

I can hear your argument now....but they may be in a lower tax bracket when they take the money out.  Maybe......maybe not....income taxes and cap gains are very very low now compared to the past. Google it. Oooh ooooh.  They plan to take the money out over an extended time frame and spread the tax over years.  Maybe....what if they need to liquidate a large chunk of the annuity?  Screwed!

Now lets look at the effect on transfering this asset to the heirs.  Most of the time, that is what the clients intend.  If the money was not in a VA the beneficary would get a step up in value and owe NO TAXES.  In the VA there is no step up in value so the kids will owe income taxes on 70,000.

You can use all the cute little phrases you want on your clients, but believe me you can't run that magic penny bull crap past me when you are ignorant of long term vs short term cap gains and estate issues such as step up in value.  Don't try to teach your grandmother to suck eggs. 

http://idioms.thefreedictionary.com/teach+grandmother+to+suc k+eggs

[/quote]

Let's see....you don't understand a concept as fundamental as compounding, you can't handle simple arithmatic, and you think people use annuities for wealth transfer.

You really are a Babbling Looney!

can you can stretch both qualified and non qualified annuites so the heirs don’t get that big tax hit you’re talking. They also have the ability to take income for a substantial period of time while the investments grow tax deferred.

Too, BL's example is flawed because it doesn't really account for the difference in value caused by compounding on gains that would have otherwise been paid out in taxes.

I point this out despite the fact that I generally subscribe to the 'annuities are overused' camp.

There's lots of flaws in what most people have had to say. Here's the bottom line...clients prefer making more money over making less money.

Here's the next bottom line...If a broker can't compete with returns, he will compete with fees. What else is someone gonna do when he adds no upside value, relative to the competition?

[quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler]

Now, I'm curious to see who has the guts to tell ME what YOU are doing with your clients money. Don't forget to include the fees, methods, and returns.

[/quote]

Are they going to be allowed to pull numbers out of thin air w/o supporting evidence, like you did?

[/quote]

Jobhopper, what  would be an example of supporting evidence and how would I present it?

[/quote]

Well, annuity-hack , that's pretty easy. Name the annuity you're using and the sub-accounts. Their performance is a matter of public record.

Now, those who care will have to assume you've been perfectly honest in naming the sub-accounts and not simply doing the "pick the best past performance" game. They wouldn't question your honesty, would they? I mean, a guy who tell customers "I can end your fees" while selling them an annuity over the brokerage account they currently have just has to be a model of integrity, right? <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

BTW, I'm not playing the condemn all annuity game, I'm playing the condemn deceptive sales practices game. There's a dif 

[quote=Philo Kvetch]

Let's see....you don't understand a concept as fundamental as compounding, you can't handle simple arithmatic, and you think people use annuities for wealth transfer.

[/quote]

You seem to have an aversion to the truth, Philo. Why's that? What is it that keeps you from honestly acknowledging the shortcomings in annuities BL (who sells them, as do I) pointed out?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

For example, she didn’t say annuities were used for wealth transfer, she simply pointed out that eventually most annuities will be transferred to the next generation. Since you sell the tax advantages of compounding, isn’t it simply being honest to acknowledge the tax  disadvantages, like the fact that there’s no step-up in basis at death and that the preferential tax status of cap gains over  ordinary income is lost with an annuity?

To me it says a great deal that so many annuity sales are made on a deceptive basis. Perhaps that’s part of the reason they get such universally bad press.

[quote=Dirk Diggler]

Here's the next bottom line...If a broker can't compete with returns, he will compete with fees. What else is someone gonna do when he adds no upside value, relative to the competition?

[/quote]

Actually, you can beat most annuities on both performance (the sub-accounts are almost always available, with the same perfromance outside the annuity wrapper) and fees. It's pretty easy, really.

Having said that, there is a place for annuities, I've sold them myself. Long term retirement money for people who have maxed out all other, cheaper quailifed routes first, for example.

 It's just a shame so many are sold dishonestly.

[quote=mikebutler222][quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler]

Now, I'm curious to see who has the guts to tell ME what YOU are doing with your clients money. Don't forget to include the fees, methods, and returns.

[/quote]

Are they going to be allowed to pull numbers out of thin air w/o supporting evidence, like you did?

[/quote]

Jobhopper, what  would be an example of supporting evidence and how would I present it?

[/quote]

Well, annuity-hack , that's pretty easy. Name the annuity you're using and the sub-accounts. Their performance is a matter of public record.

Now, those who care will have to assume you've been perfectly honest in naming the sub-accounts and not simply doing the "pick the best past performance" game. They wouldn't question your honesty, would they? I mean, a guy who tell customers "I can end your fees" while selling them an annuity over the brokerage account they currently have just has to be a model of integrity, right? <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

BTW, I'm not playing the condemn all annuity game, I'm playing the condemn deceptive sales practices game. There's a dif 

[/quote]

The annuity and subaccounts are posted all over the place on this board. Look them up.

Has anyone done any reserach on how many years it takes, in general, for the tax deferral aspect of a VA to outweigh not using the VA and simply investing in a "normal" taxable account?

Any studies also on how often the "guarantees" actually come into play.    I am not sure but I'd hazard to guess that not very often.

I prefer to educate my clients on why NOT to choose a VA in most cases.   It might hurt my bottom line but until I see proof positive that these instruments are beneficial to a client I'll just use taxable accounts.

My .02  YMMV

scrim

[quote=mikebutler222][quote=Dirk Diggler]

Here's the next bottom line...If a broker can't compete with returns, he will compete with fees. What else is someone gonna do when he adds no upside value, relative to the competition?

[/quote]

Actually, you can beat most annuities on both performance (the sub-accounts are almost always available, with the same perfromance outside the annuity wrapper) and fees. It's pretty easy, really.

I agree, completely. Most VA's that I've seen suck. I use one. It works great.

Having said that, there is a place for annuities, I've sold them myself. Long term retirement money for people who have maxed out all other, cheaper quailifed routes first, for example.

 It's just a shame so many are sold dishonestly.

How many are sold dishonestly? More than the number of stock trades that are sold dishonestly? More than the number of Mutual Funds that are sold dishonestly? What about the one's that have Morgan Stanley in the name?

[quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Here's the next bottom line...If a broker can't compete with returns, he will compete with fees. What else is someone gonna do when he adds no upside value, relative to the competition?

[/quote]

Actually, you can beat most annuities on both performance (the sub-accounts are almost always available, with the same performance outside the annuity wrapper) and fees. It's pretty easy, really.

[/quote]

I agree, completely. Most VA's that I've seen suck. I use one. It works great.

[/quote]

Goody, then you’ll be happy to name it, rather than hiding behind your skirts while everyone else is fully open and honest. BTW, even the one you use that “works great” can be defeated on both performance and fees for the very same reasons.

Oh, and the way the annuity-only competition is easily defeated is that you point out to the client that that other guy has as his only tool, a hammer. Therefore, everything looks like a nail to him.

[quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler] [quote=mikebutler222]

Having said that, there is a place for annuities, I've sold them myself. Long term retirement money for people who have maxed out all other, cheaper qualified routes first, for example.

 It's just a shame so many are sold dishonestly.

[/quote]

How many are sold dishonestly?

[/quote]

It would seem most. And it would seem that people who offer nothing but annuities, in their constant need to fit a square peg in a round hole, are the worst offenders. Your “I can end your fees” line was a classic example.

[/quote]

More than the number of stock trades that are sold dishonestly? More than the number of Mutual Funds that are sold dishonestly?

[/quote]

According to every regulatory body, yes, far more.

Perhaps you could explain that one. We have your example of a dishonest sales line, perhaps you could provide an example of a dishonest stock trade. And while you’re at it, perhaps you could explain how, even if there is such a thing, it excuses your dishonest approach?

[quote=Dirk Diggler]

What about the one's that have Morgan Stanley in the name?

[/quote]

No firm has a lock on integrity, so MS is as suspect as anyone else.

BTW, your continued use of your knowledge of where I am,  while hiding behind your skirts about where you are and your CRD really does mark you as the worst of pond scum. I consider talking to you as the same thing as looking through a microscope at a tiny fleck of talking fecal matter. I need to ensure I’ve washed my hands well afterward. 

No offense…..

Let's see....you don't understand a concept as fundamental as compounding, you can't handle simple arithmatic, and you think people use annuities for wealth transfer.

I understand compounding. What you don't understand is first of all how to spell arithmetic and simple examples that use rounded or approximate numbers.  You also don't have much reading comprehension since I never said that people should use annuities for wealth transfer.  People (your clients I presume) think that annuities are good for wealth transfer because they hear the "will avoid probate" mantra and are not informed about step up rules.   You also don't seem to understand that taxes and their effect on the entire picture, now and in the future are also a part of financial planning.  Current tax deferral is nice.  Compounding is wonderful, which is why i always recommend reinvesting stock and other dividends. If the client does plan to spread the tax hit on an annuity withdrawal over years that works too.

I can't begin to tell you how many people have trusts that they got from an insurance hack running a trust mill just so the agent really can sell annuities.  The client who's intention was to pass money to their heirs, come to me with a portfolio full of annuities and other investments too.  Usually by this time, they realize that they didn't hear the entire story. They never planned to use the income or needed the income, and the annuities have appreciated substantially.  This is good, making money is nice, but now they realize that if they did want to gift money to their family or fund their grandchild's education using that annuity, they are looking at paying higher current taxes and when they leave the asset to whomever, that person is also looking at a tax hit too.  Nothing like leaving someone a big fat liability as a parting gift.  

Oh, yeah... I do know insurance is the preferred method of wealth transfer. (I have been licensed at least half as long as you have been alive or longer if you are not at least 38 yrs old.) Why didn't the original advisor ask what the client's intentions were in the first place and set up an ILIT or buy insurance.   Because it is much easier to slam someone into an annuity and move on.  By the time the client's have figured it out, they are unable to get insurance due to health or it is too expensive

This started out as a discussion about FEE BASED VS TRANSACTION BASED  business which could have been interesting and informative   But like everything else on this board it devolves into a discussion either about EDJ= evil or Annuities=the holy grail or Annuities = evil.  None of those things is true.  Trying to compare annuities to fee based business is not valid.

My main gripe with you, Dirk and others who seem to be flogging annuities because they are high commission products is that I get the feeling that you guys are less than forthcoming with your clients. 

This wham bam thank-you ma'am method is about as appealing in the dating scene as it is in the financial advisory business.   But then again, if all you are looking for is a one night stand.... I guess it works...for you.

[quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler]

Now, I'm curious to see who has the guts to tell ME what YOU are doing with your clients money. Don't forget to include the fees, methods, and returns.

[/quote]

Are they going to be allowed to pull numbers out of thin air w/o supporting evidence, like you did?

[/quote]

Jobhopper, what  would be an example of supporting evidence and how would I present it?

[/quote]

Well, annuity-hack , that's pretty easy. Name the annuity you're using and the sub-accounts. Their performance is a matter of public record.

Now, those who care will have to assume you've been perfectly honest in naming the sub-accounts and not simply doing the "pick the best past performance" game. They wouldn't question your honesty, would they? I mean, a guy who tell customers "I can end your fees" while selling them an annuity over the brokerage account they currently have just has to be a model of integrity, right? <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

BTW, I'm not playing the condemn all annuity game, I'm playing the condemn deceptive sales practices game. There's a dif 

[/quote]

The annuity and subaccounts are posted all over the place on this board. Look them up.

[/quote]

This isn't my battle (but I'm enjoying it!), but, Dirk, that's sounds like you're dodging the question.  Why not just tell us the annuity & sub-accounts you use?

[quote=mikebutler222] … tiny fleck of talking fecal matter. I need to

ensure I’ve washed my hands well afterward.

[quote=Duke#1][quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler]

Now, I'm curious to see who has the guts to tell ME what YOU are doing with your clients money. Don't forget to include the fees, methods, and returns.

[/quote]

Are they going to be allowed to pull numbers out of thin air w/o supporting evidence, like you did?

[/quote]

Jobhopper, what  would be an example of supporting evidence and how would I present it?

[/quote]

Well, annuity-hack , that's pretty easy. Name the annuity you're using and the sub-accounts. Their performance is a matter of public record.

Now, those who care will have to assume you've been perfectly honest in naming the sub-accounts and not simply doing the "pick the best past performance" game. They wouldn't question your honesty, would they? I mean, a guy who tell customers "I can end your fees" while selling them an annuity over the brokerage account they currently have just has to be a model of integrity, right? <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

BTW, I'm not playing the condemn all annuity game, I'm playing the condemn deceptive sales practices game. There's a dif 

[/quote]

The annuity and subaccounts are posted all over the place on this board. Look them up.

[/quote]

This isn't my battle (but I'm enjoying it!), but, Dirk, that's sounds like you're dodging the question.  Why not just tell us the annuity & sub-accounts you use?

[/quote]

Why the F should I? The information is here, already, and I don't care what anyone thinks about what I do. Think about it...do I really care what some jobhopper at morgan stanley thinks about what I sell, especially, given the fact that it's not even sold in the wirehouse channel? I don't blame him for not liking annuities, per se. He's at morgan frickin' stanley, for pete's sake. MS haircuts them down to about 4%, before giving him a crappy payout. I wouldn't tie up MY assets for 7 years, either, for that kind of compensation! Anyone with business sense can do the math on that. You have to pay me a lot of money to place assets somewhere else, where I can't generate revenues off of them. The poor guy, at most, gets paid 2 points on the whole deal. I'm sure he'll be changing jobs soon. Maybe, he should go somewhere where he can thrive and actually help people.

What was the original question again?

[quote=Dirk Diggler]

Here’s the problem with

everyone’s criticism of me. You guys are assuming that I’m getting

mediocre returns like you are. If that were true, you guys would

be absolutely right. Annuities would suck. In general, almost ALL

annuities suck in my opinion.

However, you guys are wrong. The benefits FAR

outweigh the costs, in my case. I know how most brokers did last year. I

see lots of statements. I have yet to see one that can even sniff in the

same neighborhood of my returns.

You guys may not understand this, but most clients

are willing to overlook costs when the net, after tax dollars put more

money in their pockets than what they’ve already experienced.

Here’s a conversation I had today:

Me: I was just reviewing the annuity statements this

week. Have you looked at yours?

Client: It came about a week ago. Not too bad. [/

COLOR>

Me: I’m pretty happy, too. On January 1, you had a

little over $600,000. Now, you’re north of $710,000. If you had invested

in the S&P 500, you would be at about $620,000. A lot of people didn’t

even do THAT well. Let’s add another $250,000 to the annuity?

Client: We can add money to it?

Me: Yep

Client: I’d like to, but I can only part with $175,000.

Me:That’s no big deal. Do you have it in your

checking account right now?

Client: Yes.

Me: Great. I’ll have a courier stop by in a couple of

hours to pick it up. Does that work for you?

Client: Yes. I really appreciate you.

Me: Me too. I really appreciate your business and

friendship. I’ll call you when your money hits the account. Say hi to Sally

for me.

$175,000 * 7.5% * 90% = $11,812.50

5 minute phone call = $2,362.50 per minute[/

COLOR>

THAT is what happens when you make people

money. I LOVE this business.

[quote=Dirk Diggler] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Why the F should I?

[/quote]

Because you don't want to sound like a fool, all talk, no truth?

BTW, I couldn't care less, it was you that brought up the performance/fees issue.

[quote=Dirk Diggler]

 Think about it...do I really care what some jobhopper at morgan <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />stanley thinks about what I sell,

[/quote]

Ugh, I'm cut to the quick. A dishonest annuity-hack hiding behind his skirts called me a name.... 

[quote=Dirk Diggler]

I don't blame him for not liking annuities, per se. He's at morgan frickin' stanley, for pete's sake. MS haircuts them down to about 4%, before giving him a crappy payout.

[/quote]

Wow, wrong on both counts. I don't dislike them (I dislike people who sell them dishonestly), and we don't take a haircut to 4%. In fact, if payout was my goal, I'd sell the daylights out of annuities as they're the  last of the massive, no break points sales. They are the richest ticket available. The fact is they simply don't fit most people. 

 [quote=Dirk Diggler]

The poor guy, at most, gets paid 2 points on the whole deal.

[/quote]

Hmmm, a dishonest salesman AND ill-informed about the business. An interesting combination...oh, and thin-skinned to boot  <?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />

[quote=Dirk Diggler]

I'm sure he'll be changing jobs soon. Maybe, he should go somewhere where he can thrive and actually help people.

[/quote]

Oh, golly, there's that reference to moving. My whole day is ruined…

And this from the guy hiding deep in his anonymous bunker. What a man he his, so courageous. I wish I could be like him….

BTW, since when did a guy who says to his customers "I can end your fees" ever care about "helping people"? 

[quote=Dirk Diggler]

5 minute phone call = $2,362.50 per minute

THAT is what happens when you make people money. I

LOVE this business.

[quote=skeedaddy] [quote=Dirk Diggler]

5 minute phone call = $2,362.50 per minute

THAT is what happens when you make people money. I
LOVE this business.

[/quote]

If I made over $140,000/hour, I would definately not "turn my broker meter
off"!
[/quote]

If I'm being honest... I have some minutes where I don't make anything.

[quote=Dirk Diggler][quote=dude][quote=babbling looney]

Dude..... I have already stated that I sell VAs and EIAs and there is nothing wrong with the products. And I have sold them to those risk adverse clients who feel they need a safety net and are illing to pay for it.  What is wrong is not understanding the ramifications of the product, the tax consequences, the estate issues and not explaining it fully to the client.

I don't know what you mean about First Trust UITs?? My few clients who do have unit trusts, brought them over from elsewhere and have owned for quite a few years. We are just waiting for them to end in a year or so.  Unless they were bond UITs they have done pretty well.  Not as good as a well managed mutual fund or stock portfolio, but no losses. 

[/quote]

These are the investments within the annuity (First Trust, Target series trusts, check out their website www.ftportfolios.com)  that Dirk uses which has supposedly produced the extraordinary returns (20% plus) he claims (and as I said if he put the $'s in towards the beginning of the year this may be true).  My point is that they (the target UIT's) are VEEERYY volatile and this is one situation where a guarantee might come in handy.

[/quote]

What do YOU do with people's money? Be specific. Do you have the guts to share it with the class? I doubt it.

[/quote]

Drik,

I've already shared it multiple times and have been quite honest about what I percieve to be the downsides and weaknesses of my approach too many times to repeat it.  I don't believe there are any approaches that are perfect. 

I too had an interest in the Target UIT's until I found that the performance graphs on the Fact Sheet were ALL hype, when I took the actual performance of the trusts that HAD been issued and did some REAL homework instead of just buying the wholesalers pitch.  I'm sure some of those Target UIT's can have some great years, but when you look at the volatility and performance of ACTUALLY issued UIT's it doesn't support the INCREDIBLE claims the performance chart shows.  Here are some links for those interested (the promotional materials):

https://www.ftportfolios.com/Common/dp/productinfo/downloadm aterial/VLJA6/brochureinsert.pdf

https://www.ftportfolios.com/Common/dp/productinfo/downloadm aterial/DPJA6/brochure.pdf

https://www.ftportfolios.com/Common/dp/productinfo/downloadm aterial/DDJA6/brochureinsert.pdf

To give you all an idea of what the above links are, they essentiall show 2 of the "Target" trusts prmotional material the "Dow Dividend" and "Value Line 25" trusts plus a strategy called "double play" that combines the former trusts in equal portions.  the awesome performance that each of these trusts show is based on a hypothetical as if the strategy had been implemented over the last 20 years (read the fine print, very important if you want to sell these things to clients).  Anyway these trusts have not been around longer than 5 years and if you take the actual trusts that have been issued the performance is nowhere near what they claim.

Dirk you can base your advice on hype and flat out deception, I'll pass.  Fine if they have performed well in 2005, let's see it do so consistently.

[quote=joedabrkr][quote=dude]

BL,

Those First Trust UIT's are so risky you NEED the guarantee.  I did an analyses on the rolling returns of each of the "target" strategy UIT's based on ACTUALLY issued trusts (the performance charts go back 20 years based on a hypo of the strategy, the oldest target trusts go back maybe 5 years), needless to say my findings were shocking.

Where the 5 year performance (based on the hypothetical) should have been up 5% annually, ACTUAL performance was down 5% annually based on buying a trust and rolling it every 15 months.  In fact one of the trusts that advertises the greatest gain was down over 70% during the bear market!!

I always get real skeptical when a strategy uses "hypothetical" returns to advertise a backtested strategy.  Almost all backtested strategies end up failing in the long run because of data mining.

You would have done great (really great) with some of the target trusts if you had bought early in 2005, but anytime after april to june and your clients would have been hammered. 

Also a VA would be the better way to use these vehicles because of the nasty tax situation of having your whole portfolio cashed in every 15 months (not to mention the need for a guarantee on this type of roller coaster).

[/quote]

Dude-

I have used the First Trust UIT's for about 10 years now, and I have rarely seen the sort of volatility you describe.  Could be because I've used them as part of a diversified portfolio and rarely if ever use just one trust.  I usually use a combination of their strategies and rebalance between them every year.

My clients have experienced some very handsome returns, to say the least.

True they did get knocked around a bit during the 2000-200? bear market, but that is because they are fully invested portfolios with no cash whatsoever.  They also recovered VERY nicely when the market bounced back.  Volatility in and of itself is not necessarily evil-it can work both ways.

Just today I was on the phone with one of the senior partners at First Trust who is a friend.  He tells me that their assets under management have doubled in the last five years.  Tell me any other asset manager who can make that claim!!  They must be doing something right.

Truthfully, though, I've always sorta liked it that no every one 'gets it' when it comes to their products.  Gives me an edge because it's something unique I can show to clients.

[/quote]

Have you been using the "Target" trusts for 10 years? (haven't been around that long)

I have also used their trusts, just not the ones with deceptive advertising.

[quote=dude][quote=Dirk Diggler][quote=dude][quote=babbling looney]

Dude..... I have already stated that I sell VAs and EIAs and there is nothing wrong with the products. And I have sold them to those risk adverse clients who feel they need a safety net and are illing to pay for it.  What is wrong is not understanding the ramifications of the product, the tax consequences, the estate issues and not explaining it fully to the client.

I don't know what you mean about First Trust UITs?? My few clients who do have unit trusts, brought them over from elsewhere and have owned for quite a few years. We are just waiting for them to end in a year or so.  Unless they were bond UITs they have done pretty well.  Not as good as a well managed mutual fund or stock portfolio, but no losses. 

[/quote]

These are the investments within the annuity (First Trust, Target series trusts, check out their website www.ftportfolios.com)  that Dirk uses which has supposedly produced the extraordinary returns (20% plus) he claims (and as I said if he put the $'s in towards the beginning of the year this may be true).  My point is that they (the target UIT's) are VEEERYY volatile and this is one situation where a guarantee might come in handy.

[/quote]

What do YOU do with people's money? Be specific. Do you have the guts to share it with the class? I doubt it.

[/quote]

Drik,

I've already shared it multiple times and have been quite honest about what I percieve to be the downsides and weaknesses of my approach too many times to repeat it.  I don't believe there are any approaches that are perfect. 

I too had an interest in the Target UIT's until I found that the performance graphs on the Fact Sheet were ALL hype, when I took the actual performance of the trusts that HAD been issued and did some REAL homework instead of just buying the wholesalers pitch.  I'm sure some of those Target UIT's can have some great years, but when you look at the volatility and performance of ACTUALLY issued UIT's it doesn't support the INCREDIBLE claims the performance chart shows.  Here are some links for those interested (the promotional materials):

https://www.ftportfolios.com/Common/dp/productinfo/downloadm aterial/VLJA6/brochureinsert.pdf

https://www.ftportfolios.com/Common/dp/productinfo/downloadm aterial/DPJA6/brochure.pdf

https://www.ftportfolios.com/Common/dp/productinfo/downloadm aterial/DDJA6/brochureinsert.pdf

To give you all an idea of what the above links are, they essentiall show 2 of the "Target" trusts prmotional material the "Dow Dividend" and "Value Line 25" trusts plus a strategy called "double play" that combines the former trusts in equal portions.  the awesome performance that each of these trusts show is based on a hypothetical as if the strategy had been implemented over the last 20 years (read the fine print, very important if you want to sell these things to clients).  Anyway these trusts have not been around longer than 5 years and if you take the actual trusts that have been issued the performance is nowhere near what they claim.

Dirk you can base your advice on hype and flat out deception, I'll pass.  Fine if they have performed well in 2005, let's see it do so consistently.

[/quote]

Duke, would you feel better about me if I used actual results, from my own client's returns, over the last 3.25 years? I hope so, because that's what I do. I just want you to be comfortable with this whole thing.

[quote=mikebutler222]

[quote=Dirk Diggler] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Why the F should I?

[/quote]

Because you don't want to sound like a fool, all talk, no truth?

BTW, I couldn't care less, it was you that brought up the performance/fees issue.

[quote=Dirk Diggler]

 Think about it...do I really care what some jobhopper at morgan <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />stanley thinks about what I sell,

[/quote]

Ugh, I'm cut to the quick. A dishonest annuity-hack hiding behind his skirts called me a name.... 

[quote=Dirk Diggler]

I don't blame him for not liking annuities, per se. He's at morgan frickin' stanley, for pete's sake. MS haircuts them down to about 4%, before giving him a crappy payout.

[/quote]

Wow, wrong on both counts. I don't dislike them (I dislike people who sell them dishonestly), and we don't take a haircut to 4%. In fact, if payout was my goal, I'd sell the daylights out of annuities as they're the  last of the massive, no break points sales. They are the richest ticket available. The fact is they simply don't fit most people. 

 [quote=Dirk Diggler]

The poor guy, at most, gets paid 2 points on the whole deal.

[/quote]

Hmmm, a dishonest salesman AND ill-informed about the business. An interesting combination...oh, and thin-skinned to boot  <?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />

[quote=Dirk Diggler]

I'm sure he'll be changing jobs soon. Maybe, he should go somewhere where he can thrive and actually help people.

[/quote]

Oh, golly, there's that reference to moving. My whole day is ruined…

And this from the guy hiding deep in his anonymous bunker. What a man he his, so courageous. I wish I could be like him….

BTW, since when did a guy who says to his customers "I can end your fees" ever care about "helping people"? 

[/quote]

Would you buy a Morgan Stanley product from this man?

Looks like a nice guy to me.

[quote=dude]Looks like a nice guy to me.[/quote]

Maybe he looks like one, but I've never seen him pass up an opportunity to be a A-Hole.

Dirk, I could be wrong about these things,  I'm just taking the trusts as I analyzed them (starting with the first trust issued in the series) and rolled every 15 months as if I had invested $100k and calculated my actual performance (not accounting for taxes).  Then I compared that # to the one they were advertising (the 5 year performance #) and they were nowhere close to each other.

I know quite a few brokers that just look at those beautiful charts and hop on board with out testing.  Your results may have been better since you have been using them for about 3.25 years, well we've been in a bull market about that long so wonder.  I have tracked these things and they can have VERY sharp drops in value during less flush times in the market.  I think you have the right idea putting these in a VA w/ aguarantee if you like them, I'm just not a big fan of annuites for reasons I've already disclosed.

[quote=dude]

Dirk, I could be wrong about these things,  I'm just taking the trusts as I analyzed them (starting with the first trust issued in the series) and rolled every 15 months as if I had invested $100k and calculated my actual performance (not accounting for taxes).  Then I compared that # to the one they were advertising (the 5 year performance #) and they were nowhere close to each other.

I know quite a few brokers that just look at those beautiful charts and hop on board with out testing.  Your results may have been better since you have been using them for about 3.25 years, well we've been in a bull market about that long so wonder.  I have tracked these things and they can have VERY sharp drops in value during less flush times in the market.  I think you have the right idea putting these in a VA w/ aguarantee if you like them, I'm just not a big fan of annuites for reasons I've already disclosed.

[/quote]

First, the one's in the annuity are run by Mellon, not FT. They use slightly different criteria than FT. Second, FT's hypos are based on a 12 month hold, from Jan to Dec. Also, they are net of fees, which are HIGHER than ALL the fees in the VA. Since these strategies would capture momentum, much of the gains are in the earlier months. These things can become "stale" over time.

Dirk,

Wait until we have a down year.  I blew people up while "learning" in 2000 in UIT's

[quote=bankrep1]

Dirk,

Wait until we have a down year.  I blew people up while "learning" in 2000 in UIT's

[/quote]

What's so bad about having a down year?

I love it!  The hype (hypo, oops...type, I mean typo ) is based on a 12 month hold period, yet the trusts ar 15 month trusts!  F*ckin' brilliant!  I wouldn't be so down on these things if they were presented a little more honestly.

[quote=dude]

I love it!  The hype (hypo, oops...type, I mean typo ) is based on a 12 month hold period, yet the trusts ar 15 month trusts!  F*ckin' brilliant!  I wouldn't be so down on these things if they were presented a little more honestly.

[/quote]

It's stated on the hypos. All you have to do is read it.

[quote=mikebutler222][quote=Philo Kvetch]

Let's see....you don't understand a concept as fundamental as compounding, you can't handle simple arithmatic, and you think people use annuities for wealth transfer.

[/quote]

You seem to have an aversion to the truth, Philo. Why's that? What is it that keeps you from honestly acknowledging the shortcomings in annuities BL (who sells them, as do I) pointed out?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

For example, she didn’t say annuities were used for wealth transfer, she simply pointed out that eventually most annuities will be transferred to the next generation. Since you sell the tax advantages of compounding, isn’t it simply being honest to acknowledge the tax  disadvantages, like the fact that there’s no step-up in basis at death and that the preferential tax status of cap gains over  ordinary income is lost with an annuity?

To me it says a great deal that so many annuity sales are made on a deceptive basis. Perhaps that’s part of the reason they get such universally bad press.

[/quote]

Mike, you need to learn to comprehend what is being said before you presume to lecture on truth.

When, for example, did I say that I sold annuities, and that I did so based upon a tax scenario?   Let me help ya there, kid.  I never did.  I'm merely pointing out that several of you are getting all worked up over strawman arguments, and that in reality, you don't know what you're arguing about. 

[quote=Dirk Diggler][quote=dude]

I love it!  The hype (hypo, oops...type, I mean typo ) is based on a 12 month hold period, yet the trusts ar 15 month trusts!  F*ckin' brilliant!  I wouldn't be so down on these things if they were presented a little more honestly.

[/quote]

It's stated on the hypos. All you have to do is read it.

[/quote]

Does not, I have the literature in front of me right now. 

[quote=dude][quote=joedabrkr][quote=dude]

BL,

Those First Trust UIT's are so risky you NEED the guarantee.  I did an analyses on the rolling returns of each of the "target" strategy UIT's based on ACTUALLY issued trusts (the performance charts go back 20 years based on a hypo of the strategy, the oldest target trusts go back maybe 5 years), needless to say my findings were shocking.

Where the 5 year performance (based on the hypothetical) should have been up 5% annually, ACTUAL performance was down 5% annually based on buying a trust and rolling it every 15 months.  In fact one of the trusts that advertises the greatest gain was down over 70% during the bear market!!

I always get real skeptical when a strategy uses "hypothetical" returns to advertise a backtested strategy.  Almost all backtested strategies end up failing in the long run because of data mining.

You would have done great (really great) with some of the target trusts if you had bought early in 2005, but anytime after april to june and your clients would have been hammered. 

Also a VA would be the better way to use these vehicles because of the nasty tax situation of having your whole portfolio cashed in every 15 months (not to mention the need for a guarantee on this type of roller coaster).

[/quote]

Dude-

I have used the First Trust UIT's for about 10 years now, and I have rarely seen the sort of volatility you describe.  Could be because I've used them as part of a diversified portfolio and rarely if ever use just one trust.  I usually use a combination of their strategies and rebalance between them every year.

My clients have experienced some very handsome returns, to say the least.

True they did get knocked around a bit during the 2000-200? bear market, but that is because they are fully invested portfolios with no cash whatsoever.  They also recovered VERY nicely when the market bounced back.  Volatility in and of itself is not necessarily evil-it can work both ways.

Just today I was on the phone with one of the senior partners at First Trust who is a friend.  He tells me that their assets under management have doubled in the last five years.  Tell me any other asset manager who can make that claim!!  They must be doing something right.

Truthfully, though, I've always sorta liked it that no every one 'gets it' when it comes to their products.  Gives me an edge because it's something unique I can show to clients.

[/quote]

Have you been using the "Target" trusts for 10 years? (haven't been around that long)

I have also used their trusts, just not the ones with deceptive advertising.

[/quote]

Working only from my memory-

I have used the VIP portfolio for about 5-6 years now, ever since it came out.

Before that I used a combination of 5-6 portfolios that looked very similar to the mix of strategies in the VIP, and rebalanced every year equally between the strategies.  I did that for about 2-3 years.

Priot to THAT, I'd used the Dow 5 and Dow 10 trusts for at least a couple of years.

That comes out to be about a decade by my reckoning.

The trusts have worked quite well for me, and the better I get at being disciplined the better they've done for me.

I added the Dow Dividend strategy to my mix about 15 months ago.  The first bunch that matured underperformed but we did make a profit.

I don't see how the 15 month actual versus calendar year hypothetical is so deceptive.  You can always sell the existing position and roll it over at no incremental cost if you want to replicate the hypo returns more closely.

Dirk really do you need to post the picture?

https://www.ftportfolios.com/Common/dp/productinfo/downloadm aterial/VLJA6/brochureinsert.pdf

https://www.ftportfolios.com/Common/dp/productinfo/downloadm aterial/DPJA6/brochure.pdf

https://www.ftportfolios.com/Common/dp/productinfo/downloadm aterial/DDJA6/brochureinsert.pdf

Read for yourself.  Directly from the horses' mouth (or should I say Horses' Ass)

[quote=joedabrkr][quote=dude][quote=joedabrkr][quote=dude]

BL,

Those First Trust UIT's are so risky you NEED the guarantee.  I did an analyses on the rolling returns of each of the "target" strategy UIT's based on ACTUALLY issued trusts (the performance charts go back 20 years based on a hypo of the strategy, the oldest target trusts go back maybe 5 years), needless to say my findings were shocking.

Where the 5 year performance (based on the hypothetical) should have been up 5% annually, ACTUAL performance was down 5% annually based on buying a trust and rolling it every 15 months.  In fact one of the trusts that advertises the greatest gain was down over 70% during the bear market!!

I always get real skeptical when a strategy uses "hypothetical" returns to advertise a backtested strategy.  Almost all backtested strategies end up failing in the long run because of data mining.

You would have done great (really great) with some of the target trusts if you had bought early in 2005, but anytime after april to june and your clients would have been hammered. 

Also a VA would be the better way to use these vehicles because of the nasty tax situation of having your whole portfolio cashed in every 15 months (not to mention the need for a guarantee on this type of roller coaster).

[/quote]

Dude-

I have used the First Trust UIT's for about 10 years now, and I have rarely seen the sort of volatility you describe.  Could be because I've used them as part of a diversified portfolio and rarely if ever use just one trust.  I usually use a combination of their strategies and rebalance between them every year.

My clients have experienced some very handsome returns, to say the least.

True they did get knocked around a bit during the 2000-200? bear market, but that is because they are fully invested portfolios with no cash whatsoever.  They also recovered VERY nicely when the market bounced back.  Volatility in and of itself is not necessarily evil-it can work both ways.

Just today I was on the phone with one of the senior partners at First Trust who is a friend.  He tells me that their assets under management have doubled in the last five years.  Tell me any other asset manager who can make that claim!!  They must be doing something right.

Truthfully, though, I've always sorta liked it that no every one 'gets it' when it comes to their products.  Gives me an edge because it's something unique I can show to clients.

[/quote]

Have you been using the "Target" trusts for 10 years? (haven't been around that long)

I have also used their trusts, just not the ones with deceptive advertising.

[/quote]

Working only from my memory-

I have used the VIP portfolio for about 5-6 years now, ever since it came out.

Before that I used a combination of 5-6 portfolios that looked very similar to the mix of strategies in the VIP, and rebalanced every year equally between the strategies.  I did that for about 2-3 years.

Priot to THAT, I'd used the Dow 5 and Dow 10 trusts for at least a couple of years.

That comes out to be about a decade by my reckoning.

The trusts have worked quite well for me, and the better I get at being disciplined the better they've done for me.

I added the Dow Dividend strategy to my mix about 15 months ago.  The first bunch that matured underperformed but we did make a profit.

I don't see how the 15 month actual versus calendar year hypothetical is so deceptive.  You can always sell the existing position and roll it over at no incremental cost if you want to replicate the hypo returns more closely.

Dirk really do you need to post the picture?

[/quote]

Only as much as you needed to use it as an avatar for six months.

[quote=Dirk Diggler][quote=mikebutler222]

[quote=Dirk Diggler] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Why the F should I?

[/quote]

Because you don't want to sound like a fool, all talk, no truth?

BTW, I couldn't care less, it was you that brought up the performance/fees issue.

[quote=Dirk Diggler]

 Think about it...do I really care what some jobhopper at morgan <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />stanley thinks about what I sell,

[/quote]

Ugh, I'm cut to the quick. A dishonest annuity-hack hiding behind his skirts called me a name.... 

[quote=Dirk Diggler]

I don't blame him for not liking annuities, per se. He's at morgan frickin' stanley, for pete's sake. MS haircuts them down to about 4%, before giving him a crappy payout.

[/quote]

Wow, wrong on both counts. I don't dislike them (I dislike people who sell them dishonestly), and we don't take a haircut to 4%. In fact, if payout was my goal, I'd sell the daylights out of annuities as they're the  last of the massive, no break points sales. They are the richest ticket available. The fact is they simply don't fit most people. 

 [quote=Dirk Diggler]

The poor guy, at most, gets paid 2 points on the whole deal.

[/quote]

Hmmm, a dishonest salesman AND ill-informed about the business. An interesting combination...oh, and thin-skinned to boot  <?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />

[quote=Dirk Diggler]

I'm sure he'll be changing jobs soon. Maybe, he should go somewhere where he can thrive and actually help people.

[/quote]

Oh, golly, there's that reference to moving. My whole day is ruined…

And this from the guy hiding deep in his anonymous bunker. What a man he his, so courageous. I wish I could be like him….

BTW, since when did a guy who says to his customers "I can end your fees" ever care about "helping people"? 

[/quote]

Would you buy a Morgan Stanley product from this man?

[/quote]

Why, of course. Many people do 

BTW, could you let me in on the fear or humiliation or whatever you think it is I’m supposed to be felling as you exploit my lack of anonymity while you cower behind your own? I bet your answer would be fascinating…. 

I had a big lunch today.  My tummy hurt right after.  In an hour, I felt fine though.

[quote=mikebutler222][quote=Dirk Diggler][quote=mikebutler222]

[quote=Dirk Diggler] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Why the F should I?

[/quote]

Because you don't want to sound like a fool, all talk, no truth?

BTW, I couldn't care less, it was you that brought up the performance/fees issue.

[quote=Dirk Diggler]

 Think about it...do I really care what some jobhopper at morgan <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />stanley thinks about what I sell,

[/quote]

Ugh, I'm cut to the quick. A dishonest annuity-hack hiding behind his skirts called me a name.... 

[quote=Dirk Diggler]

I don't blame him for not liking annuities, per se. He's at morgan frickin' stanley, for pete's sake. MS haircuts them down to about 4%, before giving him a crappy payout.

[/quote]

Wow, wrong on both counts. I don't dislike them (I dislike people who sell them dishonestly), and we don't take a haircut to 4%. In fact, if payout was my goal, I'd sell the daylights out of annuities as they're the  last of the massive, no break points sales. They are the richest ticket available. The fact is they simply don't fit most people. 

 [quote=Dirk Diggler]

The poor guy, at most, gets paid 2 points on the whole deal.

[/quote]

Hmmm, a dishonest salesman AND ill-informed about the business. An interesting combination...oh, and thin-skinned to boot  <?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />

[quote=Dirk Diggler]

I'm sure he'll be changing jobs soon. Maybe, he should go somewhere where he can thrive and actually help people.

[/quote]

Oh, golly, there's that reference to moving. My whole day is ruined…

And this from the guy hiding deep in his anonymous bunker. What a man he his, so courageous. I wish I could be like him….

BTW, since when did a guy who says to his customers "I can end your fees" ever care about "helping people"? 

[/quote]

Would you buy a Morgan Stanley product from this man?

[/quote]

Why, of course. Many people do 

BTW, could you let me in on the fear or humiliation or whatever you think it is I’m supposed to be felling as you exploit my lack of anonymity while you cower behind your own? I bet your answer would be fascinating…. 

[/quote]

I don't care how you "fell."

Don't you fell kind of sleazy when you push propreitary products? How much more do you make on MS products vs. their readily available equivalents?

[quote=Philo Kvetch][quote=mikebutler222][quote=Philo Kvetch]

Let's see....you don't understand a concept as fundamental as compounding, you can't handle simple arithmatic, and you think people use annuities for wealth transfer.

[/quote]

You seem to have an aversion to the truth, Philo. Why's that? What is it that keeps you from honestly acknowledging the shortcomings in annuities BL (who sells them, as do I) pointed out?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

For example, she didn’t say annuities were used for wealth transfer, she simply pointed out that eventually most annuities will be transferred to the next generation. Since you sell the tax advantages of compounding, isn’t it simply being honest to acknowledge the tax  disadvantages, like the fact that there’s no step-up in basis at death and that the preferential tax status of cap gains over  ordinary income is lost with an annuity?

To me it says a great deal that so many annuity sales are made on a deceptive basis. Perhaps that’s part of the reason they get such universally bad press.

[/quote]

Mike, you need to learn to comprehend what is being said before you presume to lecture on truth. When, for example, did I say that I sold annuities, and that I did so based upon a tax scenario? 

[/quote]

Hmmm, that would be here, where you said "Mike, do you also show them the compounding effect of the tax advantage in the annuity?". Now, perhaps you were just informing me (yeah, that's the ticket) or you were pointing out what you tell clients.

That's fine by me if you tell them that, it is true, after all. I'm just curious why you howl in pain when BL points out there are tax drawbacks as well.

 [quote=Philo Kvetch]

 Let me help ya there, kid.  I never did. 

[/quote]

Sorry, Philo, you can't unring that bell

[quote=Philo Kvetch]

 I'm merely pointing out that several of you are getting all worked up over strawman arguments, and that in reality, you don't know what you're arguing about. 

[/quote]

Hmmm, again, sorry. You haven't pointed out anything that people here, probably with more experience than you, didn't already know.

Again, both BL and I sell these things where appropriate. My only beef is deceptive sales practices.

[quote=joedabrkr]

Dirk really do you need to post the picture?

[/quote]

Hey! What are you saying?  That's not a bad picture 

PM me about how you used it as an avitar (all's forgiven, pal) and I may use it myself.

Oh, and did he have to? Of course he did, it's what he is.

[quote=mikebutler222][quote=Philo Kvetch][quote=mikebutler222][quote=Philo Kvetch]

Let's see....you don't understand a concept as fundamental as compounding, you can't handle simple arithmatic, and you think people use annuities for wealth transfer.

[/quote]

You seem to have an aversion to the truth, Philo. Why's that? What is it that keeps you from honestly acknowledging the shortcomings in annuities BL (who sells them, as do I) pointed out?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

For example, she didn’t say annuities were used for wealth transfer, she simply pointed out that eventually most annuities will be transferred to the next generation. Since you sell the tax advantages of compounding, isn’t it simply being honest to acknowledge the tax  disadvantages, like the fact that there’s no step-up in basis at death and that the preferential tax status of cap gains over  ordinary income is lost with an annuity?

To me it says a great deal that so many annuity sales are made on a deceptive basis. Perhaps that’s part of the reason they get such universally bad press.

[/quote]

Mike, you need to learn to comprehend what is being said before you presume to lecture on truth. When, for example, did I say that I sold annuities, and that I did so based upon a tax scenario? 

[/quote]

Hmmm, that would be here, where you said "Mike, do you also show them the compounding effect of the tax advantage in the annuity?". Now, perhaps you were just informing me (yeah, that's the ticket) or you were pointing out what you tell clients.

That's fine by me if you tell them that, it is true, after all. I'm just curious why you howl in pain when BL points out there are tax drawbacks as well.

 [quote=Philo Kvetch]

 Let me help ya there, kid.  I never did. 

[/quote]

Sorry, Philo, you can't unring that bell

[quote=Philo Kvetch]

 I'm merely pointing out that several of you are getting all worked up over strawman arguments, and that in reality, you don't know what you're arguing about. 

[/quote]

Hmmm, again, sorry. You haven't pointed out anything that people here, probably with more experience than you, didn't already know.

Again, both BL and I sell these things where appropriate. My only beef is deceptive sales practices.

[/quote]

Aren't YOU being deceptive when you fail to disclose that you are paid more money and are pressured to sell proprietary products? That's the first thing I ask a prospect when I see a statement with prop. products.

[quote=mikebutler222][quote=joedabrkr]

Dirk really do you need to post the picture?

[/quote]

Hey! What are you saying?  That's not a bad picture 

PM me about how you used it as an avitar (all's forgiven, pal) and I may use it myself.

Oh, and did he have to? Of course he did, it's what he is.

[/quote]

If we could use avatars, your picture would be under my name. Trust me.

Again, Mike, where did I say that I sold annuities?  And again, you seem to have a problem with strawman arguments.  (You keep losing them, and that’s a frightening prospect.)

[quote=Dirk Diggler]

I don't care how you "fell."

[/quote]

Golly, the big guy in the skirt got me on a typo. Now I'm doubly shamed  <?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />

It's interesting how you can't explain just what you figure I should feel bad about. Perhaps what’s got your tongue on the issue the frustration  you feel that I couldn't care less about what you figure are devastating tactics on your part. BFD 

[quote=Dirk Diggler]

Don't you fell kind of sleazy when you push propreitary products?

[/quote]

Well, I might, if I did, but I don't, so I don't.   

BTW, if I have to learn how to spell “feel”, perhaps you should look into how the word “proprietary” is spelled.

Say, don't you feel sleazy when you lie to prospective annuity buyers? Would you tell your Mom, "Say, I can end fees for you with this annuity"?

[quote=Dirk Diggler]

 How much more do you make on MS products vs. their readily available equivalents?

[/quote]

Not one red cent. You really should learn a bit about the industry you're trying to make a living in. 

[quote=Dirk Diggler] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Aren't YOU being deceptive when you fail to disclose that you are paid more money and are pressured to sell proprietary products?

[/quote]

Again, skirt-boy, neither of those two claims are true. Where do you get this stuff?

[quote=Dirk Diggler]

That's the first thing I ask a prospect when I see a statement with prop. products.

[/quote]

Ohhhh, good to know. That's just another lie they've been told that I can correct for the client. Man, you're in such an integrity deficient, you'll never be able to crawl out of it. 

[quote=Dirk Diggler][quote=mikebutler222][quote=joedabrkr]

Dirk really do you need to post the picture?

[/quote]

Hey! What are you saying?  That's not a bad picture 

PM me about how you used it as an avitar (all's forgiven, pal) and I may use it myself.

Oh, and did he have to? Of course he did, it's what he is.

[/quote]

If we could use avatars, your picture would be under my name. Trust me.

[/quote]

Why? You fear using your own, skirt-boy? 

[quote=mikebutler222]

[quote=Dirk Diggler] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Aren't YOU being deceptive when you fail to disclose that you are paid more money and are pressured to sell proprietary products?

[/quote]

Again, skirt-boy, neither of those two claims are true. Where do you get this stuff?

[quote=Dirk Diggler]

That's the first thing I ask a prospect when I see a statement with prop. products.

[/quote]

Ohhhh, good to know. That's just another lie they've been told that I can correct for the client. Man, you're in such an integrity deficient, you'll never be able to crawl out of it. 

[/quote]

So...if I call any of my MS buddies, they'll tell me the same thing?

[quote=Philo Kvetch]Again, Mike, where did I say that I sold annuities?  And again, you seem to have a problem with strawman arguments.  (You keep losing them, and that's a frightening prospect.)[/quote]

Are you claiming now that you don't?

And just why do you object to telling the client the pros AND the cons? While you're at it, how about pointing out the "strawman" that's been used?

[quote=mikebutler222][quote=Dirk Diggler][quote=mikebutler222][quote=joedabrkr]

Dirk really do you need to post the picture?

[/quote]

Hey! What are you saying?  That's not a bad picture 

PM me about how you used it as an avitar (all's forgiven, pal) and I may use it myself.

Oh, and did he have to? Of course he did, it's what he is.

[/quote]

If we could use avatars, your picture would be under my name. Trust me.

[/quote]

Why? You fear using your own, skirt-boy? 

[/quote]

I just don't think that using my picture would irritate you, like using your picture would.

[quote=Dirk Diggler][quote=mikebutler222]

[quote=Dirk Diggler] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Aren't YOU being deceptive when you fail to disclose that you are paid more money and are pressured to sell proprietary products?

[/quote]

Again, skirt-boy, neither of those two claims are true. Where do you get this stuff?

[quote=Dirk Diggler]

That's the first thing I ask a prospect when I see a statement with prop. products.

[/quote]

Ohhhh, good to know. That's just another lie they've been told that I can correct for the client. Man, you're in such an integrity deficient, you'll never be able to crawl out of it. 

[/quote]

So...if I call any of my MS buddies, they'll tell me the same thing?

[/quote]

Sure. Do call them. If they feel "pressure" it's their local management. I've never, ever felt any. On the pay issue, straight up, not a penny more.

After you get off the phone, feel free to come back here and corrrect yourself. 

[quote=Dirk Diggler][quote=mikebutler222][quote=Dirk Diggler][quote=mikebutler222][quote=joedabrkr]

Dirk really do you need to post the picture?

[/quote]

Hey! What are you saying?  That's not a bad picture 

PM me about how you used it as an avitar (all's forgiven, pal) and I may use it myself.

Oh, and did he have to? Of course he did, it's what he is.

[/quote]

If we could use avatars, your picture would be under my name. Trust me.

[/quote]

Why? You fear using your own, skirt-boy? 

[/quote]

I just don't think that using my picture would irritate you, like using your picture would.

[/quote]

That can't be it, skirt-boy. Clearly the picture doesn't irritate me, and just as clearly, using your own would be a step out from behind the skirt, and you lack the manhood to do that.

[quote=mikebutler222]

[quote=Philo Kvetch]Again, Mike, where did I say that I sold annuities?  And again, you seem to have a problem with strawman arguments.  (You keep losing them, and that's a frightening prospect.)[/quote]

Are you claiming now that you don't?

And just why do you object to telling the client the pros AND the cons? While you're at it, how about pointing out the "strawman" that's been used?

[/quote]

Does it matter to you whether I do or don't sell annuities?  Does that change the fact that you clearly don't understand what you're talking about?

As to strawman arguments, you're using one right now.  I simply asked if you explain the tax advantages to your clients and you've devised both sides of our discussion, and it seems to be agitating you quite a bit.  (That's a little creepy, but it's your fantasty.)

Happy delusions of adequacy to ya!

I'll post my picture in support of MikeB.

[quote=Philo Kvetch][quote=mikebutler222] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

[quote=Philo Kvetch]Again, Mike, where did I say that I sold annuities?  And again, you seem to have a problem with strawman arguments.  (You keep losing them, and that's a frightening prospect.)[/quote]

Are you claiming now that you don't? <?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />

And just why do you object to telling the client the pros AND the cons? While you're at it, how about pointing out the "strawman" that's been used?

[/quote]

Does it matter to you whether I do or don't sell annuities? 

[/quote]

Not a bit to me, but since you brought up the "where did I say that I sold annuities" question shortly after misrepresenting our prior conversation with "When, for example, did I say that I sold annuities, and that I did so based upon a tax scenario? / "Mike, do you also show them the compounding effect of the tax advantage in the annuity?", I thought I’d ask.

Now, I suppose it’s not impossible that you don’t sell annuities (like I said, I don’t care one way or another) AND it’s not impossible that "Mike, do you also show them the compounding effect of the tax advantage in the annuity?" wasn’t meant to imply that you do, in fact sell annuities AND that you don’t use the above line about “compounding effect of the tax advantage” in said sales process.  It’s not impossible, but it’s highly, highly unlikely.

[quote=Philo Kvetch]

 Does that change the fact that you clearly don't understand what you're talking about?

[/quote]

Repeating that line doesn’t make it any less incorrect. You’ve yet to point out a single incorrect thing about annuities by the critics.

While you piped in with the “compounding effects of the tax advantage” line, it was pointed out to you that there are tax disadvantages as well, and they should be explained to the client too. You then went on to twist BL’s point about the lack of step-up into a claim that she thought annuities were used for wealth transfer. That was incredibly ridiculous. She never said anything of the sort. She simply pointed out the tax disadvantage of an annuity in an estate situation. Unless you’re talking to someone thinking of buying an annuity that’s figured out a way to live forever, it’s only right to explain the tax disadvantage to dying with an annuity.

[quote=Philo Kvetch]

As to strawman arguments, you're using one right now.  I simply asked if you explain the tax advantages to your clients and you've devised both sides of our discussion, and it seems to be agitating you quite a bit.  (That's a little creepy, but it's your fantasty.)

Happy delusions of adequacy to ya!

[/quote]

 ROFLMAO, so quoting you is “devis[ing] both sides of our discussion”? Now there’s a ploy I’ve never seen used before by someone like yourself, obviously caught in a logic trap of their own creation. Congrats. BTW, “agitated”, hardly, more like amused at your contortions.

Here’s what I suggest to you, feel free to ignore it and continue with your “you don’t know what you’re talking about”,  “strawman!!!!!” and “who says I sell annuities” lines. I suggest we engage in an open, honest discussion of the pros and cons of annuities, where they’re suitable, what tax implications the client should be told about and ethical sales practices.

Sound reasonable?

[quote=dude]

I'll post my picture in support of MikeB.

[/quote]

Thanks, dude, you're turning out to be a regualr Lebowski

BTW, what's with the way you're touching yourself in that picture?

If you looked like this wouldn’t you be touching yourself?

If you've ever had your head shaved, it's kinda like rubbing the stubbies (not THE stubby ) on your head.  Feels really nice.

BTW, as for actionable stock ideas, buy companies in the business of salt production.

LOL...what else are the voices telling you, Mike?

Listen, when you finish your training, get a rep ID and are allowed to talk with clients, feel free to have an opinion. 

Philo,

F this guy. Let's not even communicate with him. He's your typical big mouthed loser who fails at every firm he goes to, losing a big chunk of his book (pamphlet) every time he moves. Everywhere he goes, there he is. Every firm he couldn't handle had one thing in common - him. He gets his self-worth from his superiority complex and we get ours from how many people we help and how much money we make. You and I own our own businesses and he can't even handle holding a job. That pretty much says it all.

[quote=Philo Kvetch]

LOL...what else are the voices telling you, Mike?

Listen, when you finish your training, get a rep ID and are allowed to talk with clients, feel free to have an opinion. 

[/quote]

Well, thanks Philo. I sure do look forward to havin' one of them "rep ID" thingies.

[quote=Dirk Diggler]

Philo,

F this guy. Let's not even communicate with him. He's your typical big mouthed loser who fails at every firm he goes to, losing a big chunk of his book (pamphlet) every time he moves. Everywhere he goes, there he is. Every firm he couldn't handle had one thing in common - him. He gets his self-worth from his superiority complex and we get ours from how many people we help and how much money we make. You and I own our own businesses and he can't even handle holding a job. That pretty much says it all.

[/quote]

whhhhaaaa, I'm just crushed, skirt-boy doesn't like meeeeeee!!!! 

You know, you wouldn't have to hide and lie if you simply told the truth.

[quote=dude]

If you've ever had your head shaved, it's kinda like rubbing the stubbies (not THE stubby ) on your head.  Feels really nice.

[/quote]

I have, a time or two, as a condition of employment. I have to say, I never found it enjoyable. Perhaps it wasn't just the bad haircut that sucked the fun out of the experience 

You’ve rubbed your stubby as a condition of employment?

[quote=dude]You've rubbed your stubby as a condition of employment?[/quote]

LOL, er, uh, that's not what I meant....

[quote=dude]You've rubbed your stubby as a condition of employment?[/quote]

That explains a lot.

[/quote]

The annuity and subaccounts are posted all over the place on this board. Look them up.

[/quote]

This isn't my battle (but I'm enjoying it!), but, Dirk, that's sounds like you're dodging the question.  Why not just tell us the annuity & sub-accounts you use?

[/quote]

Why the F should I? The information is here, already, and I don't care what anyone thinks about what I do. Think about it...do I really care what some jobhopper at morgan stanley thinks about what I sell, especially, given the fact that it's not even sold in the wirehouse channel? I don't blame him for not liking annuities, per se. He's at morgan frickin' stanley, for pete's sake. MS haircuts them down to about 4%, before giving him a crappy payout. I wouldn't tie up MY assets for 7 years, either, for that kind of compensation! Anyone with business sense can do the math on that. You have to pay me a lot of money to place assets somewhere else, where I can't generate revenues off of them. The poor guy, at most, gets paid 2 points on the whole deal. I'm sure he'll be changing jobs soon. Maybe, he should go somewhere where he can thrive and actually help people.

[/quote]

Why, Dirk?  Because a couple people questioned your posts about the performance you touted, and you won't or can't present the facts to substantiate it.  People that are telling the truth are more than willing to back it up.  You haven't, so absent anything to the contrary it's only fair to assume you can't.

Again, this is not my battle, but your lack of ability or willingness to defend your position, plus your off-the-handle and off subject ranting & raving diatribe above says a lot.  To the extent any of us thought you had credibility... well, it's pretty far gone absent any direct response to the question.  That's why.

Oh, and your point about tying up assets for 7 years -- VAs, properly selected and properly sold, are tied up much longer than that.  That is, of course, unless someone's routinely flipping 1035s for commissions whenever the surrender period is over.  But, that would be just those commission whores in our business, not reps like you that are always concerned with their clients' best interests --right?   (he said dripping with sarcasm)

[quote=babbling looney]

Let's see....you don't understand a concept as fundamental as compounding, you can't handle simple arithmatic, and you think people use annuities for wealth transfer.

I understand compounding. What you don't understand is first of all how to spell arithmetic and simple examples that use rounded or approximate numbers.  You also don't have much reading comprehension since I never said that people should use annuities for wealth transfer.  People (your clients I presume) think that annuities are good for wealth transfer because they hear the "will avoid probate" mantra and are not informed about step up rules.   You also don't seem to understand that taxes and their effect on the entire picture, now and in the future are also a part of financial planning.  Current tax deferral is nice.  Compounding is wonderful, which is why i always recommend reinvesting stock and other dividends. If the client does plan to spread the tax hit on an annuity withdrawal over years that works too.

I can't begin to tell you how many people have trusts that they got from an insurance hack running a trust mill just so the agent really can sell annuities.  The client who's intention was to pass money to their heirs, come to me with a portfolio full of annuities and other investments too.  Usually by this time, they realize that they didn't hear the entire story. They never planned to use the income or needed the income, and the annuities have appreciated substantially.  This is good, making money is nice, but now they realize that if they did want to gift money to their family or fund their grandchild's education using that annuity, they are looking at paying higher current taxes and when they leave the asset to whomever, that person is also looking at a tax hit too.  Nothing like leaving someone a big fat liability as a parting gift.  

Oh, yeah... I do know insurance is the preferred method of wealth transfer. (I have been licensed at least half as long as you have been alive or longer if you are not at least 38 yrs old.) Why didn't the original advisor ask what the client's intentions were in the first place and set up an ILIT or buy insurance.   Because it is much easier to slam someone into an annuity and move on.  By the time the client's have figured it out, they are unable to get insurance due to health or it is too expensive

This started out as a discussion about FEE BASED VS TRANSACTION BASED  business which could have been interesting and informative   But like everything else on this board it devolves into a discussion either about EDJ= evil or Annuities=the holy grail or Annuities = evil.  None of those things is true.  Trying to compare annuities to fee based business is not valid.

My main gripe with you, Dirk and others who seem to be flogging annuities because they are high commission products is that I get the feeling that you guys are less than forthcoming with your clients. 

This wham bam thank-you ma'am method is about as appealing in the dating scene as it is in the financial advisory business.   But then again, if all you are looking for is a one night stand.... I guess it works...for you.

[/quote]

You are correct, BL.  I did misspell the word 'arithmetic'.

Other than that, your post does nothing but demonstrate your status as a neophyte in the money business....drivel at it's finest.  You are clueless on the subject of current vs future taxation.  You, in fact, were the one that brought up the concept of wealth transfer through annuities...no one else.  Since protecting gains from taxation now as a means of generating higher returns is an alien concept (clearly due to the fact that you can't add), you dismiss the notion as nonsense, without any means of refuting the facts.  Further, your simplistic idea of financial planning comes complete with the idea that an annuity can only exist in a vacuum, without any other investments in a portfolio.

If nothing else, you're a good example of a bad example.

Keep up the bad work!

Philo,

When I told you about the annuity, did you criticize it or did you do your homework and sell the crap out of it? Did your income take a big jump? It has been an absolute career maker for me. It freaks me out at how much my income has jumped since I decided to focus on annuities, instead of trying to be a jack of all trades.

The "yeah, but what about...?" people are doomed to get nothing accomplished. Just like the democrats. They love to criticize, but have nothing better to offer. This broad is an idiot, plain and simple. F her. We've got nothing to prove to some woman trying to live in a man's world.

You really are a defective tool aren't you.

Meant to address that one to philo something. Not you Dirk…this time   

[quote=babbling looney]

You really are a defective tool aren't you.

[/quote]

I have no doubt that you've seen a lot of tools. If you had as many sticking out of you as you've had sticking in you,  you'd look like a porcupine!

[quote=babbling looney]Meant to address that one to philo something. Not you Dirk...this time    [/quote]

Noted. I meant to address my recent post to Linda Lovelace, not you.

Wow…what’s next… I’m rubber you’re glue.   LOL

I think it's safe to say that Dirk is worried about one thing... YTB (yield to broker).  Your so called guarantees aren't worth anything if the contract drops before the 10 year hold is up.

It's all smoke an mirrors.  I had a guy come in today with an 800k AXA annuity inside an IRA.  He didn't even know it was an annuity, he thought it was mutual funds.

Keep being a salesman.  The rest of us will continue giving objective advice.

[quote=babbling looney]

You really are a defective tool aren't you.

[/quote]

Maybe.  But that doesn't change the fact that you don't know what you're talking about.

[quote=iconsult100]

I think it's safe to say that Dirk is worried about one thing... YTB (yield to broker).  Your so called guarantees aren't worth anything if the contract drops before the 10 year hold is up.

I'm in business to make money. Isn't that the point?

It's all smoke an mirrors.  I had a guy come in today with an 800k AXA annuity inside an IRA.  He didn't even know it was an annuity, he thought it was mutual funds.

You're just pissed that you can't get your hands on that $800m. Too bad.

Keep being a salesman.  The rest of us will continue giving objective advice.

Ok. Mr. Client, would you rather work with someone who has to use a sales pitch that he's objective or would you rather make money?

[/quote]

[quote=Dirk Diggler][quote=iconsult100]

I think it's safe to say that Dirk is worried about one thing... YTB (yield to broker).  Your so called guarantees aren't worth anything if the contract drops before the 10 year hold is up.

I'm in business to make money. Isn't that the point?

It's all smoke an mirrors.  I had a guy come in today with an 800k AXA annuity inside an IRA.  He didn't even know it was an annuity, he thought it was mutual funds.

You're just pissed that you can't get your hands on that $800m. Too bad.

Keep being a salesman.  The rest of us will continue giving objective advice.

Ok. Mr. Client, would you rather work with someone who has to use a sales pitch that he's objective or would you rather make money?

[/quote]

[/quote]

Sorry to dissappoint you, but the dude is 45 (36 when he bought it) and it's out of surrender.  It's nice to have a tax deferred investment inside a tax deferred investment huh.  That money will be with money managers in about 10 days.

Don’t even get me started on money managers.

[quote=Dirk Diggler]

Philo,

When I told you about the annuity, did you criticize it or did you do your homework and sell the crap out of it? Did your income take a big jump? It has been an absolute career maker for me. It freaks me out at how much my income has jumped since I decided to focus on annuities, instead of trying to be a jack of all trades.

The "yeah, but what about...?" people are doomed to get nothing accomplished. Just like the democrats. They love to criticize, but have nothing better to offer. This broad is an idiot, plain and simple. F her. We've got nothing to prove to some woman trying to live in a man's world.

[/quote]

I did what ALL good brokers do...investigate and evaluate....not denigrate.

I think that Philo and Dirk should get a room if they aren't already the same person.  You do know that auto erotica is a vice?  I just wish he/they would stop doing it in a public forum.

[quote=rightway] [quote=Dirk Diggler][quote=babbling looney]

Dude..... I have already stated that I sell VAs and EIAs and there is nothing wrong with the products. And I have sold them to those risk adverse clients who feel they need a safety net and are illing to pay for it.  What is wrong is not understanding the ramifications of the product, the tax consequences, the estate issues and not explaining it fully to the client.

I don't know what you mean about First Trust UITs?? My few clients who do have unit trusts, brought them over from elsewhere and have owned for quite a few years. We are just waiting for them to end in a year or so.  Unless they were bond UITs they have done pretty well.  Not as good as a well managed mutual fund or stock portfolio, but no losses. 

[/quote]

What do YOU do with people's money? Be specific. Do you have the guts to share it with the class? I doubt it.

[/quote]

Dirk- You have been asked several times how you generate the 9% comssissions and returns but you fail to disclose.  Can't YOU share with the class?
[/quote]

5:50 am?  Are you sh*tting me?  I was at the gym at 6 this morning, not answering to DD.  I got into this business for quality of life.  If "at the office" before 6= quality of life to you, then more power to you.  C'mon Rightway, I had a higher opinion of of you than that.

[quote=babbling looney]

I think that Philo and Dirk should get a room if they aren't already the same person.  You do know that auto erotica is a vice?  I just wish he/they would stop doing it in a public forum.

[/quote]

Thanks for the advice, porcupine.

"We've got nothing to prove to some woman trying to live in a man's world. "

 Just when I thought this mouth-breather had hit rock bottom, he serves up another gem...

[quote=babbling looney]

I think that Philo and Dirk should get a room if they aren't already the same person.  You do know that auto erotica is a vice?  I just wish he/they would stop doing it in a public forum.

[/quote]

That's the stuff!

When you can't refute the facts, make some idiotic statement.  The hubris of the true hack.

Keep up the bad work!

[quote=Philo Kvetch][quote=babbling looney]

When you can't refute the facts, make some idiotic statement.  The hubris of the true hack.

[/quote]

Funny, that's been your tactic. In fact, you've yet to refute any criticism of annuities that's been made. And made by people, I should add, that sell them and know what they can and can't do well.

Mike, from your posts I've come to believe that you don't understand squat.  Why would I want to refute "criticisms of annuities"?  Further, why would I care what you sell?

To put an end to this nonsense, you clearly aren't smart enough to be in my league.  Why should I debate anything someone like yourself?  The answer?  No reason at all.  You're simply bottom tier.

The REAL reason these people hate annuities is that they can’t get them as clients because they can’t churn people out of them. It’s money that is just right there, in front of their faces, and they can’t get their hands on it. That’s why I take the money upfront. Nobody will ever get paid for the work that I did, except me.

[quote=Dirk Diggler]The REAL reason these people hate annuities is that they can't get them as clients because they can't churn people out of them. It's money that is just right there, in front of their faces, and they can't get their hands on it. That's why I take the money upfront. Nobody will ever get paid for the work that I did, except me. [/quote]

Good point. 

Like I said earlier Diversify, Diversify, Diversify.  Someone earlier mentioned taking the money out of an annuity and going to a money manager.  I hope that money is still there by the time that client needs it.  Don't get me wrong I'm not knocking money managers because I use them as well as annuities.  Just be very careful about who you pick.

Annuities are good for some people and MM is good for some people.  We can't compare the two.

I think it is safe to assume that the majority of us are concerned about taking care of our clients.  We just have different views on how to do it.

[quote=Dirk Diggler]The REAL reason these people hate annuities is that they can't get them as clients because they can't churn people out of them. It's money that is just right there, in front of their faces, and they can't get their hands on it. That's why I take the money upfront. Nobody will ever get paid for the work that I did, except me. [/quote]

I don't hate annuities. I use them frequently and have for over 15 years.

I am, however, developing an extreme distaste for you and your obviously unethical, self serving methods of doing business as well as your juvenile insults and general demeanor of a 14 yr old boy. 

[quote=babbling looney]

[quote=Dirk Diggler]The REAL reason these people hate annuities is that they can't get them as clients because they can't churn people out of them. It's money that is just right there, in front of their faces, and they can't get their hands on it. That's why I take the money upfront. Nobody will ever get paid for the work that I did, except me. [/quote]

I don't hate annuities. I use them frequently and have for over 15 years.

I am, however, developing an extreme distaste for you and your obviously unethical, self serving methods of doing business as well as your juvenile insults and general demeanor of a 14 yr old boy. 

[/quote]

Let me see if I have this right... you are experiencing some emotions over a bunch of words on your computer monitor that were written by someone named "Dirk Diggler," who doesn't even exist? Wow! You've lost your grip on reality.

So you admit that you are a big nothing? 

[quote=Dirk Diggler][quote=babbling looney]

[quote=Dirk Diggler]The REAL reason these people hate annuities is that they can't get them as clients because they can't churn people out of them. It's money that is just right there, in front of their faces, and they can't get their hands on it. That's why I take the money upfront. Nobody will ever get paid for the work that I did, except me. [/quote]

I don't hate annuities. I use them frequently and have for over 15 years.

I am, however, developing an extreme distaste for you and your obviously unethical, self serving methods of doing business as well as your juvenile insults and general demeanor of a 14 yr old boy. 

[/quote]

Let me see if I have this right... you are experiencing some emotions over a bunch of words on your computer monitor that were written by someone named "Dirk Diggler," who doesn't even exist? Wow! You've lost your grip on reality.

[/quote]

Let me see if I have this right, you are investing a whole bunch of time responding and bantering with a "babbling looney"?  

And who's the one who's lost their grip on reality?

You're a piece of work, Dirk. 

Oh Sh*t!  I told myself I wouldn’t do it, I wouldn’t do it.  I got a life to live, this place can suck you in.  Peace.

Dirk,

Take it all up front.  That's good for smaller producers who have insecurities associated with client retention.  Judging by your posts--I'd get it all up front too.

[quote=zacko]

Dirk,

Take it all up front.  That's good for smaller producers who have insecurities associated with client retention.  Judging by your posts--I'd get it all up front too.

[/quote]

I suspect that you're pretty happy having it trickle in on the back end.

[quote=Dirk Diggler][quote=zacko]

Dirk,

Take it all up front.  That's good for smaller producers who have insecurities associated with client retention.  Judging by your posts--I'd get it all up front too.

[/quote]

I suspect that you're pretty happy having it trickle in on the back end.

[/quote]

Real mature response there dude....

Maybe my 14 yr old estimate was too high?

I thought I might add a little data here:

The portfolio I proposed on the first page collectively averaged in the top 19% over the last 5 years, top 17% over the last 10 years, top 20% over the last 15 years, top 21% over the last 20 years, and top 19% since inception (by Thompson). So it has been a consistently pretty good portfolio (I could easily have given an example with higher average rankings). And by the way all of the funds in the portfolio are team managed. But looking at an individual fund year by year shows much inconsistency: AMCAP, for example, has had individual year rankings going back from 2004 of top 51, 41, 23, 21, 20, 60, 30, 30, 82, and 69% (I see this kind of annual rankings inconsistency for about all of the funds). On which of those years does the advisor decide to move money out of AMCAP because the 'next' time period may give below average performance? Doing so could easily miss out of a good period for the fund. Hence the philosophy of buying quality and holding it for the long term without trying to time performance. I'm asserting that the ability to move the investments without incurring additional sales charges is of questionable value.

But what is the cost of the wrap account versus the front load? I picked the three funds AMCAP, Templeton Foreign, and Van Kampen Comstock for a 20 year hypothetical. Their 20 year rankings average top 19%. I used a 5% year withdrawal on the initial investment of $300k, with $100k in each of the three funds. The A share illustration gave a return of 13.32%, withdrawals of $711k, ending value of $1.12M, and charges of $10.9k. The same funds in a wrap account had a return of 12.38%, withdrawls of $646k, an ending value of $917k, and charges of $150k. The performance difference was $272k. Even allowing for an occasional 'Putnam blow up' and movement from that family into another with extra sales charges still leaves the A shares far ahead.

The nice thing about mutual funds is that the performance is there to be quantified and compared. One can claim that moving money within a wrap account enhances performance above the fees charged, but is there data to support the claim? Do clients understand the long-term costs and potential effect on performance? I'm not comfortable thinking I could do it, and especially not comfortable with the thought of costing my clients so much.

QUOTE=Butkus]

I thought I might add a little data here:

The portfolio I proposed on the first page collectively averaged in the top 19% over the last 5 years, top 17% over the last 10 years, top 20% over the last 15 years, top 21% over the last 20 years, and top 19% since inception (by Thompson).

[/quote]

I'm not condemning your mutual fund approach, but I have a couple of questions for you

Instead of evaluating performance based on "top x%", could we use absolute numbers, like "annualized 15%"?

[quote=Butkus]

I'm asserting that the ability to move the investments without incurring additional sales charges is of questionable value.

[/quote]

Well, it's just as easy to assert, and probably far easier to prove, that the ability to move between funds and fund families without repeated sales charges does have a value.

[quote=Butkus]

But what is the cost of the wrap account versus the front load?

[/quote]

It depends on the size of the account and what was paid in front load charges. If you're pinging the client for 4% upfront, and he's therefore starting with 4% less invested, and the best defense you have for that 4% ping is he's saving 50bps a year, all in, including management fees on the part of the fund managers, well, that's going to take a long time to overcome.

Additionally, what’s the justification for using multiple families, if overall fees is you single focus, and not performance? Why not then use a single family and minimize the biggest fee the client will ever pay, that massive upfront charge? After all, you’re saying in the case of a fee account that using the best managers doesn’t matter, so why does using several families matter? By that theory it seems you should go as cheaply as possible and muddle through.

Better still, if fees are te single focus, why not use ETFs, pay a commission that’s far smaller than the upfront sales charge on a load fund and no on going fee, just the minimal management fee in the ETF?

[quote=Butkus]

The performance difference was $272k. Even allowing for an occasional 'Putnam blow up' and movement from that family into another with extra sales charges still leaves the A shares far ahead.

[/quote]

You're going to have to show us the math for the fees you assumed and the front load you paid. Personally I think you'll have a hard time ever justifying having the client repeatedly pay front load sales charges. How many front loads sales charges did you assume the client might encounter?

[quote=Butkus]

The nice thing about mutual funds is that the performance is there to be quantified and compared. One can claim that moving money within a wrap account enhances performance above the fees charged, but is there data to support the claim?

[/quote]

Yes, there is.

[quote=Butkus]

Do clients understand the long-term costs and potential effect on performance? I'm not comfortable thinking I could do it, and especially not comfortable with the thought of costing my clients so much.

[/quote]

You're comfortable hitting them for a sales charge who knows how many times, plus the fund management fees, but you're uncomfortable charging them a flat fee with unlimited movement?

Again, personally, I can't find a justification for a front load sales charge these days. There are too many better controlled, better priced alternatives.

I don’t know where everyone got the idea that cheaper is better. Annual fees are not for me because I like to get paid upfront. It’s not hard to prove that adding a fee is more expensive, but if tha’t how someone likes to get paid, more power to them. We should get paid as much as we want, in the manner that we want.

Butkus, you are very much on target.  If someone is going be a buy and hold investor, "A" shares will give the person a much higher return.  The total expenses will be much lower.

Wrap accounts make the most sense for the client when they will be investing in multiple fund families and doing a lot of buying and selling.

IMO, the person who employs a buy and hold strategy with "A" shares will come out ahead in most scenarios.

However, as an advisor, there is a major downfall with "A" shares.  In future years, the payout is only .25% which then goes through your grid.  With this payout, brokers can't afford to properly service their clientele.   

[quote=anonymous]

Butkus, you are very much on target.  If someone is going be a buy and hold investor, "A" shares will give the person a much higher return.  The total expenses will be much lower.

Wrap accounts make the most sense for the client when they will be investing in multiple fund families and doing a lot of buying and selling.

IMO, the person who employs a buy and hold strategy with "A" shares will come out ahead in most scenarios.

However, as an advisor, there is a major downfall with "A" shares.  In future years, the payout is only .25% which then goes through your grid.  With this payout, brokers can't afford to properly service their clientele.   

[/quote]

You sound like someone who has only used A-shares and has no first hand experience with real world money in a wrap program.

Hypothetical returns are just that Hypothetical.  Rare that you pick the perfect selection of funds right from the start, or that the client actually sticks with them for that long......

Did you not read my post?  I seldom use A shares. 

....and you're comparing it to  picking the perfect wrap account from the beginning?

I've been doing this for a long time and I have NEVER had a client move money out of an A share.  If someone has an A share and their annual expenses are well under 1%, it's awfully hard to justify doing anything else with the money.

The typical wrap account would have to outperform an "A" share by 1% a year to have the same result.

[quote=anonymous]

Did you not read my post?  I seldom use A shares. 

....and you're comparing it to  picking the perfect wrap account from the beginning?

I've been doing this for a long time and I have NEVER had a client move money out of an A share.  If someone has an A share and their annual expenses are well under 1%, it's awfully hard to justify doing anything else with the money.

The typical wrap account would have to outperform an "A" share by 1% a year to have the same result.

[/quote]

And Dirk is saying that that is not hard to do

"The typical wrap account would have to outperform an "A" share by 1% a year to have the same result."

No, not really--wrap account doesn't have the A-share upfront cost, plus the A share still has .25%/yr to the broker...so really it's only a .75% difference in the out years (if we're talking 1% wrap fee).  But, don't let the facts get in the way of the discussion.

Also, as joeda mentions, it aint hard to look BACK twenty years and pick the best funds, but it is impossible to predict some group will be as superior the next twenty years.  I think having some flexibility is worth something, even if you end up never using it.

The flexibility can work against you just as easily as it can work for you.  

I think that there are plenty of reasons to put clients into wrap accounts.  In most cases, I'd rather put a client into a wrap account than an A share mutual fund. 

Keep in mind that depending on the size of the investment, the A share may not have an upfront fee.

We'll only know in hindsight, what will perform the best.  The point is that the wrap account must outperform the A share by a significant amount for the long term investor to get the same return because of the fee difference.

Keep in mind that my argument in favor of A shares deals with INVESTMENT performance, but the only thing that really matters is INVESTMOR performance.

[quote=Cowboy93]“The typical wrap account would have to outperform an “A” share by 1% a year to have the same result.”

No, not really--wrap account doesn't have the A-share upfront cost, plus the A share still has .25%/yr to the broker...so really it's only a .75% difference in the out years (if we're talking 1% wrap fee).  But, don't let the facts get in the way of the discussion.

Also, as joeda mentions, it aint hard to look BACK twenty years and pick the best funds, but it is impossible to predict some group will be as superior the next twenty years.  I think having some flexibility is worth something, even if you end up never using it.[/quote]

Agree on the upfront charges hurdle, and if things don't go as planned, the client has that hurdle again and again, when the advisor recommends moving on (and face it, if the fund turns to sh*t, that's what you'll be doing...some advisors don't even wait for that to happen).

Disagree about there only being a 75 bp differential.  This is true with qualified money where I have to rebare the 12b-1s against fees, but I don't rebate 12b-1s in non-retirement accounts.  Some may, but I'll bet that most advisors don't.

Agree on flexibility being worth something.  top-performing funds get big and top tier performance gets tougher and tougher (see Magellan and ICA).  Fund managers change.  Some stay but lose their touch.  For many reasons, what is good now, may be a piece of crap in five or ten years.  It sure is nice to recommend a change without having to explain another 3-5% hit to the position.

[quote=anonymous]

Keep in mind that depending on the size of the investment, the A share may not have an upfront fee.[/quote]

Now you're assuming a multi-million dollar asset pool so that you can use several fund families w/o a sales charge. At that doller level the lack of tax controls in a mutual fund, ths cash balances every fund manager will be holding, the "herd" mentality of the others invested with you in those funds and the management fees, for which you get no break-points, becomes a cost issue well beyond most SMA programs.

Does anyone know which firms have a fee-based platform that allows clients to trade through their advisor or online by themselves at their discretion?  For folks that like to do a little online trading but still rely on their advisor for the big decisions, this seems like a good way to go.  Also a good way to leverage my time and avoid dealing with tiny trades by allowing them do DIY.

Thanks !!!!!

Dr J.

Do most independent brokers heavily use wrap accounts?

[quote=DrJoey]

Does anyone know which firms have a fee-based platform that allows clients to trade through their advisor or online by themselves at their discretion?  For folks that like to do a little online trading but still rely on their advisor for the big decisions, this seems like a good way to go.  Also a good way to leverage my time and avoid dealing with tiny trades by allowing them do DIY.

Thanks !!!!!

Dr J.

[/quote]

I would think that they all do.

[quote=Butkus]Do most independent brokers heavily use wrap accounts?[/quote]

I definately do.  It's an easy sell. 

I wonder what the avg gross production is for independents who do not use wrap accounts?

[quote=iconsult100]

[quote=Butkus]Do most independent brokers heavily use wrap accounts?[/quote]

I definately do.  It's an easy sell. 

[/quote]

Oh...so you go for the easy sell, instead of what's best for the client?