Pru Annuity question

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Spaceman Spiff's picture
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Joined: 2006-08-08

I don't sell Prudential annuities, so I'm not up to speed on their VAs.  I have a client whose new husband rolled over his 401k into a Pru annuity.  He sent me a copy of it this morning and I just don't get the rider.  The annuity is the Advisor's Plan III and the benefit is the GRO Plus.  I get that it's a variable annuity with some sort of guaranteed account value, but I can't figure out how it works.  Contract value is $24,500 and he has $20,700 that matures 10/2011 and $28,800 that matures 10/2014.  Am I assuming correctly that if he holds it until 2014, they'll jump the contract value up to the $28K figure? 
 
BTW, he's 35 years old.  The guy that sold it to him worked for World Group Securities.  Now the guy is gone.  He probably decided his day job was more palatable than the finance world.
 
Any insight on how the rider works is appreciated.

now_indy's picture
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Joined: 2006-07-28

I have clients who transferred their Pru annuity to me, and it has the GRO rider on it. They bought the annuities 4 years ago, and they are both currently 100% in the fixed account. This is due to the fact that Pru moves parts of the subaccounts into the fixed account every time the market goes down a certain amount. Well, it's gone down a lot, so they are 100% in the fixed bucket. I am currently working on a way to do a 1035 transfer so they can "get back in the market."  They would gradually come out of the fixed bucket, but it will take a LONG time.

Squash1's picture
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Joined: 2008-11-19

From my understanding they never go totally in the fixed bucket, it is up to certain percentages..

now_indy's picture
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Joined: 2006-07-28

Both of the VA's (two SEPs) are 100% in the fixed bucket. If we have a good day or two, it will move a very small (less than 1 or 2%) into the money market bucket. From there, it will supposedly go back into real subaccounts, but that has never happened, because a bad day usually follows the good day, and it puts everything back in the fixed account.
Spiff, you may want to call Pru to see what, if any, market value adjustment (from the fixed account) will hit if he decides to move the contract.  My clients will both lose money due to market value adjustment if we go to another contract.

gvf's picture
gvf
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Joined: 2008-07-01

I was just reviewing the PRU prospectus the other day for some of their VAs...I saw sections that said they reserve the right to move up to 100% in certain situations (2008 obviously could have been one).  But in other sections I saw that it was limited to 90%...I couldn't make heads of tails of it. 

snaggletooth's picture
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Joined: 2007-07-13

gvf wrote:I was just reviewing the PRU prospectus the other day for some of their VAs...I saw sections that said they reserve the right to move up to 100% in certain situations (2008 obviously could have been one).  But in other sections I saw that it was limited to 90%...I couldn't make heads of tails of it. 
 
There was a flaw in the 2008 version.  They never thought it would actually go to 100% fixed, but it did.  Clients were locked in there and unable to get out.
They have since corrected this issue so that you will never go 100% fixed. 
 
I have a Pru contract from January that started at 20% fixed and went to 40% fixed by mid February or so, then back to about 30% fixed now.  Client actually loves it.

Spaceman Spiff's picture
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Joined: 2006-08-08

So, the annuity company, not you or your client, is pulling the decisions on when to move money out of the market?  Isn't that counter productive?  Haven't we all seen those charts that show that the average investor puts money into and pulls money out of the market at absolutely the wrong time?  So, my guy, who may or may not be 100% in the fixed bucket, sits in an account earning him 3% while the indexes move up 20% in the last 2-3 weeks?  Wouldn't the inverse make infinitely more sense?  As the market goes up they move a certain percentage into the fixed bucket.  Actually, now that I think about it, neither one makes any sense at all.  Either way you're handicapping the owner of the policy, pretty much guaranteeing below average performance. 
 
Anyway, this guy's seems to be 99.5% fixed bucket.  Can any of you tell me why there are two maturity buckets?  Is it because he might have made a contribution after the initial rollover? 
 
It seems like a lot of moving parts...even for an annuity. 

snaggletooth's picture
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Joined: 2007-07-13

Spaceman Spiff wrote:So, the annuity company, not you or your client, is pulling the decisions on when to move money out of the market?  Isn't that counter productive?  Haven't we all seen those charts that show that the average investor puts money into and pulls money out of the market at absolutely the wrong time?  So, my guy, who may or may not be 100% in the fixed bucket, sits in an account earning him 3% while the indexes move up 20% in the last 2-3 weeks?  Wouldn't the inverse make infinitely more sense?  As the market goes up they move a certain percentage into the fixed bucket.  Actually, now that I think about it, neither one makes any sense at all.  Either way you're handicapping the owner of the policy, pretty much guaranteeing below average performance. 
 
Anyway, this guy's seems to be 99.5% fixed bucket.  Can any of you tell me why there are two maturity buckets?  Is it because he might have made a contribution after the initial rollover? 
 
It seems like a lot of moving parts...even for an annuity. 

 
I'm not familiar with your specific annuity.  You should call Pru.
 
But to answer your question about being counter productive, if instead of losing 50%, they lost 25% because they were moved partially to the fixed bucket, then they don't have to make as much on the way up.
 
Time will tell if it works any better or not, who knows. 
 
In my personal experience, it has worked just fine, and it allows me to not have to review accounts constantly.  That really doesn't interest me anymore.  I'd rather find new business.
 
Good luck on your case, call Pru.

HAAIC's picture
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Joined: 2009-03-30

Spaceman Spiff wrote:So, the annuity company, not you or your client, is pulling the decisions on when to move money out of the market?  Isn't that counter productive?  Haven't we all seen those charts that show that the average investor puts money into and pulls money out of the market at absolutely the wrong time?  So, my guy, who may or may not be 100% in the fixed bucket, sits in an account earning him 3% while the indexes move up 20% in the last 2-3 weeks?  Wouldn't the inverse make infinitely more sense?  As the market goes up they move a certain percentage into the fixed bucket.  Actually, now that I think about it, neither one makes any sense at all.  Either way you're handicapping the owner of the policy, pretty much guaranteeing below average performance. 
 
Anyway, this guy's seems to be 99.5% fixed bucket.  Can any of you tell me why there are two maturity buckets?  Is it because he might have made a contribution after the initial rollover? 
 
It seems like a lot of moving parts...even for an annuity.  Who cares? Are you going to try to attack it, so you can churn him out of it?

Johnny Roast Beef's picture
Joined: 2008-02-12

HAAIC wrote: Spaceman Spiff wrote:So, the annuity company, not you or your client, is pulling the decisions on when to move money out of the market?  Isn't that counter productive?  Haven't we all seen those charts that show that the average investor puts money into and pulls money out of the market at absolutely the wrong time?  So, my guy, who may or may not be 100% in the fixed bucket, sits in an account earning him 3% while the indexes move up 20% in the last 2-3 weeks?  Wouldn't the inverse make infinitely more sense?  As the market goes up they move a certain percentage into the fixed bucket.  Actually, now that I think about it, neither one makes any sense at all.  Either way you're handicapping the owner of the policy, pretty much guaranteeing below average performance. 
 
Anyway, this guy's seems to be 99.5% fixed bucket.  Can any of you tell me why there are two maturity buckets?  Is it because he might have made a contribution after the initial rollover? 
 
It seems like a lot of moving parts...even for an annuity.  Who cares? Are you going to try to attack it, so you can churn him out of it?
He doesn't have a choice, he works for EDJ.  If you can't "review it" charging an hourly fee, can't take a 12b-1 because it's not a "preferred vendor", how else does he get paid?
 
 

"Mr. and Mrs. Lunchbucket, I recommend we transfer this to one of our "preferred" annuity companies.  Prudential may have a fine contract but, If I'm unable to "track" it for you, how well do you really think you'll do, long term?"  "Oh, you just bought it a couple years ago you say?  Let's do this...go ahead and sign this partial transfer form and we'll get the 10% free withdrawal out of this horrible investment, move it to the Edward Jones brokerage IRA (that $40.00 IRA fee is well worth the personal service you'll get from me on that 10,000 Capital Income Builder A-share trade).  Did I mention Capital Income Builder has only lost money once since they launched it in 1987 (well actually twice - can't really count '08 because everything lost money last year, right)?"  "Once the CDSC gets to 2% where my FSD will let you take the hit without donating the commission to charity, we'll blow it out.  Until then, who else do you know that I might introduce myself to?"
 

Johnny Roast Beef's picture
Joined: 2008-02-12

Spaceman Spiff wrote:So, the annuity company, not you or your client, is pulling the decisions on when to move money out of the market?  Isn't that counter productive?  Haven't we all seen those charts that show that the average investor puts money into and pulls money out of the market at absolutely the wrong time?  So, my guy, who may or may not be 100% in the fixed bucket, sits in an account earning him 3% while the indexes move up 20% in the last 2-3 weeks?  Wouldn't the inverse make infinitely more sense?  As the market goes up they move a certain percentage into the fixed bucket.  Actually, now that I think about it, neither one makes any sense at all.  Either way you're handicapping the owner of the policy, pretty much guaranteeing below average performance. 
 
Anyway, this guy's seems to be 99.5% fixed bucket.  Can any of you tell me why there are two maturity buckets?  Is it because he might have made a contribution after the initial rollover? 
 
It seems like a lot of moving parts...even for an annuity. 
 
That's what you don't yet understand.  The guys pulling the strings at Prudential are not your "average investor".  American Funds would have you believe that if you missed the best 20 days in the Dow since 1989 you're a fool.  Ask your wholesaler this:  What if I missed the 20 best AND 20 worst days?  He'll have no clue.  Look it up.  It's not "reading tea leaves" as Alan Skrainka would have you believe.  In many cases it's exercising common sense.  Snaggletooth is right - I don't care about missing the last 20% bull run.  I care about missing the last 20% down move...takes me more than a 20% upturn to get back to even. 

Spaceman Spiff's picture
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Johnny Roast Beef wrote:HAAIC wrote: Spaceman Spiff wrote:So, the annuity company, not you or your client, is pulling the decisions on when to move money out of the market?  Isn't that counter productive?  Haven't we all seen those charts that show that the average investor puts money into and pulls money out of the market at absolutely the wrong time?  So, my guy, who may or may not be 100% in the fixed bucket, sits in an account earning him 3% while the indexes move up 20% in the last 2-3 weeks?  Wouldn't the inverse make infinitely more sense?  As the market goes up they move a certain percentage into the fixed bucket.  Actually, now that I think about it, neither one makes any sense at all.  Either way you're handicapping the owner of the policy, pretty much guaranteeing below average performance. 
 
Anyway, this guy's seems to be 99.5% fixed bucket.  Can any of you tell me why there are two maturity buckets?  Is it because he might have made a contribution after the initial rollover? 
 
It seems like a lot of moving parts...even for an annuity.  Who cares? Are you going to try to attack it, so you can churn him out of it?
He doesn't have a choice, he works for EDJ.  If you can't "review it" charging an hourly fee, can't take a 12b-1 because it's not a "preferred vendor", how else does he get paid?
 
 

"Mr. and Mrs. Lunchbucket, I recommend we transfer this to one of our "preferred" annuity companies.  Prudential may have a fine contract but, If I'm unable to "track" it for you, how well do you really think you'll do, long term?"  "Oh, you just bought it a couple years ago you say?  Let's do this...go ahead and sign this partial transfer form and we'll get the 10% free withdrawal out of this horrible investment, move it to the Edward Jones brokerage IRA (that $40.00 IRA fee is well worth the personal service you'll get from me on that 10,000 Capital Income Builder A-share trade).  Did I mention Capital Income Builder has only lost money once since they launched it in 1987 (well actually twice - can't really count '08 because everything lost money last year, right)?"  "Once the CDSC gets to 2% where my FSD will let you take the hit without donating the commission to charity, we'll blow it out.  Until then, who else do you know that I might introduce myself to?"
 
 
Or I could say "Mr. Lunchbucket, who's helping you make decisions on what happens with your money in this investment?  Nobody?  Well, as you might imagine there are a ton of sleazy "advisors" out there that will slap you into something that you don't understand, pocket the commission, then never speak to you again.  Isn't that pretty much what has happened here?  Didn't you tell me the guy who sold this to you isn't in the business anymore?  So, you have a couple of options.  You can continue to hold onto this product, knowing that you'll never get anyreal advice or planning along with it.  If you'd like, we can change the agent of record on it, move it into an account for you here and at least let me keep track of it for you. 
 
Or we can explore some different investment options for you based on your risk tolerance, goals for the money, and your time horizon.  Now, at this point, I don't know if it would be better for you to hold onto this policy or if we should explore some other options.  I'm still trying to figure out how the thing works and what the benefits to you are.  We may find out it's a wonderful policy for you and decide to hold onto it.  Or we may find out it's smoke and mirrors and that we need to look for alternatives.  But let's at least start with changing the agent of record."
 
Johnny - so, what you're telling me is that CAIBX is a BAD investment?  You're going to have to explain to me why.  My feeble Jones infected mind must not be able to fully grasp the intracacies of the investing world. 
 
Just so you know, this policy has a $35 annual fee for anything under $100K.  So, $40 in a Jones IRA that I can control and give him advice on, or $35 in an annuity (with all the other fees and expenses tacked on) seems pretty close to a wash to me.  I would venture to guess that I could find him a good bond these days that would out perform this annuity.  The sub account choices are decent, but only if you can keep your money in them.
 
Do either of you to bozos have anything really constructive to add to how this policy might be a benefit to this guy?  
 
 

HAAIC's picture
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Joined: 2009-03-30

Spaceman Spiff wrote:Johnny Roast Beef wrote:HAAIC wrote: Spaceman Spiff wrote:So, the annuity company, not you or your client, is pulling the decisions on when to move money out of the market?  Isn't that counter productive?  Haven't we all seen those charts that show that the average investor puts money into and pulls money out of the market at absolutely the wrong time?  So, my guy, who may or may not be 100% in the fixed bucket, sits in an account earning him 3% while the indexes move up 20% in the last 2-3 weeks?  Wouldn't the inverse make infinitely more sense?  As the market goes up they move a certain percentage into the fixed bucket.  Actually, now that I think about it, neither one makes any sense at all.  Either way you're handicapping the owner of the policy, pretty much guaranteeing below average performance. 
 
Anyway, this guy's seems to be 99.5% fixed bucket.  Can any of you tell me why there are two maturity buckets?  Is it because he might have made a contribution after the initial rollover? 
 
It seems like a lot of moving parts...even for an annuity.  Who cares? Are you going to try to attack it, so you can churn him out of it?
He doesn't have a choice, he works for EDJ.  If you can't "review it" charging an hourly fee, can't take a 12b-1 because it's not a "preferred vendor", how else does he get paid?
 
 

"Mr. and Mrs. Lunchbucket, I recommend we transfer this to one of our "preferred" annuity companies.  Prudential may have a fine contract but, If I'm unable to "track" it for you, how well do you really think you'll do, long term?"  "Oh, you just bought it a couple years ago you say?  Let's do this...go ahead and sign this partial transfer form and we'll get the 10% free withdrawal out of this horrible investment, move it to the Edward Jones brokerage IRA (that $40.00 IRA fee is well worth the personal service you'll get from me on that 10,000 Capital Income Builder A-share trade).  Did I mention Capital Income Builder has only lost money once since they launched it in 1987 (well actually twice - can't really count '08 because everything lost money last year, right)?"  "Once the CDSC gets to 2% where my FSD will let you take the hit without donating the commission to charity, we'll blow it out.  Until then, who else do you know that I might introduce myself to?"
 
 
Or I could say "Mr. Lunchbucket, who's helping you make decisions on what happens with your money in this investment?  Nobody?  Well, as you might imagine there are a ton of sleazy "advisors" out there that will slap you into something that you don't understand, pocket the commission, then never speak to you again.  Isn't that pretty much what has happened here?  Didn't you tell me the guy who sold this to you isn't in the business anymore?  So, you have a couple of options.  You can continue to hold onto this product, knowing that you'll never get anyreal advice or planning along with it.  If you'd like, we can change the agent of record on it, move it into an account for you here and at least let me keep track of it for you. 
 
Or we can explore some different investment options for you based on your risk tolerance, goals for the money, and your time horizon.  Now, at this point, I don't know if it would be better for you to hold onto this policy or if we should explore some other options.  I'm still trying to figure out how the thing works and what the benefits to you are.  We may find out it's a wonderful policy for you and decide to hold onto it.  Or we may find out it's smoke and mirrors and that we need to look for alternatives.  But let's at least start with changing the agent of record."
 
Johnny - so, what you're telling me is that CAIBX is a BAD investment?  You're going to have to explain to me why.  My feeble Jones infected mind must not be able to fully grasp the intracacies of the investing world. 
 
Just so you know, this policy has a $35 annual fee for anything under $100K.  So, $40 in a Jones IRA that I can control and give him advice on, or $35 in an annuity (with all the other fees and expenses tacked on) seems pretty close to a wash to me.  I would venture to guess that I could find him a good bond these days that would out perform this annuity.  The sub account choices are decent, but only if you can keep your money in them.
 
Do either of you to bozos have anything really constructive to add to how this policy might be a benefit to this guy?  
 
 So....you insult the guy for buying something he doesn't understand? What if he only understands cattle futures? Is that what you would recommend?

Spaceman Spiff's picture
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I'm actually much more tactful in real life.  I'd be much more tactful about telling him he's dumb for buying something he doesn't understand.  Then I'll educate him on how the thing works, what the pros/cons to him are and we'll make a decision from there. 
I tactfully insult people all the time for buying something they don't understand.  It's also the reason I spend a little more time with my clients educating them on how my investments work.  You'd be suprised how many people own mutual funds, but don't really understand them.  All those silly things on my desk like the crayon box, or the stack of pencils, are great visual aids. 
 
I'm never surprised though at the number of people I run across that hold annuities like this one or an EIA that haven't got a clue how they really work.  One of those sleazy "advisors" told them they can't lose money, but they'll make market-like returns and they buy it.  Hopefully you're not one of those guys. 

HAAIC's picture
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Joined: 2009-03-30

Spaceman Spiff wrote:I'm actually much more tactful in real life.  I'd be much more tactful about telling him he's dumb for buying something he doesn't understand.  Then I'll educate him on how the thing works, what the pros/cons to him are and we'll make a decision from there. 
I tactfully insult people all the time for buying something they don't understand.  It's also the reason I spend a little more time with my clients educating them on how my investments work.  You'd be suprised how many people own mutual funds, but don't really understand them.  All those silly things on my desk like the crayon box, or the stack of pencils, are great visual aids. 
 
I'm never surprised though at the number of people I run across that hold annuities like this one or an EIA that haven't got a clue how they really work.  One of those sleazy "advisors" told them they can't lose money, but they'll make market-like returns and they buy it.  Hopefully you're not one of those guys.  Why don't you ask him to bring in the application and the suitability form that he SIGNED, acknowledging that he understood. EIA returns over the last few years have NOT made market like returns. They have done MUCH better. What market are you looking at? Take a look here and pick a ten year period where the markets have done much better than what an index annuity can do. There aren't many.  http://www.measuringworth.com/DJIA_SP_NASDAQ/

Johnny Roast Beef's picture
Joined: 2008-02-12

Spaceman Spiff wrote:Johnny Roast Beef wrote:HAAIC wrote: Spaceman Spiff wrote:So, the annuity company, not you or your client, is pulling the decisions on when to move money out of the market?  Isn't that counter productive?  Haven't we all seen those charts that show that the average investor puts money into and pulls money out of the market at absolutely the wrong time?  So, my guy, who may or may not be 100% in the fixed bucket, sits in an account earning him 3% while the indexes move up 20% in the last 2-3 weeks?  Wouldn't the inverse make infinitely more sense?  As the market goes up they move a certain percentage into the fixed bucket.  Actually, now that I think about it, neither one makes any sense at all.  Either way you're handicapping the owner of the policy, pretty much guaranteeing below average performance. 
 
Anyway, this guy's seems to be 99.5% fixed bucket.  Can any of you tell me why there are two maturity buckets?  Is it because he might have made a contribution after the initial rollover? 
 
It seems like a lot of moving parts...even for an annuity.  Who cares? Are you going to try to attack it, so you can churn him out of it?
He doesn't have a choice, he works for EDJ.  If you can't "review it" charging an hourly fee, can't take a 12b-1 because it's not a "preferred vendor", how else does he get paid?
 
 

"Mr. and Mrs. Lunchbucket, I recommend we transfer this to one of our "preferred" annuity companies.  Prudential may have a fine contract but, If I'm unable to "track" it for you, how well do you really think you'll do, long term?"  "Oh, you just bought it a couple years ago you say?  Let's do this...go ahead and sign this partial transfer form and we'll get the 10% free withdrawal out of this horrible investment, move it to the Edward Jones brokerage IRA (that $40.00 IRA fee is well worth the personal service you'll get from me on that 10,000 Capital Income Builder A-share trade).  Did I mention Capital Income Builder has only lost money once since they launched it in 1987 (well actually twice - can't really count '08 because everything lost money last year, right)?"  "Once the CDSC gets to 2% where my FSD will let you take the hit without donating the commission to charity, we'll blow it out.  Until then, who else do you know that I might introduce myself to?"
 
 
Or I could say "Mr. Lunchbucket, who's helping you make decisions on what happens with your money in this investment?  Nobody?  Well, as you might imagine there are a ton of sleazy "advisors" out there that will slap you into something that you don't understand, pocket the commission, then never speak to you again.  Isn't that pretty much what has happened here?  Didn't you tell me the guy who sold this to you isn't in the business anymore?  So, you have a couple of options.  You can continue to hold onto this product, knowing that you'll never get anyreal advice or planning along with it.  If you'd like, we can change the agent of record on it, move it into an account for you here and at least let me keep track of it for you. 
 
Or we can explore some different investment options for you based on your risk tolerance, goals for the money, and your time horizon.  Now, at this point, I don't know if it would be better for you to hold onto this policy or if we should explore some other options.  I'm still trying to figure out how the thing works and what the benefits to you are.  We may find out it's a wonderful policy for you and decide to hold onto it.  Or we may find out it's smoke and mirrors and that we need to look for alternatives.  But let's at least start with changing the agent of record."
 
Johnny - so, what you're telling me is that CAIBX is a BAD investment?  You're going to have to explain to me why.  My feeble Jones infected mind must not be able to fully grasp the intracacies of the investing world. 
 
Just so you know, this policy has a $35 annual fee for anything under $100K.  So, $40 in a Jones IRA that I can control and give him advice on, or $35 in an annuity (with all the other fees and expenses tacked on) seems pretty close to a wash to me.  I would venture to guess that I could find him a good bond these days that would out perform this annuity.  The sub account choices are decent, but only if you can keep your money in them.
 
Do either of you to bozos have anything really constructive to add to how this policy might be a benefit to this guy?  
 
 
 
Hello Mr. CAIBX

Johnny Roast Beef's picture
Joined: 2008-02-12

Johnny Roast Beef wrote:Spaceman Spiff wrote:Johnny Roast Beef wrote:HAAIC wrote: Spaceman Spiff wrote:So, the annuity company, not you or your client, is pulling the decisions on when to move money out of the market?  Isn't that counter productive?  Haven't we all seen those charts that show that the average investor puts money into and pulls money out of the market at absolutely the wrong time?  So, my guy, who may or may not be 100% in the fixed bucket, sits in an account earning him 3% while the indexes move up 20% in the last 2-3 weeks?  Wouldn't the inverse make infinitely more sense?  As the market goes up they move a certain percentage into the fixed bucket.  Actually, now that I think about it, neither one makes any sense at all.  Either way you're handicapping the owner of the policy, pretty much guaranteeing below average performance. 
 
Anyway, this guy's seems to be 99.5% fixed bucket.  Can any of you tell me why there are two maturity buckets?  Is it because he might have made a contribution after the initial rollover? 
 
It seems like a lot of moving parts...even for an annuity.  Who cares? Are you going to try to attack it, so you can churn him out of it?
He doesn't have a choice, he works for EDJ.  If you can't "review it" charging an hourly fee, can't take a 12b-1 because it's not a "preferred vendor", how else does he get paid?
 
 

"Mr. and Mrs. Lunchbucket, I recommend we transfer this to one of our "preferred" annuity companies.  Prudential may have a fine contract but, If I'm unable to "track" it for you, how well do you really think you'll do, long term?"  "Oh, you just bought it a couple years ago you say?  Let's do this...go ahead and sign this partial transfer form and we'll get the 10% free withdrawal out of this horrible investment, move it to the Edward Jones brokerage IRA (that $40.00 IRA fee is well worth the personal service you'll get from me on that 10,000 Capital Income Builder A-share trade).  Did I mention Capital Income Builder has only lost money once since they launched it in 1987 (well actually twice - can't really count '08 because everything lost money last year, right)?"  "Once the CDSC gets to 2% where my FSD will let you take the hit without donating the commission to charity, we'll blow it out.  Until then, who else do you know that I might introduce myself to?"
 
 
Or I could say "Mr. Lunchbucket, who's helping you make decisions on what happens with your money in this investment?  Nobody?  Well, as you might imagine there are a ton of sleazy "advisors" out there that will slap you into something that you don't understand, pocket the commission, then never speak to you again.  Isn't that pretty much what has happened here?  Didn't you tell me the guy who sold this to you isn't in the business anymore?  So, you have a couple of options.  You can continue to hold onto this product, knowing that you'll never get anyreal advice or planning along with it.  If you'd like, we can change the agent of record on it, move it into an account for you here and at least let me keep track of it for you. 
 
Or we can explore some different investment options for you based on your risk tolerance, goals for the money, and your time horizon.  Now, at this point, I don't know if it would be better for you to hold onto this policy or if we should explore some other options.  I'm still trying to figure out how the thing works and what the benefits to you are.  We may find out it's a wonderful policy for you and decide to hold onto it.  Or we may find out it's smoke and mirrors and that we need to look for alternatives.  But let's at least start with changing the agent of record."
 
Johnny - so, what you're telling me is that CAIBX is a BAD investment?  You're going to have to explain to me why.  My feeble Jones infected mind must not be able to fully grasp the intracacies of the investing world. 
 
Just so you know, this policy has a $35 annual fee for anything under $100K.  So, $40 in a Jones IRA that I can control and give him advice on, or $35 in an annuity (with all the other fees and expenses tacked on) seems pretty close to a wash to me.  I would venture to guess that I could find him a good bond these days that would out perform this annuity.  The sub account choices are decent, but only if you can keep your money in them.
 
Do either of you to bozos have anything really constructive to add to how this policy might be a benefit to this guy?  
 
 
 
Hello Mr. CAIBX 
 
The best part is, this bond is free...see it's like when you go to the grocery store Mr. Lunchbucket and buy a gallon of milk, see, the grocery store buys milk in bulk right? , so they get a discount, right?, and they mark it up to retail, OK, and that's where you come in.  That makes sense, doesn't it? (notice the high quality hamburger technique).  It's a good thing that high quality bond won't get "decimated" when rates go off the charts, isn't it?  I know, I know...we bought this cow for the milk Mr. Lunchbucket, we're not cow traders, are we? 
 
 
Oh dear!

Johnny Roast Beef's picture
Joined: 2008-02-12

Johnny - so, what you're telling me is that CAIBX is a BAD investment?  You're going to have to explain to me why.  My feeble Jones infected mind must not be able to fully grasp the intracacies of the investing world. 
 
 
Yes, that's true...also your feeble Jones infected mind can't spell "intricacies".

Johnny Roast Beef's picture
Joined: 2008-02-12

Spaceman Spiff wrote:I don't sell Prudential annuities, so I'm not up to speed on their VAs.  I have a client whose new husband rolled over his 401k into a Pru annuity.  He sent me a copy of it this morning and I just don't get the rider.  The annuity is the Advisor's Plan III and the benefit is the GRO Plus.  I get that it's a variable annuity with some sort of guaranteed account value, but I can't figure out how it works.  Contract value is $24,500 and he has $20,700 that matures 10/2011 and $28,800 that matures 10/2014.  Am I assuming correctly that if he holds it until 2014, they'll jump the contract value up to the $28K figure? 
 
BTW, he's 35 years old.  The guy that sold it to him worked for World Group Securities.  Now the guy is gone.  He probably decided his day job was more palatable than the finance world.
 
Any insight on how the rider works is appreciated.
 
That's only partly correct...you have a "customer", not a client.

Johnny Roast Beef's picture
Joined: 2008-02-12

Spaceman Spiff wrote:
I'm actually much more tactful in real life.  I'd be much more tactful about telling him he's dumb for buying something he doesn't understand.  Then I'll educate him on how the thing works, what the pros/cons to him are and we'll make a decision from there. 
I tactfully insult people all the time for buying something they don't understand.  It's also the reason I spend a little more time with my clients educating them on how my investments work.  You'd be suprised how many people own mutual funds, but don't really understand them.  All those silly things on my desk like the crayon box, or the stack of pencils, are great visual aids. 
 
I'm never surprised though at the number of people I run across that hold annuities like this one or an EIA that haven't got a clue how they really work.  One of those sleazy "advisors" told them they can't lose money, but they'll make market-like returns and they buy it.  Hopefully you're not one of those guys. 
 
Actually Spiff, it doesn't seem as though you have a clue as to how these horrible annuities work either.  Who the hell is the "expert" here anyway?  Seems like the expert would know enough to call 1-800-FIND-PRU on this thing, no?  Did you even get your AAMS designation yet? 

Johnny Roast Beef's picture
Joined: 2008-02-12

Johnny Roast Beef wrote:Spaceman Spiff wrote:
 All those silly things on my desk like the crayon box, or the stack of pencils, are great visual aids. 
  
 
I'll take the Periwinkle C share to fund my Roth Spiff.  What's the expense ratio on the "Burnt Orange" Large cap value?

Sam Houston's picture
Offline
Joined: 2008-12-01

You really needed six consecutive posts to make your point?  ADD.

Johnny Roast Beef's picture
Joined: 2008-02-12

Sam Houston wrote:You really needed six consecutive posts to make your point?  ADD.
 
In retrospect I could probably trpe one 5,000 work post (so much to work with here)...I'm not sure I have it in me though.  Out of curiosity, what point was I trying to make Sam?

Johnny Roast Beef's picture
Joined: 2008-02-12

Johnny Roast Beef wrote:Sam Houston wrote:You really needed six consecutive posts to make your point?  ADD.
 
In retrospect I could probably trpe one 5,000 work post (so much to work with here)...I'm not sure I have it in me though.  Out of curiosity, what point was I trying to make Sam?
 
work = word.  My feeble former Jones mind still can't spell worth sh!t.

Sam Houston's picture
Offline
Joined: 2008-12-01

Johnny Roast Beef wrote:Sam Houston wrote:You really needed six consecutive posts to make your point?  ADD.
 
In retrospect I could probably trpe one 5,000 work post (so much to work with here)...I'm not sure I have it in me though.  Out of curiosity, what point was I trying to make Sam?
 
Your guess is as good as mine.

Takingnames's picture
Offline
Joined: 2007-11-09

With your client on the line - conference in Prudential and ask them to explain it. ID yourself as a Registered Rep with whatever firm you are with and they will ask the client some identifying info.
Then - dig in as much as you want - they will explain the whole kit - n- caboodle.  Any company will.
 
Or - Call the wholesaler..

Spaceman Spiff's picture
Offline
Joined: 2006-08-08

Johnnie -
 
1) CAIBX - good investment or not?  I never said I was going to use that fund with this client. 
2) Maybe you've told people that buying a bond is free, but I haven't.  However, I have found a lot of bonds that will produce better returns than many EIAs I've seen recently. 
3) My bad on the spelling mistake.  I'll make sure I do spell checker next time.
4) Define for me client vs. customer?  Perhaps I'll start using your definition instead of mine.
5) I could have called Pru.  However, I thought that with the wealth of knowledge on this forum, I might be able to get some information from here instead of having to call the client back into the office and call Pru.  Evidently very few people are willing to help.  Maybe because nobody actually uses this rider.  And the AAMS has been on my card for a few years now.  What does that have to do with anything?  Did I miss the chapter on Prudential VA riders? 
6) Periwinkle? - that's the color you pulled out of your butt for that post?  That may explain a lot. 
7) At what point are you going to answer my question about CAIBX being a good or bad fund? 
 
HAAIC - There aren't many?  Really?  I just quickly used your website and plugged in 10 year periods starting in 1970 and going through 1980.  Just using those time frames 75% of them would have killed EIAs.  The first few years probably would have broken even with them, depending on minimums, type of crediting, caps, etc.  In fact, I also went back and did it a second time, this time starting in 1990.  All of those 10 year time frames except 1999-2009 (Jan - Jan) would have beaten them.  I could go back and do the same thing for all decades and I'd probably find similar results.  And at the end of the 10 year time frames with your EIA clients/customers (we'll have to wait for Johnnie to define them for us) most of them probably have 5-10 years left of surrender period. 

Squash1's picture
Offline
Joined: 2008-11-19

Spaceman Spiff wrote:I don't sell Prudential annuities, so I'm not up to speed on their VAs.  I have a client whose new husband rolled over his 401k into a Pru annuity.  He sent me a copy of it this morning and I just don't get the rider.  The annuity is the Advisor's Plan III and the benefit is the GRO Plus.  I get that it's a variable annuity with some sort of guaranteed account value, but I can't figure out how it works.  Contract value is $24,500 and he has $20,700 that matures 10/2011 and $28,800 that matures 10/2014.  Am I assuming correctly that if he holds it until 2014, they'll jump the contract value up to the $28K figure? 
 
BTW, he's 35 years old.  The guy that sold it to him worked for World Group Securities.  Now the guy is gone.  He probably decided his day job was more palatable than the finance world.
 
Any insight on how the rider works is appreciated.
 
Is this the Advanced Series Advisor's Plan III?

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