If you want to school us in planning, you will need to try harder.

Who wants to school you in anything?  We are offering free information and observations of investor psychology from years of experience.  You are free to ignore all of this.  Your choice.

Disclaimer: I too have a very small portion of my book in VAs (probably less than 5%). So I have no vested interest in getting anyone to use the product. 

Not being sold on the concept does not make a good or bad planner.

But, refusing to view the concept with an open mind and being incredibly certain that you (generic you, not you specifically...although maybe it is you) have all the answers based on a 3 year run in this industry does make you a bad planner.  And it is setting you up for a very big fall when the next bear market correction occurs.

Again...your choice.  Read my signature line...it says it all.

You bring up a lot of good points. We all need to be open-minded in order to be good planners.

You tailor the use of annuities to the individual. 5% of anything is a very small number. Very significant to that individual, especially in a down market.

But in terms of the total amount of money you run for clients, it is just a Swiss Army knife off to the side. It this is an important tool for boomers who are in trouble, the manufacturers need to do a better job.

I guess sometimes passion sounds feels like schooling.

Personally, I have used this tool at times, mainly to learn and address specific problems.

I feel like I have built "clean" portfolios at great personal comparative expense, in terms of the way this industry chooses to reward producers.

Every product manufacturers will have to earn the respect of me and my clients.

But, refusing to view the concept with an open mind and being incredibly certain that you (generic you, not you specifically...although maybe it is you) have all the answers based on a 3 year run in this industry does make you a bad planner.  And it is setting you up for a very big fall when the next bear market correction occurs.

Now we are talking. Thanks sharing a passionate viewpoint which is tempered by the fire.

[quote=babbling looney]

If you want to school us in planning, you will need to try harder.

Who wants to school you in anything?  We are offering free information and observations of investor psychology from years of experience.  You are free to ignore all of this.  Your choice.

Disclaimer: I too have a very small portion of my book in VAs (probably less than 5%). So I have no vested interest in getting anyone to use the product. 

Not being sold on the concept does not make a good or bad planner.

But, refusing to view the concept with an open mind and being incredibly certain that you (generic you, not you specifically...although maybe it is you) have all the answers based on a 3 year run in this industry does make you a bad planner.  And it is setting you up for a very big fall when the next bear market correction occurs.

Again...your choice.  Read my signature line...it says it all.

[/quote] Amen BB.   That's is exactly why I feel pretty comfortable when the next bear market comes.  If you looked at all my clients in aggregate they are pretty much 1/3 equites..1/3 bonds...1/3 cash.

This should insulate me to some degree when stocks fall by 20-40% which we all now is not if but when.

Thanks for all the great feedback.

scrim

"I feel pretty comfortable when the next bear market comes."

"This should insulate me to some degree when stocks fall by 20-40%."

Scrim, I think that your arrogance is going directly over your head.  It's not up to you to be comfortable.  It's not your money.  It's not about insulating you.  It's not your money!

Just curious, are your clients getting charged 1% for the 1/3 cash that they have?

You mentioned that you are doing the right thing for your client as evidenced by staying away from big annuity commissions.  You do realize that you'll be earning more with your 1% wrap than an annuity, don't you? 

Let's use some logic.  Your client base is conservative based upon the fact that your clients have as much money in cash as they do in equities.   You know that the stock market will drop 20-40% at some point.  You (should) know that many of your clients will bale on their equity positions if the market tanks like you expect leading to performance worse than the market.   Over a 10 year period, you expect a 100% equity position to outperform a 33%/33%/33% equity/bond/cash position.  So, please explain how your conservative clients with a long enough time horizon are better off in their 33/33/33 portfolio instead of a VA in 100% equities?

[quote=anonymous]

"I feel pretty comfortable when the next bear market comes."

"This should insulate me to some degree when stocks fall by 20-40%."

Scrim, I think that your arrogance is going directly over your head.  It's not up to you to be comfortable.  It's not your money.  It's not about insulating you.  It's not your money!

Just curious, are your clients getting charged 1% for the 1/3 cash that they have?

You mentioned that you are doing the right thing for your client as evidenced by staying away from big annuity commissions.  You do realize that you'll be earning more with your 1% wrap than an annuity, don't you? 

Let's use some logic.  Your client base is conservative based upon the fact that your clients have as much money in cash as they do in equities.   You know that the stock market will drop 20-40% at some point.  You (should) know that many of your clients will bale on their equity positions if the market tanks like you expect leading to performance worse than the market.   Over a 10 year period, you expect a 100% equity position to outperform a 33%/33%/33% equity/bond/cash position.  So, please explain how your conservative clients with a long enough time horizon are better off in their 33/33/33 portfolio instead of a VA in 100% equities?

[/quote] I think to some degree I need to be comfortable with the way I run the business.

VA's make me uncomfortable.

Any clients involved in the wrap program are being charged the annual fee.  

My most conservative clients and/or assets they plan on using within a year or two are just in a plain vanilla money market funds where the total fees run around 70 bps.

The whole part of who will bail is the big wild card for me.  I have not been thru a bear market in my practice yet.   I'm praying that if I did the right things from the beginning and gave them the best servicing they've ever had I will keep the inevitable defections to 10-15%.

Time will tell.

Congrats to the Colts!

scrim

[quote=scrim67][quote=anonymous]

"I feel pretty comfortable when the next bear market comes."

"This should insulate me to some degree when stocks fall by 20-40%."

Scrim, I think that your arrogance is going directly over your head.  It's not up to you to be comfortable.  It's not your money.  It's not about insulating you.  It's not your money!

Just curious, are your clients getting charged 1% for the 1/3 cash that they have?

You mentioned that you are doing the right thing for your client as evidenced by staying away from big annuity commissions.  You do realize that you'll be earning more with your 1% wrap than an annuity, don't you? 

Let's use some logic.  Your client base is conservative based upon the fact that your clients have as much money in cash as they do in equities.   You know that the stock market will drop 20-40% at some point.  You (should) know that many of your clients will bale on their equity positions if the market tanks like you expect leading to performance worse than the market.   Over a 10 year period, you expect a 100% equity position to outperform a 33%/33%/33% equity/bond/cash position.  So, please explain how your conservative clients with a long enough time horizon are better off in their 33/33/33 portfolio instead of a VA in 100% equities?

[/quote] I think to some degree I need to be comfortable with the way I run the business.

VA's make me uncomfortable.

Any clients involved in the wrap program are being charged the annual fee.  

My most conservative clients and/or assets they plan on using within a year or two are just in a plain vanilla money market funds where the total fees run around 70 bps.

The whole part of who will bail is the big wild card for me.  I have not been thru a bear market in my practice yet.   I'm praying that if I did the right things from the beginning and gave them the best servicing they've ever had I will keep the inevitable defections to 10-15%.

Time will tell.

Congrats to the Colts!

scrim

[/quote] My most conservative clients who have ten or more years to retirement are usually in some kind of "moderate" allocation.  Around 50/50.

I have not compared how that would do against 100% equities in a VA wrapper.

Again, I will not present a product I'm not comfortable with so VA's are still not an option if you hire me.

scrim

"At the vey least, not selling annuities, or even struggling through the contract language (when I see broker dealers use the same payout rate for annuity producers and non-producers, cut out the wasteful incentives, simplify the product) does not make you a good or bad advisor. If you want to school us in planning, you will need to try harder." Planet Roached.

Ground control to Major Tom..

Ground control to Major Tom...

Take your protein pill and put your helmet on!

I just got back from my doctor. He told me that there was this new medicine that would help me through these psychotic episodes, but he wasn't going to give it to me because, well, it's too darned expensive, and also he's not sure how exactly it works! He's sure that attaching leeches to my temples when the voices start shouting will eventually start to work, and what with the blood letting and the tut tut there thereing he should be able to get me through the depression and back to my good old manic state.

Manic depression has captured my soul

I know what I want but I just don't know (how to go about gittin it!)

Bad news, planet, this job just is not simple. No matter how simple you want things to be, they're not. Some things are more complicated than other things, but that doesn't mean they're bad. Do you want your doctor to give you two good old asprin when you are in need of prozac? Is prozac more complicated than asprin? You want your doctor to prescribe the most effective cure for what ails you.

"Know what I mean, Doc?" (what's that from? we know the top ref is Space Oddity from Bowie, the middle is Jimi's Manic Depression, this one is not Bugs Bunny.)

Mr. A

"Again, I will not present a product I'm not comfortable with so VA's are still not an option if you hire me." Scrimp

Another word for comfort is bliss. You know what is blissful? Ignorance!

You don't know what you are talking about. You are ignorant of what you are talking about, but you have convinced yourself that hoping and praying will have been enough and that allows you to be blissed.

Mr. A

Are you saying if you are not comfortable with a product you will still present it to your clientele?

How is that a good thing?

scrim

[quote=scrim67]

Are you saying if you are not comfortable with a product you will still present it to your clientele?

How is that a good thing?

scrim

An annuity is gamble with someone much smarter than you and who has already taken a 6% handicap and still thinks they will win.

Not a good bet.

Nice mental picture.

[quote=planrcoach]

Nice mental picture.

An annuity is gamble with someone much smarter than you and who has already taken a 6% handicap and still thinks they will win.

Not a good bet.

Nice rhetoric.  It has no basis in reality, but, hey, it sounds good.   Don't get me wrong.  The total expenses do matter, but what ends up in the salesperson pocket does not.  A 1% wrap will garner more total compensation than an annuity. 

The total expenses of a good annuity are typically going to be about 1% more than the total expenses in a wrap program.   If the money is going to be invested in an identical manner, I agree that the VA probably does not make sense and I would not use one.  However, if the VA allows the client to invest more aggressively, it makes sense.  For me, the decision to recommend a VA tends to be very easy.  "Will conservative client, Mr. Smith, invest more aggressively if we have a guarantee on the money and do I believe that  this will allow him achieve a long term return that is more than 1% higher?" 

Don't discount the value of the death benefit and the ability to annuitize.  These are both important factors that have value.  Many people die with losses in their portfolio.  With a standard death benefit this can't happen with a VA.   Annuitization can also be a huge benefit.  The risk of one outliving their money is very real for many people.   The annuity contract allows them to get payouts based upon today's mortality tables instead of future mortality tables.  This type of risk tolerance makes a lot of sense for many people for part of their portfolio.

You'll get no argument from me if you say that VA's are usually not appropriate.  That does not change the fact that sometimes they are and should be used in these instances.

Scrim, I'm in complete agreement that you should not be using VA's in your practice if you aren't comfortable.  That being said, get comfortable!  There is a segment of your book that would benefit greatly from these products.

"An annuity is gamble with someone much smarter than you and who has already taken a 6% handicap and still thinks they will win."

This makes absolutely zero sense.

MAYBE, if you had said an annuity RIDER is a blah blah blah, it might make a little sense.

I think you are confusing annuities with derivative contracts. What is your risk in the annuity? That the market value drops. The insurance company makes money on this? The market drops, the insurance company loses, because they have guaranteed a growth rate.

Yes, there are M&E expenses. You are buying a benefit, it costs money. Are you not going to live in a house because you have to buy fire insurance on it? Are you cheesed off every year that your house didn't burn down? Are you not going to drive a car because you need to be insured?

There are fees for riders... as opposed to having a set contract that doesn't give you the choice of which bells you want and which whistles you don't.

And then there are fees for running the money. Annuity company funds often times cost less in total fees then the same funds outside the contract (there are lots of reasons for this and the top two reasons are the money is stickier in annuities and the annuity gives the money manager access to a large pool of capital, and they are willing to take less money for that access).

So where is this "gamble" you refer to? And how did the insurance company "Take a 6% handicap"? And if it is the Insurance company who "took the handicap" (as opposed to having weighed you down with a 6% handicap) (and where do you come up with 6% anyway? The commission? How is that a handicap? The guarantees are based on the premiums paid which are not net of commission. 6% in total fees is outside the realm of the AXA annuity which this thread is based upon.) wouldn't it make sense for that side of the bet to think they are going to win?

Your statement makes NO sense.

Further, the average investor has no idea, beyond the superficial, how a REIT works. How exactly does an ETF work? Do you know? How does a cell phone work? Do you know? How does GE work? Do You KNOW? Do your clients KNOW how a leveraged muni bond fund works? Do YOU? Do you know how MBIA transfers the risk of underwriting Munibonds? Are you comfortable with that whole process? And what about all those fees you're paying for all those insured Munis (not to mention that the market has discounted the importance of insurance on munis, as evidenced by the spread between insured and non)

In truth, I’m surprised that Spitzer and his ilk never went after MBIA.  It’s an odd way to run a railroad, and I’ve never been able to get cozy with it…particularly in light of some of it’s failures.

Thanks sharing a passionate viewpoint which is tempered by the fire.

?? What's up with this passionate stuff. 

I am merely pointing out some aspects of VAs that are appropriate and appeal to some clients.   If you don't want to consider them for logical and valid reasons, that's your prerogative.

I am also pointing out that the arrogant fallacy of people who have been in the business for a very short time and in an incredible bull market to boot, shouldn't be so sure that they have all the answers.

 The only reason I post here (besides liking to stir the pot a bit ) is to try to share some of my experiences and philosophy. Do what you want. I really don't care.

Well, you argue your opinion with passion. That's just my opinion. I think you are logical and passionate.

And then there is pragmatism. Consider this quote from page 100 of February 2007 Money Magazine. I am not not quoting this as fact, merely to demonstrate that public perception is also relevant. Why? Because we work in an industry that (still) ties itself in knots over ethics questions, to the detriment of Americans who need our help:

... Jeffrey Brown of the Univesity of Illinois says that more retirees should consider an immediate annuity, which guarantees  a lifetime income. Be careful: many annuities salesmen will sell you expensive policies that have risky investment features. For more, see...

Would you like to buy an annuity?

No thanks. I might need the immediate annuity, though. Had too many adventures in my youth.

I'll bet you could help me think of something smarter to do with the cash, though.

Interestingly enough, I know of at least one VA contract that is lower cost than a great many vanilla G&I type mutual funds.  And that includes the M&E.

[quote=mranonymous2u]

“An annuity is gamble with someone much smarter than you and who has already taken a 6% handicap and still thinks they will win.”

This makes absolutely zero sense.[/quote]

[quote]Further, the average investor has no idea, beyond the superficial, how a REIT works. How exactly does an ETF work? Do you know? How does a cell phone work? Do you know? How does GE work? Do You KNOW? Do your clients KNOW how a leveraged muni bond fund works? Do YOU? Do you know how MBIA transfers the risk of underwriting Munibonds? Are you comfortable with that whole process? And what about all those fees you're paying for all those insured Munis (not to mention that the market has discounted the importance of insurance on munis, as evidenced by the spread between insured and non)