For Rankstocks - A Discussion

or Register to post new content in the forum

53 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Jul 14, 2008 10:54 pm

OK - I'm want to open up the discussion a bit more about variable annuities and fixed index annuities.

 
You say you don't think your clients will need the guarantees.  You say they're not worth the extra you pay for said guarantees.  You say you're upset that insurance companies and reps make money off the sale of these products. 
 
I agree:  clients don't need the guarantees.  But they want them.  I say the extra you pay is only worth it if the living benefits make a client a better investor (i.e. not being tempted to buy high and sell low).  I say that, given the complex nature of what we do, I have no guilt getting paid large commissions for the sale of complex insurance products.  If a client ever asked me how much, I would hold my head high and tell them.  Otherwise, it is none of their concern.  Although, if I were in a pissing contest with a fee-based advisor or a trader, I would list out the potential future commissions I would be missing out on by not doing a fee-based or trading account.
 
I have never sold an FIA.  I have no problems with them.  For many people, a guaranteed fixed rate of return, coupled with the opportunity to have a better growth rate than a CD is attractive.  Moreover, it is a prudent investment strategy.  Observe:
 
$100k investment - I will average a client 25% R/O/R over four years.
 
Year one:  Up 100%, the account balance is $200k
Year two:  Down 50%, the account balance is $100k
Year three:  Up 100%, the account balance is $200k
Year four:  Down 50%, the account balance is $100k
 
Volatility is a huge player in how well an investor does.  FIAs look a hell of a lot better now, don't you think?  Granted, withdrawals are taxed at income rather than LTCG rates, but what about a qualified plan?  Who cares how withdrawals are taxed then?  Even in a taxable account, is it safe to say tax-deferral combined with the ability to NEVER LOSE MONEY could outperform net of taxes at withdrawal?  Maybe, maybe not.  But unlike you, I'm not about to throw blanket statements in order to ignorantly bash one strategy and praise another.  I hold myself accountable.  I need to prove strategies to my clients. 
 
I have stated before that my main focus is not VAs and FIAs.  I know, however, when an argument is valid and when one is full of half-truths and opinions.  And I'll fight for the right of other producers to practice they way they want, given it is in the best interest of their clients. 
 
Your turn.  Good luck.  You'll need it.
Jul 14, 2008 11:15 pm

Listen...rankstocks is an idiot. He would argue medicine with a doctor. The truth is that he is losing clients to annuities and he's not smart enough to realize that they only way to make money in sales it to find out what people want to buy and sell it to them. I sell lots of annuities, but if I find out that people would rather have life settlements, then I will be in the life settlement business. I'm a smart SOB, but I have no clue about how to fight the masses. 

Jul 15, 2008 10:06 am
deekay:

OK - I'm want to open up the discussion a bit more about variable annuities and fixed index annuities.

 
You say you don't think your clients will need the guarantees.  You say they're not worth the extra you pay for said guarantees.  You say you're upset that insurance companies and reps make money off the sale of these products. 
 
I agree:  clients don't need the guarantees.  But they want them.  I say the extra you pay is only worth it if the living benefits make a client a better investor (i.e. not being tempted to buy high and sell low).  I say that, given the complex nature of what we do, I have no guilt getting paid large commissions for the sale of complex insurance products. I'm afraid you'd be shocked at the number of salesmen who can't answer extremely basic questions about FIAs. I've had some interesting discussions with a few local guys who sell them, and I was appalled at how little they knew about the product. You're correct, they are certainly complex insurance products.  If a client ever asked me how much, I would hold my head high and tell them.  Otherwise, it is none of their concern.  Although, if I were in a pissing contest with a fee-based advisor or a trader, I would list out the potential future commissions I would be missing out on by not doing a fee-based or trading account.
 
I have never sold an FIA.  I have no problems with them.  For many people, a guaranteed fixed rate of return, coupled with the opportunity to have a better growth rate than a CD is attractive.  Moreover, it is a prudent investment strategy.  
Observe:
 
$100k investment - I will average a client 25% R/O/R over four years.
 
Year one:  Up 100%, the account balance is $200k
Year two:  Down 50%, the account balance is $100k
Year three:  Up 100%, the account balance is $200k
Year four:  Down 50%, the account balance is $100k
 
Volatility is a huge player in how well an investor does.  FIAs look a hell of a lot better now, don't you think?  Granted, withdrawals are taxed at income rather than LTCG rates, but what about a qualified plan?  Who cares how withdrawals are taxed then?  Even in a taxable account, is it safe to say tax-deferral combined with the ability to NEVER LOSE MONEY could outperform net of taxes at withdrawal?  Maybe, maybe not.  But unlike you, I'm not about to throw blanket statements in order to ignorantly bash one strategy and praise another.  I hold myself accountable.  I need to prove strategies to my clients. 
 
I have stated before that my main focus is not VAs and FIAs.  I know, however, when an argument is valid and when one is full of half-truths and opinions.  And I'll fight for the right of other producers to practice they way they want, given it is in the best interest of their clients. My issue with sale of FIAs and "bonus" fixed annuities is not so much the products themselves but rather the common practice of churning. The fictitious bonus was created by insurance companies to provide the illusion that the client is overcoming the surrender fees when taking a salesman's advice to 1035 into a "better" annuity. I see this going on constantly, and it's just wrong.
 
Your turn.  Good luck.  You'll need it.
Jul 15, 2008 10:15 am

Borker BOY, how is it that you SEE this going on constantly? How do you do that and still find the time to work? Are you lying to us?

Jul 15, 2008 12:38 pm

I have an annuity churning factory in my town, and their clients come in constantly and ask me to help them get out of their "investment." I SEE this going on by looking at their statements and SEEING that their original investment has been 1035'd 7-8 times over the course of 10 years.

 
Obvioulsy, I don't get paid for telling folks they've been taken advantage of and there's nothing I can do to help, but I would consider it to be a part of my job, i.e., WORK.
 
 
Jul 15, 2008 1:03 pm
Borker Boy:

I have an annuity churning factory in my town, and their clients come in constantly and ask me to help them get out of their "investment." I SEE this going on by looking at their statements and SEEING that their original investment has been 1035'd 7-8 times over the course of 10 years.

 
Obvioulsy, I don't get paid for telling folks they've been taken advantage of and there's nothing I can do to help, but I would consider it to be a part of my job, i.e., WORK.
 
 



You're a damned liar.

Jul 15, 2008 1:13 pm

Holly Hobby,

 
We have a team in my town that just moved from AGE to SB.  That was their M.O.  They have to "renew" their variable annuity contracts that "mature" every four years or so.  That's practically all they sell.  The AGE BOM basically forced them out.  I know because I know the BOM.  He was so concerned about what they do with their annuities, that they were given an ultimatum.  So they left.  They are now with their 3rd B/D in less than 7 years.  I give them less than 1 year with their SB.
 
It happens.
Jul 15, 2008 1:30 pm
B24:

Holly Hobby,

 
We have a team in my town that just moved from AGE to SB.  That was their M.O.  They have to "renew" their variable annuity contracts that "mature" every four years or so.  That's practically all they sell.  The AGE BOM basically forced them out.  I know because I know the BOM.  He was so concerned about what they do with their annuities, that they were given an ultimatum.  So they left.  They are now with their 3rd B/D in less than 7 years.  I give them less than 1 year with their SB.
 
It happens.



...and, naturally, all of their clients have, coincidentally, made their way to you to show you what happened to them. Why don't you PM their names to me, so I can look these scoundrels up?

Jul 15, 2008 2:35 pm

I don't have any reason to lie to you. I don't know you, you don't know me, and I'd assume that 99.9% of potential investors don't even know this forum exists--so I'm in no position to sway a prospective annuity buyer's opinion. I'm just telling you what I've seen with my own eyes and have been shown by CPAs who do the taxes for the vicitims of these guys.

 
If I trusted you, which I don't, I'd be glad to forward several statements to you (with names removed, of course) that prove exactly what I'm talking about.
 
I'm actually glad that you think I'm lying. Maybe that means that the practice of churning annuities isn't as pervasive as I think it is.
 
With regard to the AGE/SB team, I've not witnessed this going on in wirehouses. I've only seen it in the independent channels where there's no supervision by a BOM.
Jul 15, 2008 2:57 pm
Borker Boy:

I don't have any reason to lie to you. I don't know you, you don't know me, and I'd assume that 99.9% of potential investors don't even know this forum exists--so I'm in no position to sway a prospective annuity buyer's opinion. I'm just telling you what I've seen with my own eyes and have been shown by CPAs who do the taxes for the vicitims of these guys.

 
If I trusted you, which I don't, I'd be glad to forward several statements to you (with names removed, of course) that prove exactly what I'm talking about.
 
I'm actually glad that you think I'm lying. Maybe that means that the practice of churning annuities isn't as pervasive as I think it is.
 
With regard to the AGE/SB team, I've not witnessed this going on in wirehouses. I've only seen it in the independent channels where there's no supervision by a BOM.



Caught in another lie. AGE is not in the independent channel.

No supervision? We ARE BOM's. I know that you think that we won't figure out how naive you are, but you're wrong. I KNOW that you are relatively new in the business. You're losing clients because you are using C-Shares and Asset based fee accounts. It's easy to steal from guys like you with annuities. "Mr. Prospect, the first thing we're gonna do is turn off that EXTRA fee that they're charging you...."

Jul 15, 2008 3:07 pm
Hobby Bull:
B24:

Holly Hobby,

 
We have a team in my town that just moved from AGE to SB.  That was their M.O.  They have to "renew" their variable annuity contracts that "mature" every four years or so.  That's practically all they sell.  The AGE BOM basically forced them out.  I know because I know the BOM.  He was so concerned about what they do with their annuities, that they were given an ultimatum.  So they left.  They are now with their 3rd B/D in less than 7 years.  I give them less than 1 year with their SB.
 
It happens.



...and, naturally, all of their clients have, coincidentally, made their way to you to show you what happened to them. Why don't you PM their names to me, so I can look these scoundrels up?

 
Boy, that would be helpful. 
Jul 15, 2008 3:14 pm
Hobby Bull:
Borker Boy:

I don't have any reason to lie to you. I don't know you, you don't know me, and I'd assume that 99.9% of potential investors don't even know this forum exists--so I'm in no position to sway a prospective annuity buyer's opinion. I'm just telling you what I've seen with my own eyes and have been shown by CPAs who do the taxes for the vicitims of these guys.

 
If I trusted you, which I don't, I'd be glad to forward several statements to you (with names removed, of course) that prove exactly what I'm talking about.
 
I'm actually glad that you think I'm lying. Maybe that means that the practice of churning annuities isn't as pervasive as I think it is.
 
With regard to the AGE/SB team, I've not witnessed this going on in wirehouses. I've only seen it in the independent channels where there's no supervision by a BOM.



Caught in another lie. AGE is not in the independent channel.

No supervision? We ARE BOM's. I know that you think that we won't figure out how naive you are, but you're wrong. I KNOW that you are relatively new in the business. You're losing clients because you are using C-Shares and Asset based fee accounts. It's easy to steal from guys like you with annuities. "Mr. Prospect, the first thing we're gonna do is turn off that EXTRA fee that they're charging you...."

 
Re-read my statement. I didn't say AGE was in the independent channel.  I said that I've not witnessed annuity churning going on in wirehouses, i.e., at firms like AGE or SB. I've only seen it in the independent channels.
 
 
Jul 15, 2008 3:15 pm
Hobby Bull:
Borker Boy:

I don't have any reason to lie to you. I don't know you, you don't know me, and I'd assume that 99.9% of potential investors don't even know this forum exists--so I'm in no position to sway a prospective annuity buyer's opinion. I'm just telling you what I've seen with my own eyes and have been shown by CPAs who do the taxes for the vicitims of these guys.

 
If I trusted you, which I don't, I'd be glad to forward several statements to you (with names removed, of course) that prove exactly what I'm talking about.
 
I'm actually glad that you think I'm lying. Maybe that means that the practice of churning annuities isn't as pervasive as I think it is.
 
With regard to the AGE/SB team, I've not witnessed this going on in wirehouses. I've only seen it in the independent channels where there's no supervision by a BOM.



Caught in another lie. AGE is not in the independent channel.

No supervision? We ARE BOM's. And that's what's so wrong, and terrifying, about independent annuity salesmen. Thanks for making my point.  I know that you think that we won't figure out how naive you are, but you're wrong. I KNOW that you are relatively new in the business. You're losing clients because you are using C-Shares and Asset based fee accounts. It's easy to steal from guys like you with annuities. "Mr. Prospect, the first thing we're gonna do is turn off that EXTRA fee that they're charging you...."

Jul 15, 2008 3:31 pm

Just because HB doesn't have a BOM in his office doesn't mean there isn't any supervision.  He has to have an OSJ to approve all trades. 

Jul 15, 2008 3:32 pm

Yeah, I'm indy and do annuities and have a compliance department which reviews them very carefully.

Jul 15, 2008 6:14 pm

Unfortunately churning of annuities happens everywhere, not just with the independant guys.  There are a ton of advisors who call their clients every 7 years when their B share annuity is out of surrender offering them the next best thing.  Or just flat out telling them that they are maturing and they need to do something else.  We had an FA in our region that did that frequently.  Probably $5-10K gross/month just on his annuity churning.  Pitiful.  Now, to his credit when he 1035'd them he would usually move them to an A share annuity.  So, no more annuity flipping. 

Jul 15, 2008 6:56 pm
Spaceman Spiff:

Unfortunately churning of annuities happens everywhere, not just with the independant guys.  There are a ton of advisors who call their clients every 7 years when their B share annuity is out of surrender offering them the next best thing.  Or just flat out telling them that they are maturing and they need to do something else.  We had an FA in our region that did that frequently.  Probably $5-10K gross/month just on his annuity churning.  Pitiful.  Now, to his credit when he 1035'd them he would usually move them to an A share annuity.  So, no more annuity flipping. 



Really, Queef? An annuity with NO surrender charge is harder to flip? There are a ton of advisors who have no clue as to what they're talking about. You are one of them.

Jul 15, 2008 7:51 pm

There are a ton of advisors who call their clients every 7 years when their B share annuity is out of surrender offering them the next best thing



 
I don't see a problem with moving a client from an older annuity that is out of surrender to a new annuity with better features, better guarantees, better fund selection if it is a variable annuity, better interest rate if it is a fixed annuity  As long as the client is aware of the new surrender charges and isn't in need of his/her principal in the near future, what's the problem?   Often you have no choice BUT to move to another annuity if you want to better their situation because of the deferred gains.
 
If you have a client in a stock or a mutual fund in an asset class that has played out, don't you recommend making a change in their portfolio to take advantage of the gains and try to get repositioned for more growth?
Jul 15, 2008 8:03 pm

What a joke

Jul 16, 2008 8:32 am

 in general, I find that many brokers (esp at banks), while they can legally and technically say that they explained it all and gave a prospectus (big deal), actually "spin" it to get the sale and the commision. Then later the client either 1. believes what he thinks he heard and is blissfully ignorant or 2. realizes (too late! Gotcha w/the CDSC!) that in fact the principal is dependent on the stock market to some degree and is now dropping. No 6% "return".

 
Many, many angry people when I explain it with no spin. If you do not need/take the income, there is no 6% return, no princ guar, etc. In fact, your princ drops FASTER due the cost (that GMWB is being charged even though you do not need income! Then there is this cost and that cost....)
 
My annuity is all in for less than half. I take 50bps only, with Vanguard subaccounts (25 bps), no CDSC, a 55 bp M & E, and a GMWB that is FREE unless activated.
 
But now with falling principals back to about the amount invested, we can just cash out instead of 1035.