Ideas Needed

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Dec 21, 2009 6:18 pm

Client is rolling $300K into his IRA from 401k plan.

 
Guy wants safety and growth (who doesn't?).  We are ready to go with $200K into an EIA but need ideas for the rest.
 
I've shown him ST bond funds and he's not crazy about it because of principal fluctuation.  CDs pay zilch.  MM even less.  Thinking maybe a shorter term corporate?
 
Ideas appreciated.
Dec 21, 2009 6:42 pm

Contact your compliance officer and start writing your complaint rebuttal.

Dec 21, 2009 7:19 pm

Why not do all of it into the EIA?  Seems like he likes the idea of it.  And without knowing the specifics, it seems like an appropriate account.

Dec 21, 2009 8:04 pm

Be a little creative with the guy.  Put 80-85k in a fixed asset (or ELCD like ageman said) and after five or six years he'll have made 12-15k.  Take the remaining 15k and put it div stocks.  Worse case, if the stocks went to zero(ya right), he wouldn't lose any principle.  a side bonus is he can brag to his buddies that he's playing the markets.

Dec 21, 2009 8:13 pm
etj4588:

Client is rolling $300K into his IRA from 401k plan.

 
Guy wants safety and growth (who doesn't?).  We are ready to go with $200K into an EIA but need ideas for the rest.
 
I've shown him ST bond funds and he's not crazy about it because of principal fluctuation.  CDs pay zilch.  MM even less.  Thinking maybe a shorter term corporate?
 
Ideas appreciated.

How old is he?  Does he need growth every year or just growth over a certain number of years?
Dec 21, 2009 11:43 pm

He's 65, doesn't need the income.  Just views this as his retirement nestegg and wants to keep it safe.  Had it in a MM for 5 years before he rolled it.

Would love to do all of it in the EIA (relax Sometimes, his net worth is about $800K), but he's one of those guys that likes to spread it around.

Dec 22, 2009 12:46 am

2nd the equity linked CD option.  High quality principal protected note is another option.

Dec 22, 2009 6:14 am

I sometimes use VAs for this type of situation.  I would use a 10 year GMAB.  He can invest the money aggressively and his absolute worst case scenario is that he'll get 100% of his money back (no annuitization required).  The best case scenario is that he'll get market returns less a couple of points for expenses. 


Just make sure to get an idea of what him RMD's will be and don't use any money that will be needed for them.
Dec 22, 2009 11:11 pm

is he going to need this money for income down the road? Why not take a look at a deferred immediate annuity equal to the fixed monthly expenses he is looking at incurring. AT that point, it is guaranteed.

Dec 23, 2009 6:09 am

aeromaks, can you elighten me with the definition of "deferred immediate annuity".

Dec 23, 2009 8:49 am
AGEMAN:
BioFreeze:
deekay:

Why not do all of it into the EIA?  Seems like he likes the idea of it.  And without knowing the specifics, it seems like an appropriate account.



I completely agree.

Of course you agree since that is the only thing you do!
 
I don't sell any EIAs.  Does this make my recommendation any more or less valid?
Dec 24, 2009 8:18 am
anonymous:

I sometimes use VAs for this type of situation. I would use a 10 year GMAB. He can invest the money aggressively and his absolute worst case scenario is that he'll get 100% of his money back (no annuitization required). The best case scenario is that he'll get market returns less a couple of points for expenses.

Just make sure to get an idea of what him RMD's will be and don't use any money that will be needed for them.







I agree with the GMAB rider on a VA. If he gets nervous about his account fluctuating in value, you could put him primarily in short term bonds using the sub accounts.



However is he is really that conservative and If he was ok with earning next to nothing in a mm and just wants a little bit of interest each month, he might be a fixed annuity client. Find the best rate and sell it to him. Call him in 7 years when it's out of surrender.

Dec 24, 2009 10:12 am

A VA, primarily invested in short term bonds??? Mmmm ...


Combine a fixed annuity with a GI MF, split evenly. Any hypo will show he'll at least make his money back even if the MF goes to zero. I'd probably combine it with a BR Global Allocation, depending on the EIA's you're using.
Dec 25, 2009 11:13 am

Do not use a Hypo! There it is again... selling past performance the EDJ way. "Any hypo will show he'll..." No, any hypo will show what happened in the past with hand picked funds that just happen to look good in retrospect! Also, the VA is a horrible idea- he just said that even the std dev of ST bond fund is unacceptable. Which means: very few options. He is a saver not an investor! You're asking for uncompensated headaches. Of course, any of us could explain to him the error of his ways long-term, but the minute the thing fluctuates downward.......

Dec 25, 2009 2:39 pm

newnew, please explain why the VA is a terrible idea.  I've put savers in them.  They NEVER pull their money out when the market goes down because they know that it it's guaranteed to go back up. 

Dec 25, 2009 10:07 pm

What part of the VA is "guaranteed to go back up"? Certainly not his cash. This is not the prospect for a product that is often difficult for the avg saver to comprehend. They often hear "6% annual ratchet for 10 years" or "5% payout for life" as meaning something similar to a 5-6% RETURN. There may be NO return on his CASH. My guess: return on his cash is what he cares about most after principle preservation. So a VA is a horrible idea- after all, this guy was nervous about the fluctuation of a short term bond fd!

Dec 25, 2009 10:28 pm

"What part of the VA is "guaranteed to go back up"? Certainly not his cash."



 
Yes, his cash.  Please don't tell me that I'm arguing with someone who doesn't understand the basics of a GMAB rider.
Dec 26, 2009 9:09 am

I do see your point if he was really willing to "invest" for the GMAB period. Maybe he is.  I just get nervous with this type of prospect- one who will call up in a few months and want to access his "return" when markets are down, or constantly fret about the account value flux on the monthly statements. What is his view of "cash": he has been in mmkt for years and will not do a bond fund. Why is that? So we do a VA? To me, a horrible idea based on the little I know of him.

Dec 27, 2009 12:56 am

A VA is out of the question for this guy.  

Dec 28, 2009 7:54 pm
newnew:

Do not use a Hypo! There it is again... selling past performance the EDJ way. "Any hypo will show he'll..." No, any hypo will show what happened in the past with hand picked funds.......





You don't need hand-picked funds. The combination of growth and income, large cap mutual funds in a 50-50 mix with fixed annuities are nearly universally successful, particularly if the income from the annuities are reinvested into the mf. On the whole, there's about a 90% chance that any GI mf, over rolling 10 year periods will be profitable. So you'll have to excuse me for calling you out on this. I don't need to hand pick, and I never do.



Don't fall into the trap to believe that because when you used hypos at Jones you used them incorrectly, we all do.