L Share annuity vs. wrap fee
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[quote=Bobby Hull]
[quote=Philo Kvetch]Even with the M&E, in a great many cases it's cheaper than owning a mutual
fund.
Best kept secret in the industry.[/quote]
Amen. The funny thing is that the critics, who happen to sell people mutual funds, don't even understand the true cost of owning a mutual fund. They thing that's it's just the expense ratio. Cracks me up. Stealing clients is so easy when you show them the true costs that their brokers "failed to disclose to you." It kills the trust they have for the incumbent and replaces it with trust for me, since I put all the costs in writing and they have to initial the form.
[/quote]
The line about the "true cost of owning a mutual fund" is one that is tossed about here often. Usually by AllREIT or someone who prefers to put ETFs in a wrap. I'm suprised to see you using it though. Since annuities are basically mutual funds with some extra bells and whistles, how do you justify telling clients their broker is lying, when you are doing the same thing. What, sub accounts, because they are technically not mutual funds, don't have trading costs? I'm going to guess that's a part of the discussion you left alone.
The short answer, Spiff, is in this case the correct answer. And that is that not all annuities use mutual funds.
Bank FC:
I believe that the lawyer you heard was Mr. Huggard. He is an estate planner, lawyer, professor, and CFP. And he is the absolute authority on VA's. He has a book that you can order. Also, he is a Professor at NC State, please don't confuse that with Chapel HIll. Furthermore, he represents brokers in NASD cases and seems to think that if you are not showing VAs in comparison to pure funds....you may be getiing into some hot water down the road. I have the name of the booke somewhere if anyone wants it.
[quote=Bobby Hull][quote=BankFC]
I was invited to the JH producers conference in Boston this past year, and the single best speaker was an Estate Lawyer from Chapel Hill NC (if I can remember correctly).
Anyway, he was as well versed in VA's as anyone I have ever met. He laid out the true cost of VA's versus mutual funds, and truly, the cost is nearly identical, and sometimes the MF's are more expensive!
As far as taxation goes, it's very similar too. People don't seem to think about turnover in portfolios creating short term capital gains (taxed at ordinary income), but it happens in all actively managed MF's.
[/quote]
They also don't consider the transaction cost of that turnover.
When did you go smart on us, bankfc?
[/quote]
Bobby, I've always been smart... You probably weren't able to notice because you were trying to think of your next "witty" comment.
[quote=the word]
Bank FC:
I believe that the lawyer you heard was Mr. Huggard. He is an estate planner, lawyer, professor, and CFP. And he is the absolute authority on VA's. He has a book that you can order. Also, he is a Professor at NC State, please don't confuse that with Chapel HIll. Furthermore, he represents brokers in NASD cases and seems to think that if you are not showing VAs in comparison to pure funds....you may be getiing into some hot water down the road. I have the name of the booke somewhere if anyone wants it.
[/quote]
You're right. I was just trying to go off memory. I suppose you're a Wolfpack fan then? Anyway, I have a ton of documentation he gave to me, I might pull it out tonight and revisit some of it.
Yes, he was absolutely an authority on the subject of VA's.
Also, can anyone name the NCAA div 1 schools whose mascot name doesn't end in S (ex trojans, bulldogs, vols, tigers, etc).
The Wolfpack is one (I think there are 5). Winner gets a free Ameriprise Dream Book.
[quote=Spaceman Spiff][quote=Bobby Hull]
[quote=Philo Kvetch]Even with the M&E, in a great many cases it's cheaper than owning a mutual
fund.
Best kept secret in the industry.[/quote]
Amen. The funny thing is that the critics, who happen to sell people mutual funds, don't even understand the true cost of owning a mutual fund. They thing that's it's just the expense ratio. Cracks me up. Stealing clients is so easy when you show them the true costs that their brokers "failed to disclose to you." It kills the trust they have for the incumbent and replaces it with trust for me, since I put all the costs in writing and they have to initial the form.
[/quote]
The line about the "true cost of owning a mutual fund" is one that is tossed about here often. Usually by AllREIT or someone who prefers to put ETFs in a wrap. I'm suprised to see you using it though. Since annuities are basically mutual funds with some extra bells and whistles, how do you justify telling clients their broker is lying, when you are doing the same thing. What, sub accounts, because they are technically not mutual funds, don't have trading costs? I'm going to guess that's a part of the discussion you left alone.
[/quote]
That's a great question. I use UIT's. Even though the total cost of the annuities are lower than most MF's, the performance is far superior. These things could cost 5% a year and still put more money in the client's pocket than some crappy MF's.
Yes, Wolfpack alum here. Two more....Fighting Irish, Stanford Cardinal.
Do most of the VA's guys use UITS instead of the mutual funds?
I use Pacific Life for lifetime income and use American skandia for their guaranteed return option. Any opinions? Could i be using a better annuity?
Pacific Life has good performance on their model portfolios.
[quote=Bobby Hull][quote=Spaceman Spiff][quote=Bobby Hull]
[quote=Philo Kvetch]Even with the M&E, in a great many cases it's cheaper than owning a mutual
fund.
Best kept secret in the industry.[/quote]
Amen. The funny thing is that the critics, who happen to sell people mutual funds, don't even understand the true cost of owning a mutual fund. They thing that's it's just the expense ratio. Cracks me up. Stealing clients is so easy when you show them the true costs that their brokers "failed to disclose to you." It kills the trust they have for the incumbent and replaces it with trust for me, since I put all the costs in writing and they have to initial the form.
[/quote]
The line about the "true cost of owning a mutual fund" is one that is tossed about here often. Usually by AllREIT or someone who prefers to put ETFs in a wrap. I'm suprised to see you using it though. Since annuities are basically mutual funds with some extra bells and whistles, how do you justify telling clients their broker is lying, when you are doing the same thing. What, sub accounts, because they are technically not mutual funds, don't have trading costs? I'm going to guess that's a part of the discussion you left alone.
[/quote]
That's a great question. I use UIT's. Even though the total cost of the annuities are lower than most MF's, the performance is far superior. These things could cost 5% a year and still put more money in the client's pocket than some crappy MF's.
[/quote]
You, or someone else, may have to educate me a little bit here. All of the annuities we use at Jones (Hartford, Lincoln, Sun America, Protective, MetLife) use sub accounts based loosely on funds. Every annuity I've ever review does the same. You have some that use UITs as sub accounts? Or were you saying you use UITs outside of the annuities?
[quote=the word]
Yes, Wolfpack alum here. Two more....Fighting Irish, Stanford Cardinal.
Do most of the VA's guys use UITS instead of the mutual funds?
I use Pacific Life for lifetime income and use American skandia for their guaranteed return option. Any opinions? Could i be using a better annuity?
Pacific Life has good performance on their model portfolios.
[/quote]
I put JH side by side with Pac Life in a Morningstar analysis. Performace is nearly identical (Pac might have been very slightly better), but the betas of the JH portfolios were much lower than Pac Life. Guarantee is slightly better too (no 5 year bucket).
For lump sum return of principle, I use Allianz High 5 L share. Works great.
[quote=Spaceman Spiff][quote=Bobby Hull][quote=Spaceman Spiff][quote=Bobby Hull]
[quote=Philo Kvetch]Even with the M&E, in a great many cases it's cheaper than owning a mutual
fund.
Best kept secret in the industry.[/quote]
Amen. The funny thing is that the critics, who happen to sell people mutual funds, don't even understand the true cost of owning a mutual fund. They thing that's it's just the expense ratio. Cracks me up. Stealing clients is so easy when you show them the true costs that their brokers "failed to disclose to you." It kills the trust they have for the incumbent and replaces it with trust for me, since I put all the costs in writing and they have to initial the form.
[/quote]
The line about the "true cost of owning a mutual fund" is one that is tossed about here often. Usually by AllREIT or someone who prefers to put ETFs in a wrap. I'm suprised to see you using it though. Since annuities are basically mutual funds with some extra bells and whistles, how do you justify telling clients their broker is lying, when you are doing the same thing. What, sub accounts, because they are technically not mutual funds, don't have trading costs? I'm going to guess that's a part of the discussion you left alone.
[/quote]
That's a great question. I use UIT's. Even though the total cost of the annuities are lower than most MF's, the performance is far superior. These things could cost 5% a year and still put more money in the client's pocket than some crappy MF's.
[/quote]
You, or someone else, may have to educate me a little bit here. All of the annuities we use at Jones (Hartford, Lincoln, Sun America, Protective, MetLife) use sub accounts based loosely on funds. Every annuity I've ever review does the same. You have some that use UITs as sub accounts? Or were you saying you use UITs outside of the annuities?
[/quote]
There are annuities that use UITs and even ~gasp~ ETFs in the subaccounts. Performance blows away anthing I've ever seen from the most popular VAs using mutual funds. Couple that with the fact that they have a cafeteria style mentality with respect to riders. The bare bones contract has an M&E of 135bps, and most UITs and ETFs have fees south of 35 bps, making TOTAL fees and expenses below 170 bps, with no short term capital gains to detract from performance.
PK, do you mind naming some of the VA’s that allow ETF’s to be used in sub-accounts? Thanks in advance.
Chris
Chris, do yourself a large favor and focus your efforts and attention upon
the VA that uses UITs.