[quote=anonymous]

The fact that one needs returns does not equate to

"it’s ALL about the returns"

If it was all about returns, wouldn’t clients simply be looking for money

managers and not financial advisors?

[quote=Philo Kvetch] [quote=anonymous]

The fact that one needs returns does not equate to
"it's ALL about the returns"

If it was all about returns, wouldn't clients simply be looking for money
managers and not financial advisors? 

[/quote]

And just what do the expect an advisor to do for them?[/quote]

Speaking for myself and the clients that I have: 

They expect me to monitor their portfolios so they don't have to think about this stuff. 

Meet with them at least 3 times a year to review their progress and call them if there is anything new or needs attention.

Recommend any moves that would be appropriate when market conditions or interest rate environment changes. 

Some people are only interested in principal protection and an income stream.  Some are interested in growth and total return. Some aggressively while others are more adverse to risk.  They expect me to know which are which and make the investments and strategies something that they are comfortable with.

They expect me to also offer advice and strategies on various topics like estate planning, retirement planning, tax efficiency, protection strategies (life, health and DI insurance).  I also do loan and debt counseling. On occasion I seem to be a family counselor for clients going through death, divorce or other family disasters.

I also make a mean cup of coffee and great coffee cakes.

My main job is to keep the clients' focused on their goals and keep them from emotional swings in their money management strategies. It isn't all about a percent of return on their money. Obviously, my clients don't want to lose money, but it isn't about getting the highest return.  This is why annuities and VAs are appropriate for some people.  They are willing to trade off some of the possible return for safety. 

As an advisor we are obligated to explain both the good and bad about all investments we present.  Do you explain to your clients the positives of VAs or do you only stress the negatives?

The coffee aside, you can do none of the rest without returns.

(Where did I say that I'm opposed to annuities?)

And just what do the expect an advisor to do for them?

Help them accomplish their goals.  Yes, higher returns are a means to helping accomplish this.  Nothing more.

They’re a MEANS to helping?  Can you name another “means” to accomplish financial goals?

Do you think the fact that they're about the only product left that pays 7+% commissions has anything to do with their popularity amongst salespeople?

Can't you get guaranteed income from having a well-diversified and well-managed portfolio of stocks, then buy a SPIA with part when the client feels like they need it? Then you save all those M&E fees, no surrender charges, manage for tax efficiency and have no strings attached...with say a 1.25% fee, transaction costs included.

Comments?

Can't you get guaranteed income from having a well-diversified and well-managed portfolio of stocks, then buy a SPIA with part when the client feels like they need it? Then you save all those M&E fees, no surrender charges, manage for tax efficiency and have no strings attached...with say a 1.25% fee, transaction costs included

A SPIA has a terrible internal interest rate and when the contract is up the money is gone.  Sure, you have an income guaranteed from the SPIA ....for a while......but in your scenario, there is no guarantee that the other money in stocks will increase to replace the spent SPIA.  

You are taking a big chance that the market is not going to have a downturn just when the clients need the other pool of money, that was not in the SPIA, for income.  It could be that the original pool of money is now drastically reduced by the vanished amount in the SPIA and a market downturn where the remainder has lost a 10 to 20% value.  How happy is your client going to be with you then?

So the answer is NO, you can't get a guaranteed income in your scenario.

I've done this strategy with guaranteed annuites. SPIA for 10- 15 years while the other annuity is guaranteed to grow back to the original amount of cash invested. When the SPIA is spent they can then annuitize the second contract. Maybe we even have a third contract to kick in as well. Its usually something I only do for those older clients who are very risk intolerant and don't care about growing their money. 

This strategy isn't as attractive right now in this low interest rate environment as it was in the past, however.  You need to put more into the SPIA to generate the income needed and have to wait much longer for the second annuity to grow back.

You also seem to be assuming that ALL of the client's money would be going into a VA.

In my cases I use VA's for various purposes and also have portfolios outside of the tax sheltered product.  It would be a bad idea to have everything in one investment.

How about a portfolio of say 200 companies that have increased their dividends for the last 10+ years. Have the div's sent to client as income which will increase every year. When a company reduces or stops their div, replace them with another. Max 15% tax on div's (now), not ordinary income. Stepped up basis to kids. Doesn't matter if value of principle goes down 10%, we're not touching it. Or sell some of down stocks and lock in a loss to offset future gains.

Isn't that guaranteed income without using the word guarantee? Can the insurance company guarantee that they will be in business in 10 years?

Doesn't matter if value of principle goes down 10%, we're not touching it. Or sell some of down stocks and lock in a loss to offset future gains.

I thought you said it was all about return.  Yah....client's just love seing their portfolios go down and really appreciate those capital losses as a tax strategy   There is nothing wrong with your managed portfolio strategy. I do it all the time. The issue is that for some people it isn't the most appropriate investment plan.

I think I'll take the guarantee of a multi billion dollar firm (that has been in business for decades) that they will still be in business  to pay out on their fixed annuities.  I'd take that over the guarantee provided by a wet behind the ears former Jones broker who is so cocksure of himself that he won't take precautions with other people's money when they need it.

Philo, easy now…you’re starting to sound like Put Trader…

[quote=Indyone]Philo, easy now...you're starting to sound like Put Trader...[/quote]

Geez...that's a lousy thing to say!

…sorry…I just couldn’t help but notice the debate style you were using…it brought back memories…some not all that bad to be honest…

[quote=Indyone]Philo, easy now...you're starting to sound like Put Trader...[/quote]

That was harsh man.

[quote=EDJ to RIA]

How about a portfolio of say 200 companies that have increased their dividends for the last 10+ years. Have the div's sent to client as income which will increase every year. When a company reduces or stops their div, replace them with another. Max 15% tax on div's (now), not ordinary income. Stepped up basis to kids. Doesn't matter if value of principle goes down 10%, we're not touching it. Or sell some of down stocks and lock in a loss to offset future gains.

Isn't that guaranteed income without using the word guarantee? Can the insurance company guarantee that they will be in business in 10 years?

[/quote]

How about I get ahold of one of your clients, show them an annuity with an avg. return over the last 4.5 years of over 24%, and tell them that they won't have to pay you that fee anymore?

[quote=Bobby Hull][quote=EDJ to RIA]

How about a portfolio of say 200 companies that have increased their dividends for the last 10+ years. Have the div's sent to client as income which will increase every year. When a company reduces or stops their div, replace them with another. Max 15% tax on div's (now), not ordinary income. Stepped up basis to kids. Doesn't matter if value of principle goes down 10%, we're not touching it. Or sell some of down stocks and lock in a loss to offset future gains.

Isn't that guaranteed income without using the word guarantee? Can the insurance company guarantee that they will be in business in 10 years?

[/quote]

How about I get ahold of one of your clients, show them an annuity with an avg. return over the last 4.5 years of over 24%, and tell them that they won't have to pay you that fee anymore?

[/quote]

Man, annuity salespeople get so defensive!

So you're saying the fees inside the annuity (M&E, management, turnover costs, admin) are less than 1.25% total? Can I get to all of my money anytime I want with no strings attached? How many choices of investments do I get?

[quote=Dust Bunny]

Doesn't matter if value of principle goes down 10%, we're not touching it. Or sell some of down stocks and lock in a loss to offset future gains.

I thought you said it was all about return.  Yah....client's just love seing their portfolios go down and really appreciate those capital losses as a tax strategy   There is nothing wrong with your managed portfolio strategy. I do it all the time. The issue is that for some people it isn't the most appropriate investment plan.

I think I'll take the guarantee of a multi billion dollar firm (that has been in business for decades) that they will still be in business  to pay out on their fixed annuities.  I'd take that over the guarantee provided by a wet behind the ears former Jones broker who is so cocksure of himself that he won't take precautions with other people's money when they need it.

[/quote]

I didn't say anything about returns. Though after-tax returns are important.

I'd take the stability of a $500 billion company that's been around since the 1800's (Standard Oil/Exxon-Mobil) to be here to pay their dividend also.

I've been investing for 20 years by the way, just the last 4 at Jones.

[quote=EDJ to RIA][quote=Bobby Hull][quote=EDJ to RIA]

How about a portfolio of say 200 companies that have increased their dividends for the last 10+ years. Have the div's sent to client as income which will increase every year. When a company reduces or stops their div, replace them with another. Max 15% tax on div's (now), not ordinary income. Stepped up basis to kids. Doesn't matter if value of principle goes down 10%, we're not touching it. Or sell some of down stocks and lock in a loss to offset future gains.

Isn't that guaranteed income without using the word guarantee? Can the insurance company guarantee that they will be in business in 10 years?

[/quote]

How about I get ahold of one of your clients, show them an annuity with an avg. return over the last 4.5 years of over 24%, and tell them that they won't have to pay you that fee anymore?

[/quote]

Man, annuity salespeople get so defensive!

So you're saying the fees inside the annuity (M&E, management, turnover costs, admin) are less than 1.25% total? Can I get to all of my money anytime I want with no strings attached? How many choices of investments do I get?

[/quote]

I'm saying those returns are net of ALL fees. Your liquidity is dependent upon which surrender option we choose. If you can't stay in the market for at least 7 years, you can't be my client.

[quote=EDJ to RIA]

Can't you get guaranteed income from having a well-diversified and well-managed portfolio of stocks, then buy a SPIA with part when the client feels like they need it? Then you save all those M&E fees, no surrender charges, manage for tax efficiency and have no strings attached...with say a 1.25% fee, transaction costs included.

Comments?

[/quote]

The problem here is that the scenario you described will PROBABLY work for the client. Some clients are scared of losing all of their money, they DO NOT like PROBABLY as an investment strategy.

Yes, annuities are more expensive. But, be careful you don't miss the forest (protection with predictable income) for the trees (higher fees). 

I'm not saying they are right for every client, or even for all of a client's money. But, having an annuity take care of a client's basic income NEEDS (utility bill, gas, mortgage, etc.) is a nice thing. Use your above strategy for the income WANTS (travel, gifting, etc.).

[quote=Bobby Hull][quote=EDJ to RIA][quote=Bobby Hull][quote=EDJ to RIA]

How about a portfolio of say 200 companies that have increased their dividends for the last 10+ years. Have the div's sent to client as income which will increase every year. When a company reduces or stops their div, replace them with another. Max 15% tax on div's (now), not ordinary income. Stepped up basis to kids. Doesn't matter if value of principle goes down 10%, we're not touching it. Or sell some of down stocks and lock in a loss to offset future gains.

Isn't that guaranteed income without using the word guarantee? Can the insurance company guarantee that they will be in business in 10 years?

[/quote]

How about I get ahold of one of your clients, show them an annuity with an avg. return over the last 4.5 years of over 24%, and tell them that they won't have to pay you that fee anymore?

[/quote]

Man, annuity salespeople get so defensive!

So you're saying the fees inside the annuity (M&E, management, turnover costs, admin) are less than 1.25% total? Can I get to all of my money anytime I want with no strings attached? How many choices of investments do I get?

[/quote]

I'm saying those returns are net of ALL fees. Your liquidity is dependent upon which surrender option we choose. If you can't stay in the market for at least 7 years, you can't be my client.

[/quote]

If you think annuities are good investments, you can't be my client!

I'm just busting your chops on the annuities. To each his own. We all have our competitive side and as long as we follow our respective rules, there's plenty of business to go around!