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Jul 16, 2008 8:40 am

[quote=newnew] 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.[/quote]

I'm sorry that the only way for you to add value is to use low priced crap. If you ever really do get a prospect with an annuity, you probably won't close the deal by pointing out that you think that they got screwed. People don't like to feel stupid and will usually avoid the guy that "told" them that they screwed up.

Why do you cash out of annuities? Need another commission?
Jul 16, 2008 5:29 pm
Hobby Bull:

[quote=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.  [/quote]

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.

Nice, and I was just beginning to think you had a brain.  You completely missed the point of the conversation.    Here's how I envision it going in YOUR office:   Holly Hobby:  Mr. Schmuck, this his Holly with Gonna Screw You Investments.  Yeah, that guy.  It has been a long time.  Seven years in fact.  You know that annuity that I bought for you 7 years ago, well, it's come due and it's time to do something different with that money.  Now, I know you like it, and it's just now where you can get to your money without a surrender penalty, but the investment world has changed drastically since we last spoke.  Yes, seven years does make a huge difference in the annuity world.  So, I have this new annuity product that was just launched.   It's light years ahead of what you currently have and I think I'm just gonna switch it over there.  That OK with you.  No, you don't need to do anything other than sign the papers.  I'll take care of the rest.  Yes, just like the last one it's only good for 7 years.  After that we'll have to do something different again.  No, there's no cost to you.  The annuity company pays me to help you.  No, the expenses are similar too.  So, you really won't see much of a change, just a different name on your statement.  But I promise it'll be better.   Yes, the market is down right now.  I have this other product you should look at.  You can get market like returns with absolutely no risk of a down year.  We should talk about that too.  That emergency fund you have would be perfect for it.  We'll talk about it when you come by to sign your life away.      Am I close?    The actual point with an A share annuity is that you lose the ability to give them a timeframe that the annuity is good for.  Thus, no flipping phone call.  You probably could 1035 them as you like, but I'd guess your compliance officer, assuming you have one, wouldn't take that very well.  I know mine wouldn't.    
Jul 16, 2008 5:45 pm

[quote=Spaceman Spiff]

  Here's how I envision it going in YOUR office:   Holly Hobby:  Mr. Schmuck, this his Holly with Gonna Screw You Investments.  Yeah, that guy.  It has been a long time.  Seven years in fact.  You know that annuity that I bought for you 7 years ago, well, it's come due and it's time to do something different with that money.  Now, I know you like it, and it's just now where you can get to your money without a surrender penalty, but the investment world has changed drastically since we last spoke.  Yes, seven years does make a huge difference in the annuity world.  So, I have this new annuity product that was just launched.   It's light years ahead of what you currently have and I think I'm just gonna switch it over there.  That OK with you.  No, you don't need to do anything other than sign the papers.  I'll take care of the rest.  Yes, just like the last one it's only good for 7 years.  After that we'll have to do something different again.  No, there's no cost to you.  The annuity company pays me to help you.  No, the expenses are similar too.  So, you really won't see much of a change, just a different name on your statement.  But I promise it'll be better.   Yes, the market is down right now.  I have this other product you should look at.  You can get market like returns with absolutely no risk of a down year.  We should talk about that too.  That emergency fund you have would be perfect for it.  We'll talk about it when you come by to sign your life away.       [/quote]   Spiff,   Annuities 7 years ago didn't have living benefits at all.  Not even close, but none at all, like today's.  Case in point, I have a newer client that had an annuity with no living benefits, nothing at all.  His surrender was up in March.  I 1035'd the annuity into one with an MGWB rider.  He is 57 and looking to retire next year.  When I first transferred in his annuity, it was worth, $350k.  By the time I was able to 1035 it, it was worth $318k.  Had he been in one with living benefits from the beginning, his $350k would be locked in, plus he'll have income for life.   So how is this scenario different from any other?  It was the right thing to do for this client.  A lot of things change in 7 years.   Do you still drive a car with manual windows?  Cassette deck?   Do you still have a typewriter?   Do you still have a TV with antennae?   Do you still use AOL 1.0?   Point is things are updated.  7 years is a long time to hold anything without it changing.   By the way, I would defend HB, that he doesn't say the annuities "mature" or "come due".  I'm sure some guys do that, but I would feel safe to say that he doesn't conduct business like that.
Jul 16, 2008 6:55 pm
So how is this scenario different from any other?  It was the right thing to do for this client.  A lot of things change in 7 years.   Do you still drive a car with manual windows?  Cassette deck?   Do you still have a typewriter?   Do you still have a TV with antennae?   Do you still use AOL 1.0?   Point is things are updated.  7 years is a long time to hold anything without it changing.   By the way, I would defend HB, that he doesn't say the annuities "mature" or "come due".  I'm sure some guys do that, but I would feel safe to say that he doesn't conduct business like that.   I don't know (or particularly care) what HB does. Here is how I do my biz.  Hold a semi annual review of everything the client has.  IF it is an annuity, we review the surrender charges, values, gain in the annuity, sub accounts if it is a VA and reposition if necessary, benefits, beneficiaries to make sure nothing has changed etc.  We also go over what current rates are in similar fixed type investments so the client can get a grip on what he is getting and make comparisons.   Often you have to remind the client just why they are invested in what they are invested in.   I don't say the annuity has "come due" or "matured".  We discuss that  the annuity is now out of surrender charge period and discuss what the current rate is, if a fixed annuity (usually dropped to the bare minimum) and compare to new annuities.  For VAs we look at the performance of the sub accounts and current benefits and compare to other VAs with better or different features like the new living benefits and VAs that have possibly a better mix of sub accounts.    For all annuities at the end of the surrender period we also discuss liquidity needs and tax treatment of the gains if the client indicates that they want to draw income or cash out the contract.   In most cases the new/replacement annuity will have a better rate or benefits, so we 1035 exchange.  How is this a bad thing?   Things change. Products change. The market changes.  If we just let a client sit in a subpar investment because the bought it once long ago we are not doing our job.
Jul 16, 2008 7:31 pm
Spaceman Spiff:

[quote=Hobby Bull] [quote=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.  [/quote]

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.

Nice, and I was just beginning to think you had a brain.  You completely missed the point of the conversation.    Here's how I envision it going in YOUR office:   Holly Hobby:  Mr. Schmuck, this his Holly with Gonna Screw You Investments.  Yeah, that guy.  It has been a long time.  Seven years in fact.  You know that annuity that I bought for you 7 years ago, well, it's come due and it's time to do something different with that money.  Now, I know you like it, and it's just now where you can get to your money without a surrender penalty, but the investment world has changed drastically since we last spoke.  Yes, seven years does make a huge difference in the annuity world.  So, I have this new annuity product that was just launched.   It's light years ahead of what you currently have and I think I'm just gonna switch it over there.  That OK with you.  No, you don't need to do anything other than sign the papers.  I'll take care of the rest.  Yes, just like the last one it's only good for 7 years.  After that we'll have to do something different again.  No, there's no cost to you.  The annuity company pays me to help you.  No, the expenses are similar too.  So, you really won't see much of a change, just a different name on your statement.  But I promise it'll be better.   Yes, the market is down right now.  I have this other product you should look at.  You can get market like returns with absolutely no risk of a down year.  We should talk about that too.  That emergency fund you have would be perfect for it.  We'll talk about it when you come by to sign your life away.      Am I close?    The actual point with an A share annuity is that you lose the ability to give them a timeframe that the annuity is good for.  Thus, no flipping phone call.  You probably could 1035 them as you like, but I'd guess your compliance officer, assuming you have one, wouldn't take that very well.  I know mine wouldn't.     [/quote]

That's exactly how it works.
Jul 16, 2008 10:58 pm

I don’t cash out for a commission Bobby cuz I never take commissions. I am not a broker and have no B/D. Also, I do not tell 'em they were stupid, either-only the facts; including the taxation to the next generation.

  As to costs- I agree not as big a deal IF IT"S ABOUT INCOME. But, yeah, costs ARE a huge deal if it's about GROWTH and annuities are NOT the way to go in that case generally IMHO.
Jul 16, 2008 11:55 pm

[quote=newnew]I don’t cash out for a commission Bobby cuz I never take commissions. I am not a broker and have no B/D. Also, I do not tell 'em they were stupid, either-only the facts; including the taxation to the next generation.

  As to costs- I agree not as big a deal IF IT"S ABOUT INCOME. But, yeah, costs ARE a huge deal if it's about GROWTH and annuities are NOT the way to go in that case generally IMHO.[/quote]

Why are you hanging out on a forum for   REGISTERED REPS,  criticizing the   REGISTERED REPS, if you're not a  REGISTERED REP?  No wonder you hate annuities! YOU can't get PAID for them! Why don't you leave us alone and go hang out at www.illnevermakemorethansixtythousanddollarsperyear.com/forum?
Jul 17, 2008 10:14 am

[quote=newnew]I don’t cash out for a commission Bobby cuz I never take commissions. I am not a broker and have no B/D. Also, I do not tell 'em they were stupid, either-only the facts; including the taxation to the next generation.

  As to costs- I agree not as big a deal IF IT"S ABOUT INCOME. But, yeah, costs ARE a huge deal if it's about GROWTH and annuities are NOT the way to go in that case generally IMHO.[/quote]

WTF?!?.  Why don't you shut up then if you aren't licensed to be a financial advisor or financial  representative?   What DO you DO for a living newnew. if I may ask?  Do you work for H&R Block and know how run a computer program?  Are you an auto mechanic?    I assumed you were a washed out EDJ broker by your name.

Seriously why are you here wasting our time?
Jul 17, 2008 10:27 am
NEW NEW Said: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.

How is it that you are offering a VA if you are not licensed? You can't offer ANY VA without the proper registration or SUPERVISION.  Who is watching you?.  How is it  (unless you have a CFP or CPA) that you are giving people financial advice in the first place if you are not licensed.

So, what I gather is that you are talking to people about products about which  you have no knowledge and for which you are not licensed and  you are getting them to quote:  just cash out instead of 1035.   What are you suggesting people do with the money that they just cashed out?  Hmmmmmm.     And you call us szeazy.

Jul 17, 2008 2:22 pm

exactly icecold. I make my living with an RIA firm, and we custody with Schwab. Registered Rep magazine has RIAs on the cover of the mag this month. Do the rest of you find this odd? Did you not know that there are many RIAs in the world? And on this forum? That read this magazine? I was very successful at Ed Jones, but went indy. Wow- get a grip folks. 

   
Jul 17, 2008 2:27 pm

I have no problems with someone doing a 1035 exchange on an annuity, if there is some benefit to doing so.  Something like a lower M&E, some living bene that wasn't available 7 years ago, a multi manager product vs a single manager product.  The problem comes in when it is assumed that simply because someone is out of the surrender penatly phase, that they need to switch to something new.  To make a call to say that an annuity (unless it is a fixed annuity) has come due is criminal.  Variable annuities don't come due.  They NEVER have to be 1035'd.  There are legitimate reasons why you would, but one of them is not because there is no longer a surrender charge. 

The way Babs and snags said they do it is the same way I work with my annuity clients.  There has to be a benefit to making the switch.    
Jul 17, 2008 2:46 pm

[quote=Spaceman Spiff]

I have no problems with someone doing a 1035 exchange on an annuity, if there is some benefit to doing so.  Something like a lower M&E, some living bene that wasn't available 7 years ago, a multi manager product vs a single manager product.  The problem comes in when it is assumed that simply because someone is out of the surrender penatly phase, that they need to switch to something new.  To make a call to say that an annuity (unless it is a fixed annuity) has come due is criminal.  Variable annuities don't come due.  They NEVER have to be 1035'd.  There are legitimate reasons why you would, but one of them is not because there is no longer a surrender charge. 

The way Babs and snags said they do it is the same way I work with my annuity clients.  There has to be a benefit to making the switch.     [/quote]   Spiff, I agree with you.  But, no regular poster on this forum calls their clients and tells them their VA is due or has matured.  That stuff is reserved for those guys seen on Dateline.    The thing with the legitimate reasons to 1035 after 7 years is that pretty much every 7 year period has seen some sort of advancement in annuities.  So in that sense, there is most likely a benefit in any 1035 after 7 years.                
Jul 17, 2008 2:48 pm

So, are we not counting Mr. Bull as a regular poster?  Cause I certainly would guess that he’s one of those Dateline kind of guys. 

Jul 17, 2008 3:15 pm
Spaceman Spiff:

So, are we not counting Mr. Bull as a regular poster?  Cause I certainly would guess that he’s one of those Dateline kind of guys. 

  No way.  There's nothing wrong with specializing in annuities.  In fact there are a lot of people that make a ton of money doing that.  It's like Bill Gross specializing in bonds, or someone specializing in covering estate taxes with a SPIA and permanent insurance.    Guys who specialize in annuities present their case and the client will say yes or no.  There has been nothing anyone has said here that would signify they call their clients and say their VA has matured or come due.   The sad fact of the matter is that there are times when we know what is best for the client and they won't do it or they delay and delay.   There are other times when the only way to get somebody to do something is to give them what they want.  If you don't, they'll find someone that will.  A lot of people right now want a guarantee.  And I'll further that by saying a lot of people need to transfer their retirement income risk to someone else.   Besides, you have one guy that is adamently against annuities...doesn't even present them.  You have another guy who believes in them, and presents what he believes in, if it doesn't work, good luck to you.  Who's to say which of these guys is right vs. wrong?  There are a million ways to run your business.  And speaking of running our business, we need referrals.  If anyone on here was that legitimately corrupt, there is no way they would get referrals.  In fact, something would catch up to them and FINRA would be all over it.   It's a simple call to make.  "Hey Mr. Client, we're out of surrender and a lot has changed in the market place.  Come on in and we'll take a look at your options and see what makes sense".    I don't know who you're running into that says the VA has matured or come due, but I would put my money on it that HB/BH isn't one of them.   One last point:  People often times don't know what's good for them.  They think they do because they read it in Money Magazine, or heard it on Cramer or Suze Orman, or heard it from a friend, but some people really have no clue.  Don't know how this ties into anything, but it was on my mind.
Jul 17, 2008 3:31 pm

[quote=Spaceman Spiff]

I have no problems with someone doing a 1035 exchange on an annuity, if there is some benefit to doing so.  Something like a lower M&E, some living bene that wasn’t available 7 years ago, a multi manager product vs a single manager product.  The problem comes in when it is assumed that simply because someone is out of the surrender penatly phase, that they need to switch to something new.  To make a call to say that an annuity (unless it is a fixed annuity) has come due is criminal.  Variable annuities don’t come due.  They NEVER have to be 1035’d.  There are legitimate reasons why you would, but one of them is not because there is no longer a surrender charge. 

The way Babs and snags said they do it is the same way I work with my annuity clients.  There has to be a benefit to making the switch.     [/quote]

How do you feel about 1035'ing qualified annuities?
Jul 17, 2008 4:56 pm

I don’t have a problem with 1035 exchanges, qualified or otherwise.  But there has to be a benefit to do it.  But, then again, I’m a know nothing queef and you’re the most brilliant annuity salesman in the world. 

Jul 17, 2008 7:29 pm

[quote=Spaceman Spiff]I don’t have a problem with 1035 exchanges, qualified or otherwise.  But there has to be a benefit to do it.  But, then again, I’m a know nothing queef and you’re the most brilliant annuity salesman in the world.  [/quote]

You’re proven, one more time, that you know nothing. You can’t 1035 qualified money.

Jul 17, 2008 7:52 pm

You know what he meant: liquidate and transfer. Same result: cash into a new annuity. Can’t you just post your own experience Bobby without the constant bitchin’? PLEASE GO BACK

Jul 24, 2008 1:09 am
Sorry everyone, I was out of the country on a Div Trip.  Hammered out over 50 calls each of the last 2 days though.   This topic makes me feel like I'm stuck in a Hamster wheel.  So I am going to change my angle a little.    Let me start that an annuity does have its place, occationally.  When you run across a 10-35 because of a garbage annuity, a client that has a need for a pension with potential for rising income (GMIB's), clients that aren't planning to use the money and are in relatively poor health (death benefit), clients that want to unwind tax consequences (period certain immediate annuitizations), nursing home patients that want to qualify for medicaid (immediate annuitizations), and a couple other legitimate reasons.  These concessions probably make deekay feel rosey inside.   deekay said, "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."  I don't really know why you would argue this point if you have never sold an EIA.  If the strategy was so prudent, why not recommend it?  Your point seemes counterintuitive.    As far as overall returns of EIA's I have three comments.  1.  First why not use this as a strategy....For a 100k purchase, buy a AAA-rated munizero with a 10 year maturity for around 60k at today's yields and buy the SPX with the other 40k.  Not only is the tax efficiency around 95%, your principal will get returned after 10 years and the SPX will most likely have grown nicely for the client as well. 2.  Second, a study came out last year, I cut it out of the Investment News weekly publication, that showed a backtesting of EIA's would have outperformed the actual market in less than 5% of all 10 year periods. 3.  Third, with most EIA's have low participation rates, caps on returns, long surrender penalties, ordinary income rates on withdrawals, and not even factoring dividends in the index's return (an extra 2%), I just can't see how anyone could justify this garbage.   I will finish off on some extremely unethical practices going on out their when it comes to annuities, another reason I consider most annuity salesmen sellers of snakeoil in a smoke and mirrors industry: 1.  Last year came across an annuity with a perpetual 6% surrender penalty (that's right, it never goes away) yielding 3.8% for the client. 2.  Annuities purchased 1999 and before that have a dollar-for-dollar death benefit reduction with a high death benefit and a low current value because of poor diversification that get fully 10-35ed even though the client could do a partial withdrawal and retain the death benefit as a quazi life insurance policy. 3.  Clients sold a "guaranteed 6% rate of return on their annuity" only to have me explain that they must either die or annuitize the contract to get that money out of it. 4.  I'm actually boring myself here, so I will stop.  But if you would like another 10 examples, please let me know.   deekay, I'm glad you "hold yourself accountable", but most annuity slingsters don't.  This industry needs cleaned up, badly.  I'd run the taskforce myself if they asked me.
Jul 24, 2008 8:14 am

[quote=rankstocks]

Sorry everyone, I was out of the country on a Div Trip.  Hammered out over 50 calls each of the last 2 days though.   This topic makes me feel like I'm stuck in a Hamster wheel.  So I am going to change my angle a little.    Let me start that an annuity does have its place, occationally.  When you run across a 10-35 because of a garbage annuity, a client that has a need for a pension with potential for rising income (GMIB's), clients that aren't planning to use the money and are in relatively poor health (death benefit), clients that want to unwind tax consequences (period certain immediate annuitizations), nursing home patients that want to qualify for medicaid (immediate annuitizations), and a couple other legitimate reasons.  These concessions probably make deekay feel rosey inside.   deekay said, "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."  I don't really know why you would argue this point if you have never sold an EIA.  If the strategy was so prudent, why not recommend it?  Your point seemes counterintuitive.    As far as overall returns of EIA's I have three comments.  1.  First why not use this as a strategy....For a 100k purchase, buy a AAA-rated munizero with a 10 year maturity A 10 year surrender period? That's a long time.

for around 60k at today's yields and buy the SPX with the other 40k.  Not only is the tax efficiency around 95%, your principal will get returned after 10 years and the SPX will most likely have grown nicely for the client as well. 2.  Second, a study came out last year, I cut it out of the Investment News weekly publication, that showed a backtesting of EIA's would have outperformed the actual market in less than 5% of all 10 year periods.

EIA's are not designed to outperform the market. They are designed to be a good alternative to CD's and fixed annuities. Since you're naive, I will point out that MANY people are quite happy to make 5-7% with no risk to principal. These tend to be big tickets.

3.  Third, with most EIA's have low participation rates, caps on returns, long surrender penalties, ordinary income rates on withdrawals, and not even factoring dividends in the index's return (an extra 2%), I just can't see how anyone could justify this garbage.

Of course you can't see it. See above.
  I will finish off on some extremely unethical practices going on out their (did you look for more unethical behavior while you were out of the country?)when it comes to annuities, another reason I consider most annuity salesmen sellers of snakeoil in a smoke and mirrors industry: (I'm sorry that you can't compete with them.)
1.  Last year came across an annuity with a perpetual 6% surrender penalty (that's right, it never goes away) yielding 3.8% for the client. I doubt it.
2.  Annuities purchased 1999 and before that have a dollar-for-dollar death benefit reduction with a high death benefit and a low current value because of poor diversification that get fully 10-35ed even though the client could do a partial withdrawal and retain the death benefit as a quazi life insurance policy. DB's are a feature. They are not a reason to buy an annuity. Life insurance does a better job.
3.  Clients sold a "guaranteed 6% rate of return on their annuity" only to have me explain that they must either die or annuitize the contract to get that money out of it. I'm not surprised that someone as desperate as you would lie to people to try to get the business.
4.  I'm actually boring myself here, so I will stop.  But if you would like another 10 examples, please let me know. Bring them on.
  deekay, I'm glad you "hold yourself accountable", but most annuity slingsters don't.  This industry needs cleaned up, badly.  I'd run the taskforce myself if they asked me. It sounds like you're already running one.
[/quote]