Principal-Protected Mutual Funds
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Does anyone still use these? I never did, but am looking for ideas for a client that is not a candidate for variable annuities. I’m not excited with our current structured note line-up, so I’m grasping for ideas for someone who needs principal protection, but wants some equity market participation. Used to be that I could find index CDs, but unless I’m missing something, I’m not seeing just the plain old vanilla S&P linked CDs anymore. Anyone got any suggestions?
The problem I had with these is when the market did well, the client was upset they gave up the upside. When the market did poorly, the client was upset they just didn’t use a CD. If a client wants principal protection, I just use a straight CD. No fuss, no problems.
These folks are section 4029 exempts (social security) and I’m told by their accountant that they can’t own ANY kind of annuity…fixed, indexed or variable without disqualifying their 4029 exemption. The CD is obviously where they end up if I don’t come up with a better plan. I’ll be watching to see what equity-linked offerigs come out this month. What I’ve seen recently has been more complex than I wanted to mess with (best of three different portfolios, best return in a basket of stocks, drop that stock and continue, etc.).
Thanks for the feedback thus far...[quote=Indyone]These folks are section 4029 exempts (social security) and I’m told by their accountant that they can’t own ANY kind of annuity…fixed, indexed or variable without disqualifying their 4029 exemption. The CD is obviously where they end up if I don’t come up with a better plan. I’ll be watching to see what equity-linked offerigs come out this month. What I’ve seen recently has been more complex than I wanted to mess with (best of three different portfolios, best return in a basket of stocks, drop that stock and continue, etc.).
Thanks for the feedback thus far...[/quote]I learn something new everyday on here. What an interesting situation, so they are some Amish or similar religion and if you get this exemption you can not have any individual retirement accounts or employer-sponsored plans, and it also looks like you can not carry any individual insurance policies.
So you're just going to setup a non-qual retail account for them? If they're uber-religious I'm surprised their church allows them to have significant individual wealth, and why do they want to talk with you about it?
I’m not sure if anyone has those principal protected mutual funds anymore. ING angered a LOT of investors with the ones they put out in 2002. Market ran from 2003 - 2007 and these funds were almost 100% in Treasuries.
LPL’s structured CD products stink right now.
Indy, i have done a few of these over the last few months. I am seeing them from my B/D, FDIC insured, issued by Wells Fargo. We get new ones every month, and there were S&P 500 linked in October. However in Nov and Dec they only offered them linked to Gold and Commodity indices, the ones linked to equity indices the last two months have been Buffered Notes (limited downside) which wouldnt work for you (and make no sense to me either).
Again, issued by Wells Fargo. Might be worth asking your B/DIndy- I am not a rep, but a trader, but there have definately been CD’s linked to S&P sold last month. They had 2 last month from Harris Bank linked to S&P. There is a firm called Incapital which issues a lot of structured products. Normally, they come out about the 4th business day of the month and close out about 2 days prior.
Check structuredinvestments.com in a few days. I am not sure if you have to sign up (no fee) to enter the site, however.