unethical behavior and/or sales practices

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not_applicable's picture
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After being in the industry for a couple years, just about all of us have come across a situation where we have seen unethical behavior and sales practices.<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />
What is the worst thing you have seen when it comes to unethical behavior and/or sales practices?

snaggletooth's picture
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Index funds with a wrap.
 
 
 
 
Kidding...that was for you Ice .

Borker Boy's picture
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Local guys taking elderly people's "never money" and putting it into Equity indexed annuities without disclosing surrender fees/periods.
 
Then, they call them every year or so and recommend they take a portion of the money out of the annuity and 1035 it to another annuity to get a "better" rate.  They also send out hand-typed statements showing only the account values and not the true surrender value.
 
I don't know how they prevent the clients from receiving the statements directly from the insurance companies, but they do.

Greenbacks's picture
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snaggletooth wrote:Index funds with a wrap.
 
 
 
 

 
Don't give them any ideas they might really try this!

Anonymous's picture
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Snags,
 
Greenbacks obviously wasn't following our other thread! 

Axle's picture
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I have a client who showed me her statement and it had annuities inside a wrap account plus the broker charged her $500 per house visit!  She got hooked up with this guy in 2003 and after meeting with me in 2007, told him she was concerned with her performance.  He had the balls to say... "Your up $7,000 over the last 4 years.. thats something to be happy about."  She had $180,000 with him. 
 
A classic example of an unscrupulous broker taking advantage of the elderly.
 
 

not_applicable's picture
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Wow.  I didn't even know that you could charge for a house visit...

Philo Kvetch's picture
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not_applicable wrote: Wow.  I didn't even know that you could charge for a house visit...

If we could, Edward D. Jones would already be doing it. (Of course, the brokers wouldn't see a dime of it.)

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Philo Kvetch wrote: not_applicable wrote:
Wow.  I didn't even know that you could charge for a house visit... If we could, Edward D. Jones would already be doing it. (Of course, the brokers wouldn't see a dime of it.)
 
 

OldLady's picture
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I left to go independent Dec. 23, 1999.  I had a client - divorced man in his early 60s on disability retirement.  He had his pension and a small nest egg.  He'd never invested in the market and had no desire to.  I had him in some bond funds, a GNMA unit trust and a couple of fixed annuities.  When I left, he was uncomfortable staying with me, so he was assigned to one of the more senior brokers in the office.  Met with him in early Jan. 2000, told him that he had been losing money with my recommendations and that they were going to get him back on track.  Sunk everything but a fixed annuity that was his IRA into quity UITs - telecom, internet, wireless, technology, one small position in a medical stock UIT and one that was Dow 20.  This fellow came to me March 2002, and his portfolio (which was his entire life savings) was down 60% - and that included the fixed annuity!!  I wanted to throw up it was so inappropriate for this client.  

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3 stories1 - Retired cop turned FA convinced a customer to let him do discretionary investments. Portfolio lost money, so FA put through an address change to a PO Box he owned and tried to recoup by buying and selling options. Was found out while on vacation when customer called manager to find out how his IBM was doing and told he no longer owned IBM. Ex cop went on to sell used cars.2 - FA used to sell closed end IPO's to customer. If stock went up 10%, sold out and went to client with a check for profit. Convinced her a 20% tip was customary. Was found out when customer's CPA called another FA in office and told about these transactions.3 - FA convinced client to go fee based. Then proceeded to sell only IPO's and collect IPO commission as well as fee. Left the firm when IPO's were no longer allowed in fee based accounts. Still operating as an independent.This last one is very funny though. It happened in the firm I was then working in, but not in my office. Trainee's in this firm were usually required to do cold canvassing in their first month's after receiving series 7 license. This trainee would go up to a home and knock on the door. If no answer, he would break in and then steal what he could. He did this for 5 months before he was caught.

Anonymous's picture
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Wowza.  You win!

not_applicable's picture
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I guess this one isnt as good as the breaking and entering one...

rankstocks's picture
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-My favorite are 10-year fixed annuities that are sold at  7% first year and then drop to 3% the next year and 3-5 years later "need" to be 10-35'ed into a new contract because there is a better rate, hitting the client with a surrender and starting the process over.
 
Found an annuity this year out of CA that a client had bought in 1990.  Had a perpetual 6% surrender penalty.....that's right, the surrender penalty never goes away, making 3.5% interest.
 
How about a Merrill account I came across late last year....95% international, fortunately the client listened to me and we allocated it appropriately.
 
Came across a MSDW account around 5 years ago, 2 million.  Client was 90% PFE with the account margined 30% at the broker's request.  Told the client to diversify, didn't listen, don't know what he is up to now, other than I am sure he had his a$$ handed to him.
 
 

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How about a Merrill account I came across late last year....95% international, fortunately the client listened to me and we allocated it appropriately.
 
I don't know that that is necessarily inappropriate if the rest of the client's holdings in other places (401K and other brokers) balance out the portfolio.  I often misallocate an account to do that if the client is overly invested in other asset classes elsewhere.  You just have to substantiate that with your compliance dept and keep a careful eye to make sure the client isn't moving his stuff around to unbalance the entire portfolio.
 
Unethical = most EIA sales.
 
I saw a broker in one of the bank branches I was at transfer a client from mutual funds that she had owned for over 15 years into an annuity, because he could make a huge commission.  Fortunately, she discussed this with her CPA who freaked out and had the trade cancelled.  She would have had over 60K in unrealized LTCG to report and this was before the cap gains rates were lowered.  It would have cost her a bundle in taxes plus this amount represented a rather large chunk of her investable assets and would have locked her money away for 10 years with a large CDSC.  
 
The broker never discussed or even inquired about how long she had owned the funds or whether there would be any tax consequences.  All he could see was a big fat commission.  If her CPA hadn't gotten involved this poor woman would have been royally screwed.

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marketguru69 wrote:
This last one is very funny though. It happened in the firm I was then working in, but not in my office. Trainee's in this firm were usually required to do cold canvassing in their first month's after receiving series 7 license. This trainee would go up to a home and knock on the door. If no answer, he would break in and then steal what he could. He did this for 5 months before he was caught.
And I would have gotten away with it too if it weren't for you meddlin' kids and that dog! 

Broker24's picture
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Spaceman Spiff wrote:marketguru69 wrote:
This last one is very funny though. It happened in the firm I was then working in, but not in my office. Trainee's in this firm were usually required to do cold canvassing in their first month's after receiving series 7 license. This trainee would go up to a home and knock on the door. If no answer, he would break in and then steal what he could. He did this for 5 months before he was caught.
And I would have gotten away with it too if it weren't for you meddlin' kids and that dog! 
 
Wow, my kids watch Scooby too.  I can't believe I recognized that line.  Scary.

Broker24's picture
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rankstocks wrote:-My favorite are 10-year fixed annuities that are sold at  7% first year and then drop to 3% the next year and 3-5 years later "need" to be 10-35'ed into a new contract because there is a better rate, hitting the client with a surrender and starting the process over.
 
Found an annuity this year out of CA that a client had bought in 1990.  Had a perpetual 6% surrender penalty.....that's right, the surrender penalty never goes away, making 3.5% interest.
 
How about a Merrill account I came across late last year....95% international, fortunately the client listened to me and we allocated it appropriately.
 
Came across a MSDW account around 5 years ago, 2 million.  Client was 90% PFE with the account margined 30% at the broker's request.  Told the client to diversify, didn't listen, don't know what he is up to now, other than I am sure he had his a$$ handed to him.
 
 
 
Well, needless to say, if he still holds all that PFE, it's like 50% of his portoflio and he's got a fat margin call.
 
You can't save 'em all.

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"Came across a MSDW account around 5 years ago, 2 million.  Client
was 90% PFE with the account margined 30% at the broker's request. 
Told the client to diversify, didn't listen, don't know what he is up
to now, other than I am sure he had his a$$ handed to him."Normally this can be a good strategy. I have a client with  700,000 shares of PFE. He is a retired chief chemist of the company. I see a lot of this, since we work with retirees, who were formally executives of public companies. I've even seen a retired store manager of PetSmart who has $2.5MM of shares. My preference in these cases to use an exchange fund if client is eligible first. 2nd choice is to set up CRT account with highly appreciated stock, using charitable deduction to buy life insurance to recover charitable gift to estate. Client will have to pay CG tax eventually, but it will be paid out over many years, and may never be fully paid. Alternatively,  give a gift  of a portion of stock to  charity.  Under current  CG  rates, will be able to sell about 5 shares to every share gifted  with deduction covering CG tax.  Others have used margin loans to buy diversification. Income and options collars, should be used to pay down the margin loan. Again CG taxes have to be paid, but properly done you can spread this out over several years.
 

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A very nice old lady (late 70s) came in terribly confused about what had happened
with her AIG account (I'm an LPL rep helping service some old clients who still have AIG money).  She had wanted to put some money into the liquid,
fixed interest rate savings account, but somehow the original deposit
along with much of the
savings account principal was transferred to the 7-year lockup,
fixed annuity.   Did I mention that there was no disclosure of the 7-year penalty and no receipt of contract?The
lady was very thankful when I showed her the "free-out" on page 8.It's time to call AIG customer service about it:"I'm sorry, that's not possible, you will have to pay the full penalty.""But I'm looking right here in the contract, page 8, the last paragraph.""I'm sorry, we don't have access to the contract." "You're telling me you don't even have records of sending the client a contract?" "No sir, we don't have any record." Time
goes on, a supervisor comes on the line, the same, memorized penalty
statements are uttered. The woman, becoming more distraught, finally
calls the agent who sold her the annuity:"There's this thing on page 8, that says I have a free-out.""Oh really? I didn't even know about that." The
woman ended up getting the transaction rescinded, but not without the
effort that would keep most people over 50 from even wanting to bother. 
And from my experience, this is exactly what AIG/Valic wants. They also want
their workforce to be incompetent. No offense to any Valic/AIG reps out there, but lately I've been hearing some terrible management stories, along with 20 year veteran reps getting weekly "beatings" and having their pay cut 50% if they can't generate another +$3 million in VALIC monies before the end of the year. 

Anonymous's picture
Anonymous

AIG VALIC (errr "Retirement") is the most UNETHICAL A-HOLE company I have dealt with...EVER.  Not just in this biz.  If there is one company I despise, it's AIG...for exactly that type of shit.

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I'm currently having a problem with them.  We sent some transfer paperwork to them and they aren't transferring the money because they are claiming that it's not the original paperwork.  It is.

Anonymous's picture
Anonymous

Anon...they don't take paperwork from other firms (not even for IRAs or taxable accounts).  They make the client call and request transfer paperwork, which you CANT EVEN MAKE COPIES OF, because they don't accept copies of transfer paperwork either...it must be original VALIC paperwork with the VALIC hologram stamped on it!  It's pathetic.  Guess if your company blows, the only way you can keep clients is to trap them!
 
Maybe they should just stick to car insurance.
 
They tried to pull the run-around on me and tell me they never received the paperwork...so i got a supervisor on the phone, told them the FedEx tracking number, and that it had been signed for, and if I didn't get satisfaction my client would be filing a complain in writing.  They put me on hold for 2 mins and magically found the paperwork! 

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That must be the exclusive to the VALIC side of AIG.  I use AIG/SunAmerica annuities all the time and my clients love them.  They're easy to work with and very responsive when I have an issue, which is hardly ever. 

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Spiff, I think you're right.  I have had to grapple with Valic, and they are nothing like the AIG/Sun America side (are they even he same company??).
 
I find Valic mostly with teachers/former teachers.  Reminds me of dealing with AXA/Equitable also.

Greenbacks's picture
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 I came across two Index life insurance  policies.

Same client had a rep put 100% of an IRA rollover $137,000 into a hotel being built in a foreign country.

How do these reps get away with this stuff?
These reps give all of us a bad name.

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AIG Valic is completely different from AIG/Sun America and all the other step children of AIG.  The problem is that VALIC was once a low cost, competitive provider, but when AIG bought them up (back in the late 90s if I remember), they didn't like the direction they were going (full service financial products, dual b/ds with LPL, etc...); this costs too much money for AIG.  So here's what they did:Right after Hank Greenberg stepped down at AIG, there was a big national conference with all the VALIC reps to do some cheerleading and to try to bring some cohesiveness to the new AIG/VALIC merger.  Sullivan came in and, in front of nearly 800 of the top producers, told them all to "lock up you clients", "get them into the fixed annuities," "net flows".  Everyone in the room was completely shocked; this is not why people become financial advisors.  This was around 1999-2000.  Since then it's been a tragic downward spiral for VALIC.  AIG/VALIC is in defense mode (sort of like HAL-9000).  They are turning off the life support of all their reps, cutting their pay if they can't produce, screwing their clients, hiring anyone with a pulse in back-office, and pissing off just about everyone in the industry.  My guess is that they will sell the whole part of VALIC in the next year or two.  You can find plenty of ex-managers, ex-reps who are plenty fed up (and involved in plenty of class actions, private settlements against them).  There are a few big names here in CA who have fought Valic, done the non-compete lawsuit, and won back their clients and $100s of millions in assets.  There are plenty of reps who are not going to watch this company make a complete mockery of the profession.  So if you've got clients with "AIG retirement" please don't give up!  Get them the hell out of there. 

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iceco1d, thanks for your response.  It is the AIG paperwork that we sent to them and it was the original.  My client was with me and we filled out the paperwork together with an AIG rep on the phone so that we could be sure that we were doing it correctly. 

Axle's picture
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I had a 77 yr old client in here yesterday that showed me her 122m IRA all in a fixed annuity with a 10 yr surrender sold in 2000 from a Physicians Mutual agent.  The agent from Physician's now works for some podunk insurance firm and asked her to move her IRA into a new annuity at his new firm for "No cost!" He didn't mention the 4% surrender to her on the old contract or the new 10 yr surrender chart.  Thank God she came to show it to me before she bought it.  I think Physician's Mutual is probably the worst outfit I've seen so far and thats saying a lot after seeing stuff from AXA, Ameriprise, and Thrivent/AAL

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Advisor wanted to allocate 20% to "alternative" investments.  He bought some hybrid funds, absolute return funds, and Mega Millions Lottery tickets to round out the portfolio.  All lottery winnings would be spread out over all accounts based on the percentage of tickets they bought. 

Greenbacks's picture
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Wow these are some nightmares!
 
Maybe I should ask this question on another thread but here it goes.
 
What would clean up this profession?

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Ways to clean up the profession:
 
(1) require the sellers of EIA's to get securities licensed
(2) Put a limit on what the maximum cdsc charge can be
 

rankstocks's picture
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For annuities, this is what I would suggest:
 
1.  Disclose, in bold font, commission paid to brokers on annuities that a client must sing off on.
2.  Disclose, in bold font, all expenses added together for M&E, administration, all riders, and average internal expenses for funds in variable annuities that a client must sign off on.
3.  Disclose, in bold font, the probability that a fixed annuity bought from a bank or insurance agent with a great rate the first year will drop near the floor the next year and have the client sign off on it.
4.  Ban all index annuities.
5.  Discose, in bold font, that a GMIB or GMWB is not a guaranteed rate of return on the principal each year, but simply a rider, and have the client sign off on it.
6.  Reduce the surrender period on all annuities to 5 years or less and reduce the CDSC.
7.  Outlaw all "Senior Designations" as well as "scare tactic" seminars.
 
These seven ideas would be a good start to clean up the annuity business.

Anonymous's picture
Anonymous

Good ideas rank...I'm betting now though that idea #4 is going to spark 12 threads of argument about the merits and pitfalls of EIAs!
 
In general, my suggestion would be to increase the education requirements prior to entering the profession. The S7 doesn't do it.  The firms aren't going to do it (obviously), all they care about is AUM and production. 
 
If entrants to the business had some sort of finance background, prior to going into production, they could at least wade through all the B.S. on their own.  There are probably a ton of brokers out there that want to do a good job for their clients, but simply lack the knowledge. 
 
As far as weeding out all of the bad eggs that WANT to rip people off, I don't think that's possible.  No matter what the deterrant, or what the disclosure; greedy people will always find a way to take advantage of the weak.  After all, murders still happen in states where the death penalty is enforced.

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FROM BILL SINGER:
 
My sincere compliments to all of you who have added to this thread.  I would love to post some articles on my Blog that shows the professionalism and sincerity of RRs and can't imagine a better vehicle than a post (or series of posts) on the abuses you all have noted.  If someone would like to send me an article (I will gladly post it under your name or a pseudonym, as you prefer) I would love to post it--you can make it a single piece or multiple.  Please visit http://BrokeAndBroker.com for some recent samples of postings.
All my best!
Bill Singer
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The problem is the bad eggs and not the products.  I've never sold an EIA, but I don't have a problem with them.  
An EIA is no more of a security than any other fixed annuity or a CD. 
Commissions should not have to be disclosed.  They have no relevance.  If a client buys XYZ product from me and I earn a commission of 3% and you earn a commission of 1% on the same product, how does this effect the client?  It doesn't.  
Index annuities make sense for people who want no investment risk and would like the opportunity to earn more money than they can in other fixed investments.
 
Reducing the surrender period, reduces the guarantees that can be given.  It can hurt clients.
 
Bottom line:  Go after the bad eggs and not products.
 
EIA's are not good or bad products.  They are either appropriate or inappropriate based upon the situation.

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rankstocks wrote:
For annuities, this is what I would suggest:
 
1.  Disclose, in bold font, commission paid to brokers on annuities that a client must sing off on.
 
If you are going to be consistent, then you better let your client know that you made a $20,000 commission on that life insurance policy you 1035 over, and they need to know about the $50 you make every time they sign up for the credit card.  You also should probably let them know that you are short $10,000 in the taxable income catagory but have made your tax free income catagory for your diversification trip, and that you need an additional $5,000 in GDC this week to keep yourself at exceeding expectations. 
 
Or we could agree that all of these things are kind of but not really relevant.  If I disclose all the costs (which I do), how does it affect the client if I make $50 or $50,000?
 
2.  Disclose, in bold font, all expenses added together for M&E, administration, all riders, and average internal expenses for funds in variable annuities that a client must sign off on.
 
I do this on a separate form that the client has to sign.
 
3.  Disclose, in bold font, the probability that a fixed annuity bought from a bank or insurance agent with a great rate the first year will drop near the floor the next year and have the client sign off on it.
 
I would love to see this.
 
4.  Ban all index annuities.
 
Overstated, but overall on the right track.  If you make change #6, then much of my objection to EIA's goes away.  The real problem is the 80 year old who still has 12 years left on their surrender schedule.  A 5 year surrender schedule also eliminates the 10%+ commissions.
 
5.  Discose, in bold font, that a GMIB or GMWB is not a guaranteed rate of return on the principal each year, but simply a rider, and have the client sign off on it.
 
I would love to see this added to my form. 
 
6.  Reduce the surrender period on all annuities to 5 years or less and reduce the CDSC.
 
I would make an exception for fixed annuities with a firm fixed rate.  Otherwise, I agree.
 
7.  Outlaw all "Senior Designations" as well as "scare tactic" seminars.
 
I don't know how to outlaw "scare tactic" seminars, but if you know please do it immediately. 
 
These seven ideas would be a good start to clean up the annuity business.
 
For whatever it's worth, my $0.02.  I would also add:
 
8.  ANYTHING that has ANY ties on rate/surrender/etc. to the stock market (read EIA's) is a security.
 
9.  Prohibit 100% upfront commission on annuities.  It doesn't have to be like a C share mutual fund, but if one of the payout options is 8% upfront and then no trail, guess who gets no service?  Give the broker some incentive for providing continuing advice.  I see these people all the time, their broker sold them a $200,000 annuity, and now won't return their call.  Even the $200 provided by a .1 trail would help, I would be ok with a .25 trail like on mutual funds.
 

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You guys are aware that all of this information is in the prospectus and that the client is free to read it. And don't try the "they don't read it, anyway" defense. If they don't read it, THEY chose not to know what it says. I'm sorry that rankstocks doesn't think that he can be honest without MORE regulation. That doesn't mean that the rest of us are just like him. Only pikers sit around, fretting over what other people are doing. Did you come into this business to clean up the industry or to make a great living and help a lot of people?

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henryhill wrote:
Ways to clean up the profession:
 
(1) require the sellers of EIA's to get securities licensed
(2) Put a limit on what the maximum cdsc charge can be
 
 
1)  EIAs are not an investment.  Why would you force producers to have a securities license?
2)  So, why would liquidity for a spendthrift would be a good thing?

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rankstocks wrote:
For annuities, this is what I would suggest:
 
1.  Disclose, in bold font, commission paid to brokers on annuities that a client must sing off on.  Does your supermarket tell you their mark up and profit on the stuff they sell?
2.  Disclose, in bold font, all expenses added together for M&E, administration, all riders, and average internal expenses for funds in variable annuities that a client must sign off on.  I don't have a problem with this
3.  Disclose, in bold font, the probability that a fixed annuity bought from a bank or insurance agent with a great rate the first year will drop near the floor the next year and have the client sign off on it.  So, you are suggesting insurance companies predict what future interest rates will be?  Are you retarded?
4.  Ban all index annuities.  What is your reasoning for this?  Do you want to ban all fixed annuities as well?
5.  Discose, in bold font, that a GMIB or GMWB is not a guaranteed rate of return on the principal each year, but simply a rider, and have the client sign off on it.  I agree with this one.  Most producers really don't understand how these work.  Maybe better education by the product vendors would help.  Actually, I know it would.
6.  Reduce the surrender period on all annuities to 5 years or less and reduce the CDSC.  Why is liquidity a good thing for everybody?  You give more liquidity, you lose guarantees.  Simple as that.
7.  Outlaw all "Senior Designations" as well as "scare tactic" seminars.  Emotion gets a client to act.  Logic does not.  As far as designations go, there is no guarantee a CFP will be any more or less honest than one who has, say, a CSA.  Nice try.
 
These seven ideas would be a good start to clean up the annuity business.
 
For someone who seems to have been in the business for a while, you have no clue how it really works.  Not that I'm shocked at all about it, but this boilerplate complaining has no real basis for discussion. 

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BIGGEST problem with all annuities (specifically EIA's and income riders) are that almost every client/prospect/friend, etc that I talk to that has one says the same thing....."Oh I just get 7% guaranteed.  Doesn't matetr whether the market goes up or down, I always get 7%.  That's MUCH better than what the market is doing now!"
 
Uhhhh, no.  You try to explain the riders, the income base guarantee (versus the account value), the floors and ceilings on return, the fees, etc.  It just goes in one ear and out the other.  They INSIST that there are no commissions or fees, and that the value jsut goes up 7% in perpetuity every year, guaranteed.  If that was the case, I would have ALL of my money in 7% guaranteed, tax deferred investments.
 
Annuities are not bad if you know EXACTLY what you are getting (which is rare).

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B24 wrote:BIGGEST problem with all annuities (specifically EIA's and income riders) are that almost every client/prospect/friend, etc that I talk to that has one says the same thing....."Oh I just get 7% guaranteed.  Doesn't matetr whether the market goes up or down, I always get 7%.  That's MUCH better than what the market is doing now!"
 
Uhhhh, no.  You try to explain the riders, the income base guarantee (versus the account value), the floors and ceilings on return, the fees, etc.  It just goes in one ear and out the other.  They INSIST that there are no commissions or fees, and that the value jsut goes up 7% in perpetuity every year, guaranteed.  If that was the case, I would have ALL of my money in 7% guaranteed, tax deferred investments.
 
Annuities are not bad if you know EXACTLY what you are getting (which is rare).
 
B24, I agree that some advisors don't explain the rider correctly.  BUT, for as difficult as it is for some advisors to understand this, it's 10x harder for their clients.
 
I feel I do a great job explaining the differences between contract value and the rider, but it is extremely difficult for clients to understand.  Some get it, some don't. 
 
The sad thing is when you see someone you know that needs and annuity and they don't understand it well enough to do it.   

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Joined: 2005-09-29

8.  ANYTHING that has ANY ties on rate/surrender/etc. to the stock market (read EIA's) is a security.
By this definition, is a bond no longer a security?  I assume that you don't mean that.  In reality, based upon this definition, virtually everything is a security.   What determines the rates on fixed insurance products?  The general account of the insurance company.  This general account invests in securities.  Where does money that get invested in fixed annuities go?  Primarily the general account of the insurance company.  Where does the money for an EIA go?  Primarily the general account of the insurance company.   The same can be said for CD's, etc.
 
An EIA is a fixed annuity.  It simply has a different crediting method than other fixed products.  If an EIA is a security, all fixed products are securities.
 
 
9.  Prohibit 100% upfront commission on annuities.  It doesn't have to be like a C share mutual fund, but if one of the payout options is 8% upfront and then no trail, guess who gets no service?  Give the broker some incentive for providing continuing advice.  I see these people all the time, their broker sold them a $200,000 annuity, and now won't return their call.  Even the $200 provided by a .1 trail would help, I would be ok with a .25 trail like on mutual funds.
 
What kind of incentive does the broker have to give continuing advice if there is a trail?  He gets paid regardless.  The commissions are for selling the product.  The broker doesn't get paid to give advice.  The last thing that we need is more rules.  Rules don't stop crooks.  They just hurt the honest people. 
 
 
BIGGEST problem with all annuities (specifically EIA's and income riders) are that almost every client/prospect/friend, etc that I talk to ...
The last time that I checked, annuities don't speak.  The problem isn't with the product.  The problem is with those who are selling them and those who are buying them without understanding what they are buying.
 

snaggletooth's picture
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Joined: 2007-07-13

anonymous wrote:
 BIGGEST problem with all annuities (specifically EIA's and income riders) are that almost every client/prospect/friend, etc that I talk to ...
The last time that I checked, annuities don't speak.  The problem isn't with the product.  The problem is with those who are selling them and those who are buying them without understanding what they are buying.
 
 
Agreed Anon, 100%.
 
I was talking to my sister-in-law last night, a dental hygenist.  I was blown away by the amount of specific course work and cost to become a dental hygenist.  You have at least 2 years of tough coursework on top of basic underground courses.  The dental hygene program costs about $25,000-$30,000 and has a tough selection process.  All to work on your teeth.
 
I'm talking to her and thinking, you don't even have to graduate college to be a rep.  You just have to cram for a test for 3 months. 
 
Maybe some of the bad apples selling the good products would be taken care of if ALL financial products paid the same commissions/fees.
 
I am not an advocate of this by any means as it's not fair to those of us that do things the right way.  But from a consumer's standpoint, it might be one solution.

theironhorse's picture
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Joined: 2007-03-03

i love the insurance agents who drop a 300,000 ticket into a VA one year and then take the 10% each year after that and go to another VA or A share funds, all under the guise of diversification.
also love the ROTH VA's i see with monthly auto contributions by a 28 year old single guy.
or the 150,000 VUL being funded at $50-$75/month.
when i joined my prior b/d i inherited roughly 50-100 annuity contracts all sold by the previous agent.  slowly but surely i saw most of these contracts being moved away, all usually taking 3-8% cdsc's.  most were invested in af subaccounts, but were being moved due to "poor performance" according to current policyholders.  always killed me how policyholders would accept a cdsc after being promised greener pastures elsewhere.

Greenbacks's picture
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Joined: 2004-12-21

So far there has been some good points made.
 
Some that are missing yet.
 
Meeting sales quota's & goals
 
Sales people that can only sell propritary products.
 
My preferance is fee based for all products including  insurance even car and  P&C.
 
But that is my opinion.

henryhill's picture
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Joined: 2007-08-23

I'll add one more thing.  All firms should accept other firms paperwork for withdrawl or if they insist on "their forms", those withdrawl/surrender forms be available on the internet.

Hobby Bull's picture
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Joined: 2008-07-09

theironhorse wrote:i love the insurance agents who drop a 300,000 ticket into a VA one year and then take the 10% each year after that and go to another VA or A share funds, all under the guise of diversification.
also love the ROTH VA's i see with monthly auto contributions by a 28 year old single guy.
or the 150,000 VUL being funded at $50-$75/month.
when i joined my prior b/d i inherited roughly 50-100 annuity contracts all sold by the previous agent.  slowly but surely i saw most of these contracts being moved away, all usually taking 3-8% cdsc's.  most were invested in af subaccounts, but were being moved due to "poor performance" according to current policyholders.  always killed me how policyholders would accept a cdsc after being promised greener pastures elsewhere.You've just proven yourself to be a liar. We don't "see these contracts being moved away." They are in our book of business one day and gone the next. We can't see whether or not it was surrendered or if the client only did an agent change.

EDJ4now's picture
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Joined: 2006-02-08

anonymous wrote:
8.  ANYTHING that has ANY ties on rate/surrender/etc. to the stock market (read EIA's) is a security.
By this definition, is a bond no longer a security?  I assume that you don't mean that.  In reality, based upon this definition, virtually everything is a security.   What determines the rates on fixed insurance products?  The general account of the insurance company.  This general account invests in securities.  Where does money that get invested in fixed annuities go?  Primarily the general account of the insurance company.  Where does the money for an EIA go?  Primarily the general account of the insurance company.   The same can be said for CD's, etc.
 
An EIA is a fixed annuity.  It simply has a different crediting method than other fixed products.  If an EIA is a security, all fixed products are securities.
 
Maybe I am slightly overstating it, but if you product goes up or down based on whether the stock market goes up or down, it should be regulated as a security.  EIA's came into existence in order to allow know-nothing insurance agents to sell something to their victims -err clients, without proper license or regulation.  They are getting by on a technical loophole, and it should be closed.
 
9.  Prohibit 100% upfront commission on annuities.  It doesn't have to be like a C share mutual fund, but if one of the payout options is 8% upfront and then no trail, guess who gets no service?  Give the broker some incentive for providing continuing advice.  I see these people all the time, their broker sold them a $200,000 annuity, and now won't return their call.  Even the $200 provided by a .1 trail would help, I would be ok with a .25 trail like on mutual funds.
 
What kind of incentive does the broker have to give continuing advice if there is a trail?  He gets paid regardless.  The commissions are for selling the product.  The broker doesn't get paid to give advice.  The last thing that we need is more rules.  Rules don't stop crooks.  They just hurt the honest people. 
 
The incentive to service is that if I don't service the account, someone else will take it over and get paid to do so.  I guess this leads to #10, commissions must be transferrable on insurance products to the servicing agent, as they are on security products. 
 
BIGGEST problem with all annuities (specifically EIA's and income riders) are that almost every client/prospect/friend, etc that I talk to ...
The last time that I checked, annuities don't speak.  The problem isn't with the product.  The problem is with those who are selling them and those who are buying them without understanding what they are buying.
 
Many of the worst examples are EIA slingers who don't even have a securities license.  This wouldn't solve all problems, but it would certainly help. 
 

Hobby Bull's picture
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Joined: 2008-07-09

EDJ4now wrote:anonymous wrote:
8.  ANYTHING that has ANY ties on rate/surrender/etc. to the stock market (read EIA's) is a security.
By this definition, is a bond no longer a security?  I assume that you don't mean that.  In reality, based upon this definition, virtually everything is a security.   What determines the rates on fixed insurance products?  The general account of the insurance company.  This general account invests in securities.  Where does money that get invested in fixed annuities go?  Primarily the general account of the insurance company.  Where does the money for an EIA go?  Primarily the general account of the insurance company.   The same can be said for CD's, etc.
 
An EIA is a fixed annuity.  It simply has a different crediting method than other fixed products.  If an EIA is a security, all fixed products are securities.
 
Maybe I am slightly overstating it, but if you product goes up or down based on whether the stock market goes up or down, it should be regulated as a security.  EIA's came into existence in order to allow know-nothing insurance agents to sell something to their victims -err clients, without proper license or regulation.  They are getting by on a technical loophole, and it should be closed.
 
9.  Prohibit 100% upfront commission on annuities.  It doesn't have to be like a C share mutual fund, but if one of the payout options is 8% upfront and then no trail, guess who gets no service?  Give the broker some incentive for providing continuing advice.  I see these people all the time, their broker sold them a $200,000 annuity, and now won't return their call.  Even the $200 provided by a .1 trail would help, I would be ok with a .25 trail like on mutual funds.
 
What kind of incentive does the broker have to give continuing advice if there is a trail?  He gets paid regardless.  The commissions are for selling the product.  The broker doesn't get paid to give advice.  The last thing that we need is more rules.  Rules don't stop crooks.  They just hurt the honest people. 
 
The incentive to service is that if I don't service the account, someone else will take it over and get paid to do so.  I guess this leads to #10, commissions must be transferrable on insurance products to the servicing agent, as they are on security products. 
 
BIGGEST problem with all annuities (specifically EIA's and income riders) are that almost every client/prospect/friend, etc that I talk to ...
The last time that I checked, annuities don't speak.  The problem isn't with the product.  The problem is with those who are selling them and those who are buying them without understanding what they are buying.
 
Many of the worst examples are EIA slingers who don't even have a securities license.  This wouldn't solve all problems, but it would certainly help. 
  Whoever wrote the blue part is dumb.

anonymous's picture
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Joined: 2005-09-29

Maybe I am slightly overstating it, but if you product goes up or down based on whether the stock market goes up or down, it should be regulated as a security.

 
I'd agree with this.  What you are writing doesn't describe an EIA or any fixed product.  Fixed products go up in value.  Securities go up and down in value.  There is not investment risk in fixed products.  There is not investment risk in EIA's.
 
EIA's came into existence in order to allow know-nothing insurance agents to sell something to their victims -err clients, without proper license or regulation.  They are getting by on a technical loophole, and it should be closed.
 
There is nothing technical about this.  The client's money is not in the market.  It's not an investment.
 
The incentive to service is that if I don't service the account, someone else will take it over and get paid to do so.  I guess this leads to #10, commissions must be transferrable on insurance products to the servicing agent, as they are on security products. 
 
I'm a free market kind of guy.  We don't need regulation that says how people should be paid.
 
Many of the worst examples are EIA slingers who don't even have a securities license.  This wouldn't solve all problems, but it would certainly help. 
 
So, the answer is to punish honest people who sell these products? 
 
 

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