[quote=EDJ to RIA]

Quote: "What would you do for a 40 year old that makes 250K per year, wants tax
free growth and retirement income, wants more than the growth in a
muni bond, maxes his 401K (if able to due to top-heavy issues), and can
use some death benefit also? "

Buy a portfolio of no-div stocks (tax-deferral) and term insurance (cheap). You could even harvest tax losses which you can't do in annuities/VUL. No 3-4% internal expenses, no commissions, no surrender charges. Can be used as an EARLY retirment asset, max 15% cap gains not ordinary income.

Just another alternative to the annuity/LIRP...

[quote=joedabrkr] [quote=EDJ to RIA]

Quote: "What would you do for a 40 year old that makes 250K per year, wants tax
free growth and retirement income, wants more than the growth in a
muni bond, maxes his 401K (if able to due to top-heavy issues), and can
use some death benefit also? "

Buy a portfolio of no-div stocks (tax-deferral) and term insurance (cheap). You could even harvest tax losses which you can't do in annuities/VUL. No 3-4% internal expenses, no commissions, no surrender charges. Can be used as an EARLY retirment asset, max 15% cap gains not ordinary income.

Just another alternative to the annuity/LIRP...

[/quote]

Just curious, what kind of "cheap" term insurance?
[/quote]

I only know term as "term". 10yr, 20yr, etc. Are there different kinds of term?

[quote=EDJ to RIA][quote=joedabrkr] [quote=EDJ to RIA]

Quote: "What would you do for a 40 year old that makes 250K per year, wants tax
free growth and retirement income, wants more than the growth in a
muni bond, maxes his 401K (if able to due to top-heavy issues), and can
use some death benefit also? "

Buy a portfolio of no-div stocks (tax-deferral) and term insurance (cheap). You could even harvest tax losses which you can't do in annuities/VUL. No 3-4% internal expenses, no commissions, no surrender charges. Can be used as an EARLY retirment asset, max 15% cap gains not ordinary income.

Just another alternative to the annuity/LIRP...

[/quote]

Just curious, what kind of "cheap" term insurance?
[/quote]

I only know term as "term". 10yr, 20yr, etc. Are there different kinds of term?

It is nice to see that not everyone at EDJ is a complete moron.

EDJ4Now and Broker24, this one's for you.

[quote=joedabrkr] [quote=EDJ to RIA][quote=joedabrkr] [quote=EDJ to RIA]

Quote: "What would you do for a 40 year old that makes 250K per year, wants tax
free growth and retirement income, wants more than the growth in a
muni bond, maxes his 401K (if able to due to top-heavy issues), and can
use some death benefit also? "

Buy a portfolio of no-div stocks (tax-deferral) and term insurance (cheap). You could even harvest tax losses which you can't do in annuities/VUL. No 3-4% internal expenses, no commissions, no surrender charges. Can be used as an EARLY retirment asset, max 15% cap gains not ordinary income.

Just another alternative to the annuity/LIRP...

[/quote]

Just curious, what kind of "cheap" term insurance?
[/quote]

I only know term as "term". 10yr, 20yr, etc. Are there different kinds of term?

[/quote]

Among others there is 10 yr 20 yr and Annually Renewable.

I ask the question because I've been trying to hone my knowledge understanding of that part of the business.  Learning more about permanent insurance as well.

How "cheap" is that term really if the client dies AFTER the term insurance has expired?  Or as they get older and the rates go way up?
[/quote]

It seems like a big dilemma, but term in not perm and vise versa.  Joe if you sold them term to cover a period of time in their life that insurance was needed, say that person dies after it expires, but they had paid their house off (which may have been the original reason they needed it) so what. That term insurance was not bought for AFTER that.  You would also have needed insurance for the time AFTER the house was paid off and term had expired.  This is where permanent insurance of which variety you use is needed. <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

They can have both at the same time.

Typically when you buy term it's level term.  At least that's the way everything I've sold at Jones works.  Payment stays the same for the entire length of the term.  Metlife actually has a 30 yr level term.  Might be a great alternative to those 40 or 50 somethings thinking about VUL, but not really concerned about cash value. 

EDJ to RIA - I understand your idea.  You make it sound so simple.  Are you considering that tax rates are the lowest they've been in a REALLY long time?  As the political climate changes, so does our tax system.  15% on cap gains now, what about 15-20 years down the road when your clients want to start selling those stocks?  What do you do when the stocks, like MSFT, suddenly start paying dividends?  Get rid of them, reap the tax gains/losses and buy another one?  I understand the tax loss selling, but do you try to buy few stocks that lose value specifically for the losses?  Doesn't your stock strategy lean a bit toward the aggressive side?  Not a knock against your strategy, those were just the questions that popped into my head.

Spaceman-

Great questions! You're right about the tax law environment, always changing. Just like the tax rules governing VA's or Life Ins could change in the future. That's what clients love about the flexibility. They don't feel stuck because they just paid a commission or have a surrender charge hanging over their head.

On MSFT, we'll take the div and reinvest it! I don't let the tax situation drive my portfolio decisions. Paying 15% tax on a handful of stocks with relatively small dividend is still better than paying 3-4% in expenses on the WHOLE amount just to avoid the div tax!

I don't buy anything because I think it's going to go down. It works just like any mutual fund. The manager buys a portfolio of stocks. A bunch of them go up, a bunch of them go down - just like the stock market. When the manager has an above avg year, it's usually because a handful of the hundred or more stocks happened to have a great year. NO manager has a portfolio of stocks that ALL do well. You just can't see it in a mutual fund. I'd rather be able to get some benefit from a downturn, I just don't know which stocks it will be!

This strategy is not aggressive, just transparent. So that stock that goes down 10% in a quarter the client sees. But he/she can also see that it makes up only 0.20% of their portfolio. Then I can take the tax loss to offset some income. It's a way they can see a silver lining to the market fluctuating.

When you look at the overall portfolio it looks similar to a Capital Income builder or Income Fund of America. A little stock, a little bond, a little cash...

Since you came from Jones you’ve probably her Skrainka say that unless a client has something like 50+ stocks he doesn’t have proper diversification.  How many stocks do you follow at one time?  I have a client with an IRA at Smith Barney and they have 49 stocks, 6 ETFs and smattering of FHLMC & FNMAs.  The part I love, 1.75% annually.  The client can’t tell you from one day to the next what stocks he owns.  Much less what an ETF is.  Are the client you work with more sophisticated than the avg client you worked with at Jones?  Or are you just better at explaining your process?

[quote=Bamzor][quote=joedabrkr] [quote=EDJ to RIA][quote=joedabrkr] [quote=EDJ to RIA]

Quote: "What would you do for a 40 year old that makes 250K per year, wants tax
free growth and retirement income, wants more than the growth in a
muni bond, maxes his 401K (if able to due to top-heavy issues), and can
use some death benefit also? "

Buy a portfolio of no-div stocks (tax-deferral) and term insurance (cheap). You could even harvest tax losses which you can't do in annuities/VUL. No 3-4% internal expenses, no commissions, no surrender charges. Can be used as an EARLY retirment asset, max 15% cap gains not ordinary income.

Just another alternative to the annuity/LIRP...

[/quote]

Just curious, what kind of "cheap" term insurance?
[/quote]

I only know term as "term". 10yr, 20yr, etc. Are there different kinds of term?

[/quote]

Among others there is 10 yr 20 yr and Annually Renewable.

I ask the question because I've been trying to hone my knowledge understanding of that part of the business.  Learning more about permanent insurance as well.

How "cheap" is that term really if the client dies AFTER the term insurance has expired?  Or as they get older and the rates go way up?
[/quote]

It seems like a big dilemma, but term in not perm and vise versa.  Joe if you sold them term to cover a period of time in their life that insurance was needed, say that person dies after it expires, but they had paid their house off (which may have been the original reason they needed it) so what. That term insurance was not bought for AFTER that.  You would also have needed insurance for the time AFTER the house was paid off and term had expired.  This is where permanent insurance of which variety you use is needed.

They can have both at the same time.

 [/quote]

What if the house was paid off, but because they had been prudent investors/savers they now had an estate issue, or simply had money that they wanted to leave as a legacy to their children.  How much higher would their term or UL premiums be in 20 or 30 years?

What about the true net cost of Whole Life when you take into account the equity accumulated in the policy?

[quote=joedabrkr]What about the true net cost of Whole Life when you take into account the equity accumulated in the policy?
[/quote]

Everybody here is majorly overthinking this. Sell people plain old permanent whole life insurance w/o any bells and whistles (i.e VUL), the Wavier of Premium/Unemployment Rider are useful to have.

The key point is that once you have the policy, you can keep it even if you later on become uninsurable. Note being old makes you less insurable, so policies with increasing rates tend to become less practical over time.

For some people, the optionality of Term-90 insurance is useful. I.e you get flat rates for years 1-10 and can then convert the policy to permanent insurance. The downside is that you didn't build up any value during years 1-10.

Whole life + Assured Purchase options can be useful b/c lets say the person get married, has a kid, and then gets cancer. AIG is not impressed when they buy more insurance when the option comes up. 

[quote=joedabrkr]

What if the house was paid off, but because they had been prudent investors/savers they now had an estate issue, or simply had money that they wanted to leave as a legacy to their children.  How much higher would their term or UL premiums be in 20 or 30 years?

What about the true net cost of Whole Life when you take into account the equity accumulated in the policy?

[/quote]

Joe its simply you doing a life insurance analysis throughout their adulthood. We can all look back and get Gerber Life insurance cheap.   I know its a big pay day when you find a couple or Trust that needs estate insurance.   It is cheaper earlier, but its expensive if they don't need it. Don't force whats not, the truth will come out.   

 My hope is in 20-30 years  I am retired and drinking Crown & 7 in Cabo San Lucas wearing flip flops all day trying to remember the last time it rained.

[quote=Spaceman Spiff]Since you came from Jones you've probably her Skrainka say that unless a client has something like 50+ stocks he doesn't have proper diversification.  How many stocks do you follow at one time?  I have a client with an IRA at Smith Barney and they have 49 stocks, 6 ETFs and smattering of FHLMC & FNMAs.  The part I love, 1.75% annually.  The client can't tell you from one day to the next what stocks he owns.  Much less what an ETF is.  Are the client you work with more sophisticated than the avg client you worked with at Jones?  Or are you just better at explaining your process?[/quote]

I don't "follow" any stocks. I pick the asset classes (lg val, lg blend, etc.) by objectively selecting the stocks that match that area. I.E. give me all Lg Cap stocks with low P/E and P/Bk and then give me the 50 that pay the highest dividend. There's Large Cap Value. I don't look at what stocks show up. If you start doing fundamental analysis on those stocks you just screw up the objectivity and process.

Clients have anywhere from 6 to 10 of these asset classes, so max is 10 x 50stock = 500 holdings. Most don't have that many. I do use ETF's some as a proxy when taking tax losses or in an asset class called "market" where I'll have the R3k, MSCI EAFE and AGG.

I do try to explain the process to clients, but since I have 100% discretion I don't call and explain every change or product.

Spiff Quote:"The client can't tell you from one day to the next what stocks he owns." 

-Just like a mutual fund...

[quote=EDJ to RIA]. If you start doing fundamental analysis on those stocks you just screw up the objectivity and process.[/quote]

Bah, I'm more abstract, I start with a total market ETF and then put value and other ETF's over it.

A procedural question.  So you've got a client with 6 asset classes X 50 stocks = 300 stocks.  I would assume you have some sort of program to place all the trades.  I know that not everyone runs a biz like yours but I'll bet I'm not the only guy wondering who in your office spends the time placing 300 trades when you get a new client. 

Playing devil's advocate...you say it's transparent.  Cost, ownership, tax harvesting all out in front of the clients.  Doesn't the sheer mass of the holdings make it much more confusing to the average client and therefore it loses some of it's transparency just based on the volume of information that must be in each of their statements.  If you're not doing any fundamental analysis, just worrying about asset classes why not just use a mix of ETFs?  6 - 10 entries on their statements, you get the asset allocation right, superior performance (since you can't outperform the markets - see QAIB), and you or your computer spend a lot less time making trades and more time playing golf?

Hope you don't mind the discussion.  It's been the most interesting one I've seen on here in a while.

Spiff,

There are a few ways to accomplish this.  One is to hire a Turnkey Asset Management Provider(TAMP) like SEI, Assetmark/Genworth, Russell etc.  They do the asset allocation( either in house or hired out to a stragegist like PanAgora or Wishire) and hire the subaccount managers.  The client gets a consolidated statement showing their individual holdings and all transactions.  The statements can be a bit longer than what you're used to (25pages per quarter is not uncommon).  You can do tax harvesting at year end, exclude certain securities that the client is opposed to or is overweighted in.  Many also have a tax overlay service like Parametric, that will coordinate sales and purchases among the numerous managers to minimize the tax concequences to the client.  The cost is generally starts at 2.4% annually and includes all managment, transaction and advisory fees.  This is less than Jones was charging for their MAP program when I was there with a few more bells and whistles.

Hope that helps

Spiff-

I use FOLIOfn as b/d. They have a unique platform where you can trade entire baskets at once. So if someone trasfers in, I can just choose to "subscribe" them to either an individual folio or a whole allocation (the 6-10 folios I mentioned) with one click. All orders are entered automatically.

Also, when I update a folio or allocation I can click a button to "sync all clients" to the same folio. So from a practice management perspective, it's more more efficient than anything I've ever seen. I can manage 1,000 accounts the same as 1!

That leaves me plenty of time for golf...

PS-Folio charges the client a flat 0.20 percent for all trades, performance reporting, confirms, statements, etc.

"PS-Folio charges the client a flat 0.20 percent for all trades, performance reporting, confirms, statements, etc."

Of course they get a 4% rump tearing when I drop all those "market orders", but Hey, what do I care, I'm playing golf! Client'll never figure it out anyway so what's the diff? "It ain't illegal unless they catch ya." Am I right!? Yoohooo!

[quote=Whomitmayconcer]

"PS-Folio charges the client a flat 0.20 percent for all trades, performance reporting, confirms, statements, etc."

Of course they get a 4% rump tearing when I drop all those "market orders", but Hey, what do I care, I'm playing golf! [/quote]

Could you explain this one?

The guy has a magic button he can push and his B/D will enter orders for a preselected basket of stocks "at the market".

If you've been a tape watcher over the years you will notice every so often that stock go across at wildly off the market prices. Executed way above the offer.

The busines of busines being to make money and all, how long do you think it would take the traders at EJD2RIA's firm to figure out how to cross trades "at the market" wher they can keep a spread.

OK, 4% is most likely exaggerating, most of the time. but any trader worth his salt can slide something out over and above the .2% that EDJ2RIA thinks it the total effect on his trades.

Sorry if I seem petulant about it. It just irks me to see people who feel there are shortcuts that don't cost anything. Especially when they are ex jones guys, who aren't particularly know for being the brightest bulbs on the Christmas tree. How long did it take them to figure out they weren't who Jones told them they were? Are they smarter than they were at Jones or did they just switch brands of Bugjuice? Based on what I read here, it's much more the latter than the former. 

I’m actually still detoxing from the former bugjuice.  I will let you know about the new bugjuice in a few months.  I’m smarter now, thank you!