Anyone familiar with Axa Accumulator

33 replies [Last post]
MsBroker's picture
Offline
Joined: 2009-06-02

Going up against it. I'm reading over the contract, and it looks like the GMIB with the roll-up actually requires annuitization to exercise. Am I reading this correct?

MsBroker's picture
Offline
Joined: 2009-06-02

Got my answer. Apparently, the "stepped up" benefit base is used to purchase  a Life Annuity.

 
I can't believe anyone sells this product. It's so damn complicated and it's complete crap. This should be fun to try to explain to the client. Hopefully they will understand it how much it sucks, though.
 
I have sold VAs in the past. This is the first one I have ever run across that requires annuitization for the GMIB. I'm actually quite surprised by this. Especially when I searched for info on this annuity, and ran across about an 8 page thread (closed, found through google) on this annuity and the guy saying he had just stuck a client's ira in it answered someone's question that, no, it didn't require annuitization to take advantage. Apparently the people selling this don't even understand it.

voltmoie's picture
Offline
Joined: 2008-11-05

Does that surprise you?

anonymous's picture
Offline
Joined: 2005-09-29

The fact that the GMIB requires annuitization isn't a bad thing.  Keep in mind that this is the worst case scenario.  What needs to be understood is the annuitization rates that are  being used.  

 
For instance, if the GMIB is 7%, that turns $100,000 into a $200,000 GMIB value in 10 years.  A $200,000 GMIB value isn't $200,000.  How much income does it give?  Let's say that in 10 years it gives an income of $1,500/month.  Is this good?  What's the true value?  At that same age, maybe a SPIA with $140,000 will give an income of $1,500/month.  This would mean that the true value of the GMIB is only 3.4%.
 
Talking about this type of GMIB as a % and not a dollar amount is extremely deceptive.   Unfortunately, most reps don't understand this.  The blame partially lies with the insurance company.  The only way to see the true payout tables is to look at an actual contract since this information is neither in the prospectus or the marketing material.

MsBroker's picture
Offline
Joined: 2009-06-02

Deleted

anonymous's picture
Offline
Joined: 2005-09-29

5% is just as good as 7%.  In fact, 2% is just as good as 15%.  Do you understand this point?
 
Are you competing product to product?  If so, what are you using?  Why are you competing product to product instead of competing you against other rep?
 
You aren't looking at a 500 page contract.  You are looking at the prospectus.  You need to see a contract. 

MsBroker's picture
Offline
Joined: 2009-06-02

Unfortunately, I just met the guy on his doorstep, and he is a big fan of this avisor who is trying to screw him over.
 
I was going to go product to product because I think thats the only way to show him the hundreds of thousands of dollars this mistake will cost him. Because this is so complex, though, there is no way to show a dollar for dollar comparison.
 
I'm hoping his broker didn't explain the annuitization part, but even trying to explain that in a way he will understand is going to be tough. I love the example you used, though, because that helped me get it, so it should help the client also.
 
This is so frustrating, because I know this is so wrong for the client, especially when we are looking at over 90% of his net worth going in this. I used to work for the bank this broker is at, and I know the Investment Manager very well, and I know she would think this is a terrible move. I'm thinking he has to be tweaking the NW to even run this through compliance.
 
I truly think this broker is either behaving unethically, or he is a complete idiot, and he is really screwing this client.
 
 
 
 
 

anonymous's picture
Offline
Joined: 2005-09-29

What makes you think that the advisor is trying to screw him over?
 
What product do you have that is going to give him hundreds of thousands of dollars extra?
 
What are the clients goals?  Risk tolerance?  Time horizon? Sources of cash?
 
The bank's investment manager would think that it's a terrible move without knowing any details?
 
Finally, like Bio Freeze said, why is he going to listen to the Avon chick over the guy he admires?

3rdyrp2's picture
Offline
Joined: 2008-11-13

This is a perfect example of a newbie knowing just enough to be dangerous.

Ron 14's picture
Offline
Joined: 2008-07-10

I don't know what bank it is, but from I am fairly certain that the entire transaction would be flagged if he was putting 90% of his net worth in a VA.

3rdyrp2's picture
Offline
Joined: 2008-11-13

How do you know it is 90% of his net worth?

Ron 14's picture
Offline
Joined: 2008-07-10

3rdyrp2, you asking me ?

3rdyrp2's picture
Offline
Joined: 2008-11-13

Nah, the girl.

Moraen's picture
Offline
Joined: 2009-01-22

Basic training in the military. Your instructors will tell you - "We teach you just enough to get your a$$ kicked".

It's the same here, except as someone said, it makes them dangerous.

Ms. Broker - I admire your tenacity, but move on. If you know nothing of the product, how do you know the advisor is trying to screw this guy over. Have you done a profile? Fast? What are his concerns? The smart money is that the other advisor knows a lot more about this prospect than you do. Get to know the prospect, maybe you'll uncover something else. Also, how do you know that it is 90% of his net worth?

MsBroker's picture
Offline
Joined: 2009-06-02

The client told me his NW and what it consists of. The only other money he has is tied up in a fixed annuity. I'm fairly certain that noone here would take a 401k and roll all of it to one of the highest fee VAs out there. He was 100% sold on the 5% rollup.

3rdyrp2's picture
Offline
Joined: 2008-11-13

What about his home equity?  Maybe he also has a rental property in Colorado he's taking monthly income off.  Maybe his government/military/county pension is more than enough to cover his monthly expenses and leave a little left over.  Maybe he thought you were asking about just his investments and he failed to mention the $75,000 he has in checking and $400,000 he has in laddered CD's at the bank.  There are times when it takes until the 3rd meeting with someone who is already a client for me to uncover something they have at a different institution.  Lesson #1:  Don't take every prospect at their word for what they have investment-wise.  They may sound genuine to be nice, but sometimes they're just trying to get you off the phone/off your doorstep.

voltmoie's picture
Offline
Joined: 2008-11-05

And maybe he has monkey's flying out of his ass!  If the guy was willing to share what he had, his net worth, and agree to a meeting .... she has a shot. Good luck!

Moraen's picture
Offline
Joined: 2009-01-22

MsBroker wrote: The client told me his NW and what it consists of. The only other money he has is tied up in a fixed annuity. I'm fairly certain that noone here would take a 401k and roll all of it to one of the highest fee VAs out there. He was 100% sold on the 5% rollup.

He TOLD you what his net worth is. Ever seen "House"? Everyone lies.

I received an email last week from one of my top clients. He happened to tell me about some money he had over at MS - $600k. When I did the little evaluation (every year for the last 4 years) that consisted of his "checkup", I asked, "Do you have any other brokerage accounts?" "Do you have any CD's anywhere?". "Do you have any annuities". "Any debentures tied to an individual?". You get the gist.

He's not telling you everything.

Moraen's picture
Offline
Joined: 2009-01-22

voltmoie wrote: And maybe he has monkey's flying out of his ass!  If the guy was willing to share what he had, his net worth, and agree to a meeting .... she has a shot. Good luck!

Volt - You have only been doing this a short while - ask the vets. We ALL think that we have all of our clients assets. It's a good bet we don't.

He lied. All prospects lie.

MsBroker's picture
Offline
Joined: 2009-06-02

He told me his assets, his house is paid off, monthly income required, and how much he withheld from the 401k to do work around the house. This was after inviting me in the house to review the axa contract. Yes I am aware that most prospects aren't totally forthcoming but I feel like this guy was. I could be wrong about that, but either way, I think the axa is overpriced and I know that the bank has better options for VAs than this.

h2ozep's picture
Offline
Joined: 2009-04-02
MsBroker's picture
Offline
Joined: 2009-06-02

What that article doesn't tell you is that you can get a VA with much lower fees and no annuitization required to take advantage of the income for life benefit. (GMIB versus Lifetime GMWB- Would you rather have 5%, but cash value is just reduced dollar for dollar by the withdrawals, or 5% but cash value is no longer in existence because you had to annuitize.) Also doesn't tell you the advisor gets 7%. No wonder he's pushing this product so hard.

anonymous's picture
Offline
Joined: 2005-09-29

We're still waiting for the answer to the question as to what product will give him hundreds of thousands of dollars extra.
 
If you have a better product for him, do you have a committment that he will do business with you as opposed to going back to his guy to buy it from him?
 
The products have lots of smoke and mirrors to them.  You can count on the fact that if the market behaves in a certain way and the client does certain things, the AXA annuity will be better.  You can also count on the fact that if the market behaves differently and the client does certaing things, the AXA annuity will be inferior.
 
Be careful with comparing fees.  Are the fees guaranteed?  Also, be careful of guarantees that are too good.  They can bring down an insurance company.
 
Be careful with incorrect facts.  For instance, does the product pay the advisor 7% or does it pay a gross dealer concession of 7%? 

voltmoie's picture
Offline
Joined: 2008-11-05

The clients decision will not come down to product .. it will come down to trust & relationship.

MsBroker's picture
Offline
Joined: 2009-06-02

anonymous wrote:We're still waiting for the answer to the question as to what product will give him hundreds of thousands of dollars extra.
 
As volt said, I'm definitely going to work to get the client based on relationship not on product, but if it comes down to it, then yes, the fees (including fund) on this one run about 3.45%. If you could save 1-1.5% on fees, with a time horizon of 20-25 years, you are looking at a significant difference. Also, with the income riders, if the market is in an upward trend, the client would see a lot more value if he still had a cash value available to capture the gains and bump the income. If they are annuitized then it doesn't matter what happens in the market, they are stuck with the same payment for life. In any market, once they exercise the rider, if the client dies within the first few years, obviously that could make a couple hundred thousand dollars difference, also.
 
 
If you have a better product for him, do you have a committment that he will do business with you as opposed to going back to his guy to buy it from him?
 
The products have lots of smoke and mirrors to them.  You can count on the fact that if the market behaves in a certain way and the client does certain things, the AXA annuity will be better.  You can also count on the fact that if the market behaves differently and the client does certaing things, the AXA annuity will be inferior.
 
Assuming similar performance of subaccounts, I can't think of a single instance where a lower fee product with the same step-up percentage and the same payouts for life (but without having to annuitize) will be outperformed by this AXA product.
 
Be careful with comparing fees.  Are the fees guaranteed?  Also, be careful of guarantees that are too good.  They can bring down an insurance company.
 
The fees are in the prospectus. The operating expenses of the subaccount, can vary of course, but the M&E will still be significantly less than AXA.
 
Be careful with incorrect facts.  For instance, does the product pay the advisor 7% or does it pay a gross dealer concession of 7%? 
 
You are right, I stated that incorrectly. I meant to say 7% to his grid.
 

anonymous's picture
Offline
Joined: 2005-09-29

Don't take anything in my post to be looked as a positive with the AXA product.  I don't know the details of it and I don't know what product you are using.
I'm just reading your post and you sound dangerous because it sounds like you don't know what you don't know.
 
"but if it comes down to it, then yes, the fees (including fund) on this one run about 3.45%. If you could save 1-1.5% on fees, with a time horizon of 20-25 years, you are looking at a significant difference."
 
A significant difference in fees can make a big difference.  Since you are talking about an annuity product with guarantees, you can't save him 1.5% because a product doesn't exist that is "all in" for under 2%.   Let me know if I'm wrong.  If you are going for the upward potential, you are hurting him by using a VA.  You are doing a VA for 2% and could do mutual funds for under 1%.  Over a 25 year span, if the underlying investments return 8%, the extra 1% of fees of the VA will lower the amount of money that he has by more than 25%.
 
In any market, once they exercise the rider, if the client dies within the first few years, obviously that could make a couple hundred thousand dollars difference, also.
 
So what? 1) The person has to care of what happens when they die.  2) You are ignoring the fact that the difference would swing the opposite direction if they live "too long".
 

"Assuming similar performance of subaccounts, I can't think of a single instance where a lower fee product with the same step-up percentage and the same payouts for life (but without having to annuitize) will be outperformed by this AXA product. "
 
 Take a look at the product that you are planning on using.  Let's assume that the client's goal is to have as much guaranteed income as possible starting 15 years from now.  Assume that the subaccounts return 0% every year.  How much guaranteed monthly income will he have starting in 15 years if he is 60 years old today and is investing $100,000?  With the AXA product, he should be somewhere between $1200-$1400.  (That's a guess, but it should be a pretty good one.)  I'm willing to bet that this is better than your product and I don't even know what your product is.  You can even assume that AXA is going to increase all of their fees and your product will keep them the same.  Don't even attempt to compete if you don't understand the worst case scenario with both products. 
 
I'm willing to make two bets.  1) You don't know what the worst case scenario is with your product for my scenario.  2) The worst case scenario in this scenario is worse with your product than the AXA product.
 
The fees are in the prospectus. The operating expenses of the subaccount, can vary of course, but the M&E will still be significantly less than AXA.
 
The operating expenses can vary.  The M&E can also vary.  How do you know that it will remain significantly less than AXA?  The fees for the riders can also vary.  You can know that the current fees are less.  You can't know that the future fees will be less.
 
 

MsBroker's picture
Offline
Joined: 2009-06-02

Client went with the Axa VA. The FA managed to convince him that he is guaranteed 8% now, not just 5%. The client doesn't understand annuitization or the way the rider works, despite all my attempts to explain it. Oh, yeah, and the FA has 2 complaints in the last year on brokercheck for VA sales.

This client is going to be surprised when the account value starts dropping.

noggin's picture
Offline
Joined: 2004-11-30

MsBroker wrote:Client went with the Axa VA. The FA managed to convince him that he is guaranteed 8% now, not just 5%. The client doesn't understand annuitization or the way the rider works, despite all my attempts to explain it. Oh, yeah, and the FA has 2 complaints in the last year on brokercheck for VA sales. This client is going to be surprised when the account value starts dropping.
You still failed to see how to get the business. There was a wedge that you could have placed in the relationship and it had nothing to do with this VA or that VA. You were stuck in the my product is better than your product. That will NEVER win you business.
 
You never understood what the client's goals were........

MsBroker's picture
Offline
Joined: 2009-06-02

I did everything I could to establish his goals. We discussed income needs while retired, what his plans were in retirement, family situation. I went at this from every angle I could think of.
 
I did change my method when I went back to him, thanks to the advice from everyone on here, and really talked about the level of service I would bring and building a portfolio instead of just pushing him into one product, but he still was stuck on this annuity. Who wouldn't be, if they thought they were locking in an 8% rate for life?
 
I wish I knew a way I could have went about this differently, but I feel that I did everything in my power.

noggin's picture
Offline
Joined: 2004-11-30

MsBroker wrote:I did everything I could to establish his goals. We discussed income needs while retired, what his plans were in retirement, family situation. I went at this from every angle I could think of.
 
I did change my method when I went back to him, thanks to the advice from everyone on here, and really talked about the level of service I would bring and building a portfolio instead of just pushing him into one product, but he still was stuck on this annuity. Who wouldn't be, if they thought they were locking in an 8% rate for life?
 
I wish I knew a way I could have went about this differently, but I feel that I did everything in my power.
 
I didn't mean to beat on you about that, but in a sales situation if you let the conversation be product vs product then you lose.... You remember in sales train where you learned about features vs benefits? You talked about features too long, benefits are " whats in it for them". Why did he like annuities?

MsBroker's picture
Offline
Joined: 2009-06-02

I appreciate the feedback. I want to know how to never have this happen again, because it makes me sick to think about what will happen when his account value starts to dip. He already said he will pull it out at that point and take the hit.
 
He liked the annuity because he thought he could make a guaranted 8% but also get the market, if the market did better. The benefit to him when presented this way is a risk free way to get market gains and guaranteed income for life with no risk of a declining value in a down market. 
 
He was very risk adverse. He just kept telling me, well, I've made up my mind, so I'm going to give this a try.

beware's picture
Offline
Joined: 2011-02-27

Don’t do business with or work for these criminals. Here's what I witnessed at AXA?• Numerous client complaints from unsuitable investment recommendations and poor customer service. • Reports of dishonest activities and taking advantage of customers, driven by greed with a total disregard of industry regulations. • Illegal kickbacks and ponzi schemes have been reported with charges and litigation pending against this company.• There are reports of the sales force not meeting regulatory requirements to conduct business as registered investment advisors. • Testimonials from employees and customers reveal disturbing facts about compliance violations, unethical behavior and criminal activities.

BACFA's picture
Offline
Joined: 2006-03-26

beware, did you even bother reading this year old thread?  You are off topic but your copy and pasting ability is impeccable.  You have two identical posts about AXA on two different AXA threads.  You must really hate them.

Please or Register to post comments.

Industry Newsletters
Investment Category Sponsor Links

 

Careers Category Sponsor Links

Sponsored Introduction Continue on to (or wait seconds) ×