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 24, 2008 11:40 am
Hobby Bull:

[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.

  OK, good for you.  You got me on the semantics.  I know that's a big word for your under developed brain so I'll post this to help you understand it:   http://en.wikipedia.org/wiki/Semantics
Jul 25, 2008 8:56 am
Spaceman Spiff:

[quote=Hobby Bull] [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.

  OK, good for you.  You got me on the semantics.  I know that's a big word for your under developed brain so I'll post this to help you understand it:   http://en.wikipedia.org/wiki/Semantics[/quote]

What you dismiss as "semantics" could trigger a taxable event.
Jul 25, 2008 10:31 am

Oh, you too?  I had this big long paragraph ready to post as a response to your comment.  However, it's just not worth it.  It's Friday.  I don't really want to work that hard.  So, I'll just say this:  I know the difference between a transfer and a 1035 exchange.   And if we're playing the semantics game, the word you should have used is will, not could. 

BTW, if Rankstocks is out of the country on a Div Trip, that means he's not desparate for anything.  It also means he can not only compete with the snake oil salesmen, but he can show their clients the things said salesmen DIDN'T tell them.     
Jul 25, 2008 11:43 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.    I don't sell them because my B/D won't allow it.  I stated that already.    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.   I'm sure it would work as well.  Maybe better than the EIA.  Maybe not.  I cannot predict the future, and neither can you.   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.   Of course it's gonna underperform the market.  It's not designed to replicated the market.  EIAs are for fixed annuity buyers who want the potential for a better ROR than a traditional fixed annuity will provide.   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.   So, some EIAs have high participation rates, no caps, short surrenders, and what not.  What's your point?  If money is held in a qualified plan, taxation doesn't change.  Of course you don't get dividends - you're not investing in the market!  You've proven yet again you have no fucking clue what you're talking about.   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.[/quote]   Prove that all EIAs are bad and are inappropriate.  All you've done is stated cases where they were sold inappropriately.  Until then, get off your high horse.   You're doing your clients a disservice by spewing mistruths and partial information.
Jul 25, 2008 1:58 pm

[quote=]

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.

[/quote]   This is correct. EIAs are not designed to outperform the market.   They're designed to fund the retirements of the crooks who are selling them.
Jul 25, 2008 2:17 pm

[quote=Borker Boy][quote=]

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.

[/quote]   This is correct. EIAs are not designed to outperform the market.   They're designed to fund the retirements of the crooks who are selling them.[/quote]     Yes, some EIA's are not sold with full disclosure as has been discussed on here to no end.   That being said, they do have their place.  Case in point, if you have a client that has saved $2 million for retirement and wants little risk and reduced volatility, what are you going to do?  He doesn't need stock market returns.  He doesn't want to lose purchasing power on his money either.  He's already saved enough money to live the way he wants in retirement, now he doesn't want to lose it.   So what are your options?  We all know what the stock market has done, and he wouldn't have been happy.  Bonds fix the income and could also lose value.  CD's real return is negative.  So what do you do for this guy?   An EIA may fit the bill for a portion of his money, wouldn't you say?   FYI, I've never sold one but I can see its place and I wouldn't make blanket statements saying that it's bad for everyone.  You can get EIA's with 5 year surrender periods, so that's not as much an issue.
Jul 25, 2008 2:58 pm

Gee, I don’t know. What did advisors do for this type of client before these magic elixirs were developed?

  Were conservative investors doomed to either losing purchasing power or sustaining huge losses in the market before EIAs finally came along and saved the day?
Jul 25, 2008 3:29 pm

[quote=Borker Boy]Gee, I don’t know. What did advisors do for this type of client before these magic elixirs were developed?

  Were conservative investors doomed to either losing purchasing power or sustaining huge losses in the market before EIAs finally came along and saved the day?[/quote]   Gee, I don't know.  Did advisors have to plan for 30 year retirements and the fact their clients didn't have company pensions? 
Jul 25, 2008 6:05 pm

I’ve never seen an EIA that was designed to distribute income over a period of time, but I’m certainly not saying I’ve seen them all.

  The contracts I've looked at would allow the usual 10% annual withdrawal, but the customer would lose all interest that had been earned on that portion of the money.   Are there EIAs that will allow a person to invest their 401(k), etc., and then begin taking distributions every year? 
Jul 26, 2008 2:52 am

Troll stated,

  "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. "

Troll, fill me in on how a munizero has a 10-year surrender period.  I didn't realize munizeros had surrender charges?  Oh, wait a second, they don't.  You can sell them in the secondary market any business day.  This exemplify's the reason why it takes an I.Q. of a monkey to sell annuities.  Most that pitch snake oil don't even know any of the other investments available to someone with more than a week long class to get their insurance license.

Borker Boy, you can hit annuity drones with fact after fact and it won't matter.  These EIA need significantly more regulation (and I hate government oversight),  because too many people are getting ripped off.
Sep 19, 2008 12:12 pm

What’s the point of 1035ing contracts or constantly transferring them when we lose ALL the income/withdraw benefits?

  Example: Year 1: Account Value is 100k/Income Base is 100k Year 10: Account Value is 200k/Income Base is 300k (because of market locks and compounding features inside a VA)   Brokers kept transferring these clients after years and years of accumulating their income bases because "new & better things" come out. Why not just go into a conservative fund or even a CD for that matter and then buy a SPIA when the client is ready to retire? You would of saved 3-5% a year for the past 10 years. Yes I said 5%, (as account values fluctuate and go lower your expenses go higher). Fee of riders are based off income bases, not account values.
Sep 19, 2008 8:14 pm

Chris, are you the same person who started a thread and wanted to have an intelligent conversation about VAs?  Geez, this post of yours is really bad. 

  Let's look at your example:   Year 1: Account Value is 100k/Income Base is 100k Year 10: Account Value is 200k/Income Base is 300k (because of market locks and compounding features inside a VA)    You are trying to use this as an example of how someone would be better off doing something conservative???  1) Let's assume that the CD/conservative investment increased by 5% a year.  The CD after 10 years would be worth $162,000.  The annuity is worth $200,000.  Last that I checked, $200,000 is worth more than $162,000.  If one then purchases a SPIA, the payout would then be 25% higher or it can be "cash and carry".   2)I don't know of any GMIB value that would go up by 200% in 10 years while the contract value goes up 100%.  If one works like this, it would have incredibly low annuitization rates.  The $300,000 would annuitize for a lower amount than the $200,000.   3) With most GMIBs, if the account value is doubling in 10 years, the GMIB value is trailing the account value.  This means that the costs of the contract are decreasing and not increasing.   4) Brokers keep transferring because it usually makes sense to do it.  In most cases, when a contract gets transferred the contract value is above the GMIB value.  Even if the contract value isn't above the GMIB value, it still makes sense to transfer when the contract value can be annuitized for a greater amount than the guarantees of the GMIB.  Again we should never think of the GMIB having a value.  It has a monthly income figure.   So, in your example, the annuity kicks butt over the alternative, but your example makes no sense.  If a broker is transferring when it doesn't make sense, that is an example of a bad broker, but says nothing about the merits of the investment.    
Oct 26, 2008 4:44 pm

[quote=anonymous]Chris, are you the same person who started a thread and wanted to have an intelligent conversation about VAs?  Geez, this post of yours is really bad. 

  Let's look at your example:   Year 1: Account Value is 100k/Income Base is 100k Year 10: Account Value is 200k/Income Base is 300k (because of market locks and compounding features inside a VA)    You are trying to use this as an example of how someone would be better off doing something conservative???  1) Let's assume that the CD/conservative investment increased by 5% a year.  The CD after 10 years would be worth $162,000.  The annuity is worth $200,000.  Last that I checked, $200,000 is worth more than $162,000.  If one then purchases a SPIA, the payout would then be 25% higher or it can be "cash and carry".   Of course, but this is of course when a client is not taking withdraws allowing both the account value and the income bases to double. If the client starts taking out withdraws, then the account value would deplete at the withdraw rate while the fees continue to increase. But yes, you are correct, if the performance of the VAs are going to be there, then it would definitely beat the CD.   2)I don't know of any GMIB value that would go up by 200% in 10 years while the contract value goes up 100%.  If one works like this, it would have incredibly low annuitization rates.  The $300,000 would annuitize for a lower amount than the $200,000.   Tons of them actually (all stock capital insurance companies). AIG Sunamerica, AXA, ING, Jackson, Met, Hartford, Lincoln (all of them as long as they have some kind of ratchet/step up because the market can fluctuate in returns)   3) With most GMIBs, if the account value is doubling in 10 years, the GMIB value is trailing the account value.  This means that the costs of the contract are decreasing and not increasing.   Correct, I'm not sure which annuities you use, but most of the mainstream stock capital insurance companies have ratchets, therefore the income base should never be lower than the account value. It should always be higher or leveled (until a certain age).   4) Brokers keep transferring because it usually makes sense to do it.  In most cases, when a contract gets transferred the contract value is above the GMIB value.  Even if the contract value isn't above the GMIB value, it still makes sense to transfer when the contract value can be annuitized for a greater amount than the guarantees of the GMIB.  Again we should never think of the GMIB having a value.  It has a monthly income figure.   I completely agree, 100%.   So, in your example, the annuity kicks butt over the alternative, but your example makes no sense.  If a broker is transferring when it doesn't make sense, that is an example of a bad broker, but says nothing about the merits of the investment.   Correct, I apologize if I did not clarify myself. I shouldn't of said VAs are a bad investment vehicle, they are just complicated products used by BAD BROKERS who don't understand them. Thank you to everyone who has been patient with my points and have provided responses, greatly appreciated!    [/quote]