Wirehouse Annuity Payout

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Aug 7, 2008 9:21 pm

Just out of curiosity, what is the commission at wirehouses for VA's, both upfront and the 4 year products?

 
I will assume a 40% payout after that from whatever number you give.
 
Also, how many of you wirehouse guys actually use annuities?
Aug 7, 2008 11:43 pm

Payout % or what is the actual commission on the Product?
Depending on the product and whether is fixed or variable and a 3/4 Year or 7 year..
Commission Varies from 3.5-6.5% upfront and .25 -1.00 trail
45% payout

Aug 22, 2008 6:06 pm

is WachSec the same or close pre merger? Will they change the old high AGE credits?. ML is at 2.25 w/ .80 trail for L share and 4.5 w/ .25 for 7 year VA.   C is 1 & 1 .

Aug 22, 2008 6:27 pm
SeriousMoney:

is WachSec the same or close pre merger? Will they change the old high AGE credits?. ML is at 2.25 w/ .80 trail for L share and 4.5 w/ .25 for 7 year VA.   C is 1 & 1 .




Yikes.

Aug 25, 2008 1:13 pm

All the wires pay annuitys out at grid. The commish amount varies by product and share type.

Aug 25, 2008 1:20 pm

I think he's trying to see if there's a haircut from the standard commission.  For example, on four year L-share stuff with my B/D, I generally get 3.5-4% initially and 1% trail starting in year two.  The upfronts I'm familiar with on the L-share are AXA & ING - 4%, Jackson - 3.7% and Lincoln - 3.5%.  Anyone have any comparative numbers at your wire for those companies?

Aug 25, 2008 1:29 pm
Indyone:

I think he's trying to see if there's a haircut from the standard commission.  For example, on four year L-share stuff with my B/D, I generally get 3.5-4% initially and 1% trail starting in year two.  The upfronts I'm familiar with on the L-share are AXA & ING - 4%, Jackson - 3.7% and Lincoln - 3.5%.  Anyone have any comparative numbers at your wire for those companies?

 
Yeah, that's what I was asking.  On my L-share, I get the 4% upfront and 1% trail in year 2.  At a wire, is that 1 and 1, or something else?  How much of a haircut is there?
 
The point I'm getting at is, is it fair to say, that due to the haircut on annuity commissions, wirehouse clients don't get a fair introduction to annuities compared to our indy clients?
 
Could it be that wirehouse guys find annuities too complicated and not worth their time for the haircut of a commission they get? 
Aug 25, 2008 1:47 pm

Snags, I can't comment to wirehouse commission on annuities, but it's pretty obvious why wirehouse guys don't sell insurance.   The compensation simply makes it not worth their efforts. 

Aug 26, 2008 12:07 am
anonymous:

Snags, I can't comment to wirehouse commission on annuities, but it's pretty obvious why wirehouse guys don't sell insurance.   The compensation simply makes it not worth their efforts. 

 
So would it be fair to tell a prospect that's a wirehouse client, "Let me show you something that you might like that your wirehouse advisor probably isn't, because he feels he doesn't get paid enough to show it to you?"
 
Sounds like a possible wedge to me.
Aug 26, 2008 12:15 am

Wirehouse insurance does get a haircut, but is still one of the higher paying products.  Non starter on the wedge.

Aug 26, 2008 12:23 am
iceco1d:

For insurance, or an annuity? 

 
At face value, presenting an annuity based on it "not paying another advisor enough" would be...wild to say the least!
 
I don't know how effective that strategy would be anyway..most prospects don't know what you mean by "wirehouse" or how their "payout grid" works as opposed to that of an indy, etc.
 
I understand what you're saying, which works in a logical world.  But many people are not hearing about the guarantees of annuities if they are wirehouse clients.  I wouldn't necessarily say "wirehouse". 
 
From the people I've talked to, they understand things like:  "Big firms, like Merrill, UBS, MS, SB"...and "proprietary vs. non-proprietary"...and they can understand it when you say, "There are certain investments that the big firms like their clients to be in because they make more money in the long run off your account".
 
It doesn't necessarily have to be true in every situation, but just a way that an indy guy can drive a wedge to make them wonder what they aren't hearing about from their "big firm" guy.
 
When I was with a wirehouse, there was one guy in the office charging close to a 3% advisor fee (I'm not even sure what is legally the highest fee you can charge, but whatever it was, he had to be there).  That didn't even include the manager fees. 
 
Annuities aren't sold very much in wirehouses.  Some clients of theirs would probably like to know about them.  I just think it's a way to create some doubt.
Aug 26, 2008 12:39 am
Primo:

Wirehouse insurance does get a haircut, but is still one of the higher paying products.  Non starter on the wedge.



I think the wedge can work if you use it right....

"At the big firms they put a lot of pressure on your advisor to produce big revenues...and they don't really give much credit for insurance business.  So, when it comes to insurance, brokers at those firms tend to ignore basic insurance needs unless it's a big dollar item like a HUGE estate planning case.  My business structure as an independent advisor allows me the time and flexibility to dedicate the time to thoroughly evaluate your protection needs as well as your investment needs.  You can be sure I won't try to spend a load of your money on unneeded insurance, because if I'm doing a good job you'll invest that money with me anyway if it's not spent on insurance.  So how about if we take a look at the whole picture?"

Something like that has worked for me more than once.  But as an indy doing insurance, you either need to be very organized or have support people to help you stay organized....because otherwise the details in doing insurance can eat up time from your business...in my limited experience.

Aug 26, 2008 6:56 am

Wirehouse insurance does get a haircut, but is still one of the higher paying products.  Non starter on the wedge.

 
I find it to be a huge wedge: 
 
Prospect: "I have a financial advisor with Merrill Lynch."
 
Me: "That's great.  Many of my clients have worked with investment advisors at Merrill Lynch.  They have some good people."
 
Prospect:  "Yea.  I've been really happy."
 
Me: "The only problem is that the ML guys are investment advisors and not financial advisors."
 
Prospect: "What do you mean."
 
Me:  "Well, he's probably doing a good job of getting you to put money away.  That is because he gets paid a lot of money to get you to invest.  On the other hand, if you get sick or hurt today, you are going to have real financial difficulties because I'm willing to bet that he never brought up the subject of disability insurance.  This is one of the first things that a financial advisor will address.   Merrill Lynch advisors don't get paid enough to address insurance issues, so they simply ignore them.
 
Prospect: "I never thought of that."
 
Me: "I never want to get in the way of an existing relationship.  Your advisor is probably doing a good job for you assuming that you live happily ever after.  Let me take a look at your situation with an eye on what would happen if things don't work out as planned.  Can we take a look at your insurance coverages?"
 
I'll get the insurance and then go after the investments after I have the relationship.
 
A wedge always exists with a wirehouse rep because we know that DI is ignored.  A good insurance agent typically earns 3x-4x the commission on an insurance sale than a wirehouse rep makes.  Wirehouse reps, in general, have no choice but to ignore insurance.  For example, I sell a lot of supplemental DI.   It's worth my time to make $500.  It's not worth the time of a wirehouse rep to make $150.  It's also more time consuming for them since they don't do a lot of it.  Life insurance is also typically ignored. I go with DI because I can be certain that it will be ignored. 
 
(My favorite wedge is used with Ameriprise Reps:  Client: "I have an advisor with Ameriprise." Me: "I bet that you paid for a financial plan and the major thing that your advisor had you do was buy a Variable Universal Life policy with Riversource."  Client: "How did you know?"  Me: "It gets recommended to everyone.  I've been in business for 20 years and I haven't seen a time where a VUL policy was in the best interest for the client.  At the very least, I would expect that a company that charges a fee for advice would recommend the best products instead of proprietary products with the highest commissions.  May I take a minute to make sure that you know exactly how your policy works?")
Aug 26, 2008 7:36 am

I'd argue you don't have to pick on wirehouses at all.  Simply by implying a specialty in an area (which the client recognizes they haven't been talked to about in the past), you build differentiation without putting down anyone else. 

 
Numerous studies have shown that affluent investors hate to be "sold".  Talking about protection strategies helps position you as more of a specialist / problem solver / advocate - all things the affluent actively seek.
 
Personally, I like to tell a story to make insurance conversations more tangiable (a "case study" if you will).  For VA business, this could be as simple as "imagine you began a systematic withdrawal stream from an SP500 index fund January 1st 2008.  It's going to be difficult ensuring the longevity of that money if you try making an inflation adjustment (or "pay raise") in 2009 with about 15-20% less principal".
 
If you really prefer poking fun at the competition, you could point out that other advisors are compensated based on how much money they manage - there's basically a disincentive for the advisor to help the client with withdrawal strategies, as then they'd be doing more and more work for a potentially SHRINKING portfolio.  Accordingly, they become highly UNDER-educated in protection and income strategies.  "I don't think this is really very fair on the client, so I've chosen to make a difference for the people I help by...".
 
It sounds like you're making insurance recommendations part of your practice for all the right reasons.  Good for you!   
Aug 26, 2008 7:59 am

I'd argue you don't have to pick on wirehouses at all. 

 
It's interesting that you say that because I complete agree with you.   Maybe I didn't come across as I would have liked.  I praise the wirehouse reps and talk about how they are usually very good at managing money.   I just try to make the point that this is what they do and although that investments are a very big part of my practice, I want to focus on protection issues with them. 
Aug 26, 2008 4:47 pm

It's not true that wirehouses do less biz in annuities, insurance, etc., and they are investment advisors rather than planners. They do lots of annuities and have so many options and companies to choose from, share classes, riders...and life insurance and disability insurance and liability management. The payout is 1-5% depending on share classes on annuities, and the trails are .25-1%. The net to advisor is usually about 42-45%. The wirehouse can go out and finance the physician's new office, apartment buildings, do construction to permanent loans....the list is long and varied and people in my office are doing all of it. There are two people in the office that do only life insurance--they are a team and both are million dollar producers. They have a niche.

Aug 26, 2008 4:55 pm

Why have I never had a client who has purchased disability insurance from a wirehouse rep?

 
Let's get specific, how many clients have bought disability policies from you this year?
 
I assume that insurance producers in your office can't prospect and get the bulk of their business from other advisors.  Am I correct?
Aug 26, 2008 10:24 pm

UBS  takes 10% of the commission sent to the firm, then pays out the rest at a insurance grid starting at 38% (can go up to 48%). 

Example: Hartford pays 5.5% on the L-Share to UBS. UBS FA sees 4.95% paid out at 38% or higher. For the trail, UBS receives 1.0% but pays out 0.90% at the insurance grid.
 
Why they take 10%? I have no idea. They do absolutely nothing for it.
 
As a UBS FA, VA's represent 10-15% of my gross. I am curious to know what other FA's % is.
Aug 26, 2008 10:49 pm

anonymous-i completely agree with your experience regarding wirehouse reps selling disability and long term care for that matter.  i cut my teeth at NML and Principal so I was brought up in an insurance agency environment, then did some time at Ed Jones, and am now independent.  i really don't think the majority of wirehouse reps have any idea what they not only leave on the table, but the "holes" in their clients planning they leave, all sitting there for some of us to pick off.  and for the record, i am building a fee based business, and have written 16 disability polices in 2008, plus 12 ltc cases.  Pretty darn good "extra" cash if your main goal and focus is fee based, ongoing revenue.  helps a ton for newbies as well.