Unethical edward jones advice

I learned that trick at my mentors office.  Made my month a few times…ahhhh the Jones memories.  THe FA was trying to get her contest catagory…no doubt.

There might be some situations where that is appropriate, around tax or liquidity planning, but who sold her the annuity strategy?

What a joke… If someone at a real firm tried doing that, there would be an open office real quick once compliance found out…

So in no situation would you ever take penalty free distributions from an annuity and buy A shares, regardless of tax and liquidity considerations?

buying 30-40 year bonds with 3 points built in.  

And add intergenerational wealth planning considerations ( stepped up basis on equity A shares, Jones advisor did not " sell " the original annuity strategy, and so on.)

Just saying, let's not be pc and be quick to incriminate our peers, maybe you are right in this particular situation, it certainly has nothing to do with Ed Jones per se and everything to do with the specific case and advisors, pro and con.

[quote=GolFA]

And add intergenerational wealth planning considerations ( stepped up basis on equity A shares, Jones advisor did not " sell " the original annuity strategy, and so on.)

Just saying, let's not be pc and be quick to incriminate our peers, maybe you are right in this particular situation, it certainly has nothing to do with Ed Jones per se and everything to do with the specific case and advisors, pro and con.

Maybe you guys havent seen some of the crappy annuities out there. Lousy annuity with a client who still has growth goal - I can see that it could be appropriate - as a rescue. 

[quote=joedabrkr] [quote=GolFA]

And add intergenerational wealth planning considerations ( stepped up basis on equity A shares, Jones advisor did not " sell " the original annuity strategy, and so on.)

Just saying, let's not be pc and be quick to incriminate our peers, maybe you are right in this particular situation, it certainly has nothing to do with Ed Jones per se and everything to do with the specific case and advisors, pro and con.

I'm afraid I have to side with the crowd on this one.  If there were really "intergenerational wealth planning considerations" there would be better solutions, IMHO.....

1.) Annuitize and buy life insurance w/ heirs as beneficiaries

2.) Withdraw and gift withdrawals from heirs.

More options.

If the surrender is tax neutral or even taxed at a low enough rate, and there is no penalty, what you have is cash.

Why would you side with the crowd, especially if you are not a big fan of annuity strategies, maybe she has too much of this strategy, over a long enough period, the costs are lower while absorbing the tax deductions now, and so on. We really don't know much about this case to make a determination.

So I must divulge--The annuity was Hartford Leaders.  It was in an IRA.  It was a Jones sold product (4 years ago).  Does that change your opinion on the right thing to do for the client?

The client was 50 years old. 

Doesn't make anyone look good. :).

[quote=spikedkoolaid]

So I must divulge--The annuity was Hartford Leaders.  It was in an IRA.  It was a Jones sold product (4 years ago).  Does that change your opinion on the right thing to do for the client?

The client was 50 years old. 

[/quote]

I have to say given those facts , I gotta rip the "adviser". I can't imagine the positive side of that...................

[quote=Bache&co]

Maybe you guys havent seen some of the crappy annuities out there. Lousy annuity with a client who still has growth goal - I can see that it could be appropriate - as a rescue. 

[/quote]

You're so hot.

[quote=spikedkoolaid]

I couldn't resist--

I just transfered an account from EDJ and the client told me that the FA wanted her to take a 10% penalty free withdrawl out of an annuity and put it into mutual funds at 5.75% commission. 

I asked her if the FA suggested moving the money inside of the annuity to achieve the same objective.  She said, "no!"  I asked if she considered re-allocating the mutual funds through an exchange within the same family.  She said, "NO!"

All I could think about was the EDJ FA needed to make some money this month.  ABSURD!

[/quote]

Why weren't you smart enough to ask her why he said he wanted to do it? He may have had a good reason, instead of the silly little things that you thought of.

Tell me where I am wrong....

Assuming the client isn't going to use a living benefit (no one does), the death benefit is the same as the current cash value or you can take withdrawals dollar for dollar (not pro rata), and the client has a number of years before retirement or needing to use the money.....let's crunch some numbers.

Considering a 1.35% M&E and 0.15% administrative expense + any riders added to the contract, I show a break even point around 4 years or less (depending on riders) if moving to an A-share at full pop.  Move it to the same fund class C and save the client 0.75% annually.

Spiked, you sold this annuity 4 years ago to a client when at Jones.  If I came across this annuity and felt it was innappropriate, I would change the agent of record and blow out at 10% annually until the surrender penalty was over.

I thought Jones Hartford Leaders contracts were all A share annuities. The Jones invention. No surrender and might have reached breakpoints getting in. The 10% penelty free withdrawl doesnt make sense. Jones clones - arent all your annuities designed like A shares? 

"Tell me where I am wrong....

Assuming the client isn't going to use a living benefit (no one does),"

You're wrong.  People don't need to collect on a living benefit to use a living benefit.  The living benefits have a huge influence on how many clients invest.

[quote=Bache&co]I thought Jones Hartford Leaders contracts were all A share annuities. The Jones invention. No surrender and might have reached breakpoints getting in. The 10% penelty free withdrawl doesnt make sense. Jones clones - arent all your annuities designed like A shares? [/quote]

That's the way I remember it for Variable Annuities when at Jones.  In fact I sold several A share Hartford Leaders for over 100K to get the breakpoint and tax deferral.

Sounds like the OP has some of his facts wrong?

Hartford Leaders EDGE is the A share product.   

Here are some assumptions I'd make, since spiked isn't giving them up.  First, the contract is less than or not much over $100K.  If it were substantially more than that it would be an A share annuity.  Compliance wouldn't let it fly if it were a B share over $100K.  Second, the 10% free w/d can't be much more than $10-15K.  $500 gross isn't enough to make a month for anyone in any segment, so let's throw that arguement out the window. 

I don't know that I understand the "I asked if she considered re-allocating the mutual funds through an exchange within the same family" question.  How did we get from talking about an annuity free w/d to mutual fund exchanges?  You can't take a Hartford annuity and do an exchange into Hartford funds.   

Bobby, the answer to your question is no.  He wasn't.  He was so blinded by his distaste for Jones that he glossed right over talking about the why of the recommendation and went right to broker bashing.  The client was willing to go along with him because she was upset about the recommendation to begin with. 

Maybe you should have asked why she has the annuity to begin with.  That's the question I ALWAYS start with when I see an annuity inside an IRA.  Most of the time the clients don't know why it's there.  They just know that the broker sold it to them.  At 50 years old, unless she's concerned about the DB, the annuity is only marginally appropriate.  Just an added expense in my opinion.  I'll agree with rankstocks that if I saw that at another company I'd change the agent and do the w/d too. 

There are too many variables for you to be calling the reco unethical. 

Maybe you should have asked why she has the annuity to begin with.  That's the question I ALWAYS start with when I see an annuity inside an IRA.

If this is your first question, I would question your annuity knowledge.

At 50 years old, unless she's concerned about the DB, the annuity is only marginally appropriate. 

Not necessarily.  Assuming that she had/has 10 years to being able to withdraw from the annuity at age 59 1/2, in an IRA annuity the GRIB can be a big benefit by guaranteeing a base retirement income in a down market.

Of course, we have all gone over this in excruciating detail.   Some of you younger guys are not going to be convinced until you actually experience a real down market and have to deal with clients who see their retirement funds going up in smoke.  I guarantee you that with the GRIB, you will have a client who, while not happy about the contract value going down, will be less likely to want to cut your throat when they know that they will still have positive cash flow and guaranteed minimum gain from the annuity.

[quote=spikedkoolaid]

I couldn't resist--

I just transfered an account from EDJ and the client told me that the FA wanted her to take a 10% penalty free withdrawl out of an annuity and put it into mutual funds at 5.75% commission. 

I asked her if the FA suggested moving the money inside of the annuity to achieve the same objective.  She said, "no!"  I asked if she considered re-allocating the mutual funds through an exchange within the same family.  She said, "NO!"

All I could think about was the EDJ FA needed to make some money this month.  ABSURD!

[/quote]

It was probably in surrender too...

[quote=Dust Bunny]Of course, we have all gone over this in excruciating detail.   Some of you younger guys are not going to be convinced until you actually experience a real down market and have to deal with clients who see their retirement funds going up in smoke.[/quote]

Amen and well said.

[quote=anonymous]

Maybe you should have asked why she has the annuity to begin with.  That's the question I ALWAYS start with when I see an annuity inside an IRA.

If this is your first question, I would question your annuity knowledge.

[/quote]

I understand annuities just fine, thank you very much.  It's not always MY knowledge of annuities that is important, rather it's the clients.  Most of them don't know or remember the M&E and Admin expenses involved, surrender periods, etc.  So, when it's time to look at investments, the question about the annuity comes up. 

Case in point, I'm looking at an account right now for a guy who has 2/3 of his $325K "stock" portfolio in annuities.  When I asked him that question he said that's what his buddy at the school sold him.  All of it is IRA money BTW.  No income guarantees, DB is contract value, and he's not planning on taking the money except for RMDs.  Why does this guy need the extra 1.4% drag on his portfolio?  MAYBE for the DB if, like Babs alluded to, the market drops.  If he were insurable I'd pull some $$ out every year and buy a nice insurance policy for him to further protect his family.   

So, my guy, like spiked's lady needs to understand the pros and cons of annuities.  IMHO if you're going to pay the extra fees of an annuity inside your IRA you better be getting something for the money.    

Spaceman,

The clients understand what they bought when they are in our offices and immediately begin to forget once they walk out of the office.  This is true for annuities and all other financial products.

If the DB is the contract value, he does not need the annuity for the DB because there isn't one.   If he invested $250,000 and it drops in value to $150,000 and he dies, his beneficiaries will get $150,000.

If this particular client is paying an extra 1.4% over what he would be paying if he was investing with you, he is in one crappy annuity.

There are plenty of unsuitable annuity sales.  This is a problem with annuity salespeople and not with annuities.  The taxation of non-qualified annuities is irrelevant to whether they are appropriate inside of IRAs.

P.S. I admire how you handle your responses concerning Edward  Jones.

[quote=Spaceman Spiff]

I understand annuities just fine, thank you very much.  [/quote]

Actually, your comments about A share vs. B share annuities was a HUGE tip that you don't understand. You sure are cute when you bark like a chihuahua with no teeth, though.

republican-Chihuahua.jpg800×510  

Whoa, Bobby Soprano.

He just missed Suze Orman.  Odds are, that was the intended target…

Nostalgia can unravel a guy. :).

[quote=Bobby Hull]

[quote=Spaceman Spiff]

I understand annuities just fine, thank you very much.  [/quote]

Actually, your comments about A share vs. B share annuities was a HUGE tip that you don't understand. You sure are cute when you bark like a chihuahua with no teeth, though.

republican-Chihuahua.jpg800×510  

[/quote]

OK, I'll bite Bobby.  Educate me.  What don't I understand?

AMEN! AMEN! AMEN! That is for sure gospel if ever I read it!

[quote=Indyone]

[quote=Dust Bunny]Of course, we have all gone over this in excruciating detail.   Some of you younger guys are not going to be convinced until you actually experience a real down market and have to deal with clients who see their retirement funds going up in smoke.[/quote]

Amen and well said.

[quote=anonymous]

Maybe you should have asked why she has the annuity to begin with.  That's the question I ALWAYS start with when I see an annuity inside an IRA.

If this is your first question, I would question your annuity knowledge.

[/quote]

I inherited a stack of accounts that have annuities inside IRA's.  The only answer why I heard was that the broker needed the six points.  It also didn't help that 6 months after annuitizing his book that the broker took a check from Mother Merrill. 

IndyEDJ

[quote=Indyone]He just missed Suze Orman.  Odds are, that was the intended target...[/quote]

Yeah, Kiyosaki and the Donald, too

[quote=IndyEDJ][quote=anonymous]

Maybe you should have asked why she has the annuity to begin with.  That's the question I ALWAYS start with when I see an annuity inside an IRA.

If this is your first question, I would question your annuity knowledge.

[/quote]

I inherited a stack of accounts that have annuities inside IRA's.  The only answer why I heard was that the broker needed the six points.  It also didn't help that 6 months after annuitizing his book that the broker took a check from Mother Merrill. 

IndyEDJ

[/quote]

You're stupid for taking a bunch of accounts that you can't get paid on and that you're liable for, from this point on. You have all the risk and none of the reward. I'll bet that broker is laughing his ass of at you. WTF were you thinking?

So, you don’t like annuities inside IRAs, or you just don’t like to inherit them?