Prospecting CPA's Using Your Clients

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snaggletooth's picture
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I have numerous clients that are getting ready to retire in 2010. 
 
For a lot of them, I've done tax-conscious investing in their taxable accounts, and have put a portion of retirement dollars in annuities that have performed phenomenally.
 
As my clients email or call or I talk to them, I'm starting to say this, "As an added service, I make myself available to meet with my clients and their CPA's together (after tax season) to ensure our retirement income strategy will be as tax-efficient as possible". 
 
I tell them I'm willing to meet at their CPA's office or anywhere else that is reasonable.  Hopefully this will introduce me to new CPA's and can show them exactly how my planning works through a mutual client at the same table that is extremely happy.
 
I already have some takers, so we'll see.  It has to be a better use of my time than some things.

B24's picture
B24
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As a side note, I met with an estate attorney yesterday, and he asked me point blank, "what do you think of annuities".  I gave him my typical balanced response about them being appropriate in the right instance, not for everyone, not for all the assets, etc.  He was pleased with that answer, and said that his thinking about annuities has changed quite a bit over the past few years.  He said when he used to see or hear "annuities" from his clients, he would think of little old ladies having all their money being ripped away by an insurance schister (his words).  It was good to hear that his thinking has changed, and I think more professionals are coming to the same conclusion.

Milyunair's picture
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I'm still too stupid to see how they have changed for the better.
 
I get more business by saying, " I don't like annuities, maybe occasionally they  are appropriate for some people, but generally I don't like them".
 
And that's true. When I'm wrong, I'll change, but I don't see the value in annuites. I won't buy them for myself or my friends. What I will do for myself is run a straight brokerage account using ETFs, everybody else pays a wrap fee.
 
The problem with one professional referring another is - it puts your own reputation at risk.
 
I have attorney and CPA friends who I wouldn't refer, because I'm not sure.
 
The best and  maybe only way it works is if there is properly disclose revenue sharing. In that case, you are business partners. Partnerships are tough.
 
Your CPA needs to give at least three referrals to choose from - if you can be one of them, and maybe part of word of mouth connection that points two you, now you have two triangulation points. The odds go way up.
 
Just having another professional know you, or mention your name, and not be negative, is a positive. If you belong to a golf club, or Rotary, and everyone has good things to say about you, you get referrals.
 
Trying talking to folks about how you run super low cost index funds with a competitive wrap fee (1.5% under 100k, etc.).
 
If there is a misunderstanding about one annuity sale from your CPA referral, CPA's client will tell five people. Even if the client misunderstands some dumb radio show. Our industry can blame itself for bad perception, where that is a problem, but perception is fact when it comes to how you feel about your money.
 
Watch the business and money pour in, watch the value of your book climb. Supplement with insurance. CPAs like that.
 
And, the writing is on the wall.
 
Once these liberals lose out out on health care and borrowing and spending, watch how they put their attention on "doing good" for consumers in the regulation of our industry.

anonymous's picture
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snaggletooth wrote:I have numerous clients that are getting ready to retire in 2010. 
 
For a lot of them, I've done tax-conscious investing in their taxable accounts, and have put a portion of retirement dollars in annuities that have performed phenomenally.
 
As my clients email or call or I talk to them, I'm starting to say this, "As an added service, I make myself available to meet with my clients and their CPA's together (after tax season) to ensure our retirement income strategy will be as tax-efficient as possible". 
 
I tell them I'm willing to meet at their CPA's office or anywhere else that is reasonable.  Hopefully this will introduce me to new CPA's and can show them exactly how my planning works through a mutual client at the same table that is extremely happy.
 
I already have some takers, so we'll see.  It has to be a better use of my time than some things.
 
Snags, here's an easier way to meet the CPAs:
 
"Mr. Client, many of my clients are CPAs.  Additionally, I think that it's very important to have a working relationship with the CPAs of my clients.  When I call on your CPA, can I tell him that we work together?"
 
The typical response will be, "That's fine.  Let me give you his number."

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Milyunair wrote:I'm still too stupid to see how they have changed for the better.
 
I get more business by saying, " I don't like annuities, maybe occasionally they  are appropriate for some people, but generally I don't like them".
 
And that's true. When I'm wrong, I'll change, but I don't see the value in annuites. I won't buy them for myself or my friends. What I will do for myself is run a straight brokerage account using ETFs, everybody else pays a wrap fee.
 
 
You are definitely missing the boat on annuities.  They are appropriate more often than you think.  Here's an example.  A client of mine has had a fixed annuity for about the last 5 years with $30,000.  He is worth several million.  He is looking for a place to park $250,000 for the next year.  He'll be able to put it into a fixed annuity and earn 4% and take the money out in less than a year with no surrender charges. 

Spaceman Spiff's picture
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Which annuity is that? Not that it'll be a company Jones works with, but I've got a client that needs to park some cash for a year and I was thinking C share short duration Gov't bonds.  A fixed annuity would be a good alternative.

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I am also not sure saying "I don't like annuities" straight up is good policy, unless you already know that the other person agrees with you.  I tend to find that using balanced words is best until you get a feel for how the CPA or attorney leans.
It seems strange to me that anyone could agrue that todays living benefit riders, or a simple fixed annuity are ALWAYS bad in EVERY situation.  I honestly don't use annuities a lot (maybe 5-10%), but they serve a valuable purpose where necessary.  More than 3 or 4 years ago, I would agree that annuities (VA's at least) didn't have as much value, as they really didn't have very good LB riders (or at all).

Milyunair's picture
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So, this is an added on payment to a fixed annuity, with no surrender charge. Or an add on payment to a flexible annuity?
Client is obviously older than 59?
 
You're going to put money in and take it out in under a year, and the subaccount pays 4%?
 
Do you mind describing the product a little more. This is an RIA or level commission product?

anonymous's picture
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The annuity that I mentioned doesn't work for what you want.  It has a 6 year surrender schedule.  The key is that the surrender charges are non-rolling and new money gets an enhanced rate.
 
For this reason, I have come to the conclusion that almost everybody 50 and older should establish a fixed annuity with a small amount of money.  My client now basically has a tax deferred savings account that pays high interest.

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B24 wrote:I am also not sure saying "I don't like annuities" straight up is good policy, unless you already know that the other person agrees with you.  I tend to find that using balanced words is best until you get a feel for how the CPA or attorney leans.
It seems strange to me that anyone could agrue that todays living benefit riders, or a simple fixed annuity are ALWAYS bad in EVERY situation.  I honestly don't use annuities a lot (maybe 5-10%), but they serve a valuable purpose where necessary.  More than 3 or 4 years ago, I would agree that annuities (VA's at least) didn't have as much value, as they really didn't have very good LB riders (or at all).
 
Fine, I'm still waiting for someone to post a case study on here, either fixed annuity or using all of the bells and whistles, where I can learn about how the new annuities would be appropriate for my clients.
 
I have the license and have to do the continuing education, please, show me the light with real examples, not feel good stuff.
 
I understand annuitization, and feel that certain pension plans end up paying out a reasonable revenue stream. Other than that, where's the beef?

deekay's picture
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I use GMABs with rollover clients who have 10 years or more before they are taking withdrawals.  Basically, if they leave the money for 10 years and their account balance is below where it started, the insurance company makes them whole.  If their account does well, they walk with the balance.  I use it for those who know logically they need equity exposure and understand long term strategies, but emotionally can't stand the swings. 

Milyunair's picture
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So we're back to promising a pension in 10 years.  You give me your money, and I'll pay it back to you, starting in ten years, at 6%.
 
Deekay, what are the total expenses on your GMABs? What is the total expense ratio, for funds, contract expenses, guarantees, everything?

Milyunair's picture
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anonymous wrote:The annuity that I mentioned doesn't work for what you want.  It has a 6 year surrender schedule.  The key is that the surrender charges are non-rolling and new money gets an enhanced rate.
 
For this reason, I have come to the conclusion that almost everybody 50 and older should establish a fixed annuity with a small amount of money.  My client now basically has a tax deferred savings account that pays high interest.
 
Wouldn't this have to be a flexible annuity? Does the subaccount on your flexible annuity really pay 4% for new money right now for the next year?
 
Could the same be said for new annuity products?

snaggletooth's picture
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Milyunair wrote:
 
Fine, I'm still waiting for someone to post a case study on here, either fixed annuity or using all of the bells and whistles, where I can learn about how the new annuities would be appropriate for my clients.
 
I have the license and have to do the continuing education, please, show me the light with real examples, not feel good stuff.
 
I understand annuitization, and feel that certain pension plans end up paying out a reasonable revenue stream. Other than that, where's the beef?
 
Why should someone on here have to take the time to teach you ALL that?  Not trying to be rude or anything.  I go to luncheons put on by my annuity reps and it amazes me that there are still advisors that don't know how this stuff works.
 
I mean, don't you feel your clients deserve to have an advisor that at least knows something about them and how/when they are appropriate?  Anything you would learn in a continuing education class is not something that you would really do.  The regulators are still stuck on not putting annuities in IRA's, so I'm sure their continuing ed material is just as useful.
 
When was the last time you met with an annuity wholesaler?
 
 

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Milyunair wrote:So we're back to promising a pension in 10 years.  You give me your money, and I'll pay it back to you, starting in ten years, at 6%.
 
Deekay, what are the total expenses on your GMABs? What is the total expense ratio, for funds, contract expenses, guarantees, everything?
 
Did you not read his post?  Where did he mention paying it back in 10 years at 6%?
 
It's cash and carry.  The money is invested in the market.  The market goes up and down.  On the tenth anniversary, if the investment is worth less than what was contributed, the insurance company makes up the difference. 
 
The major advantage of this type of guarantee is that it allows the investor to invest abover their tolerance for risk and/or when the market goes down, they have no reason to panic and dump the investment

anonymous's picture
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Milyunair wrote:anonymous wrote:The annuity that I mentioned doesn't work for what you want.  It has a 6 year surrender schedule.  The key is that the surrender charges are non-rolling and new money gets an enhanced rate.
 
For this reason, I have come to the conclusion that almost everybody 50 and older should establish a fixed annuity with a small amount of money.  My client now basically has a tax deferred savings account that pays high interest.
 
Wouldn't this have to be a flexible annuity? Does the subaccount on your flexible annuity really pay 4% for new money right now for the next year?
 
Could the same be said for new annuity products?
 
Subaccount?  What makes you think that I was referring to a variable annuity?

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Milyunair wrote:So we're back to promising a pension in 10 years.  You give me your money, and I'll pay it back to you, starting in ten years, at 6%.
 
Deekay, what are the total expenses on your GMABs? What is the total expense ratio, for funds, contract expenses, guarantees, everything?
 
It's not a GMIB.  It's a 0% GMAB.  Totally different.  The one I use has total expenses under 2%.  If the client is underwater after 10 years, he gets made whole.  If the client is above his purchase amount after 10 years, he walks with the account balance.  It's that simple.
 
EDIT:  anonymous clarified it for me already.  Thanks, pal.

deekay's picture
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snaggletooth wrote:Milyunair wrote:
 
Fine, I'm still waiting for someone to post a case study on here, either fixed annuity or using all of the bells and whistles, where I can learn about how the new annuities would be appropriate for my clients.
 
I have the license and have to do the continuing education, please, show me the light with real examples, not feel good stuff.
 
I understand annuitization, and feel that certain pension plans end up paying out a reasonable revenue stream. Other than that, where's the beef?
 
Why should someone on here have to take the time to teach you ALL that?  Not trying to be rude or anything.  I go to luncheons put on by my annuity reps and it amazes me that there are still advisors that don't know how this stuff works.
 
I mean, don't you feel your clients deserve to have an advisor that at least knows something about them and how/when they are appropriate?  Anything you would learn in a continuing education class is not something that you would really do.  The regulators are still stuck on not putting annuities in IRA's, so I'm sure their continuing ed material is just as useful.
 
When was the last time you met with an annuity wholesaler?
 
 
 
^^^^^^^^^^^ This.

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Milyunair wrote:B24 wrote:I am also not sure saying "I don't like annuities" straight up is good policy, unless you already know that the other person agrees with you.  I tend to find that using balanced words is best until you get a feel for how the CPA or attorney leans.
It seems strange to me that anyone could agrue that todays living benefit riders, or a simple fixed annuity are ALWAYS bad in EVERY situation.  I honestly don't use annuities a lot (maybe 5-10%), but they serve a valuable purpose where necessary.  More than 3 or 4 years ago, I would agree that annuities (VA's at least) didn't have as much value, as they really didn't have very good LB riders (or at all).
 
Fine, I'm still waiting for someone to post a case study on here, either fixed annuity or using all of the bells and whistles, where I can learn about how the new annuities would be appropriate for my clients.  
 
I don't know if this will help you with your clients, but I've used fixed annuities (mostly for qualified money) as a better alternative to CDs. 
 
For example, I sold a ton of MYGA fixed annuities last year.  5% for 5 years, 10% free withdrawals starting after year 1, 100% principal guarantee.  The 5 year CDs were paying 4% with no free withdrawals.  The benefit to the client was a better interest rate and the flexibility of being able to w/d some money.
 
I also sold a ton of VAs which contractually guaranteed that they will never run out of money.  My clients who have mutual funds or advisory accounts can withdrawal 4%-5% as long as there is money still in the account.  My VA clients can withdrawal 4%-5% for the rest of their lives even if they deplete the contract value.
 
On a somewhat related note, I'm concerned about VAs pricing themselves out of the market.  All in, the fees are getting between 3.50% - 3.75%.  I realize there's no free lunch in life, but I'm starting to think that VAs will not be a big part of my practice moving forward.
 
 

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Mike Damone, I've mentioned this in other threads, but the GMWB costs can even be greater than that.  When the market goes down, the fees can become 4% or higher.  The rider costs a % of the rider value, so if the rider value is greater than the contract value, the cost of the contract increases.  What happens is that your VA clients can take 4 or 5%, but there is a great chance that this is all that they can take.  This is why I like GMAB's like Deekay is describing.  This problem doesn't exist.

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anonymous, you're right.  Don't you think it's counterproductive for insurance companies to price the riders (gmib and gmwb) the way they do?  When the fees climb and in turn they are deducting more money from the cash value, are they not simply draining down the contract value even more thus creating a potential liability for themselves?

snaggletooth's picture
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Mike Damone wrote:anonymous, you're right.  Don't you think it's counterproductive for insurance companies to price the riders (gmib and gmwb) the way they do?  When the fees climb and in turn they are deducting more money from the cash value, are they not simply draining down the contract value even more thus creating a potential liability for themselves?
 
Get paid now, bank it for future liabilities, worry about it later.

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snaggletooth wrote:Milyunair wrote:
 
Fine, I'm still waiting for someone to post a case study on here, either fixed annuity or using all of the bells and whistles, where I can learn about how the new annuities would be appropriate for my clients.
 
I have the license and have to do the continuing education, please, show me the light with real examples, not feel good stuff.
 
I understand annuitization, and feel that certain pension plans end up paying out a reasonable revenue stream. Other than that, where's the beef?
 
Why should someone on here have to take the time to teach you ALL that?  Not trying to be rude or anything.  I go to luncheons put on by my annuity reps and it amazes me that there are still advisors that don't know how this stuff works.
 
I mean, don't you feel your clients deserve to have an advisor that at least knows something about them and how/when they are appropriate?  Anything you would learn in a continuing education class is not something that you would really do.  The regulators are still stuck on not putting annuities in IRA's, so I'm sure their continuing ed material is just as useful.
 
When was the last time you met with an annuity wholesaler?
 
 
 
Not being lazy here. Please name a specific product and I'll read the online prospectus. Let's make this discussion real.

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Milyunair wrote:
 
Not being lazy here. Please name a specific product and I'll read the online prospectus. Let's make this discussion real.
 
Ok, I will discuss by answering any questions.
 
Here is the 410 page prospectus for the Prudential variable annuity I use:  http://www.annuities.prudential.com/media/managed/documents/ams_investor/ASCombProspectus.pdf?siteID=25
 
I add the HD6 Plus and Spousal HD6 Plus living benefits on it.
 
 

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Mike Damone wrote:anonymous, you're right.  Don't you think it's counterproductive for insurance companies to price the riders (gmib and gmwb) the way they do?  When the fees climb and in turn they are deducting more money from the cash value, are they not simply draining down the contract value even more thus creating a potential liability for themselves?

If you structure it for the client such that it's ONLY being used for income purposes, I don't CARE what the account balance is.  For VA's with living benefits, just focus on the worst case scenario, as in many circumstances, that's what you'll get.  When the LB riders were guaranteeing 7% per year for 10 (or a double in 10), and that's the WORST you could do for an income base, how many people that need good. guaranteed income are going to balk at that?  Yes, the ratchets have come down a bit the past year, but still, 5-6% is still pretty good.  And on top of that, you get some potential for market upside if the market errupts.
BUT, I ONLY use it for the income piece.  I never talk about getting out (I will mention that it's a possibility if the stars all line up).

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snaggletooth wrote:Milyunair wrote:
 
Not being lazy here. Please name a specific product and I'll read the online prospectus. Let's make this discussion real.
 
Ok, I will discuss by answering any questions.
 
Here is the 410 page prospectus for the Prudential variable annuity I use:  http://www.annuities.prudential.com/media/managed/documents/ams_investor/ASCombProspectus.pdf?siteID=25
 
I add the HD6 Plus and Spousal HD6 Plus living benefits on it.
 
 
Thanks, looks like I have my homework cut out for me.
 
 

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Mike Damone wrote:anonymous, you're right.  Don't you think it's counterproductive for insurance companies to price the riders (gmib and gmwb) the way they do?  When the fees climb and in turn they are deducting more money from the cash value, are they not simply draining down the contract value even more thus creating a potential liability for themselves?These are very dangerous products for insurance companies.  They have been big money losers with the possibility of serious financial implications.  Here's a quick exaggerated example so that people can see the possibility of the danger:XYZ Insurance company has a GMWB rider and the cost is 10% of the rider value.  The client invests $100,000.   It is a 5% GMWB so the client is guaranteed $5,000 a year for the rest of his life.   In the first year, the client takes his $5,000, the insurance company collects $10,000 in fees and the market crashes and his contract value drops to $40,000.  The next year, the insurance company takes $10,000 in fees again and the client gets his $5,000.  The market continues to go up and down and in year 6 the account value is now $0.Result:  The insurance company collects $60,000 in fees, but must pay out $5,000/year for the rest of the person's life.

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B24 wrote:Mike Damone wrote:anonymous, you're right.  Don't you think it's counterproductive for insurance companies to price the riders (gmib and gmwb) the way they do?  When the fees climb and in turn they are deducting more money from the cash value, are they not simply draining down the contract value even more thus creating a potential liability for themselves?

If you structure it for the client such that it's ONLY being used for income purposes, I don't CARE what the account balance is.  For VA's with living benefits, just focus on the worst case scenario, as in many circumstances, that's what you'll get.  When the LB riders were guaranteeing 7% per year for 10 (or a double in 10), and that's the WORST you could do for an income base, how many people that need good. guaranteed income are going to balk at that?  Yes, the ratchets have come down a bit the past year, but still, 5-6% is still pretty good.  And on top of that, you get some potential for market upside if the market errupts.
BUT, I ONLY use it for the income piece.  I never talk about getting out (I will mention that it's a possibility if the stars all line up).The problem is that they don't do a very good job of providing income.  In almost any realistic scenario, there are better options.  If the money is needed now, a SPIA will usually be better.  If the money is for the future, a GMAB combined with a SPIA will usually be better and in most cases be much better.

Anonymous's picture
Anonymous

Two questions...1.  Could any of you guys recommend what GMAB products you're using?  Something with no b.s. fine print, plain and simple, "if you're underwater after 10 years, you can walk with your original deposit."2.  I'm thinking of using VAs that don't have investment limitations (like JNL), and adding a GMWB or GMAB, and ONLY running equities within it. Then running my fixed income outside of the VA - with the thought that there is no point in running fixed income in a portfolio costing 3%+ potentially, simply for a guarantee that you'll most certainly NOT need in fixed income.Anyone doing something like this?

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Ice, PM me if you want the specific product.  I'm not a fan of talking specifics.
 
There is no B.S. in the product.  It is basically a one day only guarantee.  Ex. Client invests $300,000.  On the tenth anniversary, if the value is less than $300,000, the insurance company makes up the difference.  There is no guarantee in year 9, day 364 and there is no guarantee in year 10 day 2.
 
On every anniversary, the client has the ability to restart the clock.  Ex. At the 4th anniversary, the value of the contract is $500,000.  The client can leave things as they are and be guaranteed $300,000 in year 10 or they can reset the clock and be guaranteed $500,000 in year 15.
 
The company also offers a 20 year GMAB.  It works the same as the 10 year, but without the ability to reset.  This one doubles the value.   Ex. The client invests $300,000.  On the 20th anniversary, if the account value is less than $600,000, the insurance company makes up the difference.
 
There is no B.S. involved at all.  It is strictly cash and carry.  In other words, the client doesn't have to annuitize or do anything.  Since the rider has no value except for one day, the cost will always be based upon the contract value.  I can't remember of of the top of my head.  It's right around .5%.  The 10 year and 20 year are identical in price.  M&E + Admin expenses combine to equal 1.15%.  Total cost around 1.65% + fund expenses.
 
What you won't like is that there are some investment limitations.  They aren't too bad.  80% of the money can be in equities.  You will be stuck with 20% fixed income.
 
I use it almost exclusively for qualified money.  It is seldom that I use a VA for unqualified money due to the tax laws.   This product has been phenomenal for my practice.  When the market crashed, none of these clients panicked.   How great is to invest $250,000 and then have the market crash bringing the account value down to $150,000 knowing that the account value is GUARANTEED to go back up?
 
The great thing about using this is that it positively impacts investor behavior.  Conservative clients can invest more aggressively.  If this more aggressive behavior pays off for them, we can then revert to investing based upon their risk tolerance.
 
Ex. Client invests $250,000.  Market crashes.  There is no reason for the client to do anything other than keep investing aggressively.
 
Ex. Client invests $250,000.  Market does well.  Account is now worth $400,000.  He doesn't want to push the guarantee out another 10 years and he wouldn't be happy with just getting $250,000.   If the product is still within its surrender period, we'll change the investment options to be in line with his risk tolerance.  If this is real conservative, we'll remove the GMAB rider and save the .5% a year in expenses.  If we're out of surrender, we may move the money somewhere else altogether giving him a cheaper/better alternative and creating more income for me.

snaggletooth's picture
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iceco1d wrote:2.  I'm thinking of using VAs that don't have investment limitations (like JNL), and adding a GMWB or GMAB, and ONLY running equities within it. Then running my fixed income outside of the VA - with the thought that there is no point in running fixed income in a portfolio costing 3%+ potentially, simply for a guarantee that you'll most certainly NOT need in fixed income.Anyone doing something like this?
 
Welcome to the dark side!!!  Lots of people are doing that.

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