The VA Story

Uhoh.  Do you realize that the 6% GMIB really is the equivalent of a around 3%?  Do you also realize that the GMIB is useless for someone who needs the money in a very short time period?

I like these types of annuities... when they are used appropriately.  Unfortunately, this is often not the case.  The % of the GMIB should NEVER be mentioned to the client because it is VERY misleading. 

Ashland, there are better VA’s out there then the AXA product.

Do they know they must annuitize to get that amount? Linclon will let you get to principle after starting the annuitization. But I am certain they are skrewd with AXA. Be honest did you tell them they would have to annuitize and the implications of annuitizing?

 This is when CSI Miami's Horatio Caine says, "This is a Crime Scene".

Let us spend one day as deliberately as nature, and not be thrown off the track by every nutshell and mosquito's wing that falls on the rails.

- Henry David Thoreau

HDT also believes in simplicity, simplicity, simplicity. Not a dirty book.

[quote=anonymous]

Uhoh.  Do you realize that the 6% GMIB really is the equivalent of a around 3%?  Do you also realize that the GMIB is useless for someone who needs the money in a very short time period?

I like these types of annuities... when they are used appropriately.  Unfortunately, this is often not the case.  The % of the GMIB should NEVER be mentioned to the client because it is VERY misleading. 

[/quote]

Do YOU realize that the GMIB is a worst case scenario and not the strategy? It's much better than losing half your money in the market.  

Do YOU realize that the GMIB is a worst case scenario and not the strategy? It's much better than losing half your money in the market.  

It is a tired insurance debate. Look at a decent balanced fund, like Dodge and Cox. Stocks, which are just ownership, are not going away. Bonds and lending will be around as long as folks have to wake up and go to work. Annuity contracts will always be around too - just be careful about how many mouths you have to feed when you sign on the dotted line.

Think about it - immediate annuitization is 90% of what is important when it comes time to take a gamble with an insurance company. Potentially longer term benefits are basically sucked out by the actuaries ( who don't work for cheap).

[quote=silouette]

Do YOU realize that the GMIB is a worst case scenario and not the strategy? It's much better than losing half your money in the market.  

It is a tired insurance debate. Look at a decent balanced fund, like Dodge and Cox. Stocks, which are just ownership, are not going away. Bonds and lending will be around as long as folks have to wake up and go to work. Annuity contracts will always be around too - just be careful about how many mouths you have to feed when you sign on the dotted line.

Think about it - immediate annuitization is 90% of what is important when it comes time to take a gamble with an insurance company. Potentially longer term benefits are basically sucked out by the actuaries ( who don't work for cheap).

[/quote]

Mutual funds are mutual funds and VA's are VA's. You sound stupid comparing two things that do different things. VA's are great if you want what a VA does. MF's are great if you want what MF's do. I like what VA's do and I like to sell them. I sell them to people who like what VA's do, also. Pretty neat, eh?

[quote=silouette]

Do YOU realize that the GMIB is a worst case scenario and not the strategy? It's much better than losing half your money in the market.  

It is a tired insurance debate. Look at a decent balanced fund, like Dodge and Cox. Stocks, which are just ownership, are not going away. Bonds and lending will be around as long as folks have to wake up and go to work. Annuity contracts will always be around too - just be careful about how many mouths you have to feed when you sign on the dotted line.

Think about it - immediate annuitization is 90% of what is important when it comes time to take a gamble with an insurance company. Potentially longer term benefits are basically sucked out by the actuaries ( who don't work for cheap).

[/quote]

It may be a tired argument to you, but not to the client who bought that annuity with the 6% guaranteed growth.  When the term is up and the actual contract market value is down or not up even as much as the 6% guarantee, they are going to want to kiss your feet because they can annuitize if they want to and have a decent income stream.   They won't care that they could have hypothetically earned a few points more by being in mutual funds.  That doesn't mean squat....hypothetically.

I just had a client who has a VA contract that reached the end of its surrender period.   NOTE: I didn't sell them this contract.  When I became agent of record in 2003 the contract was negative by over 30% from the start.  Down by about 42,000.  Since then it has recovered.  We moved the money out of the annuity now that the contract is up (1035 to fixed annuity to keep deferring the gains because the contract had already been 1035 transferred before)  They made practically no money in 8 years.  If the contract had come with a guarantee of an annual 6% compounding GMIB, they would have been better off by far. 

You can't make a direct comparison to mutual funds and VAs.  The peace of mind that the benefits buy and the costs of the benefits is worth it to some people.

I agree - it seems these contracts will become more important to the boomers, and should become more competitive and appropriate under certain cirmcumstances. Part of being an open-minded professional and a good leader is to help clients make the right decision.

That is partly why I remain a registered representative and insurance licensed. If you can't offer these products as boomers age and the products evolve to transfer risk and serve the need of boomers, you can't be objective.

Thanks for bringing up the point and the specific example. Obviously you have a big tool kit and take each case individually, as can be seen in the great list of questions for the annuity owner that you posted recently.

Peace of mind for some is # one, and that is at first a financial planning consideration, products are always second.

Bobby, I may sound stupid, but I have been in this game a long time. There have been plenty of abuses with annuity contracts, and you are free to discover for yourself and your clients what works for most people over a long period of time.

Part of your job as a registered representative, CFP, experienced investor, and so on - is to bring perspective and education to bear on on financial planning problems, not just sell what you like, or what your clients think they like after you spend a little time with them.

A great joy over time is to see how it all fits together, the beauty of simplicity and the basic idea of stocks, bonds, cash, real estate, certificates - much of the beauty and efficiency gets obscured by the time frames and needs of everyone but the client.

That doesn't mean that annuities are not appropriate sometimes, fact is, they are way overused, and you have to pay your dues, or at least be stable with your business, I would say, before you gain a qualified perspective.

[quote=silouette]

Bobby, I may sound stupid, but I have been in this game a long time. There have been plenty of abuses with annuity contracts, and you are free to discover for yourself and your clients what works for most people over a long period of time.

Part of your job as a registered representative, CFP, experienced investor, and so on - is to bring perspective and education to bear on on financial planning problems, not just sell what you like, or what your clients think they like after you spend a little time with them.

A great joy over time is to see how it all fits together, the beauty of simplicity and the basic idea of stocks, bonds, cash, real estate, certificates - much of the beauty and efficiency gets obscured by the time frames and needs of everyone but the client.

That doesn't mean that annuities are not appropriate sometimes, fact is, they are way overused, and you have to pay your dues, or at least be stable with your business, I would say, before you gain a qualified perspective.

[/quote]

You've got me confused with someone who likes to do financial planning. I"m sure it's noble work, but I don't want to take the cut in pay.

In college, my Korean religious studies professor said,

" After big sumptuous Sunday meal, all have eaten the big chicken dinner and strawberry shortcake, and had a lot of laughs, and everyone sits around and feels full and happy, and then, slowly, shi**y feeling start to creep in. This is the beginning of religious studies."

If you ever start to feel like a used car salesman, that will be your potential foundation for building a professional financial planning career in this industry.

[quote=silouette]

In college, my Korean religious studies professor said,

" After big sumptuous Sunday meal, all have eaten the big chicken dinner and strawberry shortcake, and had a lot of laughs, and everyone sits around and feels full and happy, and then, slowly, shi**y feeling start to creep in. This is the beginning of religious studies."

If you ever start to feel like a used car salesman, that will be your potential foundation for building a professional financial planning career in this industry.

[/quote]

In my college, a Business professor told me to figure out what people want to buy and sell it to them.

Take both ideas and you have the world in a grain of sand.

I have been unwrapping your type of financial sales for many, many years. Once educated, they almost never choose to go back to your type of "planning".

I admire you for being focused and motivated. Just watch for that little voice in your head, that says, " Maybe I should be doing something different for this person. " It's okay to make real planners look good, too.

[quote=Bobby Hull]

Mutual funds are mutual funds and VA’s are VA’s. You sound stupid comparing two things that do different things. VA’s are great if you want what a VA does. MF’s are great if you want what MF’s do. I like what VA’s do and I like to sell them. I sell them to people who like what VA’s do, also. Pretty neat, eh?

Managed, since you didn't ask the question of me, I'll still answer it.

I actually don't like the commission on the VA's that I sell.  From a commission standpoint, I'd much rather have my clients in an account that is paying me 1% annually.  Also, almost all of my variable annuity business is qualified money because I don't like the tax treatment of non-qualified annuities.

The thing that I like (and my clients like) about the VA is simply that their money can be invested 100% aggressively in equities and they can't lose money provided that they are willing to leave their money in the account for a specific period of time.  Despite the additional fees involved (typically 2.25% including m&e, guarantees, and fund expenses), my VA clients have done better than my other clients.  The only reason is that the VA clients have been able to invest in a way that is greater than their risk tolerance.

[quote=ManagedMoney] [quote=Bobby Hull]

Mutual funds are mutual funds and VA's are VA's. You sound stupid comparing two things that do different things. VA's are great if you want what a VA does. MF's are great if you want what MF's do. I like what VA's do and I like to sell them. I sell them to people who like what VA's do, also. Pretty neat, eh?

[/quote]


Help me out here. 

1.) What does a VA do that you like? (besides give you high commissions) 

2.) What does a VA do that your clients like?
[/quote]

Why would a guy named "managed money" want to know about VA's?

I'm sorry but you people who keep saying "You have to annuitize the AXA to get the 6%" are wrong.

The way the contract works is that you have essentially two towers of capital, the front one is your your investment account, and the back one is your insurance policy. Giggles we'll say that the two towers start off at one million dollars each. 

Your front one will do what it is going to do based on what the market and the fees do to it. For sake of the discussion, let's say that it does net 0%.

It's now 12 years on....

Tower one is still worth 1MM, tower two has a theoretical value of 2MM.

Mr. Jones says. I'm 65years old, I want income NOW! FA says, OK, here is a 6% income stream from your annuity contract, $120,000.

"120M, Wait, I gave you 1MM and it did squat, 6% is 60,000!"

"Yes, but the insurance side grew by 6% per year and in 12 years it doubled."

The 120M is coming from the initial 1MM in the investment side (which means that there is no tax on the money because it's all principal) which has now dropped from 1MM to 880M.

Mr Client can keep taking this 120M for 8 years. Let's continue to assume that the investment does net 0%. At the end of 8 years, the investment account is worth 40M and so poor mr client has to annuitize the contract. He's now 72, lets assume they're giving him 0% on the annuitized portion. They assume that he has about 15 years till dirt nap. He'll get about $133,333/year for the rest of his life. If he lives past 87 he has a total return on his million dollars of more that 3,000,000 in benefits.

Point is, he doesn't HAVE to annuitize until his initial investment has crapsed out.

Maybe that's good maybe that's bad, maybe there's better maybe there's not (and maybe I'm wrong, won't be the first time). But From what I have been able to determine from the contract this is how it works and so the knee jerk "you gotta annutitze" is PO wrong.

BTW I think that John Hancock is coming out with a 6% product in NY soon too, and JH has a AAA to go along with it. That's worth looking at. 

[quote=Whomitmayconcer]

I'm sorry but you people who keep saying "You have to annuitize the AXA to get the 6%" are wrong.

The way the contract works is that you have essentially two towers of capital, the front one is your your investment account, and the back one is your insurance policy. Giggles we'll say that the two towers start off at one million dollars each. 

Your front one will do what it is going to do based on what the market and the fees do to it. For sake of the discussion, let's say that it does net 0%.

It's now 12 years on....

Tower one is still worth 1MM, tower two has a theoretical value of 2MM.

Mr. Jones says. I'm 65years old, I want income NOW! FA says, OK, here is a 6% income stream from your annuity contract, $120,000.

"120M, Wait, I gave you 1MM and it did squat, 6% is 60,000!"

"Yes, but the insurance side grew by 6% per year and in 12 years it doubled."

The 120M is coming from the initial 1MM in the investment side (which means that there is no tax on the money because it's all principal) which has now dropped from 1MM to 880M.

Mr Client can keep taking this 120M for 8 years. Let's continue to assume that the investment does net 0%. At the end of 8 years, the investment account is worth 40M and so poor mr client has to annuitize the contract. He's now 72, lets assume they're giving him 0% on the annuitized portion. They assume that he has about 15 years till dirt nap. He'll get about $133,333/year for the rest of his life. If he lives past 87 he has a total return on his million dollars of more that 3,000,000 in benefits.

Point is, he doesn't HAVE to annuitize until his initial investment has crapsed out.

Maybe that's good maybe that's bad, maybe there's better maybe there's not (and maybe I'm wrong, won't be the first time). But From what I have been able to determine from the contract this is how it works and so the knee jerk "you gotta annutitze" is PO wrong.

BTW I think that John Hancock is coming out with a 6% product in NY soon too, and JH has a AAA to go along with it. That's worth looking at. 

[/quote]

Can't you do that if you lose money in mutual funds or managed money?

I'm sorry but you people who keep saying "You have to annuitize the AXA to get the 6%" are wrong.

Whomitmayconcer, go back to the original post.  You'll see that he's talking about a GMIB and not a GMWB.  The contract will have to be annuitized to get the 6% and the 6% isn't legit since they use lower annuitization factors.

I must admit that my knowledge is not where it should be when it comes to GMWB riders.  Please explain how money can be taken out of the contract without paying taxes unless it is truly two separate contracts.  In your example, the investment grew from $1,000,000 to $2,000,000, the first $1,000,000 taken out would all be taxed as income.  Please help me to fill in my knowledge gap.  (The question is sincere and not sarcastic.)

[quote=Bobby Hull][quote=ManagedMoney] [quote=Bobby Hull]

Mutual funds are mutual funds and VA's are VA's. You sound stupid comparing two things that do different things. VA's are great if you want what a VA does. MF's are great if you want what MF's do. I like what VA's do and I like to sell them. I sell them to people who like what VA's do, also. Pretty neat, eh?

[/quote]


Help me out here. 

1.) What does a VA do that you like? (besides give you high commissions) 

2.) What does a VA do that your clients like?
[/quote]

Why would a guy named "managed money" want to know about VA's?

[quote=Bobby Hull][quote=silouette]

Bobby, I may sound stupid, but I have been in this game a long time. There have been plenty of abuses with annuity contracts, and you are free to discover for yourself and your clients what works for most people over a long period of time.

Part of your job as a registered representative, CFP, experienced investor, and so on - is to bring perspective and education to bear on on financial planning problems, not just sell what you like, or what your clients think they like after you spend a little time with them.

A great joy over time is to see how it all fits together, the beauty of simplicity and the basic idea of stocks, bonds, cash, real estate, certificates - much of the beauty and efficiency gets obscured by the time frames and needs of everyone but the client.

That doesn't mean that annuities are not appropriate sometimes, fact is, they are way overused, and you have to pay your dues, or at least be stable with your business, I would say, before you gain a qualified perspective.

[/quote]

You've got me confused with someone who likes to do financial planning. I"m sure it's noble work, but I don't want to take the cut in pay.

[quote=joedabrkr] [quote=Bobby Hull][quote=silouette]

Bobby, I may sound stupid, but I have been in this game a long time. There have been plenty of abuses with annuity contracts, and you are free to discover for yourself and your clients what works for most people over a long period of time.

Part of your job as a registered representative, CFP, experienced investor, and so on - is to bring perspective and education to bear on on financial planning problems, not just sell what you like, or what your clients think they like after you spend a little time with them.

A great joy over time is to see how it all fits together, the beauty of simplicity and the basic idea of stocks, bonds, cash, real estate, certificates - much of the beauty and efficiency gets obscured by the time frames and needs of everyone but the client.

That doesn't mean that annuities are not appropriate sometimes, fact is, they are way overused, and you have to pay your dues, or at least be stable with your business, I would say, before you gain a qualified perspective.

[/quote]

You've got me confused with someone who likes to do financial planning. I"m sure it's noble work, but I don't want to take the cut in pay.

[/quote]

I suppose that honest work like that would be a cut in pay compared to slogging the EIA with the highest commish to blue hairs, right?
[/quote]

The only EIA I sell is a 5 year surrender with a 5% commish, but thanks for trying to take a swipe and ending looking stupid. It seemed so natural for you.

Anon,

The second "tower" is really just an insurance policy. In essence AXA buys a term policy on the life of the first tower (maybe they buy it on the annuitant, I guess they could, based on the idea that they'll get their money back some day when the guy dies, which he eventually will)

The only "real money" the guy has is the money in the investment account (the first tower). AXA hopes that that account will grow faster than the second tower so that your client will cash out of the first tower and the second one is a moot point.

Since the first tower is only the guy's own money in the example (he put in a Mil and it stayed at a mil) the money he's taking out is his own principal. He's able to take it out at a 12% rate because the second tower is still "growing" at a 6% pace on the 2MM. (if the guy took only 60M the second tower would still grow.I'm not 100% sure, but the second tower might also represent the death benefit, I think it can outside of NYS).

All of these guarantees are fun to talk about, but do any of you guys make your clients a lot of money in the VA’s? The VA I’ve been using has significantly outperformed the S&P over the last 4 1/2 years that I’ve been using it. The guarantees are a very small part of what I discuss with people.

Bobby,

It has been the guarantees that have allowed my clients to make a lot of money.  Clients with guarantees invest more aggressively than clients who don't have guarantees.

[quote=anonymous]

Bobby,

It has been the guarantees that have allowed my clients to make a lot of money.  Clients with guarantees invest more aggressively than clients who don't have guarantees.

[/quote]

I'll buy that. Another thing that helps is that they only get quarterly statements and the don't have ticker symbols that they can watch every day. I never get calls from people worrying about their annuities.

Yes, I do,(make money for my clients) and I am known to trade out of them (when it makes sense) too!

Since the first tower is only the guy's own money in the example (he put in a Mil and it stayed at a mil) the money he's taking out is his own principal. He's able to take it out at a 12% rate because the second tower is still "growing" at a 6% pace on the 2MM. (if the guy took only 60M the second tower would still grow.I'm not 100% sure, but the second tower might also represent the death benefit, I think it can outside of NYS).

Great, I'll take some McFries with that contract. Hope Ronald has a favorable record under the terms of the contract, underwise we'll  be eating humble pie in a cardboard sleeve. Maybe they'll sell us a salad to go along and make it healthy food. Let's see, for what I spent I could have had a nice piece of fresh halibut and fresh baked bread ...

[quote=silouette]

Since the first tower is only the guy's own money in the example (he put in a Mil and it stayed at a mil) the money he's taking out is his own principal. He's able to take it out at a 12% rate because the second tower is still "growing" at a 6% pace on the 2MM. (if the guy took only 60M the second tower would still grow.I'm not 100% sure, but the second tower might also represent the death benefit, I think it can outside of NYS).

Great, I'll take some McFries with that contract. Hope Ronald has a favorable record under the terms of the contract, underwise we'll  be eating humble pie in a cardboard sleeve. Maybe they'll sell us a salad to go along and make it healthy food. Let's see, for what I spent I could have had a nice piece of fresh halibut and fresh baked bread ...

[/quote]

Let me guess....your parents rejected you when you came out of the closet.

 Don’t tell anyone.

Here's a recent excerpt from Bob Veres newsletter concerning VA's. I though it was interesting:

Honolulu-based advisor David Jacobs, in his periodic DavidsDiamonds review, offers some insights into the Guaranteed Minimum Income Benefit (GMIB) provisions in variable annuities contracts. These guarantee riders typically cost 50 to 60 basis points a year, and guarantee 5% annual growth of the income base no matter what the contract's underlying performance happens to be. But Jacobs points out that the 50-60 bp fee is assessed against the guaranteed income base, which means that the company's fee automatically goes up each year. If the market drops and the account value goes down, say, 30%, suddenly what was a .5% fee can be (depending on how long the raises have been going on) 70, 80 or 90 basis points.

Also, Jacobs points out, you only get the guarantee if you annuitize the contract. In most cases, he says, if you annuitize the contract under the GMIB rider, the company will give you a far more conservative annuitization rate than you would have gotten otherwise. How much is the company taking back in this deal? When Jacobs looked at the illustrated payout on the GMIB from an annuity issued by Guardian, he found that you could go to www.immediateannuities.com and buy the same payout for roughly half as much as the guaranteed growth on the account.

If you move the numbers around a little bit you discover that the account would have to have declined by a total of 11% over ten years for the guarantee to have benefited the consumer. Otherwise, you were better off without the guarantee. Jacobs doesn't have to state the obvious, but I will: when has any reasonable equity portfolio ever declined by 11% over any ten-year period?

This is very interesting and detailed analysis. I bring it up because I think most members of the FPA would say that they would like to see this kind of evaluation in their peer-reviewed professional magazine--something that digs into the numbers in a sophisticated way, and talks to them, as professionals and adults, about the hard-dollar impacts of their choices and the numbers behind what's breathlessly touted in the marketing materials.

Instead, we have a cover story which includes a sidebar which explains GMIBs with a credulous marketing-material illustration showing that after 12 years, the annuity portfolio has lost 15% (!), but (ta da!) because of the GMIB rider, the consumer still has $179,585 to annuitize. The article contains no mention or analysis of the RATE that it will be annuitized. Meanwhile, the article goes back and forth, saying that some say that annuities are good, some are more cautious, never digging into the numbers or asking an actuary to estimate the actual costs and profit margins of these guarantees. Page after page forthrightly insulting the readership's intelligence by saying that you have to factor in peace of mind when selling annuities to clients--when, in fact, these expensive training wheels have become the primary selling point since the tax benefits were exposed to be nonexistent.

Well presented. Don't expect any big intellectual rebuttal from the annuity closers here.  For the thinkers and real planners, what more needs to be said?

[quote=silouette]Well presented. Don’t expect any big intellectual rebuttal from the annuity closers here.  For the thinkers and real planners, what more needs to be said?[/quote]



It’s so much simpler, any insurance product is a bet against a bunch of
actuaries who have worked out all the angles. The Insurance company
expects to win even after taking a 6% handicap from sales commisions.



An insurance contract is a zero sum game; and if you can’t spot the sucker…

It's absolutely ridiculous for a "thinkers and planners" like yourself to get your information from an article instead of from a primary source. 

He's wrong about how the pricing of the GMIB works.  There may be one that works that way that he describes, but that is not the norm.  Most of them go by the contract value. 

He's also wrong about the negative 11%.   I've done the calculations and it usually works out that it makes sense to annuitize if the contract has averaged around 2.8% (give or take a few tenths based upon exact details) compound annual growth.

Do I expect any of my clients to ever use the guarantees inside of a VA?  No.  Do I use guarantees?  Yes. (Primarily GMAB because I do believe that the stated % in the GMIB is disingenuous.)  If someone thinks that piece of mind does not have a lot of value, then they probably haven't been in the business very long. 

I've said it many times that my VA clients have outperformed my mutual fund clients and it's because they are paying for a guarantee.  The value of the guarantee is two-fold. 

1)The VA client is able to invest more aggressively than his risk tolerance will allow.   In other words, we're able to do an unfair comparison.  This client, if invested in MFs, might be 30% stocks and 70% bonds, yet in the VA, they are 100% stocks.

2)Just about all of our clients are less aggressive than they think.  It's easy to be aggressive when the market is going up.  However, when the market goes down, our clients aggressiveness goes down with it.  Ex. Market goes down 30%.  Client portfolio drops from $200,000 to $140,000.  MF client, in many, many cases, is going to start investing much more conservatively.  Annuity client, with guarantee, will keep money invested aggressively. 

We too often focus on investment performance instead of investor performance.  The fees inside of a VA often hurt investment performance, but at the same time, help investor performance.

AllReit, The insurance company expects to win after paying the commission in the same way that the Mutual Fund company expects to win after paying the commission.  The commission gets paid from annual expenses taken from the client or an up-front sales charge deducted from the account.  On the other hand, if you are talking about the insurance company making money from living benefit riders, it is questionable.  

Are the insurance companies trying to make money on every contract that they sell?  Yes.  Are they trying to make money on the living benefit riders?  It doesn't appear to be the case.  The riders are really designed to attract additional money to the product.  It's the additional hundreds of millions of dollars in the product that makes additional money for the insurance company and not the riders.  There is a lot of concern in the industry that these riders (GMIB, GMAB, GMWB) may be underpriced.   Therefore, I'd be very careful to only use these riders with very strong insurance companies.

Variable annuities are not a big part of my practice, but they are definitely a valuable tool.   My primary use for them is qualified money when the guarantee allows the client to invest more aggressively and the money can be tied up for a period of time.  The total annual cost of the annuity that I use, including all fund expenses and bells and whistles, is about 2.3%.   

Variable annuities are not a big part of my practice, but they are definitely a valuable tool. 

No one could reasonably condemn them outright, or say they are never appropriate, since they can transfer the risk of outliving money.

It always seems to come down to the appropriateness of immediate annuitization, and whether money should be tied up until that (unlikely) event.

Underpricing is a great example, because either contract owners will be paying too much now, or too much later. How many of would make the commitment now, with our own money? Who would sell a product they would not want to own themselves? I can do better just owning municipal bonds at non qualified, along with handful of long term stocks holdings ( even funds) and don't need the tax protection at qualified. Why wouldn't that strategy be good enough for my clients? 

If they want to transfer risk, do immediate annuitization.

Has anyone found any solid research to convincingly argue otherwise ( leaving the occasional peace of mind case aside)? As advisors, we don't change client's risk tolerance, but we better be educating them instead of pandering to their fearful emotions .

How much is the company taking back in this deal? When Jacobs looked at the illustrated payout on the GMIB from an annuity issued by Guardian, he found that you could go to www.immediateannuities.com and buy the same payout for roughly half as much as the guaranteed growth on the account.

What exactly does that mean?

It means that he can buy an immediate annuity with a rate of 2.5 to 3%?

I went to the website and put this example in... 72yo male no spouse $1,000,000 and the nums came up $8272 for straight, no period certain. This means that they think your going to live for 10 years and their not giving you any interest on your money.

If you take life with 5 year certain the num goes to 7,998 which means you are giving up nearly half your money if you get hit by a beer truck on the way home from the meeting.

If you take L W/ 10yc you give away 10% of your money.

Take LW/15yc and you are guaranteed to get back 1.225MM from your mil.

Lw/20yc = 1.5MM!

Question being, where is he making the comparison? Off the 5 and 10 year? Can't be on the straight life because 2 times zero is still zero.

The twenty year number is a 4.3% number.

So if the AXA (for example) Annuity grew by nothing and paid you out by nothing versus annuitizing your portfolio which grew by the fees in the annuity (let's call them 3.5% non compounded) over the 12 year period and then annuitized as per the above.

(1,000,000 X 3.5%) x 12 + 1,000,000 = 1,420,000  

1,420,000 @ Lw/20yc = 8,844

(8,844 X 12) X 20 = $2,122,560

AXA

(1,000,000 X .000) X 12 + 1,000,000 = 1,000,000

Monthly Income = 10,000

Capital expires in 8.25 years

Annuity pays $8,333/month 240 months = 2,000,000

1,000,000 + 2,000,000 = 3,000,000

$3,000,000 - 2,122,560 = 877,440

I'm open, tell me where this is wrong!

I can do better just owning municipal bonds at non qualified, along with handful of long term stocks holdings ( even funds) and don't need the tax protection at qualified. Why wouldn't that strategy be good enough for my clients? 

Let's keep this to qualified since that's what I sell for the vast majority of my annuities.   The purpose of these annuities has nothing to do with tax protection. 

The answer to why it is not good enough for your clients is because an all equity portfolio inside of a variable annuity should be expected to outperform a bond portfolio that is coupled with a handful of long term stock holdings.  I have been in business for over 10 years.  100% of my VA clients (who have owned a VA longer than 1 year) have lifetime returns of over 10% annually.  Many have been in the 13-15% range.  0% of my clients with mostly bond holdings have returns over 10%.

Again, what makes a VA good is how it impacts investor behavior.   I'm not sure that this can be measured, but it certainly should not be an underestimated factor.

How much is the company taking back in this deal? When Jacobs looked at the illustrated payout on the GMIB from an annuity issued by Guardian, he found that you could go to www.immediateannuities.com and buy the same payout for roughly half as much as the guaranteed growth on the account.

What exactly does that mean?

How much is the company taking back in this deal? When Jacobs looked at the illustrated payout on the GMIB from an annuity issued by Guardian, he found that you could go to www.immediateannuities.com and buy the same payout for roughly half as much as the guaranteed growth on the account.

What exactly does that mean?

I hit "post reply" too soon.   Whom, unfortuately, I didn't quite understand your post, but I think that I can explain what he was talking about. 

The annuitization rates used inside of a VA utilizing a GMIB are B.S.  They either use lower annuitization rates or an age setback or a combination of the two.

I'll make his point with made-up #'s.   The client has $1,000,000.  Using Guardian's annuitiaation rates for the GMIB for his age, sex, and payment option, the insurance company will pay him $3500/month.  If he bought a SPIA with Gualdian, it would pay him $6,900.  If the client shopped the market to find the best payout, he would find company XYZ would pay him $7,000/month for the same thing.  

However, this comparison is very misleading.   Why?  If XYZ is paying $7,000, that is what the client will get.  It does not matter what the GMIB annuitization rates happen to be.  He'll shop the market to get the best rate.  What it really means is that the client is guaranteed to get no worse than $3500. 

Mathematically, it tends to work out that annuitizing the contract using GMIB only makes sense if the rate of return is under 3%.  The higher the GMIB guarantee (5%, 6%, 7%,etc), the lower the payout.  In reality, all GMIBs are about 3%.  In other words, a SPIA will  pay more if the contract earns higher than 3%.

That is a good question, maybe someone here knows.

To me, it is a time a value of money statement. Over time, you could invest the $$ outside an annuity contract and when you are ready for a pension, buy the stream of income.

In order to get the same income as what the annuity will provide, you can assume half the return rate on investments.

Interestingly, you don't half to take half the "risk" to get more than half the return if you invest outside of an annuity.

In other words, historically, a 60% stock portfolio could generate up to 10% return over a long period of time, but it takes 100% stocks to get 12 %. This may be the most underrated concept in the business, and I think sometimes it gets abused in terms of taking advantage of investors, in many ways, not just with advisors.

[quote=anonymous]

AllReit, The insurance company expects to win after paying the commission in the same way that the Mutual Fund company expects to win after paying the commission.  The commission gets paid from annual expenses taken from the client or an up-front sales charge deducted from the account.[QUOTE]

The MF company has no skin in the game, the insurance company is exposed to risk of loss from investments or longevity.

[quote]On the other hand, if you are talking about the insurance company making money from living benefit riders, it is questionable.  Are the insurance companies trying to make money on every contract that they sell?  Yes.  Are they trying to make money on the living benefit riders?  It doesn't appear to be the case.[/quote]

Please, the insurance companies are not naive. They expect to make money on every part of the contract.

[QUOTE] There is a lot of concern in the industry that these riders (GMIB, GMAB, GMWB) may be underpriced.   Therefore, I'd be very careful to only use these riders with very strong insurance companies.[/quote]

Just between you and me, these riders are under priced. You'd better act now to lock in the advantage.

Again, an insurance contract is a zero sum game. If you can't spot the sucker...

The logic circles itself. If a "dumb sucker" gets peace of mind, and the advisor can sleep at night, so be it.

It just seems like that have to use a lot of trolling bait to subdue the sucker, aka:

However, this comparison is very misleading.   Why?  If XYZ is paying $7,000, that is what the client will get.  It does not matter what the GMIB annuitization rates happen to be.  He'll shop the market to get the best rate.  What it really means is that the client is guaranteed to get no worse than $3500. 

Mathematically, it tends to work out that annuitizing the contract using GMIB only makes sense if the rate of return is under 3%.  The higher the GMIB guarantee (5%, 6%, 7%,etc), the lower the payout.  In reality, all GMIBs are about 3%.  In other words, a SPIA will  pay more if the contract earns higher than 3%.

Just between you and me, these riders are under priced. You'd better act now to lock in the advantage.

Again, an insurance contract is a zero sum game. If you can't spot the sucker...

You're making a mistake if you are going to assume that the insurance company is so very smart and always price things correctly.  I freely admit that I have no idea whether the living riders are appropriately priced, overpriced, or underpriced.  The pricing of riders is far from any expertise that I may possess.  However,  it is a fact that many insurance company insiders are afraid that the riders are underpriced.  In your words, the "sucker" in this instance might be the insurance company.  Why do you think that almost all of the contracts now require model portfolios?   

The logic circles itself. If a "dumb sucker" gets peace of mind, and the advisor can sleep at night, so be it.

It just seems like that have to use a lot of trolling bait to subdue the sucker, aka:

First of all, the "dumb suckers" are outperforming what they'd otherwise be doing.  Secondly, I actually agree with you when it comes to "trolling bait".  The product can sell based upon it's own merit and there is no reason for the game playing with annuitization rates.   (Well, there is reason, but it shouldn't be done: "Company A is guaranteeing 5%, but we're guaranteeing 7%")  The companies should simply make the GMIB 3% and use their regular annuitization tables.  The game playing is why I almost always use GMAB riders instead of GMIB riders.

Interesting. But I think what Allreit means by zero sum is, if any aspect of the product is under priced, or if there is any other adverse experience in the contract, wouldn't the insurance company just take out their expenses plus a little profit?

How can they be on the hook  in any way. And don't they just take out their $$$ as cash flow as time goes along.

In other words, what looks like a good deal now could "blow up" in terms of the fine print in the contract.

I don't know - not in any way a specialist or even a very good student of these contracts. My distaste comes from other insurance product experiences - like, ten years ago, saying, "you pay a level premium into this long term care contract. The premium can go up in the future, but we are choosing a quality company ..."

Terms like zero sum and sucker could be useful to just understand the basic premise of the game here.

Look at the flip side: you have a huge need for some type of annuitization for a lot of unprepared boomers. We all know the industry is wetting its pants in anticipation.

How come ... how come. They can't explain to me, an experienced CFP, in simple terms, how they do their magic. Is it because I stopped going to the cool aid edcation days and don't get the complicated message, or is it just that they don't have a product?

I admire your apparent success at researching and finding something, I will need some simple, hard facts before any money moves from simple investments.

Here is an annuity product idea.

I give you $100,000. In 20 years, you give me $100,000 plus 7% per year, compounded, at the end. I can annuitize or not.

If I am afraid of the market, why do I care about all of these fancy allocations, locking crap in, interest rates, and all the rest.

You go ahead and manage the separate account and make sure my money is diversified by investments, time frames, mortality payout obligations and all the rest.

Go ahead, focus on lowering your costs so you can keep the spread, and be ready to offer a competitive annuitization rate when the time comes.

I'll give you a surrender period, but if interest rates head up in the sky in the future ( the dems get elected and achieve a Jimmy Carter social justice with 18% interest rates to help Medicare and Social Security).

Otherwise, I am paying my (cheap) taxes now and keeping my money clean.

Interesting. But I think what Allreit means by zero sum is, if any aspect of the product is under priced, or if there is any other adverse experience in the contract, wouldn't the insurance company just take out their expenses plus a little profit?

No.  The price is contractually guaranteed as are the annuitization payments.  Therefore, if poor investment returns (meaning that people would use the GMIB annuitization) gets coupled with increased longevity (meaning that payments last longer than expected), the insurance company has the possibility of taking a real financial bath.

In other words, what looks like a good deal now could "blow up" in terms of the fine print in the contract.

It could blow up, but not because of fine print.  Rather, it would blow up because the guarantee is only as good as the claims paying ability of the company.  It is important to buy guarantees from top rated companies who can pay the claims.

I will need some simple, hard facts before any money moves from simple investments.

It is for this reason that I use the GMAB rider because my clients can understand it easily.  "The GMAB is a one day guarantee.  Today is  March 27, 2007.   You are investing $250,000.  On March 27, 2017, if you have less than $250,000, the insurance company will make up the difference.  For example, if the value of your account on March 27, 2017 is $200,000, the insurance company will deposit another $50,000.  Adding this rider will lower your return by .35%/year, but it will allow us to invest the money more aggressively."  I also sometimes use a 20 year GMAB.  This guarantees that the money will double in 20 years.  Annuitization is not required with these riders.

I give you $100,000. In 20 years, you give me $100,000 plus 7% per year, compounded, at the end. I can annuitize or not.

If someone has a product that guarantees a true 7% a year, run for the hills!  Paying the claims will bankrupt a company if the return isn't 7%.

If I am afraid of the market, why do I care about all of these fancy allocations, locking crap in, interest rates, and all the rest.

Clients aren't afraid of the market.  They are afraid of losing money.  The living benefits conquers this fear for them.

Go ahead, focus on lowering your costs so you can keep the spread, and be ready to offer a competitive annuitization rate when the time comes.

At 7%, there is no spread. 

Otherwise, I am paying my (cheap) taxes now and keeping my money clean.

If we were talking about non-qualified money, I'd agree with you.  My annuity business is almost exclusively qualified money.

[quote=silouette]

Here is an annuity product idea.

I give you $100,000. In 20 years, you give me $100,000 plus 7% per year, compounded, at the end. I can annuitize or not.

If I am afraid of the market, why do I care about all of these fancy allocations, locking crap in, interest rates, and all the rest.

You go ahead and manage the separate account and make sure my money is diversified by investments, time frames, mortality payout obligations and all the rest.

Go ahead, focus on lowering your costs so you can keep the spread, and be ready to offer a competitive annuitization rate when the time comes.

I'll give you a surrender period, but if interest rates head up in the sky in the future ( the dems get elected and achieve a Jimmy Carter social justice with 18% interest rates to help Medicare and Social Security).

Otherwise, I am paying my (cheap) taxes now and keeping my money clean.

[/quote]

You're only in the 15% tax bracket...it doesn't matter.

Yo, Bobby, want some cheese curls with dat annuity?

Actually, my average tax rate is about 15%. Being a business owner, and expensing the sam out of lifestyle, 15% is cheap. Even though my national muni bond fund went up 10% last year, and has reasonable down market protection, may have to use the liquidity if real estate really tanks.

Howabbout some ranch dressing with dose cheese curls.

[quote=anonymous]

How much is the company taking back in this deal? When Jacobs looked at the illustrated payout on the GMIB from an annuity issued by Guardian, he found that you could go to www.immediateannuities.com and buy the same payout for roughly half as much as the guaranteed growth on the account.

What exactly does that mean?

I hit "post reply" too soon.   Whom, unfortuately, I didn't quite understand your post, but I think that I can explain what he was talking about. 

The annuitization rates used inside of a VA utilizing a GMIB are B.S.  They either use lower annuitization rates or an age setback or a combination of the two.

I'll make his point with made-up #'s.   The client has $1,000,000.  Using Guardian's annuitiaation rates for the GMIB for his age, sex, and payment option, the insurance company will pay him $3500/month.  If he bought a SPIA with Gualdian, it would pay him $6,900.  If the client shopped the market to find the best payout, he would find company XYZ would pay him $7,000/month for the same thing.  

However, this comparison is very misleading.   Why?  If XYZ is paying $7,000, that is what the client will get.  It does not matter what the GMIB annuitization rates happen to be.  He'll shop the market to get the best rate.  What it really means is that the client is guaranteed to get no worse than $3500. 

Mathematically, it tends to work out that annuitizing the contract using GMIB only makes sense if the rate of return is under 3%.  The higher the GMIB guarantee (5%, 6%, 7%,etc), the lower the payout.  In reality, all GMIBs are about 3%.  In other words, a SPIA will  pay more if the contract earns higher than 3%.

[/quote]

Anon,

Please. Using the example as I set out, could you show me where my calculations are wrong?

Set backs, so on so forth, they are all washed out by the fact that I use a zero percent amortization on the annuity and a zero percent growth rate. Further, I compared an appreciated asset against one that did not appreciate.

If the annuity does better than the 6% assumption then the client is always free to shop the dollar value somewhere else, for a better return.

Let me tell you what I did. I got the qoutes from the link provided and then I went to a mortgage website  (http://mortgage-x.com/calculators/amortization.htm) and found the interest rate that corresponded to the monthly I would get from a life with 20year certain immediate annuity. The rate came to 4.3%

If the AXA annuity were at half of that (so that AXA could be kicking in just 3% instead of the 6%) the client would still come out ahead of plan A. Considering, he did 877,000 better at zero interest and at 2.15% he'd get a total of 3.426MM from his million which is 1.3MM more than plan A.

It sounds too good to be true. I'd like to understand how it's not (true).  

[quote=anonymous]Interesting. But I think what Allreit means by zero sum is, if any aspect of the product is under priced, or if there is any other adverse experience in the contract, wouldn’t the insurance company just take out their expenses plus a little profit?

No.  The price is contractually guaranteed as are the annuitization payments.  Therefore, if poor investment returns (meaning that people would use the GMIB annuitization) gets coupled with increased longevity (meaning that payments last longer than expected), the insurance company has the possibility of taking a real financial bath[/quote]

BINGO, except that insurance companies have lots of experience with underwriting and pricing life insurance as well as hedging liabilities. Hence this rider is going to be correctly priced.

An annutisable VA is basicly a wrap of a forward  agreement on a SPIA and a put option on basket of mutual funds.

When the VA expires, you have the option to enter into a SPIA contract, and you can put-back the fund basket for the minimum guaranteed amount (the embedded put option). A forward contract on SPIA is worthless since the Insurance company would be happy to sell you a correctly priced SPIA any time you like. They can offer seemingly generious annuitisation terms, because you will infact be 10 years older when the SPIA is purchased.

While the annuity sums are invested into the underlying mutual funds, the insurance company at the same time takes out long term hedges against a market decline.

Just using a simple example from ivolatilty.com. Assuming Annuitsation contract expiring in 10 years with an underlying portfolio of the SPY etf and 3% gurantee; The embedded european put option is worth $13.20 per $100 over ten years for a roughly straight line M&E expense of 1.3%.

Now if we create all kinds of fancy fee's to bring the total all in expense to ~2.3% pa we do quite well for ourselves.

[quote=silouette]Yo, Bobby, want some cheese curls with dat annuity?[/quote]

How long are you going to hate me for those nasty things that I did with your mommy?

 But you taught me so much! Most of all, how to enjoy Cheetos and Coke for dinner. I don’t hate you, I wuv you Bobby.

[quote=anonymous]

Bobby,

It has been the guarantees that have allowed my clients to make a lot of money.  Clients with guarantees invest more aggressively than clients who don't have guarantees.

[/quote]

Hmm, All the people I run into with VA's that have supposed riders to protect their principal have lost their shirts, are pissed at the people who sold them and should NOT be investing more aggresively because of a rider they will never use.

PS - Silouhette (or however it's accurately spelled) is spot on - do yourself a favor by doing your clients a favor.

BTW I think that John Hancock is coming out with a 6% product in NY soon too, and JH has a AAA to go along with it. That's worth looking at.

BINGO, except that insurance companies have lots of experience with underwriting and pricing life insurance as well as hedging liabilities. Hence this rider is going to be correctly priced.

[quote=Ashland]BINGO, except that insurance companies have lots of experience with underwriting and pricing life insurance as well as hedging�liabilities.�Hence this rider is going to be correctly priced.



Yeah, GM had lots of experience handling their DB plan, too.
Think they got some help from an insurance company? Not sure if these
are priced correctly… What happens if interest rates go dramatically
higher. Don’t remember a time when tax rates were this low, either.
Insurance co’s have not priced in catastrophic natural disasters
correctly into P&C policies. Warren Buffett said so himself. How
do we know that they’ve done so on the life side… [QUOTE]



What is this? Are you trying to see how many irrelavent things you can bring up in the hope that one of them will stick?



The subject of this conversation is if a priori insurance companies expect to make an underwriting profit on VA’s. I say they do, and various ill informed people say that do not intend an underwriting profit.



If the insurance company makes an underwriting profit on the VA, then you have paid too much.



This question has nothing to do with P&C insurance, GM’s issues
with its pension plan, or interest rate movements, or current tax rates.



I’m not sure how many times I have to repeat this: A single VA contract
is zero sum, there is a winner and a loser. If you can’t see the
sucker…

[quote]The way these annuities get cooked is that we have a 10% down
year & our client’s taking out 6%. The 2.5% charge is against the
insurance benefit – now 16% lower the contract has to grow 20% +
8%(for the next yr’s w/d) to get back to even. One bad year… could
be next yr! So, I don’t sell them for inflation protection… just 6%
against current principal & the possibility if the annuitant dies
before 85 that the bene gets the full amt back.[/quote]



Grrr, we are talking about different things. The initial part of this
thread had to do with VA’s that have an investment period and then
converted to a SPIA. These a basicly a wrap of a forward agreement on a
SPIA, a european put option on the annuitisation date, and a “death
put”.



Your talking about VA’s with only a “death put”. Now this a basicly a
life insurance contract for the difference between the initial
investment amount and the current value of the fund basket.



A small contract that is surely worth less than what you are paying for it.

"BINGO, except that insurance companies have lots of experience with underwriting and pricing life insurance as well as hedging liabilities. Hence this rider is going to be correctly priced."

Neither one of us have the knowledge to know whether the living benefits are priced correctly.  I'm just pointing out that there is plenty of concern inside the industry that the riders are not appropriately priced.  It wouldn't be the first time that insurance companies didn't price things correctly.  Look at what happened in the past with DI for physicians.  They still can't get a handle on LTCi pricing.

"...for a roughly straight line M&E expense of 1.3%.

Now if we create all kinds of fancy fee's to bring the total all in expense to ~2.3% pa we do quite well for ourselves. "

Let's pretend that your example is exactly how the insurance company does it.  They pay 1.3% to hedge the contract and .8% for the typical underlying fund for a total of 2.1%.  That would leave only .2% to pay death clams, sales commissions, and all other expenses and still leave room for a profit.  (the 2.3% is an all-in figure that includes fund expenses.) 

[quote=Ashland]

BINGO, except that insurance companies have lots of experience with underwriting and pricing life insurance as well as hedging liabilities. Hence this rider is going to be correctly priced.

Yeah, GM had lots of experience handling their DB plan, too. Think they got some help from an insurance company? Not sure if these are priced correctly... What happens if interest rates go dramatically higher. Don't remember a time when tax rates were this low, either. Insurance co's have not priced in catastrophic natural disasters correctly into P&C policies. Warren Buffett said so himself. How do we know that they've done so on the life side...

The way these annuities get cooked is that we have a 10% down year & our client's taking out 6%. The 2.5% charge is against the insurance benefit -- now 16% lower the contract has to grow 20% + 8%(for the next yr's w/d) to get back to even. One bad year... could be next yr! So, I don't sell them for inflation protection... just 6% against current principal & the possibility if the annuitant dies before 85 that the bene gets the full amt back.[/quote]

The income benefit amount doesn't fall with the market. You just made yourself look stupid.

The income benefit amount doesn't fall with the market. You just made yourself look stupid.

Seems to be Bobby’s forte. Overconfident with an average IQ.

[quote=anonymous]

“BINGO, except that insurance companies have lots of experience with underwriting and pricing life insurance as well as hedging liabilities. Hence this rider is going to be correctly priced.”

Neither one of us have the knowledge to know whether the living benefits are priced correctly.  I'm just pointing out that there is plenty of concern inside the industry that the riders are not appropriately priced.  It wouldn't be the first time that insurance companies didn't price things correctly.  Look at what happened in the past with DI for physicians.  They still can't get a handle on LTCi pricing. [/quote]

Again, you are bringing up things that are not relavent to the discussion at hand. LTC insurance involves huge assumptions about how much LTC people will need and how much it will cost. VA's and thier embedded options are a mature industry.

On a VA, the question is the pricing of the death put, and annuitisation put options. If you think these are mispriced, go buy a VA for yourself.

[quote]

"...for a roughly straight line M&E expense of 1.3%.

Now if we create all kinds of fancy fee's to bring the total all in expense to ~2.3% pa we do quite well for ourselves. "

Let's pretend that your example is exactly how the insurance company does it.  They pay 1.3% to hedge the contract and .8% for the typical underlying fund for a total of 2.1%.  That would leave only .2% to pay death clams, sales commissions, and all other expenses and still leave room for a profit.  (the 2.3% is an all-in figure that includes fund expenses.) 

So Allreit, do you favor any annuity in any circumstance?

If you think these are mispriced, go buy a VA for yourself.

I don't have an opinion one way or another whether they are mispriced.  I'm simply telling you that many inside of the industry think that they are.  I won't buy a VA for myself because they are not appropriate for my situation.  I will continue to sell them to my clients when appropriate

VA's and thier embedded options are a mature industry.

There is nothing mature about the living benefits of VA's and how these will effect investor behavior.  Despite the options, as has been previously mentioned, if the market performance is poor and people live long, the insurance companies face serious risk.  This is starting to become an issue with the rating services.

Fund expenses to the insurance company are less than 0.8% since these are insitutional shares and/or the company gets kickback (12b-1) on them.  

It is the mere fact that they are institutional shares that keep the fund expenses to around .8.  If they weren't institutional shares and the client is not paying an upfront sales charge, the fund expenses would typically be higher, sometimes significantly so.  You are certainly correct about the 12b-1 fee.  This can range between 0% and .25%.

The sales comission is paid by the client, and not an ongoing expense.

The fact remains that if the total expenses are 2.3%, money has to come from this pot of money to pay the sales charges.   The client is not paying 2.3% + sales charges.  They are paying 2.3% total. 

[quote=anonymous]

If you think these are mispriced, go buy a VA for yourself.

I don't have an opinion one way or another whether they are mispriced.  I'm simply telling you that many inside of the industry think that they are.  I won't buy a VA for myself because they are not appropriate for my situation.  I will continue to sell them to my clients when appropriate

VA's and thier embedded options are a mature industry.

There is nothing mature about the living benefits of VA's and how these will effect investor behavior.  Despite the options, as has been previously mentioned, if the market performance is poor and people live long, the insurance companies face serious risk.  This is starting to become an issue with the rating services.

Fund expenses to the insurance company are less than 0.8% since these are insitutional shares and/or the company gets kickback (12b-1) on them.  

It is the mere fact that they are institutional shares that keep the fund expenses to around .8.  If they weren't institutional shares and the client is not paying an upfront sales charge, the fund expenses would typically be higher, sometimes significantly so.  You are certainly correct about the 12b-1 fee.  This can range between 0% and .25%.

The sales comission is paid by the client, and not an ongoing expense.

The fact remains that if the total expenses are 2.3%, money has to come from this pot of money to pay the sales charges.   The client is not paying 2.3% + sales charges.  They are paying 2.3% total. 

[/quote]

Give it up on these retards. Let them continue to bore people to death with their lame-assed mutual funds and wrap accounts. I love telling their clients that the first thing I'm gonna do is turn off the broker meter (fees). They love it when that goes away.

Just tell 'em ‘yer smarter than a registered rep an’ didn’t hurt your head playing hockey, Bobby.

[quote=silouette]So Allreit, do you favor any annuity in any circumstance?[/quote]

The only Annuity product I recomend are Vanguard branded SPIA’s with the CPI link option.



As an AEL shareholder I strongly encourage other people to buy EIA’s

[quote]The weighted average gross spread (annual aggregate yield on invested
assets over the aggregate annual cost of money on annuities) reached an all-
time high of 2.73% on its aggregate annuity fund values, compared with 2.48%
for 2005.



American Equity’s annuity
reserves remain well protected by surrender charges with over 97% of annuity
values within the contractual surrender charge period at December 31, 2006.
The average remaining surrender charge period was 10.1 years at December 31,
2006, with an average remaining surrender charge percentage of 13.4%. [/quote]



From the 2006 AEL’s year end earnings release…

Hmm, All the people I run into with VA's that have supposed riders to protect their principal have lost their shirts, are pissed at the people who sold them and should NOT be investing more aggresively because of a rider they will never use.

Feel free to post one specific example.  How much did they invest?  What is the account value today?

Why are the riders, "supposed riders"?  Why shouldn't the riders allow someone to invest more aggressively?

[quote=anonymous]

Why are the riders, "supposed riders"?  Why shouldn't the riders allow someone to invest more aggressively?

[/quote]

You are like a Cadillac salesman preaching to a bunch of KIA salesman. They can argue price, but have no clue about value. Last time I checked, people like Cadillacs better.

By the way...there is a very large insurance company that is raising it's upfront commission by 1%. Option A will now be 8.25%.

[quote=anonymous]

Hmm, All the people I run into with VA's that have supposed riders to protect their principal have lost their shirts, are pissed at the people who sold them and should NOT be investing more aggresively because of a rider they will never use.

Feel free to post one specific example.  How much did they invest?  What is the account value today?

[/quote]

I have a client who rolled over his 401k of $582,000 and the bank broker put him into an IGN Smartdesign VA. That was June 2003. The value is now $627,000. That's a compounded return of around 2%. Still have huge surrender charge. Returns are have been below inflation in 3 of the best market years in a long time.

I thought the client's wife was going to throw up when I told her the broker got a $40,000 commission. They never heard from the guy one time!

[quote=EDJ to RIA]I have a client who rolled over his 401k of $582,000
and the bank broker put him into an IGN Smartdesign VA. That was June
2003. The value is now $627,000. That’s a compounded return of around
2%. Still have huge surrender charge. Returns are have been below
inflation in 3 of the best market years in a long time.

I thought the client's wife was going to throw up when I told her the broker got a $40,000 commission. They never heard from the guy one time![/quote]

LOL . Did the client barf?

Bank Brokers!
What are they good for?
Absolutely Nothing!

[quote=EDJ to RIA][quote=anonymous]

Hmm, All the people I run into with VA's that have supposed riders to protect their principal have lost their shirts, are pissed at the people who sold them and should NOT be investing more aggresively because of a rider they will never use.

Feel free to post one specific example.  How much did they invest?  What is the account value today?

[/quote]

I have a client who rolled over his 401k of $582,000 and the bank broker put him into an IGN Smartdesign VA. That was June 2003. The value is now $627,000. That's a compounded return of around 2%. Still have huge surrender charge. Returns are have been below inflation in 3 of the best market years in a long time.

I thought the client's wife was going to throw up when I told her the broker got a $40,000 commission. They never heard from the guy one time!

[/quote]

It's got to be irritating to have all of those dollars in an annuity so you can't make money off of them, yourself.

Did you tell them that the bank boy only made about $1,500.00 of the $40,000 that the bank got paid?

[quote=AllREIT] [quote=silouette]So Allreit, do you favor any annuity in any circumstance?[/quote]

The only Annuity product I recomend are Vanguard branded SPIA's with the CPI link option.

As an AEL shareholder I strongly encourage other people to buy EIA's

[quote]The weighted average gross spread (annual aggregate yield on invested assets over the aggregate annual cost of money on annuities) reached an all- time high of 2.73% on its aggregate annuity fund values, compared with 2.48% for 2005.

American Equity's annuity reserves remain well protected by surrender charges with over 97% of annuity values within the contractual surrender charge period at December 31, 2006. The average remaining surrender charge period was 10.1 years at December 31, 2006, with an average remaining surrender charge percentage of 13.4%. [/quote]

From the 2006 AEL's year end earnings release....

[/quote]

 Looks pretty risky.

If we look at a few roughly historical numbers: 

10% stock returns and 6% bond returns.

60/40 mutual fund portfolio
8.4% average pre-expense return
.6% expense ratio
7.8% return after taxes

So the cost of protecting the portfolio from market risk by adding bonds is 2.2%.  This is about equal to the cost of insurance in a GMIB VA.  So cost is really only an issue if the client is comparing it to a stock only portfolio.

Other advantages of the VA:
1)  We don't have to worry about sequence of returns.  Even a 10% average rate of return can run out of money of the first few years of withdrawal are negative.
2)  We have just come off of a 20 year bull market in bonds.  Without being too predictive, using historical rates of return for bond funds is being awfully optomistic.
3)  Even 60/40 portfolios are subject to corrections that may be emotionally difficult for the client (or they might not like that one fund has been underperforming the others).  Seeing the benefit value continually increase helps the client weather volatility.
4)  What if the next 20 years aren't like the last 20?  20 years from now we may have different asset allocation models than we do now (just as ours are different from those 20 years ago).
5)  What if a catastrophic geopolitical event happens at the wrong time for your retired client?

When used correctly VAs can be great tools for risk management, just as balanced portfolios are. 

Here’s some real numbers…

10-11-2002 value: 143,200.00

3-28-2007 value: $290,030.93 (Net of ALL fees)

Standard death benefit, GMIB

No need to defend performance.

EDJ to RIA: I have a client who rolled over his 401k of $582,000 and the bank broker put him into an IGN Smartdesign VA. That was June 2003. The value is now $627,000. That's a compounded return of around 2%. Still have huge surrender charge. Returns are have been below inflation in 3 of the best market years in a long time.

Is the point of this example to show that VA's are bad?  If so, it's a poor example because you could have just as easily found someone with the IDENTICAL VA who had an incredible return over the exact same time period.  This is nothing more than an example of someone who did a terrible job picking subaccounts or possibly an EIA and not a VA.

[quote=Bobby Hull]

Here’s some real numbers…

10-11-2002 value: 143,200.00

3-28-2007 value: $290,030.93 (Net of ALL fees)

Standard death benefit, GMIB

[quote=Ashland] [quote=Bobby Hull]

Here's some real numbers...

10-11-2002 value: 143,200.00

3-28-2007 value: $290,030.93 (Net of ALL fees)

Standard death benefit, GMIB

[/quote]

Thanks, Bobby! Don't expect THIS market going forward, though, do we??? We expect somewhat of a muddling one with a very different demographic trend from the last 20 yrs. 6 Pct w/d for a 65 yr old off of the current amount invested for 30 + yrs may be a VERY good thing!

For a piece of their money![/quote]

Actually, I'm prepared for it to be pretty dicey for a number of years. It's critical that people own something that can outperform the market like this annuity and to own investments that don't have anything to do with the stock market. Also, EIA's can help buffer the bad years. In short, I'm prepared for all 3 possibilities of market direction. Don't tell anyone, but it's easy to steal clients from brokers who are only positioned for an up market.

[quote=Bobby Hull] [quote=Ashland] [quote=Bobby Hull]

Here’s some real numbers…

10-11-2002 value: 143,200.00

3-28-2007 value: $290,030.93 (Net of ALL fees)

Standard death benefit, GMIB

[/quote] Thanks, Bobby! Don’t expect THIS market going forward, though, do we??? We expect somewhat of a muddling one with a very different demographic trend from the last 20 yrs. 6 Pct w/d for a 65 yr old off of the current amount invested for 30 + yrs may be a VERY good thing! For a piece of their money![/quote]

Actually, I’m prepared for it to be pretty dicey for a number of years. It’s critical that people own something that can outperform the market like this annuity and to own investments that don’t have anything to do with the stock market. Also, EIA’s can help buffer the bad years. In short, I’m prepared for all 3 possibilities of market direction. Don’t tell anyone, but it’s easy to steal clients from brokers who are only positioned for an up market.

[quote=anonymous]

EDJ to RIA: I have a client who rolled over his 401k of $582,000 and the bank broker put him into an IGN Smartdesign VA. That was June 2003. The value is now $627,000. That's a compounded return of around 2%. Still have huge surrender charge. Returns are have been below inflation in 3 of the best market years in a long time.

Is the point of this example to show that VA's are bad?  If so, it's a poor example because you could have just as easily found someone with the IDENTICAL VA who had an incredible return over the exact same time period.  This is nothing more than an example of someone who did a terrible job picking subaccounts or possibly an EIA and not a VA.

[/quote]

Exactly why it's important to have an advisor whose compensation is tied directly to the client's success (no big losses & reasonable gains). I just don't believe that commissioned brokers are in the best interest of the client, especially when they have no fiduciary responsibility.

[quote=EDJ to RIA][quote=anonymous]

EDJ to RIA: I have a client who rolled over his 401k of $582,000 and the bank broker put him into an IGN Smartdesign VA. That was June 2003. The value is now $627,000. That's a compounded return of around 2%. Still have huge surrender charge. Returns are have been below inflation in 3 of the best market years in a long time.

Is the point of this example to show that VA's are bad?  If so, it's a poor example because you could have just as easily found someone with the IDENTICAL VA who had an incredible return over the exact same time period.  This is nothing more than an example of someone who did a terrible job picking subaccounts or possibly an EIA and not a VA.

[/quote]

Exactly why it's important to have an advisor whose compensation is tied directly to the client's success (no big losses & reasonable gains). I just don't believe that commissioned brokers are in the best interest of the client, especially when they have no fiduciary responsibility.

[/quote]

Sounds like someone's been drinking the "fiduciary" Kool Aid.

I have to agree with Bobby Hull on this one.  An ethical advisor is an ethical advisor regardless of mode of compensation. 

(In the spirit of fair disclosure.  I do some of my business on a commission basis and some with fees.)

Yeah, I'm sorry, but, Not for nothing...

The other morning on the Today show they had this kid who was brain damaged by self asfixiation and they're asking him about it... I'm saying to myself, this is like when the hurricane goes through town and they ask the hommnion who decided to "ride it out" what his advice is... Why the heck do we want to know what this idjit has to say?

He apparently wasn't worth asking opinions of BEFORE he almost won himself a Darwin Award (don't go to http://www.darwinawards.com/ unless you have hours to kill!) Now that he's dainbramaged he's better?

I'm sorry, but I get this same feeling when many of the exjoners speak in absolutes! Gee, maybe you DIDN'T learn your lesson at Jones!

Commissioned Brokers have THE real reason to put client's interests first. They'll sue your kulow back to the ice age!

Asphyxiation

I told myself to spell check!

If anything else is misspelled, I meant to do it that way.

Commissioned brokers who sell VA's are funny!  They're so fixated on how great they are they don't realize every single client they have in annuities that realize one day how shi*** the products are and how huge the commissions are will end up hating them.

You can take a salesperson out of their coffee stained polyester suit - but you are what you are.  Don't try to rationalize the sale you make for a monster payout for well thought out expert advice for turbulent markets.  I wonder how many VAs or EIAs Warren Buffet has?

If annuities are so great, then why do they have to have sickly commissions?  I suppose there's a logical reason - but to me annuity sellers are kind of like a mirage in the desert:  You think it's a drinking fountain after days of dehydration or to realize your making out with a rattle snake.

[quote=brandnewadvisor]

Commissioned brokers who sell VA's are funny!  They're so fixated on how great they are they don't realize every single client they have in annuities that realize one day how shi*** the products are and how huge the commissions are will end up hating them.

You can take a salesperson out of their coffee stained polyester suit - but you are what you are.  Don't try to rationalize the sale you make for a monster payout for well thought out expert advice for turbulent markets.  I wonder how many VAs or EIAs Warren Buffet has?

If annuities are so great, then why do they have to have sickly commissions?  I suppose there's a logical reason - but to me annuity sellers are kind of like a mirage in the desert:  You think it's a drinking fountain after days of dehydration or to realize your making out with a rattle snake.

[/quote]

You sure picked a good name for yourself, even though we would've figured it out with from this post. When you fail out of this business, remember that it was because you saw yourself as an "advisor" and not a salesman.

[quote=Whomitmayconcer]

Asphyxiation

I told myself to spell check!

If anything else is misspelled, I meant to do it that way.

[quote=EDJ to RIA] [quote=anonymous]

Hmm, All the people I run into with VA’s that have supposed riders to protect their principal have lost their shirts, are pissed at the people who sold them and should NOT be investing more aggresively because of a rider they will never use.

Feel free to post one specific example. How much did they invest? What is the account value today?

[/quote]

I have a client who rolled over his 401k of $582,000 and the bank broker put him into an IGN Smartdesign VA. That was June 2003. The value is now $627,000. That’s a compounded return of around 2%. Still have huge surrender charge. Returns are have been below inflation in 3 of the best market years in a long time.

I thought the client’s wife was going to throw up when I told her the broker got a $40,000 commission. They never heard from the guy one time!

This really happened. I recently transfered in a victim (76) from a local bank broker. Back in 2002 the client wanted more than what cd's were paying on his 120k so the clerk introduced him to Mr Jones their floating wachovia broker. He could get him 3.1 guaranteed with some type of bonus going in, for 7 years. CD's were 1.9 and tax deferral, umm good. His wife retired from the bank Wachovia bought out. They were very trusting of the advise they received. Long story short. He sold them a Hartford Leaders Variable Annuity, with a DCA (bonus) and earned them 3.1% fixed (fixed sub-account) as a fixed annuity. I helped him divide the principle by the account value to see what he as earned, well its not 3.1% because it cost over 2% a year to own. The jerk is still in business, but has never called them in 5 years even though that "fixed" annuity earned him 9500 bucks.

I know I am ranting, but I just tired of these type jerks ruining our industry.

Yep. A good advisor just educates clients about these crappy money moves. And those clients tell their friends … and eventually you end up with all the business you need. You see, the jerks make us more valuable. True economic value.

When you fail out of this business, remember that it was because you saw yourself as an "advisor" and not a salesman.

Speaking of the desert and the  metaphor of making out with a rattle snake, from what wellspring of wisdom flows all of this gratuitous fatherly tough love?

[quote=Bamzor]

This really happened. I recently transfered in a victim (76) from a local bank broker. Back in 2002 the client wanted more than what cd's were paying on his 120k so the clerk introduced him to Mr Jones their floating wachovia broker. He could get him 3.1 guaranteed with some type of bonus going in, for 7 years. CD's were 1.9 and tax deferral, umm good. His wife retired from the bank Wachovia bought out. They were very trusting of the advise they received. Long story short. He sold them a Hartford Leaders Variable Annuity, with a DCA (bonus) and earned them 3.1% fixed (fixed sub-account) as a fixed annuity. I helped him divide the principle by the account value to see what he as earned, well its not 3.1% because it cost over 2% a year to own. The jerk is still in business, but has never called them in 5 years even though that "fixed" annuity earned him 9500 bucks.

I know I am ranting, but I just tired of these type jerks ruining our industry.

[/quote]

You're lying. Anyone who understands annuities knows that the money in the fixed bucket isn't exposed to M&E charges. Please tell us another story that "really happened."

This is the truth, how could I make something like this up? How could you justify this behavior. Is this a method you used Bobby? I will give you the figures later, they do equate to below 3% annual rate of return. Also, how does the broker get paid if there are no underling charges. In your mind are you justifing the insanity of all things annuities? Annuities are not bad, it's just bad people or sometimes desperate people use them the wrong way. Bobby you are a proponent for annuities you should be the first to denounce the abuse.

[quote=Bamzor]

This is the truth, how could I make something like this up? How could you justify this behavior. Is this a method you used Bobby? I will give you the figures later, they do equate to below 3% annual rate of return. Also, how does the broker get paid if there are no underling charges. In your mind are you justifing the insanity of all things annuities? Annuities are not bad, it's just bad people or sometimes desperate people use them the wrong way. Bobby you are a proponent for annuities you should be the first to denounce the abuse.

[/quote]

You could make this up the same way that any liar makes things up....you make it up! There are no fees charged to fixed buckets. If you're going to run your mouth about annuities, you ought to know something about them. Especially, if you're going to make up a story.

Last time, it is the truth.  Answer this, have you sold a variable annuity under the pretence it is a fixed annuity?  The only reason I put it in the post is that this is the first time I have ever seen or ever heard of someone using it this way.

[quote=Bamzor]Last time, it is the truth.  Answer this, have you sold a variable annuity under the pretence it is a fixed annuity?  The only reason I put it in the post is that this is the first time I have ever seen or ever heard of someone using it this way. [/quote]

Why would you argue about something like this? Go call Hartford and report back to us. There are NO fees on the fixed bucket. There was probably another reason that it didn't perform well and you were ignorant enough to give erroneous counsel to your client. That makes YOU a danger to others. You don't know as much as you think you know and you don't even know it.

And no...I've never tried to turn a VA into a Fixed annuity. In fact, I've only sold one fixed annuity in my life and it was at the client's insistence, against my advice. I did it anyway because I wanted the commission. Someone was going to get paid and it might as well have been me.

I am in the office. I did call Hartford, Bobby. I didn't blow up the other broker infront of the client either. You assume too much. I called Hartford as soon as I was broker of record. The individual I spoke with immediately understood what the broker had done, he said something to the extent, "This is not good...Hartford depends on the broker to represent the product for what it is." By the way if you have any hartford va's their fixed sub account went from 3.1 to 3% this month.

For your enjoyment below and  your quickness to call someone a liar.  Do the math below and see if it comes close to 3.1 or even 3. Now divide principle by value then by 4.5 years. 

<?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" /><?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />April 10, 2007 - Daily Information

Investment Choice
Abbreviation

Future
Contribution
Allocation

Rate/No. Units

Unit
Value

Investment Choice
Value

% of Contract
Value*

Fixed Acc - 3% Minimum

100

$129,645.99

100%

Total

$129,645.99

* Due to rounding totals may not equal 100%

Purchase Date:
September 3, 2002

Product Name:
<?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Hartford Leaders Outlook 1

Product Type:
IRA

Contract Status:
Inforce

< langauge="">  

March 30, 2007 - Monthly Information

Total Premium Payments

$116,568.39

Total Surrenders2

$0.00

Month-End Available Free Withdrawal Value2,3

$129,645.99

Month-End Surrender Value2,3

$129,645.99

The Hartford's Principal First:

Not Elected

Death Benefit Information

Death Benefit5

$129,645.99

Maximum Anniversary Value5

$127,903.26

Earnings Protection Benefit Value

Not Elected

Optional Death Benefit

Not Elected

Click on the links above for additional information about each value.

< langauge="">

<o:p> </o:p>

1 This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice.

2 Taxable distributions (and certain deemed distributions) are subject to ordinary income tax. Any distributions taken prior to age 59 1/2 may be subject to a 10% federal income tax penalty. For SIMPLE IRA plans, if the effective date of the plan is less than two years, you may be subject to a 25% federal income tax penalty if you are under age 59 1/2 instead of the 10% penalty. Hartford Life cannot provide tax advice and strongly recommends consulting with a tax advisor for any questions pertaining to distributions from retirement plans.

3 This amount is current as of March 30, 2007. Market and Surrender values change daily and certain contracts may require additional calculations which will be computed upon receipt of a written request.

4 A valid value is not available to display at this time.

5 This amount is current as of March 30, 2007. The actual values may differ and will be based on the decedent, age at death, and the highest anniversary value (adjusted for distributions/premium payments) attained prior to the earlier of the date of death or decedent's 81st or 85th Birthday (Please click on the link for specific contract details).

This quote is not equivalent to the final Death Benefit. The Death Benefit will be calculated on all contracts associated with this client the day we receive the certified death certificate. Once the Death Benefit is calculated, the benefit amount remains invested and is subject to market fluctuation until complete settlement instructions are received. Contractual and prospectus provisions will be the sole and final determinant of all Death Benefits.

Death Benefits may be subject to ordinary income tax.

6 This amount is current as of March 30, 2007. Any withdrawal request that exceeds the Benefit Payment/Lifetime Benefit Payment will cause your Benefit Amount and Benefit Payment/Lifetime Benefit Payment to reset.

There was probably another reason that it didn't perform well and you were ignorant enough to give erroneous counsel to your client. That makes YOU a danger to others. You don't know as much as you think you know and you don't even know it.

On this professional forum, and independent of the particular facts, the quickness to thoughtlessly cross the line in flaming or " humoring ", for that matter, brings to mind the whole Don Imus question.

Everywhere you look, you see the truth emerging.

Because, you are jumping up and down the levels of context and responsibility regarding our profession.

So, when you call someone a liar, or mock them for trying to be a financial advisor instead of a sales person, you inflict damage upon the professional consciousness of the entire forum.

You can't just bludgeon your way through around here.

Experience, education, ethics - these tend to engender respect.

[quote=Bamzor]

I am in the office. I did call Hartford, Bobby. I didn't blow up the other broker infront of the client either. You assume too much. I called Hartford as soon as I was broker of record. The individual I spoke with immediately understood what the broker had done, he said something to the extent, "This is not good...Hartford depends on the broker to represent the product for what it is." By the way if you have any hartford va's their fixed sub account went from 3.1 to 3% this month.

For your enjoyment below and  your quickness to call someone a liar.  Do the math below and see if it comes close to 3.1 or even 3. Now divide principle by value then by 4.5 years. 

<?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" /><?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />April 10, 2007 - Daily Information

Investment Choice
Abbreviation

Future
Contribution
Allocation

Rate/No. Units

Unit
Value

Investment Choice
Value

% of Contract
Value*

Fixed Acc - 3% Minimum

100

$129,645.99

100%

Total

$129,645.99

* Due to rounding totals may not equal 100%

Purchase Date:
September 3, 2002

Product Name:
<?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Hartford Leaders Outlook 1

Product Type:
IRA

Contract Status:
Inforce

< langauge="">  

March 30, 2007 - Monthly Information

Total Premium Payments

$116,568.39

Total Surrenders2

$0.00

Month-End Available Free Withdrawal Value2,3

$129,645.99

Month-End Surrender Value2,3

$129,645.99

The Hartford's Principal First:

Not Elected

Death Benefit Information

Death Benefit5

$129,645.99

Maximum Anniversary Value5

$127,903.26

Earnings Protection Benefit Value

Not Elected

Optional Death Benefit

Not Elected

Click on the links above for additional information about each value.

< langauge="">  

1 This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice.

2 Taxable distributions (and certain deemed distributions) are subject to ordinary income tax. Any distributions taken prior to age 59 1/2 may be subject to a 10% federal income tax penalty. For SIMPLE IRA plans, if the effective date of the plan is less than two years, you may be subject to a 25% federal income tax penalty if you are under age 59 1/2 instead of the 10% penalty. Hartford Life cannot provide tax advice and strongly recommends consulting with a tax advisor for any questions pertaining to distributions from retirement plans.

3 This amount is current as of March 30, 2007. Market and Surrender values change daily and certain contracts may require additional calculations which will be computed upon receipt of a written request.

4 A valid value is not available to display at this time.

5 This amount is current as of March 30, 2007. The actual values may differ and will be based on the decedent, age at death, and the highest anniversary value (adjusted for distributions/premium payments) attained prior to the earlier of the date of death or decedent's 81st or 85th Birthday (Please click on the link for specific contract details).

This quote is not equivalent to the final Death Benefit. The Death Benefit will be calculated on all contracts associated with this client the day we receive the certified death certificate. Once the Death Benefit is calculated, the benefit amount remains invested and is subject to market fluctuation until complete settlement instructions are received. Contractual and prospectus provisions will be the sole and final determinant of all Death Benefits.

Death Benefits may be subject to ordinary income tax.

6 This amount is current as of March 30, 2007. Any withdrawal request that exceeds the Benefit Payment/Lifetime Benefit Payment will cause your Benefit Amount and Benefit Payment/Lifetime Benefit Payment to reset.

[/quote]

I'll take back the liar part. When I back out the 4%  bonus, I get an average of 3.15%/year. What do you get when you back it out?

Nice try, Bobby.

[quote=silouette]

There was probably another reason that it didn't perform well and you were ignorant enough to give erroneous counsel to your client. That makes YOU a danger to others. You don't know as much as you think you know and you don't even know it.

On this professional forum, and independent of the particular facts, the quickness to thoughtlessly cross the line in flaming or " humoring ", for that matter, brings to mind the whole Don Imus question.

Everywhere you look, you see the truth emerging.

Because, you are jumping up and down the levels of context and responsibility regarding our profession.

So, when you call someone a liar, or mock them for trying to be a financial advisor instead of a sales person, you inflict damage upon the professional consciousness of the entire forum.

You can't just bludgeon your way through around here.

Experience, education, ethics - these tend to engender respect.

[/quote]

Just to be helpful, here is some information:

On a 0-100 scale...

Your estimate of my level of interest in your respect for me = 100

My actual level of interest = 0

It's quite a variance, don't you think?

Just improve your behaviour or go away and your clever attacks will become meaningless … otherwise, they do matter here, whether you know what you know, or don’t know, or think you know… why do you try so hard to be someone it appears you are not?

[quote=silouette]Just improve your behaviour or go away and your clever attacks will become meaningless ... otherwise, they do matter here, whether you know what you know, or don't know, or think you know... why do you try so hard to be someone it appears you are not?[/quote]

Silouette, this is a forum where everone's opinion is just as valid as yours and mine, until proven wrong.  Frankly, I think it's a good thing when others challenge 'what I know'; it forces me to continually re-evaluate what I (and others) 'know' what is best for my clients. 

Why do you fear it?

Ideas don't scare me.

Just for the record, I am at least open-minded about annuities and always want to learn something new.

In the context of a discussion about annuities, in addition to calling another professional a liar, this is the kind of badgering and verbally abuse crap here that needs to exposed, in my opinion:

When you fail out of this business, remember that it was because you saw yourself as an "advisor" and not a salesman.

[quote=silouette]

Ideas don't scare me.

Just for the record, I am at least open-minded about annuities and always want to learn something new.

In the context of a discussion about annuities, in addition to calling another professional a liar, this is the kind of badgering and verbally abuse crap here that needs to exposed, in my opinion:

When you fail out of this business, remember that it was because you saw yourself as an "advisor" and not a salesman.

[/quote]

If it makes you feel any better, I just sold a $100,000 VA. Sometimes I wonder if I could just attach a note to a dog and have him sell these things. It's just that easy!

[quote=silouette]

Ideas don't scare me.

Just for the record, I am at least open-minded about annuities and always want to learn something new.

In the context of a discussion about annuities, in addition to calling another professional a liar, this is the kind of badgering and verbally abuse crap here that needs to exposed, in my opinion:

When you fail out of this business, remember that it was because you saw yourself as an "advisor" and not a salesman.

[/quote]

If you're not a liar, what do you care?  It doesn't matter what people call you.  What matters is what you answer to.

If it makes you feel any better, I just sold a $100,000 VA. Sometimes I wonder if I could just attach a note to a dog and have him sell these things. It's just that easy!

That is ironic, because I had a guy call me up today and set an appointment for tomorrow. His  $130,000 ten year annuity is maturing, and he wants to roll it over to a new one in his IRA, because he is getting screwed on the fixed interest rate.

We talked about alternatives, found out had has owned securities in the past and felt comfortable and had success, and guess what, I could slam him into another fixed annuity or I could show him some real options.

Not saying I am right and you are wrong, but I do find your comment about a dog just a little patronizing.

One thing about life and working in this business, it is not entirely impossible that there is some kind of connection between apparently unrelated events.

If you're not a liar, what do you care?  It doesn't matter what people call you.  What matters is what you answer to.

http://powerpresentations.blogs.com/my_weblog/2006/05/when_d id_you_st.html

So, have you stopped beating your wife?

I guess what I'm saying is, some of Bobby's comments make me feel cheap and dirty, just logging into the forum. For myself, I'd rather choose that feeling, like staying up too late and having extra drinks and smoking a cigar.

If there were not so many smart, thoughtful people here, I probably wouldn't care.

Maybe he could get his needs met somewhere else. There must be some forum where people like to talk sales, and beat on each other, in a what many folks would consider, dysfunctional sort of way.

Why are you so interested in defending Bobby's right to bully along with his right to express his "professional" ideas? 

[quote=silouette]

Ideas don’t scare me.

Just for the record, I am at least open-minded about annuities and always want to learn something new.

In the context of a discussion about annuities, in addition to calling another professional a liar, this is the kind of badgering and verbally abuse crap here that needs to exposed, in my opinion:

When you fail out of this business, remember that it was because you saw yourself as an "advisor" and not a salesman.

[quote=silouette]

If you're not a liar, what do you care?  It doesn't matter what people call you.  What matters is what you answer to.

http://powerpresentations.blogs.com/my_weblog/2006/05/when_d id_you_st.html

So, have you stopped beating your wife?

I guess what I'm saying is, some of Bobby's comments make me feel cheap and dirty, just logging into the forum. For myself, I'd rather choose that feeling, like staying up too late and having extra drinks and smoking a cigar.

If there were not so many smart, thoughtful people here, I probably wouldn't care.

Maybe he could get his needs met somewhere else. There must be some forum where people like to talk sales, and beat on each other, in a what many folks would consider, dysfunctional sort of way.

Why are you so interested in defending Bobby's right to bully along with his right to express his "professional" ideas? 

[/quote]

What's $100,000 * .0825 * .9? That's what the dog with the note on his back made me today.

Admittedly, I was surprised at Starka's and Joe's comments. You guys may have the most posts under you, so you know the "rules."  I am intrigued by Sil's discussion's and my thought patterns tend to follow his over those that are as Joe stated, "obnoxious."  Bobby's use of annuities, I have in the past found it humorously scary. He called me a liar and according to Starka, "What matters is what you answer to."  Did this come from  Mr Miyagi in the Karate Kid?  I sort of get it. To me there is a difference in come on, give us the truth. Than to I don't believe you, you are a liar! 

See we have a "fair and balanced" pairing. Bobby will continue to blast away in his, "I give Zero percent about you" pissed off ex-wife attitude. Mean while we have Sil's thought provoking commentary which strives for the posts to be more educational and meaningful.

[quote=Bamzor]

Admittedly, I was surprised at Starka's and Joe's comments. You guys may have the most posts under you, so you know the "rules."  I am intrigued by Sil's discussion's and my thought patterns tend to follow his over those that are as Joe stated, "obnoxious."  Bobby's use of annuities, I have in the past found it humorously scary. He called me a liar and according to Starka, "What matters is what you answer to."  Did this come from  Mr Miyagi in the Karate Kid?  I sort of get it. To me there is a difference in come on, give us the truth. Than to I don't believe you, you are a liar! 

See we have a "fair and balanced" pairing. Bobby will continue to blast away in his, "I give Zero percent about you" pissed off ex-wife attitude. Mean while we have Sil's thought provoking commentary which strives for the posts to be more educational and meaningful.

[/quote]

Sooooo....what did you get when you backed out the bonus?

Looks to me like you're leading a one-man lynch mob.  Good luck with that.

 Wow man, jumping in here with your profound insights regarding the topic.

I think I'm starting to get it.

According to the lexicon of Joe, here is the definition of a one man lynch mob: one who challenges the bullying behaviour of certain forum members.

" Some times I even find Bobby thought provoking when I can get past the sturm and drang."

And what makes you feel like you need to defend Bobby, since you brought up the lynch mob metaphor?

Did you know it is really sturm und drang?

So, basically, you feel Bobby's storm and impulse routine is just cute.

After you backed off on the dropping soap in the shower stuff, it looked like there might be some hope. I don't really care, have your little fun, anyway, you just might consider that sometimes others might feel it is demeaning. 

Feel free to take some more shots here, or go back and quote me where I was off base. I'm done with this topic.   

You guys may have the most posts under you, so you know the "rules." 

Bam, looks like you are the smartest one here, since you recognize that of course, this is really a discussion about culture. It does begin to become clear how certain members of the tribe strive to isolate "inappropriate" behaviour. Wonder who will be voted off the island ( not that I really care  ).

[quote=Bobby Hull]

Sooooo....what did you get when you backed out the bonus?

[/quote]

Bobby there was no bonus. The broker sold the dca feature as a Bonus. I am drinking Crown now, but it was dca @ 9% for 6 months into the fixed sub account at 3.1 it stayed in the fixed sub-account the whole time. I can copy the history if I must. As stated earlier it changed to 3% last month. This happen 4.5 years ago. It has been in the fixed account the whole time. No withdraws the client puts in $116,568, 4.5 years later it is worth $129,645. 116568 / 129645 = .8999 or 10.1%  total return for 4.5 years. This equates at best to 2.3 avg rate of return at best. Call Hartford there are underlining expenses or it would have averaged 3.1%.

[quote=silouette]

Looks to me like you’re leading a one-man lynch mob.  Good luck with that.

 Wow man, jumping in here with your profound insights regarding the topic.

I think I'm starting to get it.

According to the lexicon of Joe, here is the definition of a one man lynch mob: one who challenges the bullying behaviour of certain forum members.

" Some times I even find Bobby thought provoking when I can get past the sturm and drang."

And what makes you feel like you need to defend Bobby, since you brought up the lynch mob metaphor?

Did you know it is really sturm und drang?

So, basically, you feel Bobby's storm and impulse routine is just cute.

After you backed off on the dropping soap in the shower stuff, it looked like there might be some hope. I don't really care, have your little fun, anyway, you just might consider that sometimes others might feel it is demeaning. 

Feel free to take some more shots here, or go back and quote me where I was off base. I'm done with this topic.   

[quote=Bamzor][quote=Bobby Hull]

Sooooo....what did you get when you backed out the bonus?

[/quote]

Bobby there was no bonus. The broker sold the dca feature as a Bonus. I am drinking Crown now, but it was dca @ 9% for 6 months into the fixed sub account at 3.1 it stayed in the fixed sub-account the whole time. I can copy the history if I must. As stated earlier it changed to 3% last month. This happen 4.5 years ago. It has been in the fixed account the whole time. No withdraws the client puts in $116,568, 4.5 years later it is worth $129,645. 116568 / 129645 = .8999 or 10.1%  total return for 4.5 years. This equates at best to 2.3 avg rate of return at best. Call Hartford there are underlining expenses or it would have averaged 3.1%.

[/quote]

The math ain't making sense. Regardless...if the client was misled, I completely disagree with the tactic. You already know how I feel about the kids that work in banks.

Are you going to exchange him into another annuity? It's a slam dunk of a sale. All you have to do is tape a note on the back of a dog....

[quote=joedabrkr] [quote=silouette]

Looks to me like you're leading a one-man lynch mob.  Good luck with that.

 Wow man, jumping in here with your profound insights regarding the topic.

I think I'm starting to get it.

According to the lexicon of Joe, here is the definition of a one man lynch mob: one who challenges the bullying behaviour of certain forum members.

" Some times I even find Bobby thought provoking when I can get past the sturm and drang."

And what makes you feel like you need to defend Bobby, since you brought up the lynch mob metaphor?

Did you know it is really sturm und drang?

So, basically, you feel Bobby's storm and impulse routine is just cute.

After you backed off on the dropping soap in the shower stuff, it looked like there might be some hope. I don't really care, have your little fun, anyway, you just might consider that sometimes others might feel it is demeaning. 

Feel free to take some more shots here, or go back and quote me where I was off base. I'm done with this topic.   

[/quote]

Perhaps in hindsight I could have chosen a more appropriate metaphor.

With the exception of the rare occasions where the mods find a poster's behavior to be completely unacceptable, this is generally a forum where one is free to speak their mind.

I don't always like BH's posts...other times I do find them to be entertaining or thought provoking.  Calling some one a "liar" might be a bit over the top, but then again he was completely wrong about the whole issue with M&E being charged against fixed accounts in a VA.

BH might suffer from a lack of tact, but at least he is willing to call out BS when he thinks he sees it, and there's plenty of that floating around here.

Regardless, unless and until he(or you) are banned, he has the right to his say, just as you have the right to challenge him.

All I was simply trying to state is that if you feel the need to put on your white linen gloves and ride around preaching from your high moral horse, you might find that you are embarking on a rather solitary journey around these parts.
[/quote]

Joe, you're wrong about my being wrong about M&E being charged against the fixed bucket. It doesn't happen.

[quote=silouette]

You guys may have the most posts under you, so you know the “rules.” 

Bam, looks like you are the smartest one here, since you recognize that of course, this is really a discussion about culture. It does begin to become clear how certain members of the tribe strive to isolate "inappropriate" behaviour. Wonder who will be voted off the island ( not that I really care  ).

[quote=Bobby Hull]

Joe, you’re wrong about my being wrong about M&E being charged against the fixed bucket. It doesn’t happen.

[quote=joedabrkr] [quote=Bobby Hull]

Joe, you're wrong about my being wrong about M&E being charged against the fixed bucket. It doesn't happen.

[/quote]

Let me be clear.  On this I was AGREEING with you when you challenged the other poster who said that it WAS charged against the fixed bucket.
[/quote]

I just re-read your post. I was wrong about you being wrong. Now, I agree with you and you were right about my being right.

[quote=silouette]

If you’re not a liar, what do you care? It doesn’t

matter what people call you. What matters is what you answer to.

<a href=“http://powerpresentations.blogs.com/my_weblog/2006/05/
<br / target=”_blank">when_did_you_st.html"> http://powerpresentations.blogs.com/

my_weblog/2006/05/when_d id_you_st.html

So, have you stopped beating your wife?[/

P]

I guess what I’m saying is, some of Bobby’s comments make me feel

cheap and dirty, just logging into the forum. For myself, I’d rather choose

that feeling, like staying up too late and having extra drinks and smoking

a cigar.

If there were not so many smart, thoughtful people here, I probably

wouldn’t care.

Maybe he could get his needs met somewhere else. There must be

some forum where people like to talk sales, and beat on each other, in

a what many folks would consider, dysfunctional sort of way.

Why are you so interested in defending Bobby’s right to bully along

with his right to express his “professional” ideas?

[quote=joedabrkr] [quote=silouette]

You guys may have the most posts under you, so you know the "rules." 

Bam, looks like you are the smartest one here, since you recognize that of course, this is really a discussion about culture. It does begin to become clear how certain members of the tribe strive to isolate "inappropriate" behaviour. Wonder who will be voted off the island ( not that I really care  ).

[/quote]

If you don't really care, then why did you come back?

And why have you once again steered the topic to this?

If you feel the need to challenge posters for their behavior you are free to do so.

If you engage in a behavior that created an undesirable response in the past, why should you be suprised if it creates a similar undesirable response when you do it all over again?

"The definition of insanity is doing the same thing over and over and expecting different results."

Look, hopefully this doesn't perpetuate into another silly flame war.  I don't intend to perpetuate it.  But I wouldn't be shocked at all if you insisted on stirring the pot over and over until again you were banned(again).  I think you just can't help yourself.
[/quote]

? Are you the site moderator for RR or something ? I just made a few observations. Do you have a history of banning people you don't like?

Hey, buddy, you and your pals can do whatever you want here. Must have made some comments kind of close to home.

Of course I care about the topic, I just don't care who gets voted off the island.