FINET Annuity changes makes mockery of the term "independent."

Edward Jones is doing the same thing.  Calling it an O share.  The industry is moving in this direction, I think.

BTW: Did FINET ban paragraphs?

You realize that your entire rant centers around your payout, don’t you?

You realize that your entire rant centers around your payout, don’t you?

How many other "independent" firms or channels are cutting the L share gross commish by a third? none I would venture to say. That jackoff on the conf call today had the nerve to say that the firm was not taking any haircut at all from the annuity companies,  The only haircut is coming to the advisors gross... "Let me repeat myself" as that douche kept saying.  The commission is being reduced in the interest of best practices to add long term value and transparency to the client. This place is practically becoming a den of thieves from the top down.  I guess we are learning what it is like to work for the "Evil Bank"...

Yes your rant does center around our payout...Right on....It fits the topic line of the thread unlike most of the other B.S. that occurs around this site...

RJ did something similar years ago.  Are they true indy then?? 

2 years ago we were getting the 4% upfront and 1% trail starting in month 13.  Sure we can make a living off of B share payouts and the 2/1 but that is not the point. The real point here is that this is simply another area where they are cutting what we get to our gross.  We have already been cut in other areas recently...WTF does it end?  Probably not till we are working for a flat salary of 50-60k a year and they have eliminated the word "commission".  Shame on the brokers here that are slamming their clients into anything with longer than a 7 year CDSC, i.e. EIA's...  They are the ones giving everone a bad name in this profession because their compliance babysitting is lacking...Hopefully some regulation comes soon for these little pieces of sh*t...

Let me clarify a couple of things about my original post.  First of all, it is absolutely about comp.  Secondly, it is about the audacity of Wells to limit the choices of an independent advisor in the marketplace.   Regardless of your opinion of "L" shares, they are widely available in the mainstream of the marketplace.  Why anyone in the independent channel would be comfortable with a unilateral, arbitrary elimination of the availability of mainstream product is beyond me, especially when it diminishes compensation.  We in the independent channel have a massively different business that those working in the traditional channels.   In effect, we own and run "boutiques," and we should not be affected by the marketing decisions of a big box retailer.  There should be clear separation of management and management decisions between the traditional channels and FINET.  But, alas, there isn't, and it is getting clearer and clearer everyday that decisions that affect our businesses are being made based on the strategies of channels that have nothing to do with us.  Had I known that when I came here from a non-Wells traditional brokerage, I would not have come.  Now, it appears inevitable that I will flip the shingle shortly. because this type of thing is no doubt going to just continue unabated.

And by the way, this is not a "piker" business as one respondant so elequently suggested as he suffered through a bout of incontinence as he ate his breakfast.  I have approximately $77MM in assets under management.  "Making a living" is not a concern.  Clearing with a firm that is truly built for an independent producer is.

I am with Wells PCG and I don't have a problem with what they did.  They are making the product more client friendly and for that the FA gives up 1% to give the client a lower expense over the life of the contract.  If you want the 4 year surr period, you can still do it, but the clients expenses drop after year 4.  Most people claim that they did the L share for the 1% trail anyway and you can still do it with 2% upfront.  I agree with Ice on this one.

[quote=Longtimeplayer]

Let me clarify a couple of things about my original post.  First of all, it is absolutely about comp.  Secondly, it is about the audacity of Wells to limit the choices of an independent advisor in the marketplace.   Regardless of your opinion of "L" shares, they are widely available in the mainstream of the marketplace.  Why anyone in the independent channel would be comfortable with a unilateral, arbitrary elimination of the availability of mainstream product is beyond me, especially when it diminishes compensation.  We in the independent channel have a massively different business that those working in the traditional channels.   In effect, we own and run "boutiques," and we should not be affected by the marketing decisions of a big box retailer.  There should be clear separation of management and management decisions between the traditional channels and FINET.  But, alas, there isn't, and it is getting clearer and clearer everyday that decisions that affect our businesses are being made based on the strategies of channels that have nothing to do with us.  Had I known that when I came here from a non-Wells traditional brokerage, I would not have come.  Now, it appears inevitable that I will flip the shingle shortly. because this type of thing is no doubt going to just continue unabated.

And by the way, this is not a "piker" business as one respondant so elequently suggested as he suffered through a bout of incontinence as he ate his breakfast.  I have approximately $77MM in assets under management.  "Making a living" is not a concern.  Clearing with a firm that is truly built for an independent producer is.

LPL - LPL - LPL - LPL!!! 

Longtimeplayer, you're 100% Correct!!!

No Haircuts, No Unnecessary  Incompetent Management, No Restrictions on Business (Except only 2X in the ETF's), None of these Pikers you have to deal with in other channels!!

Just you, your clients and a friendly, responsive Broker Dealer that knows they work for you and not the other way around!! 

PS, You pikers who bend over for a reduction in payout deserve what  BIG BANK DECIDES YOU RECEIVE!!

Independence is Just that, not  taking what THEY decide to give you, it's doing what you decide is best for your clients and your business, otherwise just stay in a Bank or a Wirehouse where they own you and your book and where you should expect to get  Screwed.

Clients decide what commissions to pay, not the b/d. - or guys on here with self righteous attitudes. I wonder how many of these same saints are slamming people into C shares at 1% a year only to touch them once a year.  By your same SAINTLY logic wouldn't A shares be better?  What if your b/d got rid of C shares ... would you be pissed?

If you want to charge 1% on everything I think you should be a RIA.  We are registered reps so IMO it's about doing what is right for our clients and making a nice living.

[quote=I am legend]

I am with Wells PCG and I don't have a problem with what they did.  They are making the product more client friendly and for that the FA gives up 1% to give the client a lower expense over the life of the contract.  If you want the 4 year surr period, you can still do it, but the clients expenses drop after year 4.  Most people claim that they did the L share for the 1% trail anyway and you can still do it with 2% upfront.  I agree with Ice on this one.

[/quote]Guess what else will drop after year 4...Let me help you. Your trail.  They can't lower the expenses without lowering what they pay you. They just haven't made that announcement on trail cuts yet.

Kinda wierd you don't have a problem with this most recent case of incest.  Every broker I have spoken with about it is furious.  I am talking some heavy hitting top ten producers in the region, not your everyday guys that are just doing the L's to make a living as some would like to assume.  Most are AGE guys that are simply sick of being cut on every corner of every dollar they make for the firm since the merger.  Most of the Wach guys seem to be O.K. with being sodomized since they have to be quite used to it by now.

One more little thought just to make you like the firm even more...If the CDSC on the "L" or new 4 year "B" is 7,7,6,6  what do you suppose the firm is being paid first before they give you the 2% gross?   

Judging by some of these posts it would seem there are are a few guys here that inherited their biz and didn't start from the ground up the old fashioned way. 

You are correct that there is a 7% payout on B shares, but that payout has zero trail I think and we aren't able to choose anything w/ zero trial.  You can take 6% with a small trial.  I have a little bit of a problem with it, but at the same time I thought it wasn't good for the client to pay the higher fee forever either.  Like someone else said RJ did something similar years ago.  Others will soon be following.  BTW, I built it the old fashioned way.

Why can't you make a career off of 25 basis points? Sell A shares and do what is right for the client - since that is what you are preaching about.

I'm sorry, I don't take advice from a guy slinging wrap accounts in the teachers lounge.

Do you disclose to your clients the payout on these product?

I wount not sell my dead grandmother annuities!

Wow, puts, I should come to you for advice.  

I have a couple with 700k in assets. She is 58 and he is 64. He has medical problems and needs her to be with him at all times.

Income goal from the portfolio is $2400 per month (plus taxes, $$ is in IRA).

This gives us a portfolio withdrawal rate of well over 5%, starting immediately.

Give me some strategies for meeting this goal. Don't tell me throw it in a wrap account and pray.

I wount not sell my dead grandmother annuities!

With all respect, death is not always an option.

Times-

5% sounds like muni world to me.

I like 12-15%, It requires about 400 trades a year for that size account.

You don't have a real solution?

Agreed. It's funny how some folks are calling themselves advisors.

[quote=iceco1d]

No, noobie McNoobstain, that's NOT what I'm talking about. 

If a client is going to hold a fund for 3, 6, 8 years, C-shares are the cheapest.

With variable annuities (I know, this is a foreign concept to you, since EDJ spoon feeds you "special," dumbed down products), there is NO TIME FRAME where L-shares are the cheapest.  NOT EVER. 

There is a big difference.  Again, I know the EDJ in you doesn't want to believe it, but try to think outside the big green box on this one. 

[/quote]Man, things got ugly here in a hurry. x7, don't worry, it is evident that Puts is only 6/63 so that is why he won't utilize the benefits of annuities. Anyone here that was licensed around Y2K knows the benefits these annuities are now spitting out. Probably safe to say most here were in jr. high around Y2K.

Ice, you cherry picked the 3,6,8 year periods for the C share being the best option and most productive.  Fact is as soon as you get beyond 7.5 to 8 years you have surpassed the break-even period for paying the "A" load vs. higher "C" share expenses. The A's win going forward for any fund.  Don't believe me? Go to the FINRA website, mutual funds, and utilize the analyzer.  When you campare the A share to the C share of the same fund the break even seems to always land in the 8 year range when the fund is indifferent as to whether the A or C should have been purchased. Fact is that the avg holding period of any mutual fund is just over 3 years. Ask any of your MF wholesalers.

Once you have seen this fact from the FINRA website, you can apply the same methodology to "L" vs."B" annuities even though you cannot run it on the analyzer. Setup an excel spread sheet, put in the formulas starting at 100k, zero mkt growth, 1.4% expense for the "B" share and 1.75% for the "L" share. Most "L"s are .35bps higher than their "B" option of the same annuity. If done correctly, you will see the break-even point across both share classes to be right about 5 years once you factor in the remaining CDSC of 3% for the "B" share. After 5 years, the "B" is clearly the cheaper going forward. No question about it.

The next fact is, things can change quickly in peoples lives and finances and investments need to be geared around having short surrenders even if there are a little higher expenses involved.  Money has to be nimble and available with the loosest of handcuffs while trying to help the client achieve their objective.  That comes at a little higher expense.  Same as buying a car vs. leasing or paying points or not on a new mortgage. 

Ice, the next fact is the L share would be cheaper if the planets line up nicely as they do sometimes. I have had it happen a few times.  Client starts at 100k. Market is up 3 out of the 5 years. Current value at year 5 is 135k. No CDSC left on L share and client pulls out half to buy that highly underpriced property in Florida. He still would have had the the 3-4% CDSC with the "B" share.   L share CDSC is 7,7,6,5 & the B share is 7,7,6,5,4,3,2 from most annuities.

This thread is not about suitability it is about these animals constantly dicking around with the comp schedule which has already occurred this year. 

You may be correct on the Life License for the VA's.  I was thinking the 7 was required. But then again things have changed quite a bit and it was last century when I went thru all of that.

Bottom line with the annuity is if there is any concern with the annuity liquidity, yes do the C share or no annuity at all. They are considered to be long term products but clients liquidity needs can change on a dime.

And if a client ever said they needed liquidity at a specific year, say 4, then a high quality corp bond or cd with the same maturity would be the appropriate solution. Not a 4 year annuity that could be down 40% on cash value due to market conditions.

On May 2nd they drop the L share. They will call it the B share with a 4 year CDSC option that has an M&E which is the same as the current L share. They drop the pay to me on it from 3/1 down to 2/1. The firm takes no haircut with what they get paid from the annuity co, which is at least 5%.  I get a 33.3% haircut on May 2nd.  The clients M&E will drop by about .35bps+- after year 4.  The firm gets a 33.3% raise on May 2nd.  I guess they can put it in their arbitration envelope.

We have another major concern about this change that hasn't been discussed yet:  TRAIL PORTABILITY.  I'm not sure everyone understands how trails are determined on existing product when an advisor changes firms.  Many annuity vendors simply "map" trails to the trails that were in place at the firm that the advisor just moved to without regard to what trails were at the prior firm.  So, for instance, let's use Pacific Life as an example, because I know for a fact that they do this.  You were doing L shares and getting a 1 percent trail at your old firm.  Then you move to the new firm, and it turns out that the new firm was only paying 50 basis points trail on that product BACK WHEN you were doing the Pacific Life product with a 1 percent trail at your old firm.  You say, "wait a second; that product is paying a 1% trail at my new firm right now."  And Pacific Life comes back as says "it doesn't matter:  back in 2005 or 2006, your new firm was only paying 50 basis points back then, and since we map your trails to the history of your new firm, that's what you will be paid."  Worse yet, if you happen to move to a firm that paid zero trails on that product "back then," you will get no trails - even if the new firm is currently paying trails on the product. 

So let's move the discussion to this new Wells "B" share.  It doesn't even exist anywhere else.  It probably forever and always will be a proprietary structure for Wells.  So, a few years from now, you decide to move to another firm after yet another "bank channel" policy is rammed down your throat, and guess what? There is no "B" share pricing like the Wells structure anywhere else.  So, in this example, Pacific LIfe may not pay any trail at all.  Or, maybe they say, "back then, the "B" share option at XYZ (your new firm) paid 25 basis points, so we will pay you 25 basis points.  Either way, it is a tremendous risk to trail portability. And you know what? I bet you Wells knows this. 

Now I am not certain that all annuity companies do what I have outlined above. But I am positive that Pacific Life does it, and I am pretty sure Prudential does it too. Unless we all feel that we will definitely stay at Wells for the rest of our careers, it would behoove all of us at FINET to understand how, at very least, our preferred vendors handle trail portability.

These custom products are scary to me... I sure mang. thinks they are sticky, I think they are lead boots.

Superman,

I'm sure the product will be portable inasmuch as you can change the broker and dealer of record, as long as the vendor has a relationship with the new broker/dealer.  You just won't get paid.

I asked a wholesaler that services my firm if they would be portable - he said it's uncharted territory since they creating a new annuity share class for Edward Jones, the O share.

Probably not an issue and it does not appear to be with a hybrid B that you guys have... but worth thinking about. IMO, firms are doing this for two reason - they want to get ahead of industry regulation and they want to make it harder for brokers to leave.

Mr. Icecold,

Believe it.  It is firsthand information.  Trails are part of the selling agreement, and at least some vendors will tell you that the selling agreement is with the firm, not the broker.  Pacific Life, for example, will tell you that you that when you move you become part of the historical selling agreement of the new firm.  This is not speculation. Ask them.   They will tell you that it cuts both ways.  As if it should be any consolation to a broker who is losing trail revenue, they will tell you that a change of firms can cause a mini windfall for some brokers who go to a firm that has paid higher trails in the past  than the firm that you just left.  But they will also tell you that there are brokers that go to firms that have not paid trails at all on particular contracts, and in that case Pacific Life will make a one time, lump sum payment based on some arbitrary formula. 

Again, I am not certain how widespread the practice is, but I do know that Pacific Life is not the only vendor that does it.   I'm still researching the issue.  It would be wise for all annuity producers to fully understand annuity trail portability, especially when faced with selling a product that is unique to the street.  You'll be able to service it in any event as long as the firm you go to has a selling agreement with the vendor.  You just might not get paid. Now I have read, repeatedly, of your righteous indignation toward the "L" share, but I assume, at some level, with some share class, you would still like to get paid.

I wanted to address the issue of trail portability.  I left WFA in the past year, and I ran into the issue of trails on annuities.  I didn't have a huge annuity business, but the way this issue was explained to me by one of the annuity companies is that whether the trails would map over was a product of the agreement your b/d had with the annuity company.  If the b/d had taken a lump sum from the annuity company up-front, the trails were essentially being paid by your b/d from that point forward, so that when you move you may just be out of luck because, of course, your former b/d won't keep paying you a trail.  In my case, my trails from Jackson came over in full on the contracts I had and so I didn't have to pursue this issue any further, but I hope the information is helpful.

The reason the share class was changed is because the majority of the L share annuities had living benefits designed for long term products.   The firm knows this is a hot button for FINRA.  Annuity suitability is coming up on several of the audits.  Raymond James got sued in a class action suite years ago and has put several restrictions on their annuities.  

Remember as a FINET owner your getting paid 90% on annuties so it's still an awsome deal when you compair it to PCG..22% of the first 10K then 50%.  The entire annuity world is changing very soon.  Soon there will only be advisory shares with zero surrender and 1 and 1.   

Don't work with FINET if you dont think its a good deal. I don't understand the anger.  

Folks...the key here is portability.  I didnt do much with annuities...mostly a pim guy but Im telling you the

bank is aggressively tying up your clients whether its bank products or  a different annuity.  In sr management meetings they are prepared for 40% attrition to own the other 60% of aum in the wfa side.  Make no mistake that is the goal.  Pvt bankers are already calling wfa clients in Minn.  Every wf teller probably 100k of them worldwide can see all the details and positions of your clients....do your clients know this?  There will be a mass exodus of most of the remaining AGE advisors over the next 12-15 mos and even some of the comatose wach advisors who are use to this abuse are starting to wake up.  Time to run...and run quickly.  Tad's place and  SF seem to be the choice for the AGE side.  I hear Tad has 7-8 new offices coming this summer...SF has already pillaged wfa on the west coast.  Wait to the revenue sharing is rolled out this month to you guys who discount advisry business...you are looking at up to 20% paycuts.....its about to get real ugly ...2 more regionals will be cut soon as well.

Ice-

If a broker was driven solely by commission wouldn't they take all upfront and trail after 7 years?

At LPL we offer all share classes. And we just introduced a no surrender fee based annuity with all the bells and whistles with M and E around 50 bps. I have contacted several CPA's who felt that this might be the fit for them to embrace. I have always felt that for those who need guaranteed income in retirement an annuity product is the fit. Most of my contracts are L and C (approximately 25% of my assets).I expect that going forward that the fee based version will ultimately be the primary product. Current vendors are Pru, Lincoln, Sun Life, Met and Allianz. More carriers are expected in the future.

As for the comments regarding  Finet and independence. You can't really be truly independent if they box you in. Ray Jay did it and now FINET. This is not intended to be a commercial for LPL (I am now at the point where I am questioning whether or not its worth it to move to a smaller B/D or go the RIA route...LPL is too big and can't support the reps to the level they used to. There is no easy answer today.

Ice is correct about the haircuts. At Jones they used to take 1.5 off the top and split the remaining 60/40. I assume that is still the case. I don't need to tell you who got the higher figure do I?

How anyone used Protective Life's C-share VA? It has a 3% gross comp with a 1% trail and the M&E is only 1.65%. Living Benefits looked ok too, any thoughts on this product?