Anyone familiar with Axa Accumulator

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Jul 31, 2009 8:58 pm

Going up against it. I'm reading over the contract, and it looks like the GMIB with the roll-up actually requires annuitization to exercise. Am I reading this correct?

Jul 31, 2009 9:21 pm

Got my answer. Apparently, the "stepped up" benefit base is used to purchase  a Life Annuity.

I can't believe anyone sells this product. It's so damn complicated and it's complete crap. This should be fun to try to explain to the client. Hopefully they will understand it how much it sucks, though.
I have sold VAs in the past. This is the first one I have ever run across that requires annuitization for the GMIB. I'm actually quite surprised by this. Especially when I searched for info on this annuity, and ran across about an 8 page thread (closed, found through google) on this annuity and the guy saying he had just stuck a client's ira in it answered someone's question that, no, it didn't require annuitization to take advantage. Apparently the people selling this don't even understand it.
Jul 31, 2009 10:27 pm

Does that surprise you?

Jul 31, 2009 11:19 pm

The fact that the GMIB requires annuitization isn't a bad thing.  Keep in mind that this is the worst case scenario.  What needs to be understood is the annuitization rates that are  being used.  

For instance, if the GMIB is 7%, that turns $100,000 into a $200,000 GMIB value in 10 years.  A $200,000 GMIB value isn't $200,000.  How much income does it give?  Let's say that in 10 years it gives an income of $1,500/month.  Is this good?  What's the true value?  At that same age, maybe a SPIA with $140,000 will give an income of $1,500/month.  This would mean that the true value of the GMIB is only 3.4%.
Talking about this type of GMIB as a % and not a dollar amount is extremely deceptive.   Unfortunately, most reps don't understand this.  The blame partially lies with the insurance company.  The only way to see the true payout tables is to look at an actual contract since this information is neither in the prospectus or the marketing material.
Jul 31, 2009 11:45 pm


Aug 1, 2009 12:58 am

5% is just as good as 7%.  In fact, 2% is just as good as 15%.  Do you understand this point?

Are you competing product to product?  If so, what are you using?  Why are you competing product to product instead of competing you against other rep?
You aren't looking at a 500 page contract.  You are looking at the prospectus.  You need to see a contract. 
Aug 1, 2009 7:46 am

Unfortunately, I just met the guy on his doorstep, and he is a big fan of this avisor who is trying to screw him over.

I was going to go product to product because I think thats the only way to show him the hundreds of thousands of dollars this mistake will cost him. Because this is so complex, though, there is no way to show a dollar for dollar comparison.
I'm hoping his broker didn't explain the annuitization part, but even trying to explain that in a way he will understand is going to be tough. I love the example you used, though, because that helped me get it, so it should help the client also.
This is so frustrating, because I know this is so wrong for the client, especially when we are looking at over 90% of his net worth going in this. I used to work for the bank this broker is at, and I know the Investment Manager very well, and I know she would think this is a terrible move. I'm thinking he has to be tweaking the NW to even run this through compliance.
I truly think this broker is either behaving unethically, or he is a complete idiot, and he is really screwing this client.
Aug 1, 2009 9:57 am

What makes you think that the advisor is trying to screw him over?

What product do you have that is going to give him hundreds of thousands of dollars extra?
What are the clients goals?  Risk tolerance?  Time horizon? Sources of cash?
The bank's investment manager would think that it's a terrible move without knowing any details?
Finally, like Bio Freeze said, why is he going to listen to the Avon chick over the guy he admires?
Aug 1, 2009 10:29 am

This is a perfect example of a newbie knowing just enough to be dangerous.

Aug 1, 2009 10:50 am

I don't know what bank it is, but from I am fairly certain that the entire transaction would be flagged if he was putting 90% of his net worth in a VA.

Aug 1, 2009 10:51 am

How do you know it is 90% of his net worth?

Aug 1, 2009 10:53 am

3rdyrp2, you asking me ?

Aug 1, 2009 10:55 am

Nah, the girl.

Aug 1, 2009 11:09 am

Basic training in the military. Your instructors will tell you - "We teach you just enough to get your a$$ kicked".

It's the same here, except as someone said, it makes them dangerous.

Ms. Broker - I admire your tenacity, but move on. If you know nothing of the product, how do you know the advisor is trying to screw this guy over. Have you done a profile? Fast? What are his concerns? The smart money is that the other advisor knows a lot more about this prospect than you do. Get to know the prospect, maybe you'll uncover something else. Also, how do you know that it is 90% of his net worth?

Aug 1, 2009 11:52 am

The client told me his NW and what it consists of. The only other money he has is tied up in a fixed annuity. I'm fairly certain that noone here would take a 401k and roll all of it to one of the highest fee VAs out there. He was 100% sold on the 5% rollup.

Aug 1, 2009 11:59 am

What about his home equity?  Maybe he also has a rental property in Colorado he's taking monthly income off.  Maybe his government/military/county pension is more than enough to cover his monthly expenses and leave a little left over.  Maybe he thought you were asking about just his investments and he failed to mention the $75,000 he has in checking and $400,000 he has in laddered CD's at the bank.  There are times when it takes until the 3rd meeting with someone who is already a client for me to uncover something they have at a different institution.  Lesson #1:  Don't take every prospect at their word for what they have investment-wise.  They may sound genuine to be nice, but sometimes they're just trying to get you off the phone/off your doorstep.

Aug 1, 2009 12:15 pm

And maybe he has monkey's flying out of his ass!  If the guy was willing to share what he had, his net worth, and agree to a meeting .... she has a shot. Good luck!

Aug 1, 2009 12:29 pm

The client told me his NW and what it consists of. The only other money he has is tied up in a fixed annuity. I'm fairly certain that noone here would take a 401k and roll all of it to one of the highest fee VAs out there. He was 100% sold on the 5% rollup.

He TOLD you what his net worth is. Ever seen "House"? Everyone lies.

I received an email last week from one of my top clients. He happened to tell me about some money he had over at MS - $600k. When I did the little evaluation (every year for the last 4 years) that consisted of his "checkup", I asked, "Do you have any other brokerage accounts?" "Do you have any CD's anywhere?". "Do you have any annuities". "Any debentures tied to an individual?". You get the gist.

He's not telling you everything.

Aug 1, 2009 12:30 pm

And maybe he has monkey's flying out of his ass! If the guy was willing to share what he had, his net worth, and agree to a meeting .... she has a shot. Good luck!

Volt - You have only been doing this a short while - ask the vets. We ALL think that we have all of our clients assets. It's a good bet we don't.

He lied. All prospects lie.

Aug 1, 2009 1:50 pm

He told me his assets, his house is paid off, monthly income required, and how much he withheld from the 401k to do work around the house. This was after inviting me in the house to review the axa contract. Yes I am aware that most prospects aren't totally forthcoming but I feel like this guy was. I could be wrong about that, but either way, I think the axa is overpriced and I know that the bank has better options for VAs than this.