Get real people!  Everything is determined by the bottom line.  “Suzie O” talks annuities down also, but she does it because the insurance company she was working with would not give her a piece of the action.  She wanted a piece of each policy sold while she was “spreading the word”.  No $, No do!

Ben Bernanke, our Fed Chairman, owns variable annuities.  In fact, they are his largest investment holdings.  Believe it.

Those who bash VA's truely don't understand the product, and to a larger extent there clients .

If you do understand the product, and still feel the need to endlessly bash the product, then you are probably just not that smart.

Hull, what sub account of which VA is bringing in that 24%?

Know what you do about money and investing, pretend you are the client. You are offered an annuity option - it carries no surrender charges, and your advisor gets no commission up front.

Taking that potential conflict of interest and sales pressure off your mind, you decide to choose the annuity option.

Because money is more like health and spirituality than it is like cars or houses, it deserves objectivity. You may or may not believe this, but it is more fun to be free on the side of objectivity.

Since that is a subjective idea, all we can really argue about is preferences.

[quote=Philo Kvetch] And how does one do all that without returns?[/

QUOTE]



Philo-

The idea is not that annuities have no returns. Some people will pay the

extra 75-150 bips over a straight MFD to get the guarantee.

And just why do you suppose that all annuities are 75-150 bps more

expensive than your straight mutual funds?

[quote=EDJ to RIA]

Do you think the fact that they’re about the only
product left that pays 7+% commissions has anything to do with their
popularity amongst salespeople?

Can't you get guaranteed income from having a well-diversified and well-managed portfolio of stocks, then buy a SPIA with part when the client feels like they need it? Then you save all those M&E fees, no surrender charges, manage for tax efficiency and have no strings attached...with say a 1.25% fee, transaction costs included.
[/quote]

The simplest case against annuities, is that you are betting against the insurance companies actuaries, and those boys don't play to lose.

Ultimately a VA is just a basket of expensive mutual funds, wrapped up in package of options. The actuaries work very hard to make sure those options are mispriced so badly, that even after kicking 6% to the salesman, the insurance company still comes out on top.

The best arrangement from the clients perspective is to invest in solid investment strategy and then buy CPI-linked SPIA's as needed.

The final result of a VA is the purchase of a SPIA when the contract is annuitised. So the question is the path taken to get to that point.

You can do it under a heavy burdern of management/COI fee's (to recover the 6% and give the insurco a profit) or a lighter burden of low cost management fee's.

Bust on annuities all that you want.  My annuity clients outperform my mutual fund clients.  This is because the guarantees of the VA allow the annuity clients to invest more aggressively.

Take a conservative client and have them invest aggressively.  If the client is in mutual funds, they will pull money out if the investments go down.  Thus, conservative clients can't invest aggressively in mutual funds.  If the same client invests in a VA with a guarantee and they invest aggressively, they won't move money if the market goes down.

The end result is that the guarantees of the VA allow one to invest in a manner that is greater than their risk tolerance.

The cost of a good VA is not that much more than a good mutual fund portfolio and can be less expensive.

[quote=anonymous]

Bust on annuities all that you want.  My annuity clients outperform my mutual fund clients.  This is because the guarantees of the VA allow the annuity clients to invest more aggressively.

Take a conservative client and have them invest aggressively.  If the client is in mutual funds, they will pull money out if the investments go down.  Thus, conservative clients can't invest aggressively in mutual funds.  If the same client invests in a VA with a guarantee and they invest aggressively, they won't move money if the market goes down.

The end result is that the guarantees of the VA allow one to invest in a manner that is greater than their risk tolerance.

The cost of a good VA is not that much more than a good mutual fund portfolio and can be less expensive.

[/quote]

I could not agree more. 

[quote=the word]

Ben Bernanke, our Fed Chairman, owns variable annuities. In fact, they are his largest investment holdings. Believe it.

[quote=Ashland] [quote=the word]Ben Bernanke, our Fed Chairman, owns
variable annuities.  In fact, they are his largest investment
holdings.  Believe it.[/quote]

While this is true - it also is misleading. Bernanke’s largest
holding is his former 403b invested w/ TIAA Cref. I don’t think this
means that he is for or against VA’s. It means he worked for Princeton
for long time.


http://www.fmcenter.org/atf/cf/{DFBB2772-F5C5-4DFE-B310-D8 2A61944339%7D/2006disclosurereport.pdf [/quote]



Without misleading statements how else would annuities be sold?



It’s also not clear why Bernanke, who is an economist would be/should be an authority on investing.

I agree that Bernanke's holdings are meaningless.

Without misleading statements how else would annuities be sold?

I find that the truth works quite nicely.   With a certain fact pattern, I don't know anything better than a VA with a living benefit.  I prefer GMAB. 

1)Qualified Money
2)Conservative Investor
3)Investing conservatively won't allow them to reach their goals
4)Long enough time horizon that surrender charges are not an issue and they qualify for the living benefit

Anti-annuity people tend to not understand the importance of the living benefits.  The argument is basically that it is a waste of money because the insurance company is smart and won't have to pay on this benefit.  That completely misses the point of the living benefit for the conservative client.  The true importance of the living benefit is that it changes investor behavior.  As we all know, investor performance is what counts, not investment performance.   Living benefits do hurt investment performance because there is a cost.  However, they improve investor performance because investors have no reason to sell during a down market. 

[quote=AllREIT][quote=Ashland] [quote=the word]Ben Bernanke, our Fed Chairman, owns variable annuities.  In fact, they are his largest investment holdings.  Believe it.[/quote]

While this is true - it also is misleading. Bernanke's largest holding is his former 403b invested w/ TIAA Cref. I don't think this means that he is for or against VA's. It means he worked for Princeton for long time.

http://www.fmcenter.org/atf/cf/%7BDFBB2772-F5C5-4DFE-B310-D8 2A61944339%7D/2006disclosurereport.pdf [/quote]

Without misleading statements how else would annuities be sold?

It's also not clear why Bernanke, who is an economist would be/should be an authority on investing.
[/quote]

Without misleading statements how else would REITS be sold?

I agree that Bernanke’s holdings are meaningless.

I don’t agree that they are meaningless.  After all, he is one of the most prominent and powerful economists in the world.  He may not be an investment advisor, but he certainly should know enough to make educated decisions, and have access to good investment advice as welle.

Anti-annuity people tend to not understand the importance of the living benefits.  The argument is basically that it is a waste of money because the insurance company is smart and won’t have to pay on this benefit. 

For what it’s worth, I read an article just yesterday that NAVA reported that in 2004 living benefits paid out over TWO BILLION in benefits over the market value of the underlying contrats.  I am confident in saying that the recipients of those benefits do not feel that they wasted any money when they purchased their annuities.

I am not an “annuity guy”.  In fact, I used to be somewhat anti-annuity.  I still think in some cases they are over-used, and sold merely for the ‘yield to broker’.  Having said all that, I pride myself in thinking objectively about the products I use, reevaluating them on a periodic basis, and putting the client’s needs first in that process.  As stated above, I think annuities work very well for risk-averse clients in the right situation.

[quote=joedabrkr] [quote=anonymous]

I agree that Bernanke's holdings are meaningless.

I don't agree that they are meaningless.  After all, he is one of the most prominent and powerful economists in the world.  He may not be an investment advisor, but he certainly should know enough to make educated decisions, and have access to good investment advice as welle.

Anti-annuity people tend to not understand the importance of the living benefits.  The argument is basically that it is a waste of money because the insurance company is smart and won't have to pay on this benefit. 

For what it's worth, I read an article just yesterday that NAVA reported that in 2004 living benefits paid out over TWO BILLION in benefits over the market value of the underlying contrats.  I am confident in saying that the recipients of those benefits do not feel that they wasted any money when they purchased their annuities.

I am not an "annuity guy".  In fact, I used to be somewhat anti-annuity.  I still think in some cases they are over-used, and sold merely for the 'yield to broker'.  Having said all that, I pride myself in thinking objectively about the products I use, reevaluating them on a periodic basis, and putting the client's needs first in that process.  As stated above, I think annuities work very well for risk-averse clients in the right situation.

[/quote][/quote]

Joe, let's talk about your YTB comment. If I sell an annuity for $100,000, I gross $7500. If you charge a fee on $100,000, how much do YOU gross in 7 years? What if you assume 10% compounded, annual growth? Tell the truth.

[quote=AllREIT] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

The simplest case against annuities, is that you are betting against the insurance companies actuaries, and those boys don't play to lose. [/quote]

Wrong, you're not betting against the actuaries, you're betting about YOU PLACE in that risk pool that you assume the actuaries have accurately defined. They use the AVERAGE life expectancy, you’re “betting”, if anything, that you’ll out live the average when the issue is the annuitized income stream.

[quote=AllREIT] 

The final result of a VA is the purchase of a SPIA when the contract is annuitised. So the question is the path taken to get to that point. [/quote]

Wrong, yet again. You're assuming the VA HAS to be annuitized. Are you even vaguely familiar with real world VAs?

YOU PLACE should read “YOUR PLACE”

[quote=AllREIT]
Without misleading statements how else would annuities be sold? [/quote]

As others have said, the truth works nicely.

Now if your question was Without misleading statements would fewer annuities be sold?, I'd say yes, fewer would.

[quote=mikebutler222]

[quote=AllREIT]
Without misleading statements how else would annuities be sold? [/quote]

As others have said, the truth works nicely.

Now if your question was Without misleading statements would fewer annuities be sold?, I'd say yes, fewer would.

[/quote]

Your answer applies to ANY thing that is sold.

[quote=Bobby Hull]

Joe, let’s talk about your YTB comment. If I sell
an annuity for $100,000, I gross $7500. If you charge a fee on
$100,000, how much do YOU gross in 7 years? What if you assume 10%
compounded, annual growth? Tell the truth.

The 7.5% doesn’t come off the top moron, I hate people like you that bash something and they don’t even know how it works.