VAs for everybody

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FreeLunch's picture
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How can some people use Variable Annuities ONLY for everybody?  I know there are some great products out there, and there are a few that I really like - but for everybody?????
Can they truly be thinking about client's best interest, or their own?
 

troll's picture
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FreeLunch wrote:
How can some people use Variable Annuities ONLY for everybody?  I know there are some great products out there, and there are a few that I really like - but for everybody?????
Can they truly be thinking about client's best interest, or their own?
 

Here's how you do it, Mr. Five Figure Producer. First, you find people that want a VA. Next, you sell it to them.

anonymous's picture
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BH is a great example.  From reading his posts, he sells a VA when one is appropriate. When one is appropriate he sells it.  When one isn't, he says "next". 

deekay's picture
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Exactly, anon.
The posters on here who badmouth BH don't really understand that VAs are his niche, just like others like AllReit have a niche in money management (at least I think that's what he does).
What I find funny is that alot of anti-annuity posters on here really don't understand how they work and the benefits from a real world, practical level.  They automatically scream "HIGH FEES!!!!  NOOOOOOOO" and turn up their noses.  An advisor who doesn't understand what VAs are all about are unethical because they aren't doing the best job they can for their clients.

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anonymous wrote:BH is a great example.  From reading his posts, he sells a VA when one is appropriate. When one is appropriate he sells it.  When one isn't, he says "next". 

GolFA's picture
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Next - isn't he the guy who thinks having your CFP is stupid?

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Bobby Hull wrote:FreeLunch wrote:
How can some people use Variable Annuities ONLY for everybody?  I know there are some great products out there, and there are a few that I really like - but for everybody?????
Can they truly be thinking about client's best interest, or their own?
 

Here's how you do it, Mr. Five Figure Producer. First, you find people that want a VA. Next, you sell it to them.

I'm sorry, although our prospective clients must be much more well informed and SO much smarter than us, how many actually WANT an annuity without being SOLD one.  I know its true that idiots read the WSJ and see some neato product of the week (maybe an annuity) and go to their local broker to buy one.  But tell me, realistically, how many prospects have walked in your office, thrown a check on your desk and said, "I'll take one EIA, all riders, and make sure it pays you 10%"?  No one WANTS an investment product as complex as an annuity.  EVERYONE is SOLD an annuity.  Yes, people do want guarantees.  People do want insurance backed investments.  People do want tax deferral.  But how many prospects actually have the exact demands that come in an annuity?  My guess BH, is that anyone that has even a slight interest in one of the features you offer will be hounded and manipulated until they are convinced that your are selling them eternity giving holy water with a Guaranteed minimum.  How is that giving them options with their investments? 
Also, sometimes it is in the best interests of clients to not sell them what they want, but what they really NEED.  In another post, someone talked about a 35 year old that bought an annuity inside an IRA.  Why does a 35 year old need an expensive annuity in an IRA?  "Because they want the guarantee" you say? They don't need a guarantee right now.  They need maximum share accumulation when they are that young, whether their account value goes up or down.  They may be scared to see the market go down 20%.  I see the opportunity for them to accumulate more shares(leading to a larger peak recovery return), not for them to feel all goody goody about their 3% guarantee. 
I do feel that there are appropriate times to sell an annuity to someone.  But, after the amount of prospecting I've done, and the amount of qualifying for investments that I have done.  I would guess that maybe 10-20% of the qualified prospects I've talked to would have a truly good place for annuities (for SOME of their money) in their accounts.  So, out of app. 2000 prospects, only about 300-400 really qualified to become clients over the next few years; selling annuities to 30-60 clients and referring the other 80% to the guy not exclusively selling annuities would not allow me to stay in the business very long.  BH, what percentage of qualified prospects have you sent to other Advisors that have (in those situations) more appropriate investment opportunities for them? What percentage of prospects have you worked to CONVINCE them that an annuity is what they WANT?  Even if I specialized in something (and lied to myself about the appropriateness of it), I would never have the conscience to only do that one service for all of my clients.  Somewhere along the line I would build in a back up plan so that I could actually feel like I helped someone other than myself.

troll's picture
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BteamBomber wrote:Bobby Hull wrote:FreeLunch wrote:
How can some people use Variable Annuities ONLY for everybody?  I know there are some great products out there, and there are a few that I really like - but for everybody?????
Can they truly be thinking about client's best interest, or their own?
 

Here's how you do it, Mr. Five Figure Producer. First, you find people that want a VA. Next, you sell it to them.

I'm sorry, although our prospective clients must be much more well informed and SO much smarter than us, how many actually WANT an annuity without being SOLD one.  I know its true that idiots read the WSJ and see some neato product of the week (maybe an annuity) and go to their local broker to buy one.  But tell me, realistically, how many prospects have walked in your office, thrown a check on your desk and said, "I'll take one EIA, all riders, and make sure it pays you 10%"?  No one WANTS an investment product as complex as an annuity.  EVERYONE is SOLD an annuity.  Yes, people do want guarantees.  People do want insurance backed investments.  People do want tax deferral.  But how many prospects actually have the exact demands that come in an annuity?  My guess BH, is that anyone that has even a slight interest in one of the features you offer will be hounded and manipulated until they are convinced that your are selling them eternity giving holy water with a Guaranteed minimum.  How is that giving them options with their investments? 
Also, sometimes it is in the best interests of clients to not sell them what they want, but what they really NEED.  In another post, someone talked about a 35 year old that bought an annuity inside an IRA.  Why does a 35 year old need an expensive annuity in an IRA?  "Because they want the guarantee" you say? They don't need a guarantee right now.  They need maximum share accumulation when they are that young, whether their account value goes up or down.  They may be scared to see the market go down 20%.  I see the opportunity for them to accumulate more shares(leading to a larger peak recovery return), not for them to feel all goody goody about their 3% guarantee. 
I do feel that there are appropriate times to sell an annuity to someone.  But, after the amount of prospecting I've done, and the amount of qualifying for investments that I have done.  I would guess that maybe 10-20% of the qualified prospects I've talked to would have a truly good place for annuities (for SOME of their money) in their accounts.  So, out of app. 2000 prospects, only about 300-400 really qualified to become clients over the next few years; selling annuities to 30-60 clients and referring the other 80% to the guy not exclusively selling annuities would not allow me to stay in the business very long.  BH, what percentage of qualified prospects have you sent to other Advisors that have (in those situations) more appropriate investment opportunities for them? What percentage of prospects have you worked to CONVINCE them that an annuity is what they WANT?  Even if I specialized in something (and lied to myself about the appropriateness of it), I would never have the conscience to only do that one service for all of my clients.  Somewhere along the line I would build in a back up plan so that I could actually feel like I helped someone other than myself.

Take the number that plop down money and ask for stocks and mutual funds and insist that they be charged a fee, taken quarterly, then multiple by two and that's my answer. Would it shock you that everybody who makes a purchase from a car dealer ends up with a car? Even the one's who "need" a motorcycle. The horror of it all....

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Bobby Hull wrote:BteamBomber wrote:Bobby Hull wrote:FreeLunch wrote:
How can some people use Variable Annuities ONLY for everybody?  I know there are some great products out there, and there are a few that I really like - but for everybody?????
Can they truly be thinking about client's best interest, or their own?
 

Here's how you do it, Mr. Five Figure Producer. First, you find people that want a VA. Next, you sell it to them.

I'm sorry, although our prospective clients must be much more well informed and SO much smarter than us, how many actually WANT an annuity without being SOLD one.  I know its true that idiots read the WSJ and see some neato product of the week (maybe an annuity) and go to their local broker to buy one.  But tell me, realistically, how many prospects have walked in your office, thrown a check on your desk and said, "I'll take one EIA, all riders, and make sure it pays you 10%"?  No one WANTS an investment product as complex as an annuity.  EVERYONE is SOLD an annuity.  Yes, people do want guarantees.  People do want insurance backed investments.  People do want tax deferral.  But how many prospects actually have the exact demands that come in an annuity?  My guess BH, is that anyone that has even a slight interest in one of the features you offer will be hounded and manipulated until they are convinced that your are selling them eternity giving holy water with a Guaranteed minimum.  How is that giving them options with their investments? 
Also, sometimes it is in the best interests of clients to not sell them what they want, but what they really NEED.  In another post, someone talked about a 35 year old that bought an annuity inside an IRA.  Why does a 35 year old need an expensive annuity in an IRA?  "Because they want the guarantee" you say? They don't need a guarantee right now.  They need maximum share accumulation when they are that young, whether their account value goes up or down.  They may be scared to see the market go down 20%.  I see the opportunity for them to accumulate more shares(leading to a larger peak recovery return), not for them to feel all goody goody about their 3% guarantee. 
I do feel that there are appropriate times to sell an annuity to someone.  But, after the amount of prospecting I've done, and the amount of qualifying for investments that I have done.  I would guess that maybe 10-20% of the qualified prospects I've talked to would have a truly good place for annuities (for SOME of their money) in their accounts.  So, out of app. 2000 prospects, only about 300-400 really qualified to become clients over the next few years; selling annuities to 30-60 clients and referring the other 80% to the guy not exclusively selling annuities would not allow me to stay in the business very long.  BH, what percentage of qualified prospects have you sent to other Advisors that have (in those situations) more appropriate investment opportunities for them? What percentage of prospects have you worked to CONVINCE them that an annuity is what they WANT?  Even if I specialized in something (and lied to myself about the appropriateness of it), I would never have the conscience to only do that one service for all of my clients.  Somewhere along the line I would build in a back up plan so that I could actually feel like I helped someone other than myself.

Take the number that plop down money and ask for stocks and mutual funds and insist that they be charged a fee, taken quarterly, then multiple by two and that's my answer. Would it shock you that everybody who makes a purchase from a car dealer ends up with a car? Even the one's who "need" a motorcycle. The horror of it all....

 
Does it say "Bobby Hull, Annuities only!" on the sign outside your office?  My guess is that when someone goes to a car dealership they don't all walk out with fully loaded Hummers (great gas mileage and affordable!)

troll's picture
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BteamBomber wrote:Bobby Hull wrote:BteamBomber wrote:Bobby Hull wrote:FreeLunch wrote:
How can some people use Variable Annuities ONLY for everybody?  I know there are some great products out there, and there are a few that I really like - but for everybody?????
Can they truly be thinking about client's best interest, or their own?
 

Here's how you do it, Mr. Five Figure Producer. First, you find people that want a VA. Next, you sell it to them.

I'm sorry, although our prospective clients must be much more well informed and SO much smarter than us, how many actually WANT an annuity without being SOLD one.  I know its true that idiots read the WSJ and see some neato product of the week (maybe an annuity) and go to their local broker to buy one.  But tell me, realistically, how many prospects have walked in your office, thrown a check on your desk and said, "I'll take one EIA, all riders, and make sure it pays you 10%"?  No one WANTS an investment product as complex as an annuity.  EVERYONE is SOLD an annuity.  Yes, people do want guarantees.  People do want insurance backed investments.  People do want tax deferral.  But how many prospects actually have the exact demands that come in an annuity?  My guess BH, is that anyone that has even a slight interest in one of the features you offer will be hounded and manipulated until they are convinced that your are selling them eternity giving holy water with a Guaranteed minimum.  How is that giving them options with their investments? 
Also, sometimes it is in the best interests of clients to not sell them what they want, but what they really NEED.  In another post, someone talked about a 35 year old that bought an annuity inside an IRA.  Why does a 35 year old need an expensive annuity in an IRA?  "Because they want the guarantee" you say? They don't need a guarantee right now.  They need maximum share accumulation when they are that young, whether their account value goes up or down.  They may be scared to see the market go down 20%.  I see the opportunity for them to accumulate more shares(leading to a larger peak recovery return), not for them to feel all goody goody about their 3% guarantee. 
I do feel that there are appropriate times to sell an annuity to someone.  But, after the amount of prospecting I've done, and the amount of qualifying for investments that I have done.  I would guess that maybe 10-20% of the qualified prospects I've talked to would have a truly good place for annuities (for SOME of their money) in their accounts.  So, out of app. 2000 prospects, only about 300-400 really qualified to become clients over the next few years; selling annuities to 30-60 clients and referring the other 80% to the guy not exclusively selling annuities would not allow me to stay in the business very long.  BH, what percentage of qualified prospects have you sent to other Advisors that have (in those situations) more appropriate investment opportunities for them? What percentage of prospects have you worked to CONVINCE them that an annuity is what they WANT?  Even if I specialized in something (and lied to myself about the appropriateness of it), I would never have the conscience to only do that one service for all of my clients.  Somewhere along the line I would build in a back up plan so that I could actually feel like I helped someone other than myself.

Take the number that plop down money and ask for stocks and mutual funds and insist that they be charged a fee, taken quarterly, then multiple by two and that's my answer. Would it shock you that everybody who makes a purchase from a car dealer ends up with a car? Even the one's who "need" a motorcycle. The horror of it all....

 
Does it say "Bobby Hull, Annuities only!" on the sign outside your office?  My guess is that when someone goes to a car dealership they don't all walk out with fully loaded Hummers (great gas mileage and affordable!)

I sell annuities, dickhead. Everybody that comes to my office knows that we are going to talk about annuities. A piker like you wouldn't have the first clue about having the courage to specialize in something - "I can't do that....what if I leave money on the table?" Faggot.

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I must have touched the right nerve.  Wow, deep underneath the conscience of Bobby Hull.  Its not just "greater than thou" ego and cynicism.  Its actually anger and greed.  I underestimated you Bobby.  You truly are the greedy trash that I thought you were.  Keep at it, don't leave any money on the table Bobby, you might actually do your client good if you do.  Get every penny you swine. 

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bteam I emailed the admin to change your username to piker.  It's more suited to you.

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How am i piker for doing exactly what Bobby does only TO Bobby?  I actually have made good points about the business and have had legitimate questions for OTHER people on this sight in the past.  I just can't stand to see every single person that comes to RR with a real concern and question recieve a jackass remark from some bitter, greedy, schmuck that doesn't offer anything.  Every single post does not require a juvenile response from Bobby (as entitled as he feels to give one).  I know that he is expressing his freedom to be a jerk on this site, but it bothers me even more that when someone has legitimate arguments about his way of sleazily running his business that people like you defend him and encourage him to do more. 

troll's picture
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Bobby are you specialized if you're selling oil partnerships now too?Or is it because 8% is more than 7%?

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BteamBomber wrote:I must have touched the right nerve.  Wow, deep underneath the conscience of Bobby Hull.  Its not just "greater than thou" ego and cynicism.  Its actually anger and greed.  I underestimated you Bobby.  You truly are the greedy trash that I thought you were.  Keep at it, don't leave any money on the table Bobby, you might actually do your client good if you do.  Get every penny you swine. 
Never underestimate solid salesmen like me. We're talking to your clients and you don't even know it.

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Bobby Hull wrote:solid salesmen like me. We're talking to your clients and you don't even know it. Exactly.My clients are smart enough to recognize one, in my experience.

GolFA's picture
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Bobby Soprano.

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joedabrkr wrote:Bobby are you specialized if you're selling oil partnerships now too?Or is it because 8% is more than 7%?
Fair question. I get bored sometimes and want to add something to the mix. I like the excitement of racing against the clock to finish a project. Also, it's REAL easy to get referrals for stuff like this. By the way...the annuity pays 7.5%.

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...And thats why this business is so difficult.  I think there is about $300,000,000 in CD's just in my area that no broker will ever see.  Why?  Because of the number of bad advisors and swindlers there are in the business.  Every time a person became trapped in the wrong investment; every time a client was advised to do something that had nothing to do with their needs; every time some jerk took a huge payout on absolutely, the most innappropriate investment; I and most everyone else in this business lost a chance to really help someone.  I'll lay down a challenge to you Bobby.  Keep track of how many people with money available you actually do turn down for annuity business because it wasn't the right situation for them.  Keep track for one month, or even a year, and tell me if what we all suspect about you is true? 

troll's picture
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joedabrkr wrote: Bobby Hull wrote:
solid salesmen like me. We're talking to your clients and you don't even know it.
Exactly.My clients are smart enough to recognize one, in my experience.
That was a very snappy comeback, Joe. I'd rather be open about it then to be one in disguise, like you.

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Bobby Hull wrote:joedabrkr wrote: Bobby Hull wrote:
solid salesmen like me. We're talking to your clients and you don't even know it.
Exactly.My clients are smart enough to recognize one, in my experience.
That was a very snappy comeback, Joe. I'd rather be open about it then to be one in disguise, like you.

We are ALL salespeople and there is nothing wrong with that.  If you don't think you are, then you are kidding yourself. 

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Bobby Hull wrote:I sell annuities, dickhead. Everybody that comes to my office knows that we are going to talk about annuities. A piker like you wouldn't have the first clue about having the courage to specialize in something - "I can't do that....what if I leave money on the table?" Faggot. Nice, 6th grade level name calling.  Are you ever going to show how you get 25% per year, or are we just going to have to trust you on this one?

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Maxstud wrote: Bobby Hull wrote:
I sell annuities, dickhead. Everybody that comes to my office knows that we are going to talk about annuities. A piker like you wouldn't have the first clue about having the courage to specialize in something - "I can't do that....what if I leave money on the table?" Faggot.
Nice, 6th grade level name calling.  Are you ever going to show how you get 25% per year, or are we just going to have to trust you on this one?

Trust me.

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joedabrkr wrote:
Bobby Hull wrote:solid salesmen like me. We're talking to your clients and you don't even know it. Exactly.My clients are smart enough to recognize one, in my experience.

If you tell clients the truth about annuities they won't buy them.

1) 6% Commisions.

2) Surrender charges. (What if you suddenly need the money?)

3) Fee's Fee's Fee's. (You pay more than a hedge fund to get a bunch of crotty mutual funds)

4) Insurance company profits == Consumer losses (Your annuity, my dividend.

5) For EIA's, walk people through AEL's financial statements and
explain how the EIA is just bad fixed annuity whose stable cash flow
has been converted to risky cash flow.

6) Magic conversion of LTCG into Ordinary Income.

7) You vs 50 Actuaries. (Even with a 6% handicap, the insurco still expects to make money).

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AllREIT wrote: joedabrkr wrote: Bobby Hull wrote:
solid salesmen like me. We're talking to your clients and you don't even know it.
Exactly.My clients are smart enough to recognize one, in my experience.If you tell clients the truth about annuities they won't buy them. 1) 6% Commisions.2) Surrender charges. (What if you suddenly need the money?)3) Fee's Fee's Fee's. (You pay more than a hedge fund to get a bunch of crotty mutual funds)4) Insurance company profits == Consumer losses (Your annuity, my dividend.5) For EIA's, walk people through AEL's financial statements and explain how the EIA is just bad fixed annuity whose stable cash flow has been converted to risky cash flow. 6) Magic conversion of LTCG into Ordinary Income.7) You vs 50 Actuaries. (Even with a 6% handicap, the insurco still expects to make money).

The commissions are 7.5% and they are none of the client's business. What the client pays, is their business. You've never seen a disclosure form, have you? Did you know that they include every tiny detail and that I use it as a tool to close the deal? That's right...I go over the disclosure form first and have them sign it, acknowledging that I've disclosed every material fact. It's easy to sign this form, but once I've gotten a signature out of them, they don't resist signing apps and paperwork.
THere's a little sales tip for you kids.

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Allreit: when you give your pitch, the client hears, " blah, blah, blah." They remember the fear, though.
Bobby's disclosure form, client hears, " blah, blah, blah."
Problem is, both of you are right and both of you are wrong.
The only thing that matters is disclosure, regulation. Allreit, do we need more disclosure and regulation?
From a financial planning standpoint, in some way, folks will have to stay open minded about (immediate) annuities, given the goals and constraints of the general public.
Since all they hear is blah blah blah, why strike the fear of God into the average consumer? Better to focus on documented disclosure.
Personally, I am not a big fan of the Bobbys and their product, but a little perspective suggests maybe he is selling an overpriced Chevy and you a Toyota, or whatever, this is the reality - why not scrutinize the whole Bobby value proposition - is he a good planner, and does he provide good service?

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AllREIT wrote: joedabrkr wrote: Bobby Hull wrote:
solid salesmen like me. We're talking to your clients and you don't even know it.
Exactly.My clients are smart enough to recognize one, in my experience.If you tell clients the truth about annuities they won't buy them. 1) 6% Commisions.
Which the client doesn't pay.  We've been through this before, AR.2) Surrender charges. (What if you suddenly need the money?)
Then don't put all your liquid assets in an annuity.  Simple.3) Fee's Fee's Fee's. (You pay more than a hedge fund to get a bunch of crotty mutual funds)
Since when does any VA cost more than a hedge fund?  Last I checked, a hedge fund took 20% of the profits before giving anything to the investors.  Oh yeah, they still get a 1% management fee.4) Insurance company profits == Consumer losses (Your annuity, my dividend.
If a VA allows a client to invest more aggressively to reach their goals, then they profit more than investing conservatively.  I fail to see how a product manufacturer's profit motive has anything to do with it.  Is it safe to assume all the companies you work with are non-profit organizations?5) For EIA's, walk people through AEL's financial statements and explain how the EIA is just bad fixed annuity whose stable cash flow has been converted to risky cash flow.
A fixed annuity and an EIA are the same farging thing, except for how the gains are credited.  FI's are generally based on overall interest rates in the general account.  EIAs are tied to an index of investments, usually the S&P or such.  Both guarantee a minimal rate of return.  For someone who claims to know alot, you haven't the foggiest.6) Magic conversion of LTCG into Ordinary Income.
Use annuities in qualified accounts and you never have to worry about this.7) You vs 50 Actuaries. (Even with a 6% handicap, the insurco still expects to make money).
How'd you come up with this one?  Of course the insurance company expects to make money.  They're capitalists just like you, me, your client, and the rest of the country.  Again, I reiterate - if a conservative investor (who needs to be more aggressive in order to reach their goals) can invest for higher rates with the peace of mind knowing their principal is protected, then the fee is justified.
Mind you, I understand how the markets work.  Nobody needs an annuity if they've got a long-term time frame.  But I have to agree with BH, when you present the concept to them, a whole helluva lot of them want it.

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Deekay,
Great post!  You are 100% on the money.

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Oh lordy DK.

1) If the client doesn't pay the commision who does? The insurance company. Where does the insurance company get the money to pay the commision? From the clients.

Denial is not just a river in Egypt

2) VA's are usually pitched as total portfolio solutions. That's how big-ticket annuity salesmen work.

3) Typical VA has all-in costs of around 2.5% and not uncommon for it to be higher.

4) Well, Vanguard is a cooperative company, and the ETF providers are "low profit"

5) Read and understand what "fixed annuity whose stable cash flow has been converted to a risky cash flow" means.

6) Using VA's in pre-tax accounts is probably dominated by directly
investing and then buying a SPIA when needed. Without the tax deferral
all that's left is package of over priced put options and an call
option on buying a SPIA.

7) You're not getting what I'm saying. The insurance company has
designed the contract to be profitable under all reasonable conditions,
that means the client takes an economic loss under all reasonable
conditions.

If making insurance company shareholders rich is your bag, go for it.

Client education solves most of these issues, and it is possible to
invest in an agressive though conservative manner. Much of the
potential higher performance of agressive investment strategies is
given up to VA fee's.

IMHO the main appropriate place to use a VA is as weak replacement/suppliment to Roth IRA's

I guess I shouldn't be so negative on VA salesmen, the collective economic losses of annuitants are the excess profits the insurco's. So this MET/HIG shareholder thanks the worker bees who collect the honey for the beekeeper.

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AllREIT wrote:Oh lordy DK.1) If the client doesn't pay the commision who does? The insurance company. Where does the insurance company get the money to pay the commision? From the clients.
So, you work for free?Denial is not just a river in Egypt2) VA's are usually pitched as total portfolio solutions. That's how big-ticket annuity salesmen work.
Sometimes a VA for all of a clients assets is the best way to go.  I've never seen that senario yet, but there could be a case.  I fail to see how having something relatively illiquid is a bad thing.  Why are there spendthrift clauses in trusts?  So people can avoid spending down their assets too quickly.3) Typical VA has all-in costs of around 2.5% and not uncommon for it to be higher.
How much do you charge for your uninsured portfolios?  1%?  1.5%?  How much is that peace of mind worth to your clients?  Not to you, we know where you stand.  How much is it worth to a client to fully insure a retirement nest egg?  For some, it may be worth nothing.  For others, it may be a whole lot more than 1%.4) Well, Vanguard is a cooperative company, and the ETF providers are "low profit"
OK - low profit.  I didn't ask to what extent they make profits.  I asked whether or not they were "non-profit".  Last I checked, Vanguard is one of the largest fund managers in the world.  Even their very low expenses create enormous profits for them.  5) Read and understand what "fixed annuity whose stable cash flow has been converted to a risky cash flow" means.
I read it and understood it.  Now, I ask you, what does "guaranteed minimum rate of return" mean to you?6) Using VA's in pre-tax accounts is probably dominated by directly investing and then buying a SPIA when needed. Without the tax deferral all that's left is package of over priced put options and an call option on buying a SPIA.
Actually, there's not a thing wrong with this strategy.  But you know as well as I do that when the market goes down again, our clients will focus on the part that was invested, regardless of how much we invested in the SPIA.  And might I remind you that when we are discussing VAs, we're not just looking at clients who are in the income phase.  In those instances, an SPIA obv. doesn't make sense.7) You're not getting what I'm saying. The insurance company has designed the contract to be profitable under all reasonable conditions, that means the client takes an economic loss under all reasonable conditions.
All investment companies by their structure make money regardless of whether the client makes a profit or loss.  The internal costs of a ETF, MF, SMA, EMA, VA, whatever, make this so.  I think we're caught in two different worlds.  Your argument is academic - mine is practical.  I will be more than happy to discuss the academic validity of your theories.  You dismiss my practical investment applications because you fail to see how ethical, good-natured, honest advisors could ever see how a VA fits.  And that's a shame.If making insurance company shareholders rich is your bag, go for it.
FTR, I deal mostly with mutual insurance companies.  So, no, despite your flip answer, I don't try to make shareholders rich.  I try to help my clients from going poor.Client education solves most of these issues, and it is possible to invest in an agressive though conservative manner. Much of the potential higher performance of agressive investment strategies is given up to VA fee's.
Please define "agressive though conservative".  My weak mind cannot get itself around this.  I agree, ongoing hand holding is essential for clients to acheive their goals.  I am a firm believer that investor behavior is to investment results as 19 is to 1 (thank you Nick Murray!).  A VA is one tool in my shed that allows me to focus on good 'investor behavior' rather than what their ROR is.  Think about this - an investment's 10 year ROR is 10%.  What is the investor's ROR if they bailed out at the bottom?IMHO the main appropriate place to use a VA is as weak replacement/suppliment to Roth IRA's
That could be one way of positioning a VA.  I don't agree with it, but different strokes for different folks.   I guess I shouldn't be so negative on VA salesmen, the collective economic losses of annuitants are the excess profits the insurco's. So this MET/HIG shareholder thanks the worker bees who collect the honey for the beekeeper.
 Of course, no AllReit rant would be complete without a smarmy back-handed remark.  Kudos, sir.  You've done the RIA community a world of good. 

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AllREIT wrote:Oh lordy DK.1) If the client doesn't pay the commision who does? The insurance company. Where does the insurance company get the money to pay the commision? From the clients. Denial is not just a river in Egypt2) VA's are usually pitched as total portfolio solutions. That's how big-ticket annuity salesmen work.3) Typical VA has all-in costs of around 2.5% and not uncommon for it to be higher. 4) Well, Vanguard is a cooperative company, and the ETF providers are "low profit" 5) Read and understand what "fixed annuity whose stable cash flow has been converted to a risky cash flow" means. 6) Using VA's in pre-tax accounts is probably dominated by directly investing and then buying a SPIA when needed. Without the tax deferral all that's left is package of over priced put options and an call option on buying a SPIA.7) You're not getting what I'm saying. The insurance company has designed the contract to be profitable under all reasonable conditions, that means the client takes an economic loss under all reasonable conditions. If making insurance company shareholders rich is your bag, go for it.Client education solves most of these issues, and it is possible to invest in an agressive though conservative manner. Much of the potential higher performance of agressive investment strategies is given up to VA fee's.IMHO the main appropriate place to use a VA is as weak replacement/suppliment to Roth IRA's I guess I shouldn't be so negative on VA salesmen, the collective economic losses of annuitants are the excess profits the insurco's. So this MET/HIG shareholder thanks the worker bees who collect the honey for the beekeeper.
Guess what? You're wrong, but even if you're right, it doesn't matter. All I have to do is show people my annuity statements and it's all over. Even if the fees were 10% per year, they'd still average 15%! You know what else? This is a big selling annuity that I'm using and there's lots of guys who have enjoyed the same type of returns, with principal protection. And your clients are being bombarded by annuity salesmen with high returns and there's nothing  you can do to stop it. You have no defense against it.

FreeLunch's picture
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Bobby,
If you want to keep the returns up, you better swap out of the Real Estate Funds.

troll's picture
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FreeLunch wrote:
Bobby,
If you want to keep the returns up, you better swap out of the Real Estate Funds.

No real estate funds. No "funds" at all. UIT's only.

FreeLunch's picture
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First Trust?

troll's picture
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FreeLunch wrote:First Trust?
Nope, but close enough.

anonymous's picture
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Bobby,
If many of your clients like the guarantees, don't you have to start making many of these portfolios more conservative?

troll's picture
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Deekay I agree with many of your points.  But, to state the the client "does not pay the 6% commission" on an annuity is splitting hairs, IMHO.  Whether it is shown overtly or not, they are paying in in the form of a surrendur period and M&E charges.  Simple enough.I'm not taking the position that an annuity is bad, btw.  For the right situation I think they're just fine.  

troll's picture
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anonymous wrote:
Bobby,
If many of your clients like the guarantees, don't you have to start making many of these portfolios more conservative?

what are you talking about?

FreeLunch's picture
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I would think it would be the opposite

deekay's picture
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joedabrkr wrote:Deekay I agree with many of your points.  But, to state the the client "does not pay the 6% commission" on an annuity is splitting hairs, IMHO.  Whether it is shown overtly or not, they are paying in in the form of a surrendur period and M&E charges.  Simple enough.I'm not taking the position that an annuity is bad, btw.  For the right situation I think they're just fine.  
Yeah, after reading my original post, I realize I wasn't 100% clear on that.  My mistake.  I interpreted AR's comment about a 6% commission as being that it comes out off the top immediately.  We know that isn't the case, and the internal costs/M&E allow the insurance company to compensate the rep for placing the business.
And FTR, I entered this debate not as an "all VA all the time" rep.  Far from it.  I placed far fewer VAs than you may expect  I guess it was pent-up frustration about the "VA's are evil" camp.
The fact of the matter is, all financial institutions are looking to hold onto our money as long as possible and don't ever want to give it back.  The best solution is to come up with the most effective strategy to take advantage of that knowledge.
I respectfully bow out of the debate because I know it's a never-ending argument.  Unless someone comes along and says something moronic that I can't avoid making a comment about

anonymous's picture
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Bobby,
I am talking about living benefits.  For instance, I often use VA's because I can take a conservative investor and have them invest much more aggressively.  However, if we use a GMAB that promises a return of premium and their account has gone from $100,000 to $300,000, we can't keep investing aggressively because that $100,000 guarantee no longer has the same importance. 

troll's picture
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anonymous wrote:
Bobby,
I am talking about living benefits.  For instance, I often use VA's because I can take a conservative investor and have them invest much more aggressively.  However, if we use a GMAB that promises a return of premium and their account has gone from $100,000 to $300,000, we can't keep investing aggressively because that $100,000 guarantee no longer has the same importance. 

I only use living benefits about half the time. In your case, I would move the $200,000 gain into a new contract, which would mean that the living benefit base goes from $100 to $300.

Vin Diesel's picture
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Joined: 2007-04-18

annuites are designed for qualified accounts

deekay's picture
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Vin Diesel wrote:annuites are designed for qualified accounts
Care to elaborate?  Tell me why a VA would not be appropriate in a qualified account.

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