Client Situation
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I received a referral from an estate attorney of a client that is coming into a $1MM inheritance (non-qualified). There will be more money later, but that’s what it is now.
Estate attorney and client want an index annuity for the bulk of this money, before even talking to me (I can't make this up). Client is 55 years old, on disability, and will need $3,000 per month starting right away. First, since the client is on disability, there is the possibility that she can withdraw money from the annuity without the pre-59 1/2 10% penalty. Has anyone had experience with this? I don't know how disabled she is yet, but from what I can tell, the IRS determines this as "the inability to do any substantial gainful activity" and a doctor can sign off. Second, if that dosn't apply, how would you structure this? Would you take a 72q for 5 years? Buy a SPIA for 5 years? Any thoughts?Snags, there’s a lot of information needed before a determination can be made.
Is the client married? Dependents (adult or children)? How old are they? What kind of health insurance does the client have? What are the lifetime limits? Deductibles and Co-Pays? What is causing the disability? What will happen when the client needs long term care? Is there insurance in place or will it come out of pocket? How much life insurance do they have? What kind (term or permanent)? What are the conversion provisions? Did it have Waiver of premium? And, if so, is the insurance company paying the premiums now? How much do they need? How much do they want? How much do they have in liquid cash (savings/CDs/MMFs)? What other investments do they have? How liquid are they? How down are they from the top? What other income streams does the client get? How are they generated (SSDI/personal DI policy/group DI/unearned and investment income, etc.)?[quote=deekay]Snags, there’s a lot of information needed before a determination can be made.
Is the client married? Dependents (adult or children)? How old are they? What kind of health insurance does the client have? What are the lifetime limits? Deductibles and Co-Pays? What is causing the disability? What will happen when the client needs long term care? Is there insurance in place or will it come out of pocket? How much life insurance do they have? What kind (term or permanent)? What are the conversion provisions? Did it have Waiver of premium? And, if so, is the insurance company paying the premiums now? How much do they need? How much do they want? How much do they have in liquid cash (savings/CDs/MMFs)? What other investments do they have? How liquid are they? How down are they from the top? What other income streams does the client get? How are they generated (SSDI/personal DI policy/group DI/unearned and investment income, etc.)? [/quote] Good points Dee. I will find out tomorrow when I meet with her. But I get the feeling from my initial conversation that she didn't have a lot of wealth prior to this, and that this won't be her only inheritance.Snags,
Don't you just love the attorney and client determining the best investment for the situation? This will help make a pretty decent month for you. Explain to them the advantages and disadvantages of what they want. Tell them what you would recommend for this situation and why. Maybe the get it, maybe they don't. If they don't want to listen to your recommendations don't spend too much time trying to convince them, give them what they want. I am by no means endorsing indexed annuities! SPIA 5 years for income could work, invest the rest into a 5 yr indexed annuity. Deekay is correct there is a ton of other info needed.Snags,
Yeah, nothing worse that someone telling you what they want (especially and attorney). I agree with the other posts, try to get more information and explain the pros and cons of the annuity. If they are relentless and want the annuity, sell it and get a big commission if you feel comfortable. Make sure you document this in detail.
[quote=snaggletooth]I received a referral from an estate attorney of a client that is coming into a $1MM inheritance (non-qualified). There will be more money later, but that’s what it is now.
Estate attorney and client want an index annuity for the bulk of this money, before even talking to me (I can't make this up). Client is 55 years old, on disability, and will need $3,000 per month starting right away. First, since the client is on disability, there is the possibility that she can withdraw money from the annuity without the pre-59 1/2 10% penalty. Has anyone had experience with this? I don't know how disabled she is yet, but from what I can tell, the IRS determines this as "the inability to do any substantial gainful activity" and a doctor can sign off. Second, if that dosn't apply, how would you structure this? Would you take a 72q for 5 years? Buy a SPIA for 5 years? Any thoughts?[/quote]I'd do SPIA ($180k pays out $3107/mo 5yr certain) and then show an EIA and a moderate-allocation SMA for the remainder of the money. There is no reason for a 55 year old not to have at least some exposure to the market for his long-term money and an EIA is a great tool for a portion of the money but will not outperform a moderate allocation over a 20 year period.
[quote=Omar]Snags,
Yeah, nothing worse that someone telling you what they want (especially and attorney). I agree with the other posts, try to get more information and explain the pros and cons of the annuity. If they are relentless and want the annuity, sell it and get a big commission if you feel comfortable. Make sure you document this in detail.[/quote]
You’re an idiot.
The young Architect was excited as he sat down with his first clients to help them design their dream house. "We want a turret front and center" exclaimed the wife. The hubby answered "Yeah, we're really into castles. We don't want to go overboard or anything like with a moat, but the turret and heavy wooden doors would be cool!" The young Architect slumped in his chair.
Yeah, life is tough all over. Tell'em like it is, show them what they want and then show them what they need. As advised above in this thread, it is the only way to go.[quote=BondGuy]
The young Architect was excited as he sat down with his first clients to help them design their dream house. “We want a turret front and center” exclaimed the wife. The hubby answered “Yeah, we’re really into castles. We don’t want to go overboard or anything like with a moat, but the turret and heavy wooden doors would be cool!” The young Architect slumped in his chair.
Yeah, life is tough all over. Tell'em like it is, show them what they want and then show them what they need. As advised above in this thread, it is the only way to go.[/quote]And if they balk at your ideas, shutup, write the ticket, and flush your pride down the toilet in exchange for that $70,000 sale. I know I would
[quote=BerkshireBull] [quote=BondGuy]
The young Architect was excited as he sat down with his first clients to help them design their dream house. "We want a turret front and center" exclaimed the wife. The hubby answered "Yeah, we're really into castles. We don't want to go overboard or anything like with a moat, but the turret and heavy wooden doors would be cool!" The young Architect slumped in his chair.
Yeah, life is tough all over. Tell'em like it is, show them what they want and then show them what they need. As advised above in this thread, it is the only way to go.[/quote]And if they balk at your ideas, shutup, write the ticket, and flush your pride down the toilet in exchange for that $70,000 sale. I know I would
[/quote] Who said there's no pride in it? I happen to be a big fan of FIA's in the right situation...a big fan.
[quote=snaggletooth][quote=BerkshireBull] [quote=BondGuy]
The young Architect was excited as he sat down with his first clients to help them design their dream house. "We want a turret front and center" exclaimed the wife. The hubby answered "Yeah, we're really into castles. We don't want to go overboard or anything like with a moat, but the turret and heavy wooden doors would be cool!" The young Architect slumped in his chair.
Yeah, life is tough all over. Tell'em like it is, show them what they want and then show them what they need. As advised above in this thread, it is the only way to go.[/quote]And if they balk at your ideas, shutup, write the ticket, and flush your pride down the toilet in exchange for that $70,000 sale. I know I would
[/quote] Who said there's no pride in it? I happen to be a big fan of FIA's in the right situation...a big fan.[/quote]
As am I, however I wouldn't put my entire retirement into one. Would you?
No, but I think they get a bad rap by too many "advisors". I was talking to a seasoned Smith Barney advisor at the dry cleaners the other day who does a lot of annuities...more VA's. He was saying how he knows some advisors that feel ashamed for even saying the word annuity. There shouldn't be a stigma about annuities, but unfortunately there is. I happen to really like them.
As am I, however I wouldn’t put my entire retirement into one. Would you?
Annuities are great in the right situations. I think the people that give them a bad name are the one’s that sell them to everyone, in all situations, for all their money, and “forget” about some of the little details. Otherwise I would not have prospects tell me “well this insurance guy told me it will go up whenever the market goes up, but never go down”. I hear that crap too much. They “forget” to tell them about caps, crediting methods, etc.
But I sell annuities myself - fixed, SPIA's, and VA's (but only with income riders). Probably 15% of my business.[quote=B24]Annuities are great in the right situations. I think the people that give them a bad name are the one’s that sell them to everyone, in all situations, for all their money, and “forget” about some of the little details. Otherwise I would not have prospects tell me “well this insurance guy told me it will go up whenever the market goes up, but never go down”. I hear that crap too much. They “forget” to tell them about caps, crediting methods, etc.
But I sell annuities myself - fixed, SPIA's, and VA's (but only with income riders). Probably 15% of my business.[/quote]The people who give them a bad name are the one's who can't sell them or the one's who are losing clients to them.
No, the brokers who give EIA’s a bad name are the ones the client goes to after the first agent did NOT explain the 20 year cdsc schedule and now the client is stuck.
[quote=henryhill]No, the brokers who give EIA’s a bad name are the ones the client goes to after the first agent did NOT explain the 20 year cdsc schedule and now the client is stuck. [/quote]
I don’t know anyone who sells EIA’s with a surrender longer than 7 years. The Masterdex10 was popular with some people but I don’t know anyone who sold it. I’m sure someone, somewhere came up with an EIA with a 20 year surrender and someone sold it, but you’re just fear-mongering now.
What’s the surrender on a SPIA that doesn’t have an income access type rider? Talk about locking someone’s money up…