We'll have to agree to disagree. 

I'm certain I would win the client if I was competing against your proposal... but I don't expect you to buy that.

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.  . 

What are you talking about being capped out?  The client has all kinds of choices.  I don't think you understand what you are talking about.

1.)If the market performs better than the guaranteed rate then the client doesn't HAVE to annuitize.  It is their discretion.  They can just keep trucking along, let the annuity continue to grow or start withdrawals of any amount they like since they are beyond the surrender period. 

2.)Just like any other annuity they are entitled to a 10% witdrawal.  And the 7% guaranteed growth doesn't stop until the original amount has tripled.  Taking fromthe annuity doesn't invalidate the guaranetee if they did decide to annuitze later, say at year 16 or 18.  Prior withdrawals would be deducted from the rolled up amount.

3.) If in 10 years the performance of the annuity was less than the guarantee and IF the client wants to take the higher amount in the annuity as an annuitized income stream rather than waiting to see if there would be recovery in the performance. But they don't HAVE to annuitize unless they want to.  And I bet they would want to if the contract was underwater and the rollup amount looked pretty good.

I am not arguing that it isn't expensive.  Also annuities have some significant downsides in tax treatment for income vs capital gains and are certainly not a good wealth transfer vehicle.  But we are not talking about that now.

Edit my previous.  The 7% goes up until the contract has tripled or the client turns 80%.   So don’t sell this to any really older clients.  It is all a part of knowing your products and guaging to your individual clients

Babbling,



I understand it, trust me.  Have a great evening!

So what is the big expense with the ING?

From what I understand ING pays the PFA the commission?

BFC,

You are arguing a product that you don't fully understand and Looney has illustrated that in the above posts, although the 7% guarantee caps when the client turns 80 years old, which is what I'm sure BL meant when posting 80%.  Also, the ratchet feature is available under ING just like they are under your favorite VA.  Continue selling the strengths of your products, but understand your competitors well, so you'll know how to sell against them.  Just saying they are expensive and misleading won't get you anywhere if I'm on the other side acknowledging the cost, but explaining the benefits and the net minimum payouts.

Bottom line is, pretty much all annuities are expensive when compared to other products, but again, you get what you pay for...and you pay for the protection.  Scrim, for most people, mutual funds and term insurance is a fine idea, but for those clients who want guaranteed returns, without having to die to get them, annuities have a place and you would better yourself by learning a VA product or two so you are ready when that prospect comes in and demands some guarantees.

This is rather timely:

I just got off the phone with a client of mine who I was notified by my back office he is ACATing his "conservative" 40/60 asset allocation program we started 4 months ago to an AXA EQUITABLE VA because the advisor pitched all the guarantees.

I asked him "did they tell you the total expenses"   reply "no"

"how about the unfavorable tax treatment of withdrawals"   "no"

"did they explain the GMIB kicks in only if you annuitize?"  "no"

I told him to come in and see me again because if he really wants this product after I give him the full story I can sell it to him.

Now, he's worried that because he signed all the paperwork this account will be transferred.   My back office will not transfer out his assets if my client has changed him mind.  Plus, I do believe he has a 10 day free look.

No matter how this plays out it will be a good learning experience for me.   

I take responsibility from the standpoint that my client didn't yet consider me his "trusted advisor" since he was so easily persuaded.  He didn't even call me for my opinion.   I will have to be wary of this going forward with all my clients no matter if they have been my clients for 4 months 4 years or 4 decades.

scrim

"I take responsibility from the standpoint that my client didn't yet consider me his "trusted advisor" since he was so easily persuaded.  He didn't even call me for my opinion.   I will have to be wary of this going forward with all my clients no matter if they have been my clients for 4 months 4 years or 4 decades."

This could be a great opportunity for you in that you can reexamine how you have been dealing with this client, and whether there are some common themes with all your clients. Nothing like a client moving money out for us all to reassess our business and look for ways to improve the model.

BankFC

...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...

---------------------------------------------

Be careful selling investments products with the expectation of high market returns. By high, I mean returns over 7%. For a reference, simply go back to the mid to late '90's.  Although no one can predict what the market will do, I can make several arguments why the market might only average 7% over the next 10 years. For the source of my arguments, simply refer to the writings of Warren Buffett.

I just reviewed some John Hancock funds and over the past 5 years they were all between -1 and +1 percent on average. I know this includes 01 which was a huge negative, but no one can predict the market.

I have some new clients who had a few hundred thousand in savings. I believe a ING variable annuity for these 50 somethings to be a good deal for them? Any suggestions..

I told him to come in and see me again because if he really wants this product after I give him the full story I can sell it to him

This is a good strategy.  I usually tell my customers that when we are done talking I want them to know not only WHAT they own but more importantly WHY they own it.  This differentiates me (any you) from being a saleman and merely a product pusher and elevates you to advisor status.

Good luck

Babbling,

I understand the ING just fine...I know you don't HAVE to annuitize.  What we were debating is which guarantee is better, not ALL circumstances. 

Mike Damone understood that, why didn't you?

Again, it's called a debate...on a forum.  So just because I don't type every bit of minutia I can think of doesn't equate to a lack of understanding.

[quote=scrim67]

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

[/quote]

Scrim, look at the difference between "Death Benefits" and "living benefits" -- I imagine you're already picking up on this but hopefully that distinction will help.

The annuity helps the client who is more concerned about what happens if he/she LIVES too long.  The taxable mutual fund could run out of money some day.  Go over to FPi and see some hubbub about monte carlo if you want details. 

With an annuity (with a lifetime guarantee -- whether annuitized or not), the client doesn't have to worry about running out of money as long as the insurance company is good.  Like indy1 said, this type of client doesn't care about the term insurance (death benefit) because you'd have to die to get it.

If a client is worried about the market; worried to the point that they
may reduce or eliminate their proper exposure to growth as per a
purdent financial plan, they should consider an annuity with living and
death benefits.  Right now it is the only vehicle that can rovide
a level of protection along with growth potential. 



It is up to the advisor to sift through the garbage and find a good
annuity product.  But don’t get attached, as soon as you find it,
another will slap on a benefit or reduce a cost to be more
competetive.  ING this year, AXA Next…its a little ridiculous if
you ask me.  

[quote=Indyone]  Scrim, for most people, mutual funds and term insurance is a fine idea, but for those clients who want guaranteed returns, without having to die to get them, annuities have a place and you would better yourself by learning a VA product or two so you are ready when that prospect comes in and demands some guarantees.[/quote]

VERY FUNNY!!!!

Bank - Don't worry so much about trying to hit a Home run every time at bat. Annuities are great choices for some. The good ones all cost about the same, they all have varying features that are there to benefit clients if the world ends tomorrow, (or in 8 years). I use 3-4 different ones because, different situations call for varying solutions. I couldn't tell you, nor do I care what the "best" one is.