Their "peace of mind" is only at risk because they haven't met a professional who explained their fears are unfounded.  More likely what they've met is someone who played on their unfounded fears and used annuity propaganda built on the bogus "need" for a "guarantee".

-----------------------

Two issues here--the second sentence above is probably true in a lot of cases.  However, I'm not on board 100% with the first: the idea that a professional can explain away someone's fears w/logic.  As a woman who I'm married to is fond of saying, "you can't deny me my feelings." (insert marriage joke here!)  If logic ruled the behavior of the consumer why would anyone EVER buy a brand new car?  My theory for that kind of purchase, among thousands of others, is that it "feels good."  And many people, no matter how compelling the evidence, cannot seem to use logic and numbers to their advantage.  Mutual fund flows clearly show how bad we humans are at staying the course--assets always peak in a category/fund/asset class very close to the the peak in value....and bottom out at the point of maximum opportunity.

Cowboy

Add yourself to the stupid list

[quote=mikebutler222][quote=BankFC][quote=mikebutler222][quote=BankFC]

OMG,

That is like saying a person who has a small child SHOULD NOT buy an SUV for protection in a crash because it is more expensive, costs more in gas, and well frankly, you might not even have a crash anyway. 

[/quote]

Not even close. If you need a car example it's more like the salesman who knows the cars he sells will never rust and have lifetime rust warantees, yet he tries to sell rust proofing to everyone who walks into the showroom OR he doesn't bother to explain to people afraid of rust that there's nothing to worry about.

[/quote]

WOW...according to your example, you are telling your clients their accounts will NEVER go down, and they have NO MARKET RISK.  NO???  Let's use your example:

"It's like the salesman who knows the car he sells (the investments he sells) will never rust (lose principle) and has guaranteed warranties (mutual funds have guarantees?  wait, no, thats a VA )...blah blah blah.

[/quote]

It's obvious you're deeply confused (although my guess isn't you're as confused as you pretend, you're just as confused as you need to be to sell a massive commission product). Perhaps we should start fresh with something more to the point. We've hear over and over again that some people “need” that guarantee. <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

1) Tell me, does a diversified, balanced long term investor “need” a guarantee? Or do they just think they need a guarantee?

2) You mentioned the mythical 65 year old client who just lost 30% of their portfolio in a downturn and may need to change their life style due to it. Just when has ANY 65 year with a balanced income portfolio lost 30% of their portfolio value in a downturn?

Either you’re as clueless as the guy who thinks he needs a “guarantee” or you know you’re using bogus examples.

[/quote]

Mike,

First of all I'm not using BOGUS examples, I am exposing YOUR BOGUS example (see post on page 10 if you need a refresher).

But to answer your questions...

1.)  Well Mikey, the answer is yes and no.  If the guarantee will prevent them from making unwise decisions during downturns in the market (which they could), then YES they are worth it.  If they USE the guarantees, then YES they are worth it.  If their behavior is unlikely to be influenced and they DON'T use it, then NO, it is not worth it.

However, I submit that by that definition NO insurance (health, vision, dental, life, homeowners, disability) is worth it unless you use it.  In line with your reasoning, as a financial advisor, DO YOU advise against disability, LTC, and health insurance???? 

2.)  I've seen many 65 year olds lose 30% or more during the terrible times at the beginning of this decade with "moderate" portfolios.  How soon you forget...obviously you didn't have any money in the market then.

bankfc

I think mike is referring to periods >5 years, hell even periods of 3 years have been ok for balanced portfolios.  refer to my post earlier about the s&p 500 index fund to see how an all US equity non diversified portfolio (no bond, mid or small cap exposue) has done over the last 5 years (second worst bear market in history).... about even.  Anyone who would have put a risk averse 65 year old woman in just the s&p 500 would have been an idiot, but still she wouldn't have needed the guarantee (I'm talking about the 'make you even' after 10 year type guarantees) since she's about even now.

Ironically, the Hartford Annuity guy came in today and I talked with him.  He intrigued me with a new spin on the guarantee rider concept, they have a guaranteed withdrawal benefit for life that will increase with the portfolio (5% withdrawal rate annually based on account value stepped up annually with account increase but will not go down and is guaranteed for life) costing 50 bps.  I thought it interesting enough to look into since it is not 'annuitization' (substitute: 'dogsh*t').  Only downfall is that the client has to wait until 60 (which you can't withdraw VA's w/o penalty until 59 anyway).  Also, they have pretty low overall costs, it appears, as well as my favorite fund companies.  This might be ok for a few of the clients I work with, but still is going to have to pass the dogsh*t screen, which I have yet to find a VA that does.

I'm not closed minded to these things completely, I've just seen soooooooo many of them that were improperly sold (I used to work at a bank, no wonder compliance was so heavy handed) where the client was f*cked because of the penalty period.  I am close minded to the Equity Indexed annuities though.  Pure snake oil. 

Bottom line is that I have sold a few VA's before but they fit a very specific need (rolled over from a fixed annuity who's $'s were for heirs and client couldn't qualify for life insurance and they wanted better potential for return as an example) and might consider them in the future but I'm not standing on top of a soap box preaching that a client needs the protection, 'cause the truth is that they don't. 

Bank FC said:

1.)  Well Mikey, the answer is yes and no.  If the guarantee will prevent them from making unwise decisions during downturns in the market (which they could), then YES they are worth it.  If they USE the guarantees, then YES they are worth it.  If their behavior is unlikely to be influenced and they DON'T use it, then NO, it is not worth it.

Reply:

THis is why we take a client's risk tolerance (you know the boilerplate questionaires we all use) in to consideration.  The more likely they are to make unwise decisions in a downturn the larger the bond allocation.  We don't put a risk averse 65 year old into 100% equities.

Bank FC said:

2.)  I've seen many 65 year olds lose 30% or more during the terrible times at the beginning of this decade with "moderate" portfolios.  How soon you forget...obviously you didn't have any money in the market then.

Reply:

There are virtually NO Balanced portfolios (definition: moderate risk tolerance roughly 60/40-stocks/bonds ) that were down 30% at any point during the bear market, in fact there are almost NO Moderate Aggressive portfolio's (80/20) that were down 30% during the bear market, in fact there were almost NO well balanced all equity portfolios (diversified across capitalization, international and REITs) that were down 30% during the bear market.  If your defining moderate as all Blue Chip stocks then of course a NON diversified Large Cap equity portfolio would have been down by 30% during the bear market.  You are using invalid examples here.  I get the impression that Scrim and Mike are believers in diversification BAnkFC, your making a moot point.

mikebulter just got pwn3d.

By golly, I'll have me one'a them guaranteed annuity thingees". What happens is some salesman hears the uninformed buyer talk about his fears of the market, and instead of explaining how diversified long term investors really don't face the dangers the customer thinks,

Um ...Actually.... yes I have had people come in and ask for those annuity thingies  And while they are not for everyone or even for very many people, I agree that any guarantees that make the client more comfortable with the idea of investing in the markets are valuable.  Valuable in that they get the client actually investing instead of losing ground by being safe in CDs.  Valuable in that they may get the client to take a more appropriate level of risk than they would have done otherwise.

It seems that mikebutler can predict the future and be assured that his clients will not experience a downturn in account value when they decide to withdraw income from their investments.  How does he know that there will not be a need or what level of danger will be in the future stock markets?  It must be nice to be so perceptive.   It must be nice to be so young.

There is also the difference between needing something and wanting something.   I don't NEED to buy that 1949 Buick Roadmaster that will probably be a money pit, but I want it anyway.   It is most likely that VA clients don't really NEED to have guarantees but if they WANT to have guarantees and are aware of the costs and are willing to make that trade-off then I don't see an issue.

The people who are against VAs have a valid point in that many of the annuities were sold improperly and without full disclosure.  This is why we are seeing so much more compliance review.  I don't have a problem with this either.

Asset allocation is a good tool and is part of a VA as well as any other managed portfolio.   Whether portfolios in the past were down 30% or not for well balanced (and that is a slippery definition as well) is moot.  The value of choosing certain guarantees in a VA is that the portfolio may be down in the future but the income is guaranteed.  Many people will make that trade off.   Security at a price.

Hey what about the people that invested their life savings in the stock market in Japan?  Oh wait thats different....

[quote=bankrep1]

Hey what about the people that invested their life savings in the stock market in Japan?  Oh wait thats different....

[/quote]

ROFLMAO, that's your example of someone with a diverisifed income portfolio? The Japanese equity market?

[quote=Cowboy93]

Their "peace of mind" is only at risk because they haven't met a professional who explained their fears are unfounded.  More likely what they've met is someone who played on their unfounded fears and used annuity propaganda built on the bogus "need" for a "guarantee".

-----------------------

Two issues here--the second sentence above is probably true in a lot of cases.  However, I'm not on board 100% with the first: the idea that a professional can explain away someone's fears w/logic. [/quote]

I actually agree with you. You're not going to succeed in explaining what we all here know to be true with 100% of the people you work with. If you've done as good a job at it as possible and they understand, but still want the annuity, do it.

OTOH, if we all really did that, and if most annuity propaganda was honest and didn't press hard on the "SCARE THEM" button, annuity sales would drop 99%.

[quote=BankFC]

Mike,

First of all I'm not using BOGUS examples, I am exposing YOUR BOGUS example (see post on page 10 if you need a refresher).

[/quote]

No, you’re using a twist on it, which makes it bogus. HOWEVER, if you’d like to return to your “if they want an SUV for safety” example it’s really not a bad one. In that case you explain to them if SAFETY is what they want they DON’T want an SUV (and I’m not an SUV hater) because there are other, far safer vehicles.

See? You explained the truth to them about their fears and their mistaken idea of what addresses that fear. Instead, what most annuity sales people do is hear the fear and sell them the biggest, fattest SUV with the biggest possible commission EVEN THOUGH the sales guy knows it doesn’t “solve” their problem.

[quote=BankFC]

But to answer your questions...

1.) Well Mikey, the answer is yes and no. If the guarantee will prevent them from making unwise decisions during downturns in the market (which they could), then YES they are worth it.

[/quote]

Oh spare me. The annuity is going to do that, and NOT YOU? Just what’s your job?

[quote=BankFC]

However, I submit that by that definition NO insurance (health, vision, dental, life, homeowners, disability) is worth it unless you use it. In line with your reasoning, as a financial advisor, DO YOU advise against disability, LTC, and health insurance????

[/quote]

That’s the very same BS line annuity sales people use all the time. LTC and disability and health insurance ADDRESS A REAL NEED. No one here thinks that ANYONE with a well diversified portfolio on a long term basis NEEDS the “guarantee”.

[quote=BankFC]

2.) I've seen many 65 year olds lose 30% or more during the terrible times at the beginning of this decade with "moderate" portfolios. How soon you forget...obviously you didn't have any money in the market then.

[/quote]

That’s a complete and total crock. Diversified portfolios did NOT take a 30% dump, much less income oriented portfolios. I can provide examples, can you? Oh, and spare me the “obviously you didn’t” line, I’m more than confident I’ve been doing this far longer than you have.

[quote=babbling looney]

By golly, I'll have me one'a them guaranteed annuity thingees". What happens is some salesman hears the uninformed buyer talk about his fears of the market, and instead of explaining how diversified long term investors really don't face the dangers the customer thinks,

Um ...Actually.... yes I have had people come in and ask for those annuity thingies  And while they are not for everyone or even for very many people, I agree that any guarantees that make the client more comfortable with the idea of investing in the markets are valuable. 

[/quote]

If you can't explain them them they're wasting their money on it, fine. OTOH, you and I both know annuity sales pieces try to work UP, not down, that baseless fear.

[quote=babbling looney]

It seems that mikebutler can predict the future...

[/quote]

Come on, BL, I respect you. Let's not play some silly game where you try to tell me YOU think a diverisified long term investor needs a guarantee.

[quote=babbling looney]

There is also the difference between needing something and wanting something.   I don't NEED to buy that 1949 Buick Roadmaster that will probably be a money pit, but I want it anyway.  

[/quote]

Just likem there's a difference in buying a car because you want it and buying a "guarantee" because you have unfounded fears that some lowlife used to their advantage to bang you into an inappropriate annuity.

mikebulter just got pwn3d.

I don't use chatboards often. 

What the hell does this mean?

Thanks.

pwn3d = owned

Kind of leet speak.   If you are "owned" in an on line game, you just got your butt handed to you on a silver platter.   As in "I pwn3d u noob"

BL - MMORPG player since they were invented. Huge waste of time but a lot of fun.

Thanks BabblingLooney.  Still a little confused by the acronyms, abbreviations and jargon though. I should know this sh*t since I'm under 30, oh well.

How did mike get "owned".  I haven't seen any posts which make a "titanium" case against mike's postition.  Mostly making assumptions that are inaccurate, but then again I'm biased.

No, I don't think there is necessarily a guarantee needed in a well managed diversified portfolio. 70% of my business is in managed, by me, stock and bond portfolios (which have done very well thank you) and very little in annuities, less than 2%.  Some people do need guarantees or safety nets. 

However your contention that YOU don't think a guarantee is needed is also a conceit of the highest level.  Investing may be about numbers, alpha, beta, sharpe ratios, efficient frontiers to you and me: to the LOLs (little old ladies) it is about safety and comfort.  The emotional stress and nervousness that keeps many from investing is a huge stumbling block.  IF a VA is able to help or mitigate that; then, again I don't have a problem. However, with the huge caveat that the client be fully informed.  It isn't all about wasting their money, as you stated.  It isn't a waste if you get what you want.  I want a big fat Buick that I know will be costly.  But it will be sooo  cool after I put in a  455 with a tubo automatic....but I digress. 

I have already said that many annuities have been sold unethically.  Those guys should be strung up by their gonads. 

You need to put your animus towards annuities and "insurance salesmen", which I also can appreciate, aside and consider the client's needs and fears which you may consider superfluous and silly. But those needs are real.

[quote=dude]

How did mike get “owned”. I haven’t seen any posts

which make a “titanium” case against mike’s postition. Mostly making

assumptions that are inaccurate, but then again I’m biased.

Thanks Skee, although I think in this post you'd give mike a little respect, he's fighting a noble fight.  But it's been fun to watch you two dance.

How boring it would all be if we were all the same.  This place can get distracting.  I need to make more cold calls and will probably check out for awhile.

[quote=dude]

mikebulter just got pwn3d.

I don't use chatboards often. 

What the hell does this mean?

Thanks.

[/quote]

It means the guy using the expression has a mental age of 13 

[quote=skeedaddy] [quote=dude]

How did mike get "owned".  I haven't seen any posts
which make a "titanium" case against mike's postition.  Mostly making
assumptions that are inaccurate, but then again I'm biased.

[/quote]

Mike always puts up a good fight, but often gets "owned". I've put him in his
place a couple of times. I especially hate when he rebutts on a line by line
basis and turns a post into a short novel with multiple pages. Oh and his
tendency to always have the last word. I'm used to it, so I let him have his
way.

I think he might have been an excellent District Attorney. [/quote]

ROFLMAO, you've done WHAT????? Too funny.

BTW, what you really hate about me responding line by line is that I use YOUR words and rebut each and every assertion.