Gettin People Back in the Market

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Mar 5, 2010 11:35 am

I keep running into a lot of people who lost a stupid amount of money in the market in 08-some of 09, got out, and now are scared out of their minds to get back in.  One gentlemen I met has 1.8 million basically on the sidelines, and knows he needs to get it working for him but is scared of the market.  What are some good ideas for people like this? 

Mar 5, 2010 11:47 am

An elderly guy with 1.8 mil sounds like he's got enough money to live on unless he's paying a mortgage on a flat in the Hamptons.

Mar 5, 2010 11:54 am

ok elderly was a bad choice of words...50's to early 60's is what I meant...still pre-retired but older as well...my apologies for the poor word choice...I've updated

Mar 5, 2010 12:05 pm

How old are you, 22?  That's barely mid-life.  And he doesn't necessarily need to be in the market, especially not right now.  I know all the big firms are bringing out their best cliche's about being in the market, but to be honest, I wouldn't have more than 25% of that in the "market".  Think diversification, global, bonds, alternative exposure, etc.  Don't put too much in one place or you'll get burned.

Mar 5, 2010 12:25 pm

I like variable annuities. Sorry, but I consider an indexed annuity an act of theft. A VA allows the client to be in the market with a 5% guarantee. It is for income, and only a portion of his assets, say money for necessities.

Mar 6, 2010 8:01 am

I like variable annuities. Sorry, but I consider an indexed annuity an act of theft. A VA allows the client to be in the market with a 5% guarantee. It is for income, and only a portion of his assets, say money for necessities.

 Do yourself al favor and get educated.  You consider indexed annuitiies an act of theft because somebody told you, and not because you've done any research on your own.

Mar 8, 2010 12:39 pm

If EIA's are so great, then tell me why. Jones doesn't sell them, but that isn't exactly a death sentence on the product. My issue is that they top out before the market does, they don't actually own the assets(equities), and there have been several negative articles by a number of respected pubs.

Mar 8, 2010 12:40 pm

I like variable annuities. Sorry, but I consider an indexed annuity an act of theft. A VA allows the client to be in the market with a 5% guarantee. It is for income, and only a portion of his assets, say money for necessities.

  
 Do yourself al favor and get educated.  You consider indexed annuitiies an act of theft because somebody told you, and not because you've done any research on your own.


I couldn't agree more.  If you're using a 5% income rider to justify selling a VA, just look at the indexed annuities with 8% riders, lower fees, and less risk.  With a VA, the client assumes the market risk and pays a high price to insure the income via the rider.  With an indexed annuity, the insurance company assumes the risk, and you have a much greater income guarantee for a lower cost to the client. 
They aren't a one sized fits all miracle, but for a portion of the income producing assets that don't need to be liquid, they're hard to beat.  Also, for performance, they've done exactly what they were designed to do - give the opportunity for higher than average rates of returned when compared to other fixed products.  Check out the Wharton study to verify.  http://fic.wharton.upenn.edu/fic/Policy%20page/RealWorldReturns.pdf
 

Mar 8, 2010 3:07 pm

People who experienced the '08-'09 market decline were thrilled with the 5% VA guarantee. Can you sell an EIA without having your series 7? If so, then I have another problem with them. But most importantly, who owns the equities in the EIA?

Mar 8, 2010 4:32 pm

You're fighting a losing battle on this one, navet.  While Jones doesn't sell them, all EIA's are not bad.  I'm not a big fan of them either, but I've seen some situations where they seemed to have worked well.  You love the 5% VA guarantee, but those EIA folks will tell you that your 5% guarantee isn't a guarantee of your principal going up.  It's a guarantee of your income base going up.  It's not the same thing.  They'll tell you that some clients would prefer to see their principal going up than their income base.  

Those clients who saw the big market declines are thrilled about the VA you bought them.  Got it.  Mine too.  Question - what if they had an emergency and had to get to more than the 5% that the VA guaranteed?  What happens to the guarantee?  What if they had to get to all of the money, right now?  Which do you think they'd prefer?   

Mar 8, 2010 4:36 pm

[quote=navet]If EIA's are so great, then tell me why. Jones doesn't sell them, but that isn't exactly a death sentence on the product. My issue is that they top out before the market does, they don't actually own the assets(equities), and there have been several negative articles by a number of respected pubs.[/quote]


Listen to Spiff.  Just because Jones doesn't sell something doesn't make it a bad product.  ManOnTheCouch is right.  Wharton is an extremely respected RESEARCH INSTITUTION, whereas the pubs you've likely read are financial magazines where the authors are journalists, not financial professionals.

Please do your clients and prospects a favor and leave the investment industry.

Mar 8, 2010 5:00 pm

navet, you have proved your ignorance.

Mar 8, 2010 5:53 pm

What if the customer wants more than the 5% in the VA? Good question, usually aked by young inexperienced FA's. Retirees need income, first and foremost. VA's provide income. If you need a bolus of cash, fine. Just don't get it from the VA. The VA guarantees an adequate cash flow to take care of income needs during retirement. A simple needs analysis will indicate your customer's income needs. Guarantee that income, then invest the rest of the money in other products that provide some liquidity. ..Now, I am hearing that some of you really like EIA's. And I admit that I am no expert in that product. I don't think they can take the place of a VA. However, I am willing to listen to their benefits. I have doubts about them, though.

Mar 8, 2010 5:59 pm

[quote=ManOnTheCouch][quote][quote]I like variable annuities. Sorry, but I consider an indexed annuity an act of theft. A VA allows the client to be in the market with a 5% guarantee. It is for income, and only a portion of his assets, say money for necessities.[/quote]    Do yourself al favor and get educated.  You consider indexed annuitiies an act of theft because somebody told you, and not because you've done any research on your own.[/quote] I couldn't agree more.  If you're using a 5% income rider to justify selling a VA, just look at the indexed annuities with 8% riders, lower fees, and less risk.  With a VA, the client assumes the market risk and pays a high price to insure the income via the rider.  With an indexed annuity, the insurance company assumes the risk, and you have a much greater income guarantee for a lower cost to the client.  They aren't a one sized fits all miracle, but for a portion of the income producing assets that don't need to be liquid, they're hard to beat.  Also, for performance, they've done exactly what they were designed to do - give the opportunity for higher than average rates of returned when compared to other fixed products.  Check out the Wharton study to verify.  [url=http://fic.wharton.upenn.edu/fic/Policy%20page/RealWorldReturns.pdf]http://fic.wharton.upenn.edu/fic/Policy%20page/RealWorldReturns.pdf[/url]  [/quote]

I wonder how many moving parts are in this particular contract?

Mar 8, 2010 6:19 pm

[quote=navet]

What if the customer wants more than the 5% in the VA? Good question, usually aked by young inexperienced FA's. Retirees need income, first and foremost. VA's provide income. If you need a bolus of cash, fine. Just don't get it from the VA. The VA guarantees an adequate cash flow to take care of income needs during retirement. A simple needs analysis will indicate your customer's income needs. Guarantee that income, then invest the rest of the money in other products that provide some liquidity. ..Now, I am hearing that some of you really like EIA's. And I admit that I am no expert in that product. I don't think they can take the place of a VA. However, I am willing to listen to their benefits. I have doubts about them, though.

[/quote]

Let me assure you that I am neither a young, nor inexperienced FA.  Should you like to trade PM's on tenure and experience, I'll be more than happy.  The good thing about Jones is that they've educated you enough to know that you shouldn't put all of a client's money into a VA.  And if you haven't learned that point, Field Supervion will enforce it for you.

My point wasn't that you weren't providing the required amount of liquidity for the client, but rather that you were missing the point of the EIA vs the VA with an income benefit.  In my opinion they are two completely different products for two completely different uses.  Accumulation vs Income. 

But you keep on arguing your point.  It's really fun to watch them pick you apart. 

Mar 8, 2010 6:46 pm

[quote=navet]People who experienced the '08-'09 market decline were thrilled with the 5% VA guarantee. Can you sell an EIA without having your series 7? If so, then I have another problem with them. But most importantly, who owns the equities in the EIA?[/quote]

You should have a problem with VAs as well, because guess what?  You don't need a 7 for that either.

Mar 8, 2010 6:49 pm

Picked apart? Hardly. I still haven't had anyone explain the relative merit of the EIA. The fact that you only need an insurance license to sell it, really helps prove my point. My statement about tenure was not directed at you, although on inspection I see that it read that way. My point with that statement is that I hear from younger people(usually 25-35's) the misconception that net worth and income are directly related. That having a high net worth somehow magically provides you wih your income needs. The determination of income at retirement is a different animal than the choice of investments during accumulation. income has to be planned and properly engineered. Most of the younger FA's I've met don't have a clue about this process. I use the VA for necessary income. Where did you read that I would ever put all a client's money in a VA?

Mar 8, 2010 6:53 pm

[quote=Moraen]

[quote=navet]People who experienced the '08-'09 market decline were thrilled with the 5% VA guarantee. Can you sell an EIA without having your series 7? If so, then I have another problem with them. But most importantly, who owns the equities in the EIA?[/quote]

You should have a problem with VAs as well, because guess what?  You don't need a 7 for that either.

 [/quote]

Really???....I actually thought you did...I know you need an Insurance License...but I thought you needed the 7 as well?....oh well...you learn something new every day....

I also thought you need a 7 to sell VUL ?...true?

Mar 8, 2010 6:53 pm

You don't need a securities license to sell fixed annuities.  Does that make them bad?  Can't you plan income with a fixed annuity?

As a matter of fact, for most the business you probably do at Jones, you don't need a series 7.

Mar 8, 2010 6:53 pm

[quote=Hey Kool-Aid]

[quote=Moraen]

[quote=navet]People who experienced the '08-'09 market decline were thrilled with the 5% VA guarantee. Can you sell an EIA without having your series 7? If so, then I have another problem with them. But most importantly, who owns the equities in the EIA?[/quote]

You should have a problem with VAs as well, because guess what?  You don't need a 7 for that either.

 [/quote]

Really???....I actually thought you did...I know you need an Insurance License...but I thought you needed the 7 as well?....oh well...you learn something new every day....

I also thought you need a 7 to sell VUL ?...true?

[/quote]

You can sell VAs with a Series 6 and an insurance license HKA.  But you already knew that.