Prospecting CPA's Using Your Clients

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Jan 20, 2010 1:34 pm

I have numerous clients that are getting ready to retire in 2010. 

 
For a lot of them, I've done tax-conscious investing in their taxable accounts, and have put a portion of retirement dollars in annuities that have performed phenomenally.
 
As my clients email or call or I talk to them, I'm starting to say this, "As an added service, I make myself available to meet with my clients and their CPA's together (after tax season) to ensure our retirement income strategy will be as tax-efficient as possible". 
 
I tell them I'm willing to meet at their CPA's office or anywhere else that is reasonable.  Hopefully this will introduce me to new CPA's and can show them exactly how my planning works through a mutual client at the same table that is extremely happy.
 
I already have some takers, so we'll see.  It has to be a better use of my time than some things.
Jan 20, 2010 1:41 pm

As a side note, I met with an estate attorney yesterday, and he asked me point blank, "what do you think of annuities".  I gave him my typical balanced response about them being appropriate in the right instance, not for everyone, not for all the assets, etc.  He was pleased with that answer, and said that his thinking about annuities has changed quite a bit over the past few years.  He said when he used to see or hear "annuities" from his clients, he would think of little old ladies having all their money being ripped away by an insurance schister (his words).  It was good to hear that his thinking has changed, and I think more professionals are coming to the same conclusion.

Jan 20, 2010 2:05 pm

I'm still too stupid to see how they have changed for the better.

 
I get more business by saying, " I don't like annuities, maybe occasionally they  are appropriate for some people, but generally I don't like them".
 
And that's true. When I'm wrong, I'll change, but I don't see the value in annuites. I won't buy them for myself or my friends. What I will do for myself is run a straight brokerage account using ETFs, everybody else pays a wrap fee.
 
The problem with one professional referring another is - it puts your own reputation at risk.
 
I have attorney and CPA friends who I wouldn't refer, because I'm not sure.
 
The best and  maybe only way it works is if there is properly disclose revenue sharing. In that case, you are business partners. Partnerships are tough.
 
Your CPA needs to give at least three referrals to choose from - if you can be one of them, and maybe part of word of mouth connection that points two you, now you have two triangulation points. The odds go way up.
 
Just having another professional know you, or mention your name, and not be negative, is a positive. If you belong to a golf club, or Rotary, and everyone has good things to say about you, you get referrals.
 
Trying talking to folks about how you run super low cost index funds with a competitive wrap fee (1.5% under 100k, etc.).
 
If there is a misunderstanding about one annuity sale from your CPA referral, CPA's client will tell five people. Even if the client misunderstands some dumb radio show. Our industry can blame itself for bad perception, where that is a problem, but perception is fact when it comes to how you feel about your money.
 
Watch the business and money pour in, watch the value of your book climb. Supplement with insurance. CPAs like that.
 
And, the writing is on the wall.
 
Once these liberals lose out out on health care and borrowing and spending, watch how they put their attention on "doing good" for consumers in the regulation of our industry.
Jan 20, 2010 2:47 pm
snaggletooth:

I have numerous clients that are getting ready to retire in 2010. 

 
For a lot of them, I've done tax-conscious investing in their taxable accounts, and have put a portion of retirement dollars in annuities that have performed phenomenally.
 
As my clients email or call or I talk to them, I'm starting to say this, "As an added service, I make myself available to meet with my clients and their CPA's together (after tax season) to ensure our retirement income strategy will be as tax-efficient as possible". 
 
I tell them I'm willing to meet at their CPA's office or anywhere else that is reasonable.  Hopefully this will introduce me to new CPA's and can show them exactly how my planning works through a mutual client at the same table that is extremely happy.
 
I already have some takers, so we'll see.  It has to be a better use of my time than some things.
 
Snags, here's an easier way to meet the CPAs:
 
"Mr. Client, many of my clients are CPAs.  Additionally, I think that it's very important to have a working relationship with the CPAs of my clients.  When I call on your CPA, can I tell him that we work together?"
 
The typical response will be, "That's fine.  Let me give you his number."
Jan 20, 2010 2:53 pm
Milyunair:

I'm still too stupid to see how they have changed for the better.

 
I get more business by saying, " I don't like annuities, maybe occasionally they  are appropriate for some people, but generally I don't like them".
 
And that's true. When I'm wrong, I'll change, but I don't see the value in annuites. I won't buy them for myself or my friends. What I will do for myself is run a straight brokerage account using ETFs, everybody else pays a wrap fee.
 
 
You are definitely missing the boat on annuities.  They are appropriate more often than you think.  Here's an example.  A client of mine has had a fixed annuity for about the last 5 years with $30,000.  He is worth several million.  He is looking for a place to park $250,000 for the next year.  He'll be able to put it into a fixed annuity and earn 4% and take the money out in less than a year with no surrender charges. 
Jan 20, 2010 3:12 pm

Which annuity is that? Not that it'll be a company Jones works with, but I've got a client that needs to park some cash for a year and I was thinking C share short duration Gov't bonds.  A fixed annuity would be a good alternative.

Jan 20, 2010 3:14 pm

I am also not sure saying "I don't like annuities" straight up is good policy, unless you already know that the other person agrees with you.  I tend to find that using balanced words is best until you get a feel for how the CPA or attorney leans.

It seems strange to me that anyone could agrue that todays living benefit riders, or a simple fixed annuity are ALWAYS bad in EVERY situation.  I honestly don't use annuities a lot (maybe 5-10%), but they serve a valuable purpose where necessary.  More than 3 or 4 years ago, I would agree that annuities (VA's at least) didn't have as much value, as they really didn't have very good LB riders (or at all).
Jan 20, 2010 3:28 pm

So, this is an added on payment to a fixed annuity, with no surrender charge. Or an add on payment to a flexible annuity?


Client is obviously older than 59?
 
You're going to put money in and take it out in under a year, and the subaccount pays 4%?
 
Do you mind describing the product a little more. This is an RIA or level commission product?
Jan 20, 2010 3:28 pm

The annuity that I mentioned doesn't work for what you want.  It has a 6 year surrender schedule.  The key is that the surrender charges are non-rolling and new money gets an enhanced rate.

 
For this reason, I have come to the conclusion that almost everybody 50 and older should establish a fixed annuity with a small amount of money.  My client now basically has a tax deferred savings account that pays high interest.
Jan 20, 2010 3:31 pm
B24:

I am also not sure saying "I don't like annuities" straight up is good policy, unless you already know that the other person agrees with you.  I tend to find that using balanced words is best until you get a feel for how the CPA or attorney leans.

It seems strange to me that anyone could agrue that todays living benefit riders, or a simple fixed annuity are ALWAYS bad in EVERY situation.  I honestly don't use annuities a lot (maybe 5-10%), but they serve a valuable purpose where necessary.  More than 3 or 4 years ago, I would agree that annuities (VA's at least) didn't have as much value, as they really didn't have very good LB riders (or at all).
 
Fine, I'm still waiting for someone to post a case study on here, either fixed annuity or using all of the bells and whistles, where I can learn about how the new annuities would be appropriate for my clients.
 
I have the license and have to do the continuing education, please, show me the light with real examples, not feel good stuff.
 
I understand annuitization, and feel that certain pension plans end up paying out a reasonable revenue stream. Other than that, where's the beef?
Jan 20, 2010 3:37 pm

I use GMABs with rollover clients who have 10 years or more before they are taking withdrawals.  Basically, if they leave the money for 10 years and their account balance is below where it started, the insurance company makes them whole.  If their account does well, they walk with the balance.  I use it for those who know logically they need equity exposure and understand long term strategies, but emotionally can't stand the swings. 

Jan 20, 2010 3:44 pm

So we're back to promising a pension in 10 years.  You give me your money, and I'll pay it back to you, starting in ten years, at 6%.

 
Deekay, what are the total expenses on your GMABs? What is the total expense ratio, for funds, contract expenses, guarantees, everything?
Jan 20, 2010 3:45 pm
anonymous:

The annuity that I mentioned doesn't work for what you want.  It has a 6 year surrender schedule.  The key is that the surrender charges are non-rolling and new money gets an enhanced rate.

 
For this reason, I have come to the conclusion that almost everybody 50 and older should establish a fixed annuity with a small amount of money.  My client now basically has a tax deferred savings account that pays high interest.
 
Wouldn't this have to be a flexible annuity? Does the subaccount on your flexible annuity really pay 4% for new money right now for the next year?
 
Could the same be said for new annuity products?
Jan 20, 2010 3:54 pm
Milyunair:
 
Fine, I'm still waiting for someone to post a case study on here, either fixed annuity or using all of the bells and whistles, where I can learn about how the new annuities would be appropriate for my clients.
 
I have the license and have to do the continuing education, please, show me the light with real examples, not feel good stuff.
 
I understand annuitization, and feel that certain pension plans end up paying out a reasonable revenue stream. Other than that, where's the beef?
 
Why should someone on here have to take the time to teach you ALL that?  Not trying to be rude or anything.  I go to luncheons put on by my annuity reps and it amazes me that there are still advisors that don't know how this stuff works.
 
I mean, don't you feel your clients deserve to have an advisor that at least knows something about them and how/when they are appropriate?  Anything you would learn in a continuing education class is not something that you would really do.  The regulators are still stuck on not putting annuities in IRA's, so I'm sure their continuing ed material is just as useful.
 
When was the last time you met with an annuity wholesaler?
 
 
Jan 20, 2010 4:05 pm
Milyunair:

So we're back to promising a pension in 10 years.  You give me your money, and I'll pay it back to you, starting in ten years, at 6%.

 
Deekay, what are the total expenses on your GMABs? What is the total expense ratio, for funds, contract expenses, guarantees, everything?
 
Did you not read his post?  Where did he mention paying it back in 10 years at 6%?
 
It's cash and carry.  The money is invested in the market.  The market goes up and down.  On the tenth anniversary, if the investment is worth less than what was contributed, the insurance company makes up the difference. 
 
The major advantage of this type of guarantee is that it allows the investor to invest abover their tolerance for risk and/or when the market goes down, they have no reason to panic and dump the investment
Jan 20, 2010 4:10 pm
Milyunair:
anonymous:

The annuity that I mentioned doesn't work for what you want.  It has a 6 year surrender schedule.  The key is that the surrender charges are non-rolling and new money gets an enhanced rate.

 
For this reason, I have come to the conclusion that almost everybody 50 and older should establish a fixed annuity with a small amount of money.  My client now basically has a tax deferred savings account that pays high interest.
 
Wouldn't this have to be a flexible annuity? Does the subaccount on your flexible annuity really pay 4% for new money right now for the next year?
 
Could the same be said for new annuity products?
 
Subaccount?  What makes you think that I was referring to a variable annuity?
Jan 20, 2010 4:27 pm
Milyunair:

So we're back to promising a pension in 10 years.  You give me your money, and I'll pay it back to you, starting in ten years, at 6%.

 
Deekay, what are the total expenses on your GMABs? What is the total expense ratio, for funds, contract expenses, guarantees, everything?
 
It's not a GMIB.  It's a 0% GMAB.  Totally different.  The one I use has total expenses under 2%.  If the client is underwater after 10 years, he gets made whole.  If the client is above his purchase amount after 10 years, he walks with the account balance.  It's that simple.
 
EDIT:  anonymous clarified it for me already.  Thanks, pal.
Jan 20, 2010 4:29 pm
snaggletooth:
Milyunair:
 
Fine, I'm still waiting for someone to post a case study on here, either fixed annuity or using all of the bells and whistles, where I can learn about how the new annuities would be appropriate for my clients.
 
I have the license and have to do the continuing education, please, show me the light with real examples, not feel good stuff.
 
I understand annuitization, and feel that certain pension plans end up paying out a reasonable revenue stream. Other than that, where's the beef?
 
Why should someone on here have to take the time to teach you ALL that?  Not trying to be rude or anything.  I go to luncheons put on by my annuity reps and it amazes me that there are still advisors that don't know how this stuff works.
 
I mean, don't you feel your clients deserve to have an advisor that at least knows something about them and how/when they are appropriate?  Anything you would learn in a continuing education class is not something that you would really do.  The regulators are still stuck on not putting annuities in IRA's, so I'm sure their continuing ed material is just as useful.
 
When was the last time you met with an annuity wholesaler?
 
 
 
^^^^^^^^^^^ This.
Jan 20, 2010 4:37 pm
Milyunair:
B24:

I am also not sure saying "I don't like annuities" straight up is good policy, unless you already know that the other person agrees with you.  I tend to find that using balanced words is best until you get a feel for how the CPA or attorney leans.

It seems strange to me that anyone could agrue that todays living benefit riders, or a simple fixed annuity are ALWAYS bad in EVERY situation.  I honestly don't use annuities a lot (maybe 5-10%), but they serve a valuable purpose where necessary.  More than 3 or 4 years ago, I would agree that annuities (VA's at least) didn't have as much value, as they really didn't have very good LB riders (or at all).
 
Fine, I'm still waiting for someone to post a case study on here, either fixed annuity or using all of the bells and whistles, where I can learn about how the new annuities would be appropriate for my clients.  
 
I don't know if this will help you with your clients, but I've used fixed annuities (mostly for qualified money) as a better alternative to CDs. 
 
For example, I sold a ton of MYGA fixed annuities last year.  5% for 5 years, 10% free withdrawals starting after year 1, 100% principal guarantee.  The 5 year CDs were paying 4% with no free withdrawals.  The benefit to the client was a better interest rate and the flexibility of being able to w/d some money.
 
I also sold a ton of VAs which contractually guaranteed that they will never run out of money.  My clients who have mutual funds or advisory accounts can withdrawal 4%-5% as long as there is money still in the account.  My VA clients can withdrawal 4%-5% for the rest of their lives even if they deplete the contract value.
 
On a somewhat related note, I'm concerned about VAs pricing themselves out of the market.  All in, the fees are getting between 3.50% - 3.75%.  I realize there's no free lunch in life, but I'm starting to think that VAs will not be a big part of my practice moving forward.
 
 
Jan 20, 2010 4:45 pm

Mike Damone, I've mentioned this in other threads, but the GMWB costs can even be greater than that.  When the market goes down, the fees can become 4% or higher.  The rider costs a % of the rider value, so if the rider value is greater than the contract value, the cost of the contract increases. 

What happens is that your VA clients can take 4 or 5%, but there is a great chance that this is all that they can take.  This is why I like GMAB's like Deekay is describing.  This problem doesn't exist.