Axa/equitable

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Jan 26, 2006 5:45 pm

Ahhh...good day. 


$380,000 new money into AXA/Equitable Accumulator VA.  Guaranteed 6% GMIB, plus a nice enhanced Death Benefit (ya'll should check it out).


Clients loved it, more than willing to pay the fees for the peace of mind, and I got paid nicely.


This is a great business...sometimes, lol. 

Jan 26, 2006 5:49 pm

Not to mention...a commercial banker of mine closed a nice loan today (3.5 million) and set me up with the guy for next week.  He has a 2 million dollar annuity right now...


I hope it's plain vanilla and out of surrender...talk about a good day!!!

Jan 26, 2006 6:30 pm

Bank,


Can you crystallize the pros and cons of what you did today versus simply dividing assets into a taxable account say with a conservative allocation  40% equities 60% fixed income?


I am trying to find the positives of a VA versus a taxable account.


thanks


scrim

Jan 26, 2006 7:29 pm

Bank,


Do you have to annuitize and give up control of the assets to get that GMIB?


If so, how do you explain in layman's terms to your client as I have some problem explaining this very succintly.


Thanks in advance.


scrim

Jan 26, 2006 7:41 pm
BankFC:

Ahhh...good day. 


$380,000 new money into AXA/Equitable Accumulator VA.  Guaranteed 6% GMIB, plus a nice enhanced Death Benefit (ya'll should check it out).


Clients loved it, more than willing to pay the fees for the peace of mind, and I got paid nicely.


This is a great business...sometimes, lol. 



Nice ticket! What was the commish?

Jan 26, 2006 8:43 pm

AXA and ING are the only annuities I will use.  Those guarantees are sweeeet.  Forget Hartford, Nationwide, AIG, etc.

Jan 26, 2006 8:46 pm
iconsult100:

AXA and ING are the only annuities I will use.  Those guarantees are sweeeet.  Forget Hartford, Nationwide, AIG, etc.



What?  No Riversource (former American Express) or Allstate?

Jan 26, 2006 8:56 pm
menotellname:
iconsult100:

AXA and ING are the only annuities I will use.  Those guarantees are sweeeet.  Forget Hartford, Nationwide, AIG, etc.



What?  No Riversource (former American Express) or Allstate?



Had already forgotten them.

Jan 26, 2006 10:16 pm

Scrim,


First of all, I just want to make it clear that I'm not going to get into a pissing match with the anti-VA crowd here.  With that being said, I thing you genuinely want to learn, so I am happy to share my opinions with you.


To answer your second question first...


No, the GMIB does not require annuitization.  None of the annuities I sell do, and there are many that do not (ING just changed, John Hancock, Allianz, Hartford, Nationwide...the list goes on).  



To answer your first question second... 


Without going too far in depth, the situation was a husband and wife, 57 and 62, who have retired and need consistent, predictable income NOW.  They are retired, and don't want uncertainty.


Note:


Regarding your allocation:  It's not enough to say 40% equities and 60% fixed income.  What are we talking about really?  Blue chips stocks?  Small and mid cap mutual funds?  It makes a difference.  For examples sake, lets just assume a diversified portfolio of equities.


I don't care what anyone says, it SUCKS to be in the fixed income business right now, flat (even inverted) yield curve, rising interest rates...not fun.  Just about anything you sell that is long (say 10 years or more) is going to lose value on the statement. 


And you know as well as I (I assume) on individual bonds you can't get any decent yield without going out 10 years or more, sometimes not even then, and your basically asking to lose principle in a rising interest rate environment unless you hold them to maturity.


My point...I'd much rather have my clients overweighted in equites in this market across all the risk allocation spectrums.  But you MUST do this in a responsible way.  In other words....


I'd much rather have a 70/30 stock to bond ratio and give up around 1.5% in the form of an M&E to hedge the equity risk with a guarantee in exchange for the MUCH HIGHER upside potential of the equities compared to the fixed income. 


I highlighted that because I really think that's where the rubber meets the road, so to speak.  People can sleep easier while taking on more equity exposure than they would outside the VA BECAUSE of the guarantee.


I don't know the numbers, but I am going to be willing to bet that, on average a 70/30 stock to bond allocation will, over time, outperform a 40/60 stock to bond allocation by quite a bit more than 1.5%.


I say on average because I'm sure someone can produce some 40/60 model that went through the roof, but I have yet to find that crystal ball on EBAY...


I'm not saying I know it all, the way I do it is the only way to do it, etc.  In fact, in a perfect world, all my clients would be logical, understand and accept risk, I'd have 200MM in individual securities managed money, 2 hot assistants, and date Jessica Simpson.


But the fact is none of that is true.  However, in the mean time, I can do well for my clients, help them FEEL GOOD about their money and their retirement, and make a pretty decent living myself.


 


P.S.  Dirk, to answer your question, my B/D doesn't take haircuts (to my knowledge) so I got 7% gross, and I am netting 37.5% of that.  


I know, I know, it's not 90%, but that's a whole other debate we've already had, so let's let a sleeping dog lie. 

Jan 26, 2006 10:21 pm

I should have noted, the customers still have about $300,000 in NQ mutual funds, and I even recommended they take $75,000 that he wanted to keep liquid and stick it in that darn INGdirect account. 


4.75% LIQUID MONEY!!!


Hard to beat that.

Jan 26, 2006 10:42 pm
BankFC:

P.S.  Dirk, to answer your question, my B/D doesn't take haircuts (to my knowledge) so I got 7% gross, and I am netting 37.5% of that.  


I know, I know, it's not 90%, but that's a whole other debate we've already had, so let's let a sleeping dog lie. 



I'm cool with that. Nice ticket!

Jan 26, 2006 10:54 pm

That's a $10,000 day...I'll take that.  Also, nice job of explaining to scrim the rationale of overweighting in equities, BUT in a controlled environment (VA).  I did the same thing today, but it was $114,000 and was in ING Landmark (4% up front, 1% each year thereafter).  My day was $4,100...

Jan 26, 2006 11:08 pm

Thanks for the valuable feedback.


So can you further explain this 6% guarantee w/o having to annuitize?


Is it as easy as saying if someone puts in $1,000,000 they can take out $60,000/year without penalty?     In this scenario if the performance of the sub accounts is flat for the whole year they still have $1,000,000 even after withdrawing 60k?


scrim


Jan 26, 2006 11:14 pm

Regarding this GMIB without annuitization, what exactly is "the catch" in the fine print.


Maybe there is no catch.  I'm really not sure.


Do some of the assets have to be in a guaranteed account?


scrim

Jan 26, 2006 11:17 pm

Again,


I'm not necessarily Anti-Annuity.


Self admittedly, I just don't get it I guess.


scrim

Jan 26, 2006 11:22 pm
Indyone:

That's a $10,000 day...I'll take that.  Also, nice job of explaining to scrim the rationale of overweighting in equities, BUT in a controlled environment (VA).  I did the same thing today, but it was $114,000 and was in ING Landmark (4% up front, 1% each year thereafter).  My day was $4,100...


Another nice ticket. Good job.

Jan 26, 2006 11:23 pm

In effect can't I just have a client invest their money in some kind of asset allocation that closely matches their risk tolerance?


At some time in the future begin making "annuity type"  payments which will be taxed more favorably and keep their costs a bit lower?


Regarding the death benefit it's quite clear from other postings that this is not a great way to leave money as a legacy.


What exactly are the positives?


I guess I'm having problems mostly understading the GMIB w/o annuitization still.


scrim


Jan 26, 2006 11:33 pm

I just sat back and reread all my posts the last few minutes.


I keep coming to the same conclusion.


I'm a college graduate, in the financial field for 16 years, and am reasonably intelligent.


The fact that I cannot grasp this concept with 100% certaintly tells me that clients can't possibly understand this product.


Like I've said before, I don't want to have a client put their money into something they cannot fully understand.


I think my clients can understand an asset allocation portfolio based on their time frame and risk tolerance as opposed to a convoluted VA contract.


As long as we are putting our clients interests first, what does it matter if we are putting our clients into mutual funds, VA's, EIA's, managed money, etc.    There is no one size fits all.


Thanks for letting me babble.


Have a great weekend.


scrim

Jan 26, 2006 11:51 pm

Scrim,


The biggest differential is the guarantee.  I am admittedly a big fan of fee-based accounts (and do quite a bit more of those than I do annuities), but, like today, I ran into a prospect that was just flat-out not comfortable with the equity market and a fee-based arrangement that was not "guaranteed".  A competitor had shown them a nice hypo mix of American funds, with a 6% withdrawal that had performed admirably over the last 25 years (like a 15% average), but the bottom line was, it was not guaranteed and in the process of probing the prospects, it was obvious to me that they were VERY uncomfortable about the possibility of principal loss.


I showed them two illustrations (20K and 94K) and reading numbers from the 94K illustration, actual performance showed 82K in distributions in the first ten years, and the option to lock in at the end of ten years at $9,427 annually for life (couple is 69 & 72 at that point).  What if they die two years later you say?  The death benefit to their heirs at year 12 is 162K.  Even the 0% market performance minimum guarantees show 35K in distributions in years 1-10, the ability to lock in at $6,209/year at year ten, and a death benefit at year 12 of 101K.  These are just some of the numbers in the illustration, but I think you get the point.


The bottom line is, yes, most likely a fee-based account will perform better over the years due to expenses, but these people couldn't care less.  All they cared about was that they can make much more than they can in CDs and yet, they have a guarantee against principal loss...THAT is where an annuity is a tremendous option to have.  I got the business even though my performance lagged well behind what the other rep had shown them, because I could provide a guarantee.


That's my story and I'm stickin' to it...

Jan 26, 2006 11:55 pm

I guess maybe I live in a vacuum.


How can an appropriate mixture of stock and bonds lose principal over a long time frame?


I think it's almost impossible.


Am I not thinking outside the box here?


scrim