banged out a $100,000 EIA, 9% commish

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EDJ4now's picture
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By banged out I mean mailed a letter from a client exercising our free look and dumping the piece of s***.  Some idiot broker sold my client an EIA and told her to lie to me when I asked what she was doing with the money.
New product:
17 year surrender period, 1st year surrender penalty of 20%.  The client is 79, she'll be 96 before she can get her $$ out.  Only 1/2 can be accessed before that.  The "advisor" put her in the fixed account earning 3.5%, if she really was worried about account fluctuation how about a CD paying 5% with a 3 month interest penalty surrender?
Also, she had paid A share mutual fund commission 6 months ago on the same money. 
The "advisor" is lucky he lives several states away from the client's daughter, from the way she talked this morning I think she would inflict bodily harm if she could.
I am not the die hard "EIA's are always EVIL" person I once was, but this was a piece of crap, sold inapproriately, and the reason why those of us with ethics are put through the ringer when we really are doing the right thing.

munytalks's picture
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EXACTLY!
Having been 'born' into this business through EDJ, I never did nor will I EVER warm up to EIA's. Even now that I can sell, them I won't.
Again, I will ask, why there isn't more done to go after these crooks?
Congrats- you did a good job!

BankFC's picture
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I wish there was a good one...it's a nice concept, but from what I've seen they all suck

Devoted SA's picture
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Had a couple we tried to just become b/d on the other day. Guy in insurance marketing says to me..."Yeah -- we researched this one, and after we found xyz negatives, we stopped researching and put it on the list of 'never gonna happen'"

cranky sob's picture
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EDJ4now wrote:
By banged out I mean mailed a letter from a client exercising our free look and dumping the piece of s***.  Some idiot broker sold my client an EIA and told her to lie to me when I asked what she was doing with the money.
New product:
17 year surrender period, 1st year surrender penalty of 20%.  The client is 79, she'll be 96 before she can get her $$ out.  Only 1/2 can be accessed before that.  The "advisor" put her in the fixed account earning 3.5%, if she really was worried about account fluctuation how about a CD paying 5% with a 3 month interest penalty surrender?
Also, she had paid A share mutual fund commission 6 months ago on the same money. 
The "advisor" is lucky he lives several states away from the client's daughter, from the way she talked this morning I think she would inflict bodily harm if she could.
I am not the die hard "EIA's are always EVIL" person I once was, but this was a piece of crap, sold inapproriately, and the reason why those of us with ethics are put through the ringer when we really are doing the right thing.

You're a liar. There is no such thing as a 17 year surrender that only pays 9%.

STL Indy's picture
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BankFC wrote:I wish there was a good one...it's a nice concept, but from what I've seen they all suck
I've only found one decent one.  The ING Secure Index 5.   Only a 5yr surrender, and one moving part (I like the monthly avg. crediting method which only charges a spread, currently at 0.25% for $75k+).  It doesn't pay well, less than most VA's, but it's good for ultra conservative clients.
BTW, a 17yr surrender that only paid 9% commission?  I'm not buying that.  That should be paying 20% 

EDJ4now's picture
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You're probably right on the 9%, that's the highest I have ever seen presented to me.  Admittedly I am not familiar with the commissions they pay, because I can't see many situations when it would be in a client's best interest so I haven't spent much time researching products.  I am pretty sure that anything paying me 10%+ is helping me more than it is helping the client.
The best part of this deal is that the broker had gotten away with it, but then he got greedy.  He had her put in $50k that I didn't know about.  When he delivered the contract, he then got her to sell another $50k to add to the contract.  I didn't catch the first 50 leave, but I caught the second, and since he didn't deliver the contract for a couple of weeks, we are still in the free look period.
Damn, there goes the backyard pool for this loser.  

cranky sob's picture
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EDJ4now wrote:
You're probably right on the 9%, that's the highest I have ever seen presented to me.  Admittedly I am not familiar with the commissions they pay, because I can't see many situations when it would be in a client's best interest so I haven't spent much time researching products.  I am pretty sure that anything paying me 10%+ is helping me more than it is helping the client.
The best part of this deal is that the broker had gotten away with it, but then he got greedy.  He had her put in $50k that I didn't know about.  When he delivered the contract, he then got her to sell another $50k to add to the contract.  I didn't catch the first 50 leave, but I caught the second, and since he didn't deliver the contract for a couple of weeks, we are still in the free look period.
Damn, there goes the backyard pool for this loser.  

Here's some reality...She did this because you're lacking in some area. If she were happy with you, it never would've happened. You don't know what she told him that drove the recommendation. It could've made all the sense in the world.
You don't know about the commissions because your little firm won't LET you do outside business. They don't get paid on it and they don't want to lose assets that they can paid on. EIA's are very appropriate for a lot of people. I get paid 10% on 10 year products. I HAVE to be paid a lot of money to remove assets from my book, as I can no longer make money off of them.
One more thing little boy...did you know that those high commissions don't go to the grid? That's right! $100,000 in premium earns me $10,000. Enjoy yourself at EDJ!

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I hHaven't taken the time to change my screen name, but am no longer EDJ4now.  I suppose I should change the name to avoid stupid comments from people like the appropriately named cranky.
When I talked to the client, she agreed with me that she didn't want the EIA.  The problem is that she is reaching the point in life where she is lonely and very easily persuaded.   If you talked to her about her grandkids she would probably invest all of her money in magic beans with you.  And no, Cranky, I am not going to give her your number.
Believe me, I believe in adequate compensation for my work, which is one of the reasons why I left EDJ.  However, getting it by tying up most of a widow's liquid funds at 3.5% until she turns 97 is unethical.  Period.  If you disagree, then you have sold your soul, and I hope the regulators push your sorry a** out of this business.
 

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cranky sob wrote:
One more thing little boy...did you know that those high commissions don't go to the grid? That's right! $100,000 in premium earns me $10,000. Enjoy yourself at EDJ!

For the younger people.   This is an example of what you do not want to become--they're called sociopaths, and essentially they have no sense of what is right or wrong.
They actually believe things like "Somebody was going to screw them, it might as well have been me."
I once met one who said, "Yeah, I felt bad about how I was screwing my clients but when I get into my $50,000 car and drive to my $750,000 house on the water I feel a whole lot better."
Don't let that be you.

cranky sob's picture
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EDJ4now wrote:
I hHaven't taken the time to change my screen name, but am no longer EDJ4now.  I suppose I should change the name to avoid stupid comments from people like the appropriately named cranky.
When I talked to the client, she agreed with me that she didn't want the EIA.  The problem is that she is reaching the point in life where she is lonely and very easily persuaded.   If you talked to her about her grandkids she would probably invest all of her money in magic beans with you.  And no, Cranky, I am not going to give her your number.
Believe me, I believe in adequate compensation for my work, which is one of the reasons why I left EDJ.  However, getting it by tying up most of a widow's liquid funds at 3.5% until she turns 97 is unethical.  Period.  If you disagree, then you have sold your soul, and I hope the regulators push your sorry a** out of this business.
 

I've been at it for 7 years and have made about $3,000,000. Never had a customer complaint.
I don't need your client's phone number. She's not even close to my minimum. I'm not bragging...that's just the way I choose to do business.

Devoted SA's picture
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Cranky - which products do you sell? The one we tried to become b/d on the other day but couldn't... had something I didn't quite understand on the statement. It's an Allianz Master Dex 10....
Said...Beginning Annuitization Value $xxxx + Index Adjustment $xxxx = Ending Annuitization Value $xxxxx
Ok ..I understand what index adjustment is, I don't understand why they are calling it "annuitization value" -- what's that ALL about?

FreedomLvr's picture
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Although I've never sold one I've been facinated by indexed annuities for years now.  Here's a couple of answers:
Devoted:  The Masterdex10 REQUIRES the client to annuitize the contract for the full account value.  They could hold it for 50 years and if they try and walk away with their money Allianz will still apply a surrender charge and take back all the index gains.  It's ONLY appropriate for clients who are 100% sure (and who's 100% sure of anything) that they're going to annutize the contract for 10+ years.
I forget who asked aboutt he 17 yr contract w/ a 9% comp.  I THINK it's an American Equity Indexed annuity.  10% bonus to the client up front ($100K = $110K day 1) and penalties decline over the 17 years.  I could think of one reason to sell it to a 79 year old woman (other than the commission):  She might have told the insurance agent that she only wanted to pass this money onto her heirs.  All AE's products waive surrender upon the death of the client and pass the full account value to the beneficiaries.
EIA's seem like they could be a good place for a small portion of a clients long-term "safe-money" assets.  The biggest problem is that you'll always find the Rep who says "the right client is the one sitting in front of me and the right product is the one with the highest commisson".  And that's all you'll ever read about in the paper.

cranky sob's picture
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Devoted SA wrote:
Cranky - which products do you sell? The one we tried to become b/d on the other day but couldn't... had something I didn't quite understand on the statement. It's an Allianz Master Dex 10....
Said...Beginning Annuitization Value $xxxx + Index Adjustment $xxxx = Ending Annuitization Value $xxxxx
Ok ..I understand what index adjustment is, I don't understand why they are calling it "annuitization value" -- what's that ALL about?

STay clear of that one. It HAS to be annuitized. No lump sum - ever! It gives the client a 10% bonus to get them to buy it, but at the end of 10 years, everyone will be in trouble.

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NASD Newbie wrote:cranky sob wrote:
One more thing little boy...did you know that those high commissions
don't go to the grid? That's right! $100,000 in premium earns me
$10,000. Enjoy yourself at EDJ!

For the younger people.   This is an example of what you
do not want to become--they're called sociopaths, and essentially they
have no sense of what is right or wrong.
They actually believe things like "Somebody was going to screw them, it might as well have been me."
I once met one who said, "Yeah, I felt bad about how I was screwing
my clients but when I get into my $50,000 car and drive to my $750,000
house on the water I feel a whole lot better."
Don't let that be you.

I know I should not encourage you NASD, but... gulp.... GREAT POST!
You hit it right between the eyes.

Devoted SA's picture
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cranky sob wrote:
STay clear of that one. It HAS to be annuitized. No lump sum - ever! It gives the client a 10% bonus to get them to buy it, but at the end of 10 years, everyone will be in trouble.

   I'm making my best "I Love Lucy" noise and face right now...eeuhhhhh. These people are teachers, in their late 50's, both withdrew funds from their Roth-TSAs @ Metlife and incurred $10-$15k surrender to buy Masterdex 10.
So they just have to keep it? What happens when they WANT to start taking funds?

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Devoted:
The bonus on the product probably (hopefully) evened out their surrender charges.  Hopefully.
Anytime after the 5th policy year they can annuitize the contract for a stream of income.  The annuitization must be a minimum of a 10-year period certain or as long as life (or life w/ a period certain).
They didn't necessarily get screwed (from anything I've read in your posts) but they've seriously reduced any liquidity they might have needed on this batch of money.  If they're planning on using this....
wait a minute.  Did you say ROTH?  Then yes, they definitely got screwed.

munytalks's picture
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Ready2Jump wrote: NASD Newbie wrote:
cranky sob wrote:
One more thing little boy...did you know that those high commissions don't go to the grid? That's right! $100,000 in premium earns me $10,000. Enjoy yourself at EDJ!

For the younger people.   This is an example of what you do not want to become--they're called sociopaths, and essentially they have no sense of what is right or wrong.
They actually believe things like "Somebody was going to screw them, it might as well have been me."
I once met one who said, "Yeah, I felt bad about how I was screwing my clients but when I get into my $50,000 car and drive to my $750,000 house on the water I feel a whole lot better."
Don't let that be you.
I know I should not encourage you NASD, but... gulp.... GREAT POST!You hit it right between the eyes.
 
I agree also. This is what I was kvetching about in "Con Artists exposed.." the NASD is 'cracking down' on firms who do legitimate, ethical business, while allowing these cons who offer free dinner and screw your retirement tonight seminars to go completely unchecked.
In my town, there's even an ESTATE ATTORNEY who 'waives' the $1500 trust fee if you give him your entire life savings in an EIA- 20 YEAR surrender, so you KNOW he's sucking 20% commission. I have heard they (local attorneys) are trying to get him dis-barred, but meanwhile, he hosts these seminars twice a month.

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Devoted SA wrote:cranky sob wrote:
STay clear of that one. It HAS to be annuitized. No lump sum - ever! It gives the client a 10% bonus to get them to buy it, but at the end of 10 years, everyone will be in trouble.

   I'm making my best "I Love Lucy" noise and face right now...eeuhhhhh. These people are teachers, in their late 50's, both withdrew funds from their Roth-TSAs @ Metlife and incurred $10-$15k surrender to buy Masterdex 10.
So they just have to keep it? What happens when they WANT to start taking funds?

Just because I don't like it doesn't mean that it's not right for some people. The broker may have been perfectly clear about the product and the clients loved it. It's been a long time since I looked at it and I can't answer specific questions about it.

STL Indy's picture
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The MasterDex 10 is complete garbage, as are most of Allianz's fixed annuities (thanks to their crediting methods).
If you want to get serious about EIA sales, get something like MCP Premium which does monte carlo sim's of pretty much every EIA on the market and gives monthly updated ratings on what the current best (for the customer) EIA's are.

troll's picture
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STL Indy wrote:The MasterDex 10 is complete garbage, as are most of Allianz's fixed annuities (thanks to their crediting methods).
If you want to get serious about EIA sales, get something like MCP Premium which does monte carlo sim's of pretty much every EIA on the market and gives monthly updated ratings on what the current best (for the customer) EIA's are.Sounds interesting, but then again if I were to get involved in using that product line I want to pick something reliable and decent and use it consistently for a long time, not change monthly based upon someone's monte carlo analysis.Generally I'm pretty convinced that EIA's are a pretty raw deal for clients. 
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STL Indy's picture
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joedabrkr wrote: STL Indy wrote:
The MasterDex 10 is complete garbage, as are most of Allianz's fixed annuities (thanks to their crediting methods).
If you want to get serious about EIA sales, get something like MCP Premium which does monte carlo sim's of pretty much every EIA on the market and gives monthly updated ratings on what the current best (for the customer) EIA's are.
Sounds interesting, but then again if I were to get involved in using that product line I want to pick something reliable and decent and use it consistently for a long time, not change monthly based upon someone's monte carlo analysis.Generally I'm pretty convinced that EIA's are a pretty raw deal for clients. 
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That's pretty much the nature of EIA's.  They're always coming out with new ones, and the ones that you sold 12 months ago may have changed their moving parts so that their not as attractive anymore as what can currently be sold.  ING's Secure Index product (with monthly averaging as the crediting method) has been the leader and highest rated by the MCP Premium software for the past year (which is completely unbiased and not affliated with any insurance companies or FMO's).

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What do you all think of Equity Indexing as the mechanism driving a cash value life insurance policy?  I know that Pacific Life has a product that functions like that.  Essentially, you get the guaranteed return similar to that of a UL with a floor, but you also have the chance (Again, I said "chance".) of higher returns if the market performs well.  Of course, the market returns do not include dividends.  I've thought long and hard about EIAs and indexing in general.  If perhaps you could make a case, is this it?  Am I missing something?  Has anyone actually sold this product?

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Soothsayer,
You are missing something.  Over a long period of time, there is absolutely no reason to expect an equity indexed UL policy to perform any better than a traditional UL policy.   The main problem is not that it's equity indexed, but that it is universal life.   In the vast majority of cases, UL is a terrible insurance to own.
People buy UL because it sounds like whole life, but at a cheaper cost.  In reality, it is nothing more than term insurance with a side fund.  The problem is that term insurance is terrible for long term insurance needs.    Term is meant for temporary needs. 
The buildup of cash in UL policies is mainly an illusion.  When one takes cash out of the policy and couples this with the increasing cost of the insurance these policies usually fall apart on themselves.
I've been doing this for a long time and I have never seen a UL policy that was not in danger of blowing up at older ages. (The exception is guaranteed UL policies.  These can make sense at older ages.)

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On EIAs in general.....
I have never sold one, but...
They can be ok if the following conditions apply:
1) The client is looking for a fixed product2) The client knows that they don't mind having to hold the product for a long period of time due to surrender charges3) The client wants the opportunity to do better than other fixed products, but understands that they can do worse.

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anonymous wrote:
On EIAs in general.....
I have never sold one, but...
They can be ok if the following conditions apply:
1) The client is looking for a fixed product2) The client knows that they don't mind having to hold the product for a long period of time due to surrender charges3) The client wants the opportunity to do better than other fixed products, but understands that they can do worse.

Do you believe that anybody would willingly buy one if they were presented with alternatives?  I don't.
For the younger people.  If you decide to make this a career you're going to have to make peace with yourself on several levels.  In a way you're going to have to set your moral values aside--park them at the door.
The chief reason is because of how you're paid--fees and commissions, rather than a percentage of the growth your client experiences. That is an inherent conflict of interest.
Often times--VERY OFTEN--the appropriate action is to take no action at all, but if you don't get the client to do something you're not going to get paid.
So you "sell" the client on someting.
What is offensive--especially since I am no longer selling or supervising those who do--is the tendency for a great many sociopathic sales people to recommend things based on the size of the commission or fee they stand to earn instead of what is appropriate for an investor.
Take and EIA.  Lock your money up for years with huge penalties in a product that fluctuates with the stock market.  How smart is that?
Somebody--I think it was EAGU--pointed out that the insurance companies are buying CDs for the safety of principal component and options or futures on the benchmark index for the growth component.
I'll bet they're even more simple than that.  I'll bet the insurance company is simply sitting on cash for the safety of principal part and buying options or futures for the growth component--not even buying CDs with the cash.
I ask you this.  Why should your client pay 10% of what they invest for a scheme as simple as that?  If you had $200,000 you could put it in the bank to earn interst and buy two long term index calls and you've got essentially the same thing.  Instead of paying $20,000 plus trails you'll spend $8 at Fidelity.
In a sense the only people who use advisors are people who are too naive to know what they're doing and who have not yet bothered to look into what they're doing.
There are a lot of them, but as you approach them do your best to be honest.  It's supposed to be how much THEY MAKE from something you sell them, not how much you make.

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I ask you this.  Why should your client pay 10% of what they invest for a scheme as simple as that?  If you had $200,000 you could put it in the bank to earn interst and buy two long term index calls and you've got essentially the same thing.  Instead of paying $20,000 plus trails you'll spend $8 at Fidelity
While I don't disagree with you at all on the above post, I must point out that you have been told over and over and over that the client does NOT pay any fees or take a commission hit when they buy an annuity.  If you are going to argue about a product please get your facts straight.
There is no commission paid by the client to purchase an EIA or B Share VA.  Edward Jones is the only firm that I know of that offers an A Share annuity so I don't include that in the above paragraph.

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babbling looney wrote:
I ask you this.  Why should your client pay 10% of what they invest for a scheme as simple as that?  If you had $200,000 you could put it in the bank to earn interst and buy two long term index calls and you've got essentially the same thing.  Instead of paying $20,000 plus trails you'll spend $8 at Fidelity
While I don't disagree with you at all on the above post, I must point out that you have been told over and over and over that the client does NOT pay any fees or take a commission hit when they buy an annuity.  If you are going to argue about a product please get your facts straight.
There is no commission paid by the client to purchase an EIA or B Share VA.  Edward Jones is the only firm that I know of that offers an A Share annuity so I don't include that in the above paragraph.

For the umpteenth time, if the sales person earns 10% it is at the client's expense.  There is no free lunch and the insurance industry is not a non-profit organization.
You're being intellectually dishonest if you believe that your commissions are created out of thin air simply because they don't appear on the client's statement.

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For the umpteenth time, if the sales person earns 10% it is at the client's expense. 
No sh*t.  No one is arguing that.   
But...... it is not the same thing as paying a 10% commission.  You keep using the example of paying out of the principal and thereby reducing the amount invested into an annuity.  This is incorrect and makes it look as if you haven't a grip on the product you are discussing.  If you want us to take your arguments seriously then you need to use correct facts.

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babbling looney wrote:
For the umpteenth time, if the sales person earns 10% it is at the client's expense. 
No sh*t.  No one is arguing that.   
But...... it is not the same thing as paying a 10% commission.  You keep using the example of paying out of the principal and thereby reducing the amount invested into an annuity.  This is incorrect and makes it look as if you haven't a grip on the product you are discussing.  If you want us to take your arguments seriously then you need to use correct facts.

Suppose I invest $100,000 in an EIA when the S&P 500 is at 567.
Further suppose that three months later the index is still at 567 and I need to liquidate my investment.
How much will I get back?

compliancejerk's picture
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one of too things oh great and exaulted one
1.) you being a newbie and all - the rep didn't conduct a proper review of your needs (KYC)
2.) as a client you withheld info from your rep
                     
p.s.   stick to postings about your "cat toy" as that seems to be the limit of you "vast" knowledge ....

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NASD Newbie wrote:babbling looney wrote:
For the umpteenth time, if the sales person earns 10% it is at the client's expense. 
No sh*t.  No one is arguing that.   
But...... it is not the same thing as paying a 10% commission.  You keep using the example of paying out of the principal and thereby reducing the amount invested into an annuity.  This is incorrect and makes it look as if you haven't a grip on the product you are discussing.  If you want us to take your arguments seriously then you need to use correct facts.

Suppose I invest $100,000 in an EIA when the S&P 500 is at 567.
Further suppose that three months later the index is still at 567 and I need to liquidate my investment.
How much will I get back?

Still not the same thing.   You can argue apples and oranges all you want but the client does not pay a commission to purchase an annuity.  Like all annuities there is a surrender charge if you  break the contract.  Like all annuities you get your initial investment back less the surrender charge that is in the contract.   However, there are some EIAs that allow you to have access to up to 40% of your principal without penalty and most allow you an annual 10% free withdrawal. 
I agree with you that an EIA is bad investment for the client. However, these questions that you keep repeating and repeating and your fallacious examples make us think that you don't have a clue on how annuities work.

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anonymous wrote:
Soothsayer,
You are missing something.  Over a long period of time, there is absolutely no reason to expect an equity indexed UL policy to perform any better than a traditional UL policy.   The main problem is not that it's equity indexed, but that it is universal life.   In the vast majority of cases, UL is a terrible insurance to own.
People buy UL because it sounds like whole life, but at a cheaper cost.  In reality, it is nothing more than term insurance with a side fund.  The problem is that term insurance is terrible for long term insurance needs.    Term is meant for temporary needs. 
The buildup of cash in UL policies is mainly an illusion.  When one takes cash out of the policy and couples this with the increasing cost of the insurance these policies usually fall apart on themselves.
I've been doing this for a long time and I have never seen a UL policy that was not in danger of blowing up at older ages. (The exception is guaranteed UL policies.  These can make sense at older ages.)

Do you work for Northwestern Mutual?  I'm not trying to be funny--just wondering.

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babbling looney wrote:
I agree with you that an EIA is bad investment for the client. However, these questions that you keep repeating and repeating and your fallacious examples make us think that you don't have a clue on how annuities work.

I understand them.  My point is that it's disingenuous to deny the huge chop just because the client does not see it.
They are rarely appropriate, if they were they would not have to pay so much juice to get them sold.

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NASD Newbie wrote:
babbling looney wrote:
I agree with you that an EIA is bad investment for the client. However, these questions that you keep repeating and repeating and your fallacious examples make us think that you don't have a clue on how annuities work.

I understand them.  My point is that it's disingenuous to deny the huge chop just because the client does not see it.
They are rarely appropriate, if they were they would not have to pay so much juice to get them sold.

THe juice is to compensate me for taking the assets out of production for 10 years. It must be tough on you to have NO capacity for independent, creative thought.

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cranky sob wrote:NASD Newbie wrote:
babbling looney wrote:
I agree with you that an EIA is bad investment for the client. However, these questions that you keep repeating and repeating and your fallacious examples make us think that you don't have a clue on how annuities work.

I understand them.  My point is that it's disingenuous to deny the huge chop just because the client does not see it.
They are rarely appropriate, if they were they would not have to pay so much juice to get them sold.

THe juice is to compensate me for taking the assets out of production for 10 years. It must be tough on you to have NO capacity for independent, creative thought.

No, the juice is designed to get you to push an inappropriate investment off on unsuspecting rubes--just like five point muni odd lots and penny stocks.
If you park your ethics at the door you have no problem with them.

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NASD Newbie wrote:cranky sob wrote:NASD Newbie wrote:
babbling looney wrote:
I agree with you that an EIA is bad investment for the client. However, these questions that you keep repeating and repeating and your fallacious examples make us think that you don't have a clue on how annuities work.

I understand them.  My point is that it's disingenuous to deny the huge chop just because the client does not see it.
They are rarely appropriate, if they were they would not have to pay so much juice to get them sold.

THe juice is to compensate me for taking the assets out of production for 10 years. It must be tough on you to have NO capacity for independent, creative thought.

No, the juice is designed to get you to push an inappropriate investment off on unsuspecting rubes--just like five point muni odd lots and penny stocks.
If you park your ethics at the door you have no problem with them.

You should see the natural gas deal that I'm working on. You'd be REALLY jealous of how much I'm gonna make off of it! I'm sorry you failed out of the industry.

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cranky sob wrote:NASD Newbie wrote:cranky sob wrote:NASD Newbie wrote:
babbling looney wrote:
I agree with you that an EIA is bad investment for the client. However, these questions that you keep repeating and repeating and your fallacious examples make us think that you don't have a clue on how annuities work.

I understand them.  My point is that it's disingenuous to deny the huge chop just because the client does not see it.
They are rarely appropriate, if they were they would not have to pay so much juice to get them sold.

THe juice is to compensate me for taking the assets out of production for 10 years. It must be tough on you to have NO capacity for independent, creative thought.

No, the juice is designed to get you to push an inappropriate investment off on unsuspecting rubes--just like five point muni odd lots and penny stocks.
If you park your ethics at the door you have no problem with them.

You should see the natural gas deal that I'm working on. You'd be REALLY jealous of how much I'm gonna make off of it! I'm sorry you failed out of the industry.

What I did not leave was a string of ruin in my wake.
I'm not jealous of any of the sociopaths I've encountered in this business--there is no reason to be in the long run.

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NASD Newbie wrote:cranky sob wrote:NASD Newbie wrote:cranky sob wrote:NASD Newbie wrote:
babbling looney wrote:
I agree with you that an EIA is bad investment for the client. However, these questions that you keep repeating and repeating and your fallacious examples make us think that you don't have a clue on how annuities work.

I understand them.  My point is that it's disingenuous to deny the huge chop just because the client does not see it.
They are rarely appropriate, if they were they would not have to pay so much juice to get them sold.

THe juice is to compensate me for taking the assets out of production for 10 years. It must be tough on you to have NO capacity for independent, creative thought.

No, the juice is designed to get you to push an inappropriate investment off on unsuspecting rubes--just like five point muni odd lots and penny stocks.
If you park your ethics at the door you have no problem with them.

You should see the natural gas deal that I'm working on. You'd be REALLY jealous of how much I'm gonna make off of it! I'm sorry you failed out of the industry.

What I did not leave was a string of ruin in my wake.
I'm not jealous of any of the sociopaths I've encountered in this business--there is no reason to be in the long run.

If it helps to call successful people names, so you don't have to commit suicide for being a failure, I support you. Those sociopaths are very, very naughty.

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babbling looney, you can't agree that an eia is a bad investment because...
An EIA is a savings vehicle, not an investment.  It carries no market risk, but plenty of other risk.  Therefore, a securities license is not needed to sell the product.
I must also commend you for pointing out that Putsy's posts show that he doesn't understand the product (even if he's correct about it usually not in the client's best interest)

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anonymous wrote:
babbling looney, you can't agree that an eia is a bad investment because...
An EIA is a savings vehicle, not an investment.  It carries no market risk, but plenty of other risk.  Therefore, a securities license is not needed to sell the product.
I must also commend you for pointing out that Putsy's posts show that he doesn't understand the product (even if he's correct about it usually not in the client's best interest)

How is it possible that an EIA isn't in the clients best interest? Are you so naive that you think that everyone who sells them are out to F the client? Did you know that there happens to be a LOT of people who want to take a chunk of money, put it aside, and safely make 5-8% on a tax deferred basis?
It sounds like you pikers deal with piker clients who have to TRY to make a lot of money. You don't know that people with a lot of money are more interested in not losing it and are willing to accept modest returns.
Some of you people really freak me out with your ignorance.

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I don't do annuities, and really don't understand EIA all that well.  However, I received a call from an insurance company pitching their EIA.  I was informed that the annuity would offer a minimum of 3%/year, with an upside capped at 7% as year, regardless of the upside of the S&P.
Huh!? I asked the rep who in their right minds would recommend this product?  The best you can do is 7%, and your average return would be around 5%.  When I can purchase a T-bill that is guaranteed offering as much, what's the allure? Suffice to say, he didn't have much of an answer.

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SOB,
You and Diggler should partner up and really screw clients in the arse with your EIA slinging... Keep making that 10% commission, but shut the F- up with that talk about EIA's being good products....

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Cranky SOB,
I very much understand the ins and outs of EIAs.  I don't have any problem with them as a product.  They are neither good nor bad.  They are appropriate or inappropriate based upon the situation.  I do have problems with many of the people who sell them and how they are sold. 
Do you really think that someone has the opportunity to make 8% on a fixed product over a long period of time?  I certainly don't.  Do you think that they can't make less than 5%?  I do.  3%-6% is much more realistic. 
You may be very ethical in how you sell the product.  However, I have never met someone who owns an EIA and actually understands how the product works.  Most of these people actually believe that their money is in the market, but  that they don't have market risk.
There is absolutely no reason to expect an EIA to outperform a traditional fixed annuity, but it is possible.

cranky sob's picture
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The Judge wrote:
I don't do annuities, and really don't understand EIA all that well.  However, I received a call from an insurance company pitching their EIA.  I was informed that the annuity would offer a minimum of 3%/year, with an upside capped at 7% as year, regardless of the upside of the S&P.
Huh!? I asked the rep who in their right minds would recommend this product?  The best you can do is 7%, and your average return would be around 5%.  When I can purchase a T-bill that is guaranteed offering as much, what's the allure? Suffice to say, he didn't have much of an answer.

You're right. YOu don't understand them very well.  

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anonymous wrote:
Cranky SOB,
I very much understand the ins and outs of EIAs.  I don't have any problem with them as a product.  They are neither good nor bad.  They are appropriate or inappropriate based upon the situation.  I do have problems with many of the people who sell them and how they are sold. 
Do you really think that someone has the opportunity to make 8% on a fixed product over a long period of time?  I certainly don't.  Do you think that they can't make less than 5%?  I do.  3%-6% is much more realistic. 
You may be very ethical in how you sell the product.  However, I have never met someone who owns an EIA and actually understands how the product works.  Most of these people actually believe that their money is in the market, but  that they don't have market risk.
There is absolutely no reason to expect an EIA to outperform a traditional fixed annuity, but it is possible.

That's interesting....ONe of the selling points to EIA's is that they're NOT in the market. People like that. Have you ever flown on an airplane? Do you know how to build one?

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I agree that the client does not need to understand the inner workings of the EIA.  However, when someone flies in an airplane, they at least understand that they are flying and not riding in a bus. 
I believe that if you describe fixed annuities and variable annuities to a typical person who owns an EIA, they incorrectly think that they own a variable annuity with a minimum yearly guarantee.
As long as people sell EIAs and talk about "market returns without market risk", the product will continue to get beat up.  On the other hand, if it's described as a fixed annuity where the crediting method is partially tied to the change of a market index as opposed to the general portfolio of the insurance company, many of the problems will go away.

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anonymous wrote:
I agree that the client does not need to understand the inner workings of the EIA.  However, when someone flies in an airplane, they at least understand that they are flying and not riding in a bus. 
I believe that if you describe fixed annuities and variable annuities to a typical person who owns an EIA, they incorrectly think that they own a variable annuity with a minimum yearly guarantee.
As long as people sell EIAs and talk about "market returns without market risk", the product will continue to get beat up.  On the other hand, if it's described as a fixed annuity where the crediting method is partially tied to the change of a market index as opposed to the general portfolio of the insurance company, many of the problems will go away.

Agreed.  That is the main problem with EIA's.  They are primarily sold by insurance-only agents, who have no other types of products or securities to offer.  They have no compliance dept. keeping them on the straight and narrow, and no NASD audits or arbitration to fear.  They can almost say or do whatever they want, including giving their unsuspecting clients a false sense of hope (ie. double digit returns) and talk about their EIA's being "in the market".
EIA's were a better product when interest rates were low.  Then they filled a nice gap between traditional fixed and VA's.  Now, with fixed rates fairly high, where clients can get 5-6%/yr, the upside of the EIA is getting less and less, especially when there's a risk of having a year where they would get only 0-3% credited because of poor S&P performance.

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Cranky SOB- Yeah, I don't know too much about EIA's.  Fortunately for my client's and my production levels, I know tons about effectively managing money.  It's great not to have to rely on packaged products that have to offer so much "juice" to entice brokers to sell them. 
Reminds me of the "principle protection" funds that were all the rage about 3-4 years back.  Absolute garbage.  These funds are almost down in value after the S&P has rallied 50%.  Yet, so predictable.

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The Judge wrote:
I don't do annuities, and really don't understand EIA all that well.  However, I received a call from an insurance company pitching their EIA.  I was informed that the annuity would offer a minimum of 3%/year, with an upside capped at 7% as year, regardless of the upside of the S&P.
Huh!? I asked the rep who in their right minds would recommend this product?  The best you can do is 7%, and your average return would be around 5%.  When I can purchase a T-bill that is guaranteed offering as much, what's the allure? Suffice to say, he didn't have much of an answer.

No one in their right mind who cares about their clients or their own reputation would offer this product. 
First of all the 3% guaranteed return is not 3% compounded annually.  The 3% is usually for the lifetime of the contract.   That part is not disclosed.  Probably because the insurance salesman doesn't even understand his own product.  All he knows is the "talking points" to get people to buy.
Most of the EIAs I've seen have a cash bucket option where you can take part of your money off of the table and get a guaranteed 3 to 3.5% return.  This is in case the market index didn't have any gains at all, so now your client is getting less than a money market rate on less than their full amount invested.  Cool huh?
If all a person wants is a savings vehicle why in the world would you chose an EIA. Having your gains capped at an uncertain 7% a year and possibly actually receiving less than that, in addition to having your principle locked up for 10 to 15 years, is NOT a good deal for your client.  Yes I have seen 5 year EIAs but their guaranteed returns aren't that hot either. 
If you want to give your clients a safe 'savings opportunity' (for those who do not want to be in any growth vehicles), why not buy some short term, no longer than 3 to 5 year maturities, yielding average 5%, keep some in cash in a 4.5% money market to take advantage of rising interest rates.  Or if they want a higher guaranteed % return and are willing to lock their money up for 10 years buy a portfolio of quality bonds yeilding 6 to 7%.  It isn't hard to find those in this current market.
Oh I know.  No commish.
 

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STL Indy wrote:anonymous wrote:
I agree that the client does not need to understand the inner workings of the EIA.  However, when someone flies in an airplane, they at least understand that they are flying and not riding in a bus. 
I believe that if you describe fixed annuities and variable annuities to a typical person who owns an EIA, they incorrectly think that they own a variable annuity with a minimum yearly guarantee.
As long as people sell EIAs and talk about "market returns without market risk", the product will continue to get beat up.  On the other hand, if it's described as a fixed annuity where the crediting method is partially tied to the change of a market index as opposed to the general portfolio of the insurance company, many of the problems will go away.

Agreed.  That is the main problem with EIA's.  They are primarily sold by insurance-only agents, who have no other types of products or securities to offer.  They have no compliance dept. keeping them on the straight and narrow, and no NASD audits or arbitration to fear.  They can almost say or do whatever they want, including giving their unsuspecting clients a false sense of hope (ie. double digit returns) and talk about their EIA's being "in the market".
EIA's were a better product when interest rates were low.  Then they filled a nice gap between traditional fixed and VA's.  Now, with fixed rates fairly high, where clients can get 5-6%/yr, the upside of the EIA is getting less and less, especially when there's a risk of having a year where they would get only 0-3% credited because of poor S&P performance.

Did you know that your grocery store has no compliance department, either?

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