Annuties...good or bad?
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Rather than hijacking the other thread, I’m curious to see other advisors views on their use of annuities. I think used properly (GWB, guarantee of principal, step-up in positive market years) they are fantastic. I think their usage should be along the line of REIT’s (limited to 10% of net worth) but not quite that drastic. If I have someone 55 years old or so come in with $1,000,000, I wouldn’t want to use more than $250,000 of that at most towards an annuity if it’s something I think would be useful in their situation. The main negative right now is my firm only offers the proprietary annuity, which is great in its own right in my opinion, but I think we should have more options. Q1 next year we’ll have 3 companies to choose from, fortunately. Thoughts?
I think your opinion doesn’t matter and that you should offer your clients the choices of what they want.
Well working at a bank, I often run into those who aren’t very bright. I have never met a prospect or current client, at the bank or at Jones, who liked their annuities. More often than not it had nothing to do with the product and everything to do with their lack of understanding. Opinions have spread through the media and clients to the point where people are afraid of fixed annuities just because the word annuity is used. I rather just avoid them then deal with the BS associated with them.
Many moons ago I was trained that only an idiot would buy an annuity. I believed this until I saw people being forced out of retirement and going back to work (This was in 2002). Now I do quite a bit of annuity business (immediate, fixed and variable). Every single client I have which owns an annuity is thankful. I may not make them rich, but they'll never be poor or have to go back to work.
Some people should have all their money in an annuity. Some should have none in an annuity. Some shoud have some in an annuity. Like everything financial, it depends.
If sold properly and fits the clients wants and needs with full discloser and understanding they are great. I think fixed annuities, 3 to 5 year contracts, as a long term CD alternative for those over 59 1/2 is a great idea at the moment. I have a client that wants a pension, no market risk and doesn’t trust his wife AT ALL with money and wants to be certain she gets paid for life. SPIA is the perfect answer.
Personally I don't like (non annuitized) annuities, any of the guarantees will ultimately just be charged back to the client against the principal, there's no such thing a something for nothing.
If you like them for your own money, they're probably good enough for YOUR clients. Most annuities are never annuitized, because folks don't want to play reverse roulette with an insurance company. I stay open-minded, but every time I do the math, I stay away.That's a good theory, Chef Ramsey, but the reality is there are so many products and strategies out there that ultimately there are some ideas that advisors let slide. When you look at things like SMA's, managed funds, closed end funds, ETF's, REIT's, stocks, individual bonds, limited partnerships, annuities, permanent life insurance, very few advisors can be experts at all this stuff and comfortable enough to be able to explain how each one works, as well as all the risks with each one. I'd say it has less to do with someones opinion and more to do with not knowing everything about everything.I think your opinion doesn’t matter and that you should offer your clients the choices of what they want.