Aren't you glad you placed your clients in VA's
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Only for high tax bracket, taxable accounts why not buy a 10 year AAA muni. Net after tax return over 6%, and money is guaranteed, net out the door. Plus client has the ability to take any of it, not some 5% speed limit for life.
Although this strategy doesn't pay brokers as well and not available at most banks so probably off the radar.[quote=Gordon Gekko]I am relooking at Hancock as they are one of the few AAA rated insurers in our system. Do they have a GMIB+ similar to Met Life? I am familar with Met’s, that is why I ask. [/quote]
Yes, JH does have a GMIB.
My VA clients are mostly happy but I’ve found it’s important to stay in touch with them and ensure they understand the difference between the account value they’re seeing on their statements and the guaranteed GMIB of the VA’s.
I am finding that clients are even more skiddish of the VA's with the recent bailout talk. Most likely they will be ok but locking someone into a 4-7 year product doesn't really appeal to me right now.
[quote=GoingIndy???]
Only for high tax bracket, taxable accounts why not buy a 10 year AAA muni. Net after tax return over 6%, and money is guaranteed, net out the door. Plus client has the ability to take any of it, not some 5% speed limit for life.
Although this strategy doesn't pay brokers as well and not available at most banks so probably off the radar. [/quote] Tax free bonds and tax free zeros could provide solutions to the majority of people who are being sold EIAs and other fixed annuity products for their non-qualified money. Unfortunately, for the investors, the YTB is far too low in tax free investments to entice the annuity slingers to do the right thing.[quote=Borker Boy][quote=GoingIndy???]
Only for high tax bracket, taxable accounts why not buy a 10 year AAA muni. Net after tax return over 6%, and money is guaranteed, net out the door. Plus client has the ability to take any of it, not some 5% speed limit for life.
Although this strategy doesn't pay brokers as well and not available at most banks so probably off the radar. [/quote] Tax free bonds and tax free zeros could provide solutions to the majority of people who are being sold EIAs and other fixed annuity products for their non-qualified money. Unfortunately, for the investors, the YTB is far too low in tax free investments to entice the annuity slingers to do the right thing.[/quote] what about qualified accounts, do you use tax free bonds?Absolutely. Tax free bonds in qualified accounts provide quintuple tax deferral.
I’ve actually come across an IRA account that had tax free Maryland fund in it. The guy never lived there.
Honestly, because you might have a clue how they work and you sell your client on a “6% guarantee” or whatever rider is hot these days. In actuality, your client has no clue what they own. They think they own something better than a CD when it’s nothing close to a CD.
You are going the path of least resistance/highest yield-to-broker. That's how it can be, IMHO.Would it have made a difference if the client had lived in MD?I’ve actually come across an IRA account that had tax free Maryland fund in it. The guy never lived there.
What the market giveth with one hand, it takes away with the other. While you may be enjoying yourself, have you considered that all the VA's you sold during the bull cannot be 1035'd ethically because they are so far under the DB? Had a prospect the other day tell me they were also talking to the local annuity pimp, said that they got the full court press on the gaurantee. I asked them if this was an insurance policy or an investment. They said an investment. I asked how much the investment part was talked about. It wasn't. I asked when they bought their house, did they make the decision based on the house or the available insurance. ACAT signed.You know what’s funny? You guys find all sorts of things wrong with VA’s and I keep selling them like hotcakes. How can that be? If you don’t have the courage to sell them, go sell your little, cheap unprotected mf’s and stock accounts.
Really, an annuity is not an investment vehicle? Let me reconsider my life. Done. It is an investment vehicle, yet is sold on a singular feature, the insurance. It is kind of like selling Vanguard funds based on the expense ratio, without taking into account the investment.
Does insurance have it's place. Absolutely. Are annuities appropriate for some investors? Absolutely. Are annuities sold to many people based strictly on fear and emotion. Absolutely. Are we supposed to prevent clients from making emotional decisions, as emotional decisions are often the wrong decisions? Absolutely. Act accordingly. How do you find my analogy dishonest?[quote=Primo]Really, an annuity is not an investment vehicle? Let me reconsider my life. Done. It is an investment vehicle, yet is sold on a singular feature, the insurance. It is kind of like selling Vanguard funds based on the expense ratio, without taking into account the investment.
Not once did i say a VA is not an investment vehicle. So cut the snarky crap. VA's are sold based on the insurance it provides. Shocking. That normally happens when discussing AN INSURANCE CONTRACT. And yet, when I've sold VAs, we've also discussed the investment options within said contract. Actually, I don't know how you would be able to sell a VA without at least touching on the subaccounts. Do you? Does insurance have it's place. Absolutely. Are annuities appropriate for some investors? Absolutely. Are annuities sold to many people based strictly on fear and emotion. Absolutely. Are we supposed to prevent clients from making emotional decisions, as emotional decisions are often the wrong decisions? Absolutely. Part of our role is to help clients avoid making bad decisions when their emotions are getting in the way. Another part of our job is to appeal to a client's emotions when logically there is a sound financial decision that should be implemented. If you don't think people can make good decisions based on emotions, you're sorely mistaken. Act accordingly. How do you find my analogy dishonest?[/quote] Primo, your analogy is flawed. By your logic, the insurance behind the VA doesn't amount to anything. That it shouldn't be the primary reason to buy a VA. If the insurance isn't a key component of buying a VA, don't buy the VA. You may be better off investing in some other vehicle. Of course people buy the house first instead of the homeowner's insurance. Tell me, though. How many of your clients don't carry homeowner's insurance?[quote=deekay][quote=Primo]Really, an annuity is not an investment vehicle? Let me reconsider my life. Done. It is an investment vehicle, yet is sold on a singular feature, the insurance. It is kind of like selling Vanguard funds based on the expense ratio, without taking into account the investment.
Not once did i say a VA is not an investment vehicle. So cut the snarky crap. VA's are sold based on the insurance it provides. Shocking. That normally happens when discussing AN INSURANCE CONTRACT. And yet, when I've sold VAs, we've also discussed the investment options within said contract. Actually, I don't know how you would be able to sell a VA without at least touching on the subaccounts. Do you? Does insurance have it's place. Absolutely. Are annuities appropriate for some investors? Absolutely. Are annuities sold to many people based strictly on fear and emotion. Absolutely. Are we supposed to prevent clients from making emotional decisions, as emotional decisions are often the wrong decisions? Absolutely. Part of our role is to help clients avoid making bad decisions when their emotions are getting in the way. Another part of our job is to appeal to a client's emotions when logically there is a sound financial decision that should be implemented. If you don't think people can make good decisions based on emotions, you're sorely mistaken. Act accordingly. How do you find my analogy dishonest?[/quote] Primo, your analogy is flawed. By your logic, the insurance behind the VA doesn't amount to anything. That it shouldn't be the primary reason to buy a VA. If the insurance isn't a key component of buying a VA, don't buy the VA. You may be better off investing in some other vehicle. Of course people buy the house first instead of the homeowner's insurance. Tell me, though. How many of your clients don't carry homeowner's insurance?[/quote] I agree that the investment/subaccounts are a very important part of the discussion. I couldn't imagine presenting a VA without talking about the mutual funds inside...in fact that is usually as big of a benefit as the guarantees.[quote=SonnyClips] [quote=Primo] [quote=SonnyClips]You know what’s funny? You guys find all sorts of things wrong with VA’s and I keep selling them like hotcakes. How can that be? If you don’t have the courage to sell them, go sell your little, cheap unprotected mf’s and stock accounts. [/quote]
What the market giveth with one hand, it takes away with the other. While you may be enjoying yourself, have you considered that all the VA's you sold during the bull cannot be 1035'd ethically because they are so far under the DB?
Had a prospect the other day tell me they were also talking to the local annuity pimp, said that they got the full court press on the gaurantee. I asked them if this was an insurance policy or an investment. They said an investment. I asked how much the investment part was talked about. It wasn't. I asked when they bought their house, did they make the decision based on the house or the available insurance. ACAT signed.[/quote]
Sooooo.....what did you recommend that they do with their money? Be specific, please.[/quote] Avoid Bobby Hull, and specifically EIA's.
[quote=deekay][quote=Primo]Really, an annuity is not an investment vehicle? Let me reconsider my life. Done. It is an investment vehicle, yet is sold on a singular feature, the insurance. It is kind of like selling Vanguard funds based on the expense ratio, without taking into account the investment.
Not once did i say a VA is not an investment vehicle. So cut the snarky crap. VA's are sold based on the insurance it provides. Shocking. That normally happens when discussing AN INSURANCE CONTRACT. And yet, when I've sold VAs, we've also discussed the investment options within said contract. Actually, I don't know how you would be able to sell a VA without at least touching on the subaccounts. Do you? Does insurance have it's place. Absolutely. Are annuities appropriate for some investors? Absolutely. Are annuities sold to many people based strictly on fear and emotion. Absolutely. Are we supposed to prevent clients from making emotional decisions, as emotional decisions are often the wrong decisions? Absolutely. Part of our role is to help clients avoid making bad decisions when their emotions are getting in the way. Another part of our job is to appeal to a client's emotions when logically there is a sound financial decision that should be implemented. If you don't think people can make good decisions based on emotions, you're sorely mistaken. Act accordingly. How do you find my analogy dishonest?[/quote] Primo, your analogy is flawed. By your logic, the insurance behind the VA doesn't amount to anything. That it shouldn't be the primary reason to buy a VA. If the insurance isn't a key component of buying a VA, don't buy the VA. You may be better off investing in some other vehicle. Of course people buy the house first instead of the homeowner's insurance. Tell me, though. How many of your clients don't carry homeowner's insurance?[/quote] Flawed is a far cry from dishonest. I do not sell annuities as accumulation vehicles. I use them as distribution vehicles. I do not feel the insurance is worth the cost during the accumulation phase. That is simply how I do business. Prospect that came in was still in the accumulation phase. The other broker talked solely about the gaurantees of the contract he was trying to sell. VA's are investment vehicles with insurance overlayed, not the other way around in my opinion. The other broker preyed on fear and emotion to close a deal, I didn't and got the deal. I am failing to see how this is offensive to you.“I do not sell annuities as accumulation vehicles. I use them as distribution vehicles. I do not feel the insurance is worth the cost during the accumulation phase.”
Can you elaborate, please. I'm asking because I think that VA's make great accumulation vehicles (in the right circumstances and the insurance is absolutely worth it in these circumstances), but lousy distribution vehicles.I do not like annuities for accumulation vehicles for two reasons:
1. The investment choices do not allow me the flexibility to do what I do. Not going to go into that again, it is posted already. 2. I feel the cost of the insurance is prohibitive, and to this point, I have been able to deliver results to my clients where the insurance would not come into play. For the distribution phase, I typically use VA's with a GMIB to cover necessary expenses while giving the client a shot at outpacing inflation, limiting the risk of losing a certain lifestyle.Thanks, Primo. In my opinion, the insurance doesn’t have to come into play to have value.
I sell lots of term insurance. I've never paid a death claim on a term policy, therefore, it has no value. Obviousy, that is nonsense. I think that the same thing can be said for the guarantees on a VA. Someone doesn't have to collect on the guarantee for it to have value. It has to simpy impact the behavior of the investor. Earlier this year, a client of mine died. She was risk averse, but needed growth to achieve her goals. We invested the bulk of her money in a VA in an aggressive manner. Outside of the VA, we woud have had to invest in a more conservative manner. The guarantees of the VA ended up meaning that her beneficiaries received over $100,000 more than they otherwise woud have received. Yet, the guarantee never kicked in because it was lower than the contract value. The simple act of having the guarantee impacted the investor in a positive manner. The cost of insurance during accumulation is certainly a drag on performance, but it's not prohibitive if it impacts investor performance. On the other hand, during distribution, I believe that it is prohibitive. Ex. Client has $100,000 and has a 6% GMIB. The insurance company charges .85% for this rider. The client takes $6000 out of the market. The investments go down 25%. The client still has a GMIB value of $100,000. The value of the contract is now $69,000. The cost of the GMIB rider is now 1.23% because it's still the same $850. If someone is trying to take 6% out of an investment that has costs in the neighborhood of 3%, the great likelihood is that the contract value will decrease. With GMIB when the contract value decreases the expense ratio increases which further increases the odds that the contract value will decrease. The reality is that there is a very real chance that the contract value will hit zero. If the client is older, a SPIA will probably give them more income. If the client is younger, buying CD's for a few years and living off of that interest and then annuitizing will probably give them more income. The expenses of the VA make them inappropriate income vehicles.[quote=anonymous]Thanks, Primo. In my opinion, the insurance doesn’t have to come into play to have value. I agree completely.
I sell lots of term insurance. I've never paid a death claim on a term policy, therefore, it has no value. Obviousy, that is nonsense. I think that the same thing can be said for the guarantees on a VA. Someone doesn't have to collect on the guarantee for it to have value. It has to simpy impact the behavior of the investor. Again we agree, I have been successful in most instances impacting client behaviour through other means without insurance. Therefore the insurance is unnecessary for most of my clients in the accumulation phase. Earlier this year, a client of mine died. She was risk averse, but needed growth to achieve her goals. We invested the bulk of her money in a VA in an aggressive manner. I work in a wirehouse, this is not allowed. Subaccounts must match the risk tolerence of the investor. I can't say that I disagree with this policy. Outside of the VA, we woud have had to invest in a more conservative manner. The guarantees of the VA ended up meaning that her beneficiaries received over $100,000 more than they otherwise woud have received. I think it is great that you achieved a positive results for your client. I can give you many similar stories. I think we use different tools to achieve these results. Yet, the guarantee never kicked in because it was lower than the contract value. The simple act of having the guarantee impacted the investor in a positive manner. The cost of insurance during accumulation is certainly a drag on performance, but it's not prohibitive if it impacts investor performance. Again I agree, but if you can impact performance without the insurance, it certainly is better for the client, yes? On the other hand, during distribution, I believe that it is prohibitive. Ex. Client has $100,000 and has a 6% GMIB. The insurance company charges .85% for this rider. The client takes $6000 out of the market. The investments go down 25%. The client still has a GMIB value of $100,000. The value of the contract is now $69,000. The cost of the GMIB rider is now 1.23% because it's still the same $850. If someone is trying to take 6% out of an investment that has costs in the neighborhood of 3%, the great likelihood is that the contract value will decrease. With GMIB when the contract value decreases the expense ratio increases which further increases the odds that the contract value will decrease. The reality is that there is a very real chance that the contract value will hit zero. This is all true. Client has $1mm. Monthly expenses of $2m. I put $400m into a VA with a GMIB. Tell the client, this money is gone, it is put away to cover basic expenses for the rest of their life. Take the remaining $600m and put into whatever the clients risk tolerance dictates. If the VA does poorly and the account value drops too low, we can take from the $600m. If an unexpected expense comes up, we can take from the $600m. So on and so forth. Point is, markets don't always go down. There is an opportunity for the VA to increase, and leave a death benefit. If the client is older, a SPIA will probably give them more income. If the client is younger, buying CD's for a few years and living off of that interest and then annuitizing will probably give them more income. I abhor annuitizing, although I am aware VA's with a GMIB will likely be annuitized. The expenses of the VA make them inappropriate income vehicles. In this case, the client not having to worry about the known (as know as they can be) expenses makes the cost worth it to me. [/quote]