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Oct 17, 2005 1:15 pm

Maybe it's just me, but does any of you other fairly new guys (on a grid, rather than a salary structure i.e ML, SB) have trouble from an EMOTIONAL standpoint dropping assets into fee based and forgoing your upfront comp?  Well, I am. 


I know it would be better in the long run if everything works out perfectly to have an annuitized book...but it is hard to just take that 1% sometimes.  How are you all balancing it?

Oct 17, 2005 3:16 pm

BankFC


Bottom line.....it sucks! it kills your motivation, and passion. It's almost impossible to build a business at 1%, it's hard enough at higher payouts. You are doing 10,000 gross per month, when you could be doing 20,000 - 30,000.

Oct 17, 2005 7:02 pm

How can any firm expect to grow their fee based biz paying at 1%?  


At some firms, including mine, we get 3% upfront for non qualified assets and 2% for qualified assets.


It's still less than other products but let's helps me meet my monthly obligations while building my practice.


scrim

Oct 17, 2005 8:10 pm

Not impossible if you have money to live on. Need about 2 years worth. If so ech year gets easier and better for the long haul.

Oct 17, 2005 10:04 pm

Some annuity companies offer a larger up front and a smaller trail, ie
2.75% up frond and .85bp trail.  If your bank does not offer this,
ask them to consider it.

Oct 17, 2005 10:22 pm

ING Landmark offers 4% up front and 1% trail w/4-year surrender.  I understand they are adding Davis Venture and some Franklin funds to their lineup.

Oct 18, 2005 4:12 pm

Please don't mention ING to me...some of the other reps in my bank program sell ING almost exclusively.  The 7% GMIB is VERY misleading!


All people hear is 7% guaranteed.  Just wait till they retire when the market hits a down cycle, and they actually realize they must annuitize to get that 7%. 


Also, someone also pointed out that the way a SPIA payout is calculated versus a GMIB payout is calculated is very different, so it really isn't 7% anyway you slice it, except ON PAPER.


Plus that contract is darn expensive!!


I could go on and on (as you can tell, I dislike ING).  But your point was there are VA's that allow you to take a pretty nice up front and still annuitize down the road.  Yes, we can and do offer some of those (Equitable and All- State come to mind, and of course ING).


My favorite VA is John Hancock Venture.

Oct 18, 2005 4:29 pm

All people hear is 7% guaranteed.  Just wait till they retire when the market hits a down cycle, and they actually realize they must annuitize to get that 7%. 


The client should have been told that they have to annuitize to take advantage of that option in the first place.  If they were not told that then the rep needs to be severely disciplined, maybe have his licensce revoked and if the clients don't listen and only hear what they want to hear....that's their problem. They probably have difficulty listening to everyone, like their doctor, the plumber and so on.  Some people just create their own disasters by not paying attention.


The 7% retirement income guarantee is a fall back position in the event that the contract is worth less than the original amount or didn't even earn an annualized 7%.  Don't you think that they will be happy to have that 7% return (essentially an almost doubling of their initial deposit) instead of a loss in the event that they need to begin drawing income?  Plus there is no rule that they HAVE to annuitize the contract if the market is down.  They can still wait and see if there is recovery.  The hope and reality is that the contract is likely to achieve more than 7% return and in that case it is a moot point. 


Clients don't always need to have this guarantee, but for those that do and who have been burned by this last market downturn, the saftey net is worth it to them.    I don't know how long you have been in the business, but I have seen several cycles where clients lost significant amounts in their VAs because they bought them, lost contact with their rep and the contract was on auto pilot.  Some of these people are still in the hole and I can assure you that they would rather have at least a guarantee of not losing their money.

Oct 18, 2005 4:37 pm

Banc,


Babbling Looney is dead on. Don't be too quick to squash the guaranteed rate annuities. Don't sell it for the commission, but as a fit for the right client. I'm not going to open up a can of worms, because this subject gets a lot of interest. But with the AXA, Met, Ing and others, the client is truly guaranteed income for life. Yes, they may never need the feature, and true it comes with cost, but it can be a powerful investment. I think if you really take a look at them ill see there benefit to the client.

Oct 18, 2005 4:38 pm
BankFC:

The 7% GMIB is VERY misleading!


All people hear is 7% guaranteed.  Just wait till they retire when the market hits a down cycle, and they actually realize they must annuitize to get that 7%. 



It's actually a great product.  It sounds to me that the other reps aren't explaining how the GMIB rider actually works.


Oct 18, 2005 4:41 pm
BankFC:

Maybe it's just me, but does any of you other fairly new guys (on a grid, rather than a salary structure i.e ML, SB) have trouble from an EMOTIONAL standpoint dropping assets into fee based and forgoing your upfront comp?  Well, I am. 


I know it would be better in the long run if everything works out perfectly to have an annuitized book...but it is hard to just take that 1% sometimes.  How are you all balancing it?



I hear you.  But you don't have to put EVERYTHING into a fee based account at 1% do you?  Can't you sell some A shares?  Do any annuity business?


Oct 18, 2005 4:44 pm

You all misunderstood my post.  I LIKE GMIB riders, and I sell living benefit riders on ALL annuities I sell.  I sell ALOT of annuities.


I SPECIFICALLY do not like ING product.  It is expensive and misleading.  If you think it's not your problem that the client doesn't listen...enjoy arbitration.  Even if you are right and you win, you still will have to go through it.  I'd rather avoid it all together.


Geex

Oct 18, 2005 5:04 pm
BankFC:

Please don't mention ING to me...some of the other reps in my bank program sell ING almost exclusively.  The 7% GMIB is VERY misleading!


All people hear is 7% guaranteed.  Just wait till they retire when the market hits a down cycle, and they actually realize they must annuitize to get that 7%. 


Also, someone also pointed out that the way a SPIA payout is calculated versus a GMIB payout is calculated is very different, so it really isn't 7% anyway you slice it, except ON PAPER.


Plus that contract is darn expensive!!


I could go on and on (as you can tell, I dislike ING).  But your point was there are VA's that allow you to take a pretty nice up front and still annuitize down the road.  Yes, we can and do offer some of those (Equitable and All- State come to mind, and of course ING).


My favorite VA is John Hancock Venture.



It's only misleading if it is mis-sold.  The people who mis-sell the product will not likely be in this business over the long haul.  Expense is also a relative issue, as in you get what you pay for.  Yes, if you want guarantees, they will cost you money.  If you don't want to pay for the guarantee, you can certainly buy mutual funds or fee-based or some other market-based investments instead.  Having seen what the last five years can do to a bad annuity, I like having the guarantees to fall back on, particularly when we are talking about people heading into retirement.


And yes, the annuitization rate is different under the MGIB, but the bottom line is, what kind of monthly check does the illustration show?  What kind of guarantees are in place if the market doesn't do well?  I'd like for someone who argues against the MGIB and ING to post actual side by side illustrations rather than just make general statements about how the ING annuity is bad.


I'm far from endorsing this product as a cure-all, but I've found it useful for people who want guaranteed returns, but need market exposure.  My preference for those who don't need the guarantees is the fee-based business the original poster was discussing.  Sure, it's slow going at first, but it's steady business and slow and steady wins the race.

Oct 18, 2005 7:45 pm

I read a recent study on living benefit riders and the ING product actually provided the highest payout for a 55 year old

Oct 19, 2005 9:55 am

Once again, for those who seem to not read my entire posts...I am not arguing against GMIB and annuities.  I LIKE THEM.


I don't like ING because it is EXPENSIVE RELATIVE TO SIMILAR GMIB ANNUITY PRODUCTS, not compared to mutual fund portfolio.


Plus, I feel it is inherently a misleading product because if it were actually explained for a client the way it REALLY works, they would not get the kind of asset inflow they do.  Very few people, if you ask them, are comfortable with annuitization.


There are many products out there (aka JH, Allstate to name two right off my head) that offer "Income For Life" guarantees WITHOUT annuitization, which then allows your clients money to stay in the market and maybe rebound while taking guaranteed income (it's obviously down, hence using the GMIB) rather than annuitize.


Why then, considering apples to apples, would you want to use ING?


Please, if you are going to argue what I am saying, don't agree with me and then say I'm wrong...wouldn't that be a definition of insanity?

Oct 19, 2005 10:54 am
BankFC:

Once again, for those who seem to not read my entire posts...I am not arguing against GMIB and annuities.  I LIKE THEM.


I don't like ING because it is EXPENSIVE RELATIVE TO SIMILAR GMIB ANNUITY PRODUCTS, not compared to mutual fund portfolio.


Plus, I feel it is inherently a misleading product because if it were actually explained for a client the way it REALLY works, they would not get the kind of asset inflow they do.  Very few people, if you ask them, are comfortable with annuitization.


There are many products out there (aka JH, Allstate to name two right off my head) that offer "Income For Life" guarantees WITHOUT annuitization, which then allows your clients money to stay in the market and maybe rebound while taking guaranteed income (it's obviously down, hence using the GMIB) rather than annuitize.


Why then, considering apples to apples, would you want to use ING?


Please, if you are going to argue what I am saying, don't agree with me and then say I'm wrong...wouldn't that be a definition of insanity?



I'm like those 5% Withdrawal Benefits for Life but I would like to address something.


Hypothetical:


Male, age 55 $100,000 premium into a contract.  Doesn't need income for 10 years and the market goes to zero.


A) Worst Case Scenario the 5% Withdrawal Benefit for life will only provide $5,000 of annual income for life.  (These withdrawal benefits for life are essentially Life with 20 year certain with no annuitization)


B) Worst Case Scenario ING's 7% GMIB Rider when annuitized would provide $9395 of annual income Life with 20 year certain net of all fees.


If the clients main objective is to maximize guaranteed cash flow 10 years out using a variable annuity contract, I would have to conclude that ING's payout is more.






Oct 19, 2005 1:17 pm

Mike Damone,


That is a poorly draw conclusion with incomplete information.  I do hope this is not an indicator of how you render financial advice.


Take JH for example:


5% withdrawls for life, yes.  Also, you get a 5% bonus on the GMIB base amount each year in the first 10 years you don't take a withdrawl.  In your example of $100,000 and needing income in 10 years, that means a GMIB base of 150,000.  So that puts our worst case senario payout at $7,500 for 20 years or life, not $5,000.


Add in the fact that you can rachet the high water mark account value in years 3,6,and 9, and receive the 5% bonus on the new HIGHER amount going forward, rather that just the base premium, and your guarantee can be even higher.


So say in year 3, your actual account value reaches 130,000...15,000 higher than your guaranteed 5% return.  You RATCHET up, and now get your 5% guarantee on 130,000, or $6,500 per year.  This can happen in year 3, 6, and 9.


In short, a 5% guarantee in the JH can be much higher that a seven percent guarantee on the ING.


PLUS the fact you NEVER annuitize!!!


So, Mike Damone, please tell me how you can be so certain the ING is better???

Oct 19, 2005 1:51 pm

Reading threads such as this one reinforces why I have never suggested to a client a VA in my short time in this industry.


I do believe that a client should never invest in something they do not understand fully.    Based on my own research I get the gut feeling VA's are not fully understood and/or explained correctly even by seasoned professionals in our industry.   I have also inferred that some clients are most likely "scared into" buying an annuity since they offer some guarantees.


Not to over simplify, but why wouldn't someone just invest in a taxable mutual fund portfolio and by term insurance?


The fact that the VA's are at the very least convoluted make me reluctant to present them.    


May I ask, how you present in layman's terms VA's to your customers so that they can understand what they are buying and what bells and whistles are worth the cost to the customer.


scrim


Oct 19, 2005 2:01 pm
BankFC:

Take JH for example:


5% withdrawls for life, yes.  Also, you get a 5% bonus on the GMIB base amount each year in the first 10 years you don't take a withdrawl.  In your example of $100,000 and needing income in 10 years, that means a GMIB base of 150,000.  So that puts our worst case senario payout at $7,500 for 20 years or life, not $5,000.



Mr.and Mrs. Lemonjello, if you go with BankFC recommendation, your worst case scenario after 10 years would be $7,500 for 20 years or life.


If you go with my recommendation, your worst case scenario after 10 years would be $9395 for 20 years or life.


Which one sounds better to you?


*Note, most people I work with are looking for the maximum guaranteed income even if that means they lose control via annuitization. 


Oct 19, 2005 3:05 pm

Mike Damone wrote:


*Note, most people I work with are looking for the maximum guaranteed income even if that means they lose control via annuitization. 


Sure they do...everyone wants to hand over their life savings to an insurance company.


While my ABSOLUTE worst case my be a little lower, the BEST you can do is $9395...


Mr. and Mrs. Client, do you really think the market is only going to return 5% OR 7% over the next 10 years?  Of course it's not.


In reality, what we are really insuring is that, specifically, when you retire 10 years from now, your money will be there THEN, even in a down cycle.  With MY plan, we can take advantage of the market over time, and still not be capped out at that measily guarantee of $9,395. 


Not to mention JH Lifestyle portfolios have a longer track record...try running an ING proposal with anything except American Funds...


Obviously, you are another ING cheerleader...