401K's

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bankrep1's picture
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Just curious how everyone else handles a clients 401K. Say for example they have 200K liquid and 500K in their 401K. How do you personally handle this situation?

troll's picture
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Joined: 2004-11-29

I'm not sure if I understand the question....what do you want to know?

Ashland's picture
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Couple of things:

1 - Is a non-hardship, inservice withdrawal available? If so, it often makes sense to self-manage it.

2 - If not available, I include it in any overall allocation plan trying to pick the best asset classes in the 401k, and building around it.

I want to be the 'money guy' for my clients and feel it's important to take into account what will eventually be 60 - 80% of their financial assets at retiremet even if I can't currently get paid on it.

anonymous's picture
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Ashland, Do you put 401(k) recommendations in writing?

troll's picture
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bankrep1 wrote:Just curious how everyone else handles a clients 401K. Say for example they have 200K liquid and 500K in their 401K. How do you personally handle this situation?
You raise $2,000,000 per month and you even have to ask this question? You are a liar and I eagerly await your silly explanation.

Ashland's picture
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anonymous wrote: Ashland, Do you put 401(k) recommendations in writing?

Yes, I use Principia for most recommendations.

bankrep1's picture
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Bobby Hull wrote: bankrep1 wrote:Just curious how everyone else handles a clients 401K. Say for example they have 200K liquid and 500K in their 401K. How do you personally handle this situation?
You raise $2,000,000 per month and you even have to ask this question? You are a liar and I eagerly await your silly explanation.

Bobby I do and I know you're jealous. I get frustrated when I have given out free advice and was wondering how others approach this subject. The specific event that led me to ask this question is I have a client who has about 200K with me, she retired and has a 500K 401K for which I have given her advice on for the last couple of years. I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25%

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bankrep1 wrote: Bobby Hull wrote:
bankrep1 wrote:Just curious how everyone else handles a clients 401K. Say for example they have 200K liquid and 500K in their 401K. How do you personally handle this situation?
You raise $2,000,000 per month and you even have to ask this question? You are a liar and I eagerly await your silly explanation.
Bobby I do and I know you're jealous. I get frustrated when I have given out free advice and was wondering how others approach this subject. The specific event that led me to ask this question is I have a client who has about 200K with me, she retired and has a 500K 401K for which I have given her advice on for the last couple of years. I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25%
 
 
Show her how to make a large portion of the 401k tax free.  Right now the entire 401k balance is taxable.  You have to provide a workable suggestion for her to access the funds largely tax free.  In addition you must educate her of the benefits of doing this on HER schedule as opposed to waiting until 70 1/2 and letting the government tel her how to do it.
If she waits until 70 1/2 her RMD will force her to completely liquidate everything whether she wants to or not.  As such, it is in her best interest to employ a strategy that will either:
1)  Make 90% of her 401k completely tax free (immediately).
2)  Make a large portion of her 401k tax free while employing a partial Roth conversion strategy that will grow back the entire principal amount tax free.
These methods are out there.  You must simply educate yourself on how to construct these plans.

troll's picture
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bankrep1 wrote: Bobby Hull wrote:
bankrep1 wrote:Just curious how everyone else handles a clients 401K. Say for example they have 200K liquid and 500K in their 401K. How do you personally handle this situation?
You raise $2,000,000 per month and you even have to ask this question? You are a liar and I eagerly await your silly explanation.
Bobby I do and I know you're jealous. I get frustrated when I have given out free advice and was wondering how others approach this subject. The specific event that led me to ask this question is I have a client who has about 200K with me, she retired and has a 500K 401K for which I have given her advice on for the last couple of years. I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25%
Thanks for the silly, predictable explanation. Just what I predicted.

Dust Bunny's picture
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My question is how long can she keep the money in the 401K?  Some firms allow you to stay there indefinitely, others have a drop dead time for the client to move the money.  You might want to clarify that with her.

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I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25%

How are you adding value? What is the fee for? What does it give her that she wouldn't have otherwise? If it's because your sub-advisor gets to pick the best mutual funds for the changing times it's probably not enough. If it's because you do retirement, income, and estate planning then you have the rollover.

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I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25% "
Really??? That 401K company must be philanthropic at heart- to provide such a service for FREE !!!

anonymous's picture
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Ashland, are you legally allowed to give recommendations on her 401(k)?

bankrep1's picture
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Ashland wrote: I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25%

How are you adding value? What is the fee for? What does it give her that she wouldn't have otherwise? If it's because your sub-advisor gets to pick the best mutual funds for the changing times it's probably not enough. If it's because you do retirement, income, and estate planning then you have the rollover.

Ashland I do comprehensive planning. The thing is I think she expects me to continue to counsel her since I have her other money. She is not forced to leave the paln.

Blarm, my fees will cost more than the 401K's management fees because there is simply more valued added from the planning side.

troll's picture
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bankrep1 wrote: Bobby Hull wrote:
bankrep1 wrote:Just curious how everyone else handles a clients 401K. Say for example they have 200K liquid and 500K in their 401K. How do you personally handle this situation?
You raise $2,000,000 per month and you even have to ask this question? You are a liar and I eagerly await your silly explanation.
Bobby I do and I know you're jealous. I get frustrated when I have given out free advice and was wondering how others approach this subject. The specific event that led me to ask this question is I have a client who has about 200K with me, she retired and has a 500K 401K for which I have given her advice on for the last couple of years. I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25%
WTF do you mean there are NO FEES in a 401k???
There are fees in EVERY investment.  Typical 401k fees are about 2% per year. 
Study this and learn something young padawan learner.  And get a mentor who can help you learn how to attract more rollover assets.

troll's picture
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bankrep1 wrote: Ashland wrote: I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25% How are you adding value? What is the fee for? What does it give her that she wouldn't have otherwise? If it's because your sub-advisor gets to pick the best mutual funds for the changing times it's probably not enough. If it's because you do retirement, income, and estate planning then you have the rollover. Ashland I do comprehensive planning. The thing is I think she expects me to continue to counsel her since I have her other money. She is not forced to leave the paln. Blarm, my fees will cost more than the 401K's management fees because there is simply more valued added from the planning side.
I don't see the value you add if you don't know that 401k plans charge fees.
Read The Wedge.  Learn how to sell yourself.

bankrep1's picture
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skippy wrote: bankrep1 wrote: Bobby Hull wrote:
bankrep1 wrote:Just curious how everyone else handles a clients 401K. Say for example they have 200K liquid and 500K in their 401K. How do you personally handle this situation?
You raise $2,000,000 per month and you even have to ask this question? You are a liar and I eagerly await your silly explanation.
Bobby I do and I know you're jealous. I get frustrated when I have given out free advice and was wondering how others approach this subject. The specific event that led me to ask this question is I have a client who has about 200K with me, she retired and has a 500K 401K for which I have given her advice on for the last couple of years. I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25%
WTF do you mean there are NO FEES in a 401k???
There are fees in EVERY investment.  Typical 401k fees are about 2% per year. 
Study this and learn something young padawan learner.  And get a mentor who can help you learn how to attract more rollover assets.

I believe you are misguided by my post I understand Mutual fund expenses and the SAI. I refuse tocompete on what is has lowest cost, that is a loser's battle.

Ashland's picture
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anonymous wrote: Ashland, are you legally allowed to give recommendations on her 401(k)?

Am I legally prohibited to do so?

anonymous's picture
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What value are you giving her?
Are you illegally giving her investment advice on her 401(k)?
My clients always move their 401(k) money to me.  More to the point, it always gets done before we talk about specific investments or fees.  How do I do this?  I talk about all of the advantages of an IRA and a Roth IRA over a 401(k).  If they understand this, you can get them to rollover the money to a money market account inside of the IRA with the promise to talk specific investments once the money is transferred.  Can you put together a long list of reasons why she would be better off in an IRA/Roth IRA instead of a 401(k)?

anonymous's picture
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Am I legally prohibited to do so?
I don't know your business setup, but the answer is probably "yes".

Ashland's picture
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I refuse to compete on what is has lowest cost, that is a loser's battle.

Yeah, you're worth more than the $2000/yr to the grid that you're getting paid for on this one, and you know it... How do you help her see that?

I'm sure that I'll be dealing w/ this is a couple of years myself. I'd love to know the outcome.

Ashland's picture
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anonymous wrote: Am I legally prohibited to do so?
I don't know your business setup, but the answer is probably "yes".

How do you handle this, anon?

anonymous's picture
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401(k) conversations are never documented.  401(k) recommendations are never in writing. 

Ashland's picture
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anonymous wrote: 401(k) conversations are never documented.  401(k) recommendations are never in writing. 

Well, letter of caution & notice of fine here I come!

bankrep1's picture
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anonymous wrote: What value are you giving her?
Are you illegally giving her investment advice on her 401(k)?
My clients always move their 401(k) money to me.  More to the point, it always gets done before we talk about specific investments or fees.  How do I do this?  I talk about all of the advantages of an IRA and a Roth IRA over a 401(k).  If they understand this, you can get them to rollover the money to a money market account inside of the IRA with the promise to talk specific investments once the money is transferred.  Can you put together a long list of reasons why she would be better off in an IRA/Roth IRA instead of a 401(k)?

SHe is not a new prospect she is a current client. I am not getting the answers I thought I would get so I am going to drop this thread and seek advice elsewhere.

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Ashland wrote: anonymous wrote: Ashland, are you legally allowed to give recommendations on her 401(k)? Am I legally prohibited to do so?
Yes. Unless you have a series 66/65 and are affiliated with a RIA you are just a broker representative and are not allowed to give financial planning advice that isn't associated with an investment that you are offering.   Counseling someone on how to allocate their 401K when you are not the rep is not legal.

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Read my post again.  I gave you great advice.  They client has to see the benefit to moving the money.  All that you need to do is get them to see the advantages of an IRA/Roth IRA over the 401(k).  
The fact that she is a current client is what makes this so easy.  If she wasn't a current client, you would have to get her to understand the reasons for working with you and you might have to talk more specifically about investments. 

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Dust Bunny wrote: Ashland wrote: anonymous wrote: Ashland, are you legally allowed to give recommendations on her 401(k)? Am I legally prohibited to do so?
Yes. Unless you have a series 66/65 and are affiliated with a RIA you are just a broker representative and are not allowed to give financial planning advice that isn't associated with an investment that you are offering.   Counseling someone on how to allocate their 401K when you are not the rep is not legal.

Then I'm OK. I just have to set up IAR files for each of my 401k req's.

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Dust Bunny, having a 65/66 and being affilliated with an RIA still isn't good enough to give investment advice.  One must still have an advisory agreement with the client.  Additionally, when it comes to qualified plans, there are additional regulations, and quite frankly, I have no idea what is legit or not.

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Thats true, I thought that was understood with the RIA business model.  The client has to be an advisory client before you can give them advice on a 401K that you aren't the actual rep on. 
I guess, I don't understand what the question that Bankrep was asking in the first place.

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anonymous wrote: Dust Bunny, having a 65/66 and being affilliated with an RIA still isn't good enough to give investment advice.  One must still have an advisory agreement with the client.  Additionally, when it comes to qualified plans, there are additional regulations, and quite frankly, I have no idea what is legit or not.
============
Yeah, you're right. I'm a Investment Advisor Representative, but I don't represent the firm who has fiduciary responsibility for the plan.

However, when I do an aggregated asset allocation plan I find it very hard to miss 50%+ of client's financial assets.

This is a risk I choose to take.

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Ashland wrote: anonymous wrote: Dust Bunny, having a 65/66 and being affilliated with an RIA still isn't good enough to give investment advice.  One must still have an advisory agreement with the client.  Additionally, when it comes to qualified plans, there are additional regulations, and quite frankly, I have no idea what is legit or not. ============ Yeah, you're right. I'm a Investment Advisor Representative, but I don't represent the firm who has fiduciary responsibility for the plan. However, when I do an aggregated asset allocation plan I find it very hard to miss 50%+ of client's financial assets. This is a risk I choose to take.
There is nothing against putting the 401K assets in an overall report.  You just can't give any advice on the positioning of those assets.
I know....it's a very fine line and clients don't understand why you can't tell them what to do with their 401K when you are already giving them advice on the assets you have under management.

bankrep1's picture
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So do you dust bunny tell them you can't help them with that portion of their assets?

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Ashland, if you put it in writing, it is a stupid risk because it is one that can cost you your career.

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bankrep1 wrote:So do you dust bunny tell them you can't help them with that portion of their assets?
Pretty much.
I tell them that because those funds are in a 401K and may be different from fund outside the 401K or are proprietary funds I don't have enough information to be able to advise them on the individual funds.   Also I am not the representative on that plan so I am not supposed to do so......HOWEVER, I do go over a total asset allocation plan for them (% international, % domestic, large cap, small cap, bonds, reits etc) discuss where they are allocated with me and elsewhere and try to suggest/guess what allocations they have in the 401K.  Most of them get the idea without me telling them take X fund in the 401K and change it to XX fund in the 401K.
It has never been a problem.  Since I don't have my IAR status yet, I can only broadly hint.   Later I will be able to have them sign an advisory agreement and then be able to give information...legally instead of trying to do backdoor advice.
Its a stupid rule.

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Specific advice on 401K plans gets into ERISA laws. I would NEVER put 401K recommendations in writing.  Now, if you want to verbally tell the client...
Jones used to be big on telling IRs to give clients advice on their 401Ks as a way to talk to prospects, I would use PORTFOLIO (the Jones software) to actually lay out my recommendations.  It wasn't until I joined LPL that I learned that we (as financial advisors) are not able to do anything like that without opening up some serious liability possibilities.
Supposedly, the Pension Protection Act will allow you to become a legal plan fiduciary, which will allow you to give specific 401K advice. It's just not clear yet how or what being a plan "fiduciary" means, or how you get that designation.

troll's picture
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anonymous wrote:Read my post again.  I gave you great advice.  They client has to see the benefit to moving the money.  All that you need to do is get them to see the advantages of an IRA/Roth IRA over the 401(k).  
The fact that she is a current client is what makes this so easy.  If she wasn't a current client, you would have to get her to understand the reasons for working with you and you might have to talk more specifically about investments.  Care to share a few gems from your list, anon?

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There's lots of them, but high up on my list is the subject of some of this thread.  When the money is in a 401(k), the client is getting no advice from the broker making money on the plan and his personal advisor (you) are unable to give him advice.  Therefore, it makes sense to roll over the money even if no investment changes will be made. 

troll's picture
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bankrep1,
What are you trying to do?  I thought you were trying to get her to bring her 401k assets to you into the wrap account at 1.25%.
What is the client "debating"?  Are they debating whether to do the rollover in the first place, or are you competing against another advisor?
Until you are clear in what your situation is, you will continue to get unclear answers.
Selling is EMOTIONAL.  I have YET to have clients sign a SWITCH letter saying that the reasons for the change were more "logical" as their primary reason for changing investments.  (There must be logic to back it up, but it IS more emotional.)
You MUST have the client's emotional buy-in.  Until you do, you are competing on price, and the client's past experience with you.  If those are not the driving factors, and you don't have a bonded relationship with the client, you will (most likely) not get the deal.
You must know what you bring to the table.  But you must also know what makes your client's tick.  When there's a match, that's when you'll get the deal.

troll's picture
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bankrep1 wrote: Bobby Hull wrote:
bankrep1 wrote:Just curious how everyone else handles a clients 401K. Say for example they have 200K liquid and 500K in their 401K. How do you personally handle this situation?
You raise $2,000,000 per month and you even have to ask this question? You are a liar and I eagerly await your silly explanation.
Bobby I do and I know you're jealous. I get frustrated when I have given out free advice and was wondering how others approach this subject. The specific event that led me to ask this question is I have a client who has about 200K with me, she retired and has a 500K 401K for which I have given her advice on for the last couple of years. I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25%
Someone else is talking to her about rolling her 401k and he's looking better than you are. Selfishly, she's probably considering a guaranteed variable annuity, as opposed to something that guarantees YOU 1.25%/year. More than likely, she's already moved it and doesn't want to hurt the feelings of "that boy at the bank."

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Bobby Hull wrote:bankrep1 wrote: Bobby Hull wrote:
bankrep1 wrote:Just curious how everyone else handles a clients 401K. Say for example they have 200K liquid and 500K in their 401K. How do you personally handle this situation?
You raise $2,000,000 per month and you even have to ask this question? You are a liar and I eagerly await your silly explanation.
Bobby I do and I know you're jealous. I get frustrated when I have given out free advice and was wondering how others approach this subject. The specific event that led me to ask this question is I have a client who has about 200K with me, she retired and has a 500K 401K for which I have given her advice on for the last couple of years. I asked for the rollover and she is "debating", had I not given her advice she wouldn't of performed that well and would be handing me the rollover. Her thing is the 401K has done very well and there are no fees. . . Her other investments are in a wrap 1.25%
Someone else is talking to her about rolling her 401k and he's looking better than you are. Selfishly, she's probably considering a guaranteed variable annuity, as opposed to something that guarantees YOU 1.25%/year. More than likely, she's already moved it and doesn't want to hurt the feelings of "that boy at the bank."

Bobby is probably right.  In addition many 401K plans are already in a group variable annuity format so the switch is from something familiar to something familiar.  People don't like change........especially old people.

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Dust Bunny wrote:It has never been a problem.  Since I don't
have my IAR status yet, I can only broadly hint.   Later I
will be able to have them sign an advisory agreement and then be able
to give information...legally instead of trying to do backdoor advice.

What I'd do is say that the bank, has a policy that you cannot make
specific comments about outside accounts, including 401(k). That's not
to say that as a valued client, I won't look over your 401k, and make
comments.

Keep it general, and focus on how the 401(k) assets fit into general
allocations. And how its better to have all accounts consolidated so
you don't forget about assets etc.

If your worried about annuity sharks tell them the Truth.

Quote:Mrs Client, while I can't comment specificly about your 401(k),
Its my experience that people like your self often targeted by annuity
salesmen. These annuities are many times innapropriate and always
expensive. The most important thing you should know about annuities is
that they pay a 6% commision to the broker.

On a $500K account such as yours, that's a $30,000 payday. So you
should be aware that annuity salesmen are highly motivated. I'd take
everything they say with big grain of salt. If you ever need a second
opinion on any major financial transaction,you know that I'm always
here. Quote:

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AllREIT wrote: Dust Bunny wrote:
It has never been a problem.  Since I don't have my IAR status yet, I can only broadly hint.   Later I will be able to have them sign an advisory agreement and then be able to give information...legally instead of trying to do backdoor advice.
What I'd do is say that the bank, has a policy that you cannot make specific comments about outside accounts, including 401(k). That's not to say that as a valued client, I won't look over your 401k, and make comments.Keep it general, and focus on how the 401(k) assets fit into general allocations. And how its better to have all accounts consolidated so you don't forget about assets etc.If your worried about annuity sharks tell them the Truth.Quote:Mrs Client, while I can't comment specificly about your 401(k), Its my experience that people like your self often targeted by annuity salesmen. These annuities are many times innapropriate and always expensive. The most important thing you should know about annuities is that they pay a 6% commision to the broker.On a $500K account such as yours, that's a $30,000 payday. So you should be aware that annuity salesmen are highly motivated. I'd take everything they say with big grain of salt. If you ever need a second opinion on any major financial transaction,you know that I'm always here. Quote:
I think the difference between people like you and me is that you think that people aren't as smart as they really are. When someone like you sends the message that they are too stupid to think for themselves, you lose the prospect. I know because when I was a rookie, I made the same mistakes.

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In addition many 401K plans are already in a group variable annuity format so the switch is from something familiar to something familiar. 
This is true except that the participants tend not to know that they own a group variable annuity.  They think that they own mutual funds.
ALLREIT, live by sword, die by the sword.  The "annuity shark" can easily show that the person putting them into a fee based account will earn much more than if they bought an annuity.
The best "annuity sharks" are people like me who give their client choices.  "This is the advantage and disadvantage of the annuity.  This is the advantage and disadvantage of the UIT.  This is the advantage and disadvantage of the mutual fund, etc."  We know that we'll makde money regardless of the choice that the client makes.  The key to giving the client choices is that they are making choices between investments instead of the choice of whether to work with me or someone else. 

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anonymous wrote:ALLREIT, live by sword, die by the sword.  The
"annuity shark" can easily show that the person putting them into a fee
based account will earn much more than if they bought an annuity.

In my experience clients just "glow" when they learn how much money brokers make on annuity sales. All you need are a few drops of doubt to spoil the soup and immunize clients from annuity salesmen.

If your goal is to sour clients on annuities, then you do what I said.
If your goal is to try and later sell them an annuity yourself, then
you can't tell clients the truth about annuities.

Like I showed before, the total economic cost of a variable annuity is
probably twice that of a managed account, since the initial 6% has to
come from somewhere, the embedded insurance has to be paid for, and the
investments have to be managed.

Out of all the elements of a VA contract, the embedded insurance is the only part worth paying for. The 6% GDC doesn't add anything for the client. And I tell clients that.

As for my own practice, it is monoline. I tell clients I'm in the
investment buisness. I manage money for people. I don't sell life
insurance, don't sell annuities, don't sell mortgages etc.
Quote:The key to giving the client choices is that they are making
choices between investments instead of the choice of whether to work
with me or someone else. 

For myself, I think the value I add is helping clients make good
choices, not from presenting them with many choices, some of them bad.
I'm not a used car dealer.

Has this cost me clients? Maybe, but at least in my biased sample,
clients appreciate the fact that I focus on investments only.

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AllREIT wrote:anonymous wrote:ALLREIT, live by sword, die by the sword.  The "annuity shark" can easily show that the person putting them into a fee based account will earn much more than if they bought an annuity. In my experience clients just "glow" when they learn how much money brokers make on annuity sales. All you need are a few drops of doubt to spoil the soup and immunize clients from annuity salesmen. If your goal is to sour clients on annuities, then you do what I said. If your goal is to try and later sell them an annuity yourself, then you can't tell clients the truth about annuities. Like I showed before, the total economic cost of a variable annuity is probably twice that of a managed account, since the initial 6% has to come from somewhere, the embedded insurance has to be paid for, and the investments have to be managed. Out of all the elements of a VA contract, the embedded insurance is the only part worth paying for. The 6% GDC doesn't add anything for the client. And I tell clients that. As for my own practice, it is monoline. I tell clients I'm in the investment buisness. I manage money for people. I don't sell life insurance, don't sell annuities, don't sell mortgages etc.
Quote:The key to giving the client choices is that they are making choices between investments instead of the choice of whether to work with me or someone else. 
For myself, I think the value I add is helping clients make good choices, not from presenting them with many choices, some of them bad. I'm not a used car dealer. Has this cost me clients? Maybe, but at least in my biased sample, clients appreciate the fact that I focus on investments only.
 
I think the difference between people like you and me is that you think that people aren't as smart as they really are. When someone like you sends the message that they are too stupid to think for themselves, you lose the prospect. I know because when I was a rookie, I made the same mistakes.

Dust Bunny's picture
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Joined: 2007-05-07

As for my own practice, it is monoline. I tell clients I'm in the investment buisness. I manage money for people. I don't sell life insurance, don't sell annuities, don't sell mortgages etc.
That's your business model and that's fine for you. It doesn't give you the high horse position to denigrate others who offer a more full service and varied product selection for their clients.  Frankly you sound like an elitist know it all snob.  I also don't go around dissing other advisors to my clients.  That is something I learned not to do since in high school. It just makes you look bad when you are whining and complaining about the competition.
Disclaimer: I do about 90% of my business in securites and very little in insurance products.  So don't go off ranting that I'm an "annuity shark".  I do have the occasional annuity and life sale when it is appropriate, but I don't have the closed mind that you seem to have.
To each his own.  I'll respect your business model if you respect mine and others.

Ashland's picture
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Joined: 2007-03-06

Dust Bunny wrote: As for my own practice, it is monoline. I tell clients I'm in the investment buisness. I manage money for people. I don't sell life insurance, don't sell annuities, don't sell mortgages etc.
That's your business model and that's fine for you. It doesn't give you the high horse position to denigrate others who offer a more full service and varied product selection for their clients.  Frankly you sound like an elitist know it all snob.  I also don't go around dissing other advisors to my clients.  That is something I learned not to do since in high school. It just makes you look bad when you are whining and complaining about the competition.
Disclaimer: I do about 90% of my business in securites and very little in insurance products.  So don't go off ranting that I'm an "annuity shark".  I do have the occasional annuity and life sale when it is appropriate, but I don't have the closed mind that you seem to have.
To each his own.  I'll respect your business model if you respect mine and others.

YEAH!

anonymous's picture
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Joined: 2005-09-29

To each his own.  I'll respect your business model if you respect mine and others.
I can respect any business model that is being run in an ethical manner.  Allreit can certainly not sell annuities if he so chooses.   The problem is that based upon his anti-annuity posts, he is not doing it in an ethical manner.  For example, he talks about the amount of money that the annuity salesman makes without mentioning that he will make more money by putting the maoney into a managed account.
Like I showed before, the total economic cost of a variable annuity is probably twice that of a managed account
Actually, you made that assertion, but you failed miserably in trying to back it up.  You did succeed in letting us know that you don't understand VA's.   

AllREIT's picture
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Joined: 2006-12-16

anonymous wrote:To each his own.  I'll respect your business model if you respect mine and others.
I can respect any business model that is being run in an ethical
manner.  Allreit can certainly not sell annuities if he so
chooses.   The problem is that based upon his anti-annuity
posts, he is not doing it in an ethical manner.  For example, he
talks about the amount of money that the annuity salesman makes without
mentioning that he will make more money by putting the maoney into a
managed account.
Like I showed before, the total economic cost of a variable annuity is probably twice that of a managed account
Actually, you made that assertion, but you failed miserably in
trying to back it up.  You did succeed in letting us know
that you don't understand VA's.   

Uhhhh no. I showed how the 6% cut comes right out of total return of
the underlying investments. However several folks had a hard, very hard
time understanding that.

You look at any insurance company that sells VA's and in the P&L
there is a line for DAC (Deferred Aquisition Costs) which is an expense
applied against gross earnings from annuities. Those gross earnings are the ongoing expenses of the annuity.

Annuity costs to the client come in three parts (GDC, embedded insurance, and invesment expenses), of which the 6% GDC is wholly useless to the client.

If you have a managed account @ 1% vs an annuity at 1.25% plus a 6% GDC being amortised over the life of the contract, the annuity is going to be more expensive.

Even if the annuity was going to have ongoing costs of 1%, it would
still be more expensive because of the amortisation of the 6% GDC.
Eitherway clients care about what will be cheaper and better for them.

You tell a client that they can have a fully liquid account @ 1%,
Annuity sharks will try to sell them an annuity @ 1.25 + 6% with
surrender charges and unfavorable tax treatment at withdrawral. I think thats a very ethical thing to tell clients.

Anyways, I'm done with talk about annuities. Bobby chimed in
about swooping in with an annuity, and I responded with how to make
clients very skeptical about annuities.

----
As for the main subject of the thread: if you can charge hourly. This problem of outside assets becomes very simple.

You simply charge hourly when talking/researching outside assets.

Otherwise the best policy is simply say that you can't/don't make specific recomendations about outside assets.

bankrep1's picture
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Joined: 2004-12-02

I'm glad were done talking about annuitties. Thanks for everyones comments.

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