[quote=mikebutler222][quote=scrim67]

I'm sure this next comment will be controversial and/or thought provoking.

Let's live in a vacuum for the next minute or two.

Let's assume every financial product paid the same exact compensation to the seller.

Where would annuites then fall on our list as we build are clients portfolios?

The answer to this question probably says alot.

scrim

[/quote]

Good point. Try looking at it this way, what if the client was a family member you cared about. Where would VAs fall then in your product mix?

[/quote]

I would still sell everything.  Including VAs.  There is definitely a market for them if properly sold.

Me,

If it was a family member of yours, how would have you recommened they allocate their assets?

Scrim

[quote=menotellname][quote=mikebutler222][quote=scrim67]

I'm sure this next comment will be controversial and/or thought provoking.

Let's live in a vacuum for the next minute or two.

Let's assume every financial product paid the same exact compensation to the seller.

Where would annuites then fall on our list as we build are clients portfolios?

The answer to this question probably says alot.

scrim

[/quote]

Good point. Try looking at it this way, what if the client was a family member you cared about. Where would VAs fall then in your product mix?

[/quote]

I would still sell everything.  Including VAs.  There is definitely a market for them if properly sold.

[/quote]

Your family members are "a market"? You wouldn't explain to them what an absolute waste that "guarantee" is to long term investors?

Wow, that insurance company you work for did a great job on your head, pal  

VA's instill disipline.

If someone never invested a penny their life.... Maybe cd's, funds and savings... On a VA dosent one get the higher of the side funds performance or the guarentee.

2000 is fresh in the mind of millions of 45 - 60 year olds. Some of these people would rather lose the risk for above savings or cd rates.

This thread is enlightening so thanks.

Exec,

The problem is, is that the premise of someone getting market like returns without the risk is dishonest.  These riders (guarantees) are a product, manufactured to make a profit for the insurance company by leveraging the lack of understanding among the risk averse population.  If people are allowed to stay uneducated and convinced that these products somehow change the rules, they will miss out on much better and fundamentally more honest options.  If you look throughout history, the better times to invest was after one of the last three biggest bear markets (1929-1932, 1972-1974 and 2000-2002).  We are paid to educate and direct our clients into the best available investments relative to their comfort with risk, not to satiate nieve and uneducated fears by taking advantage and profiting from those fears. 

Look, we all have brains, so let's use them.  Why would a VA pay so much more (especially in the $100k plus area) than comparable A share mutual funds or any other "plain vanilla" investment?  Because the client is getting a better deal?  Because there is magic in the product that changes the rules of the capital markets (stock like return for bond like risk)?  Because we are doing so much more good for our clients?

Or..... The Insurance company is making a hell of a lot more $$$ off this (must be better for the client ) and guess where that $$$ comes from?  The clients' pocket. 

If clients aren't with the potential of loosing money, they should buy bonds, pure and simple if they want better than CD rates. 

Dude-

One thought-you are PRESUMING that the bear market is over....just like the talking heads at CNBC.

Meanwhile, name one major market index which has actually traded at a new high.  Not a 52 week high, but an all time high.  That would be what many technicians and strategists would use as a criteria to determine the end of a bear market.

I'll be waiting for your reply.

Bear market. NASDAQ is up what 100% is 3 years. Sounds like a nice run up. I know this is mostly tech, but thats about 33% a year.

Dude I hear you and agree the insurance companies are making a ton off of VA's. They promoted the hell out of them over the past few years going into rising rates. So ING 7% after fees is not much higher then savings at 4.1%. If the fund performs then one could get more, but rates are rising.

Exec,  are you a broker?  I don't want to presume anything but it doesn't sound like you are in this business.  I'm not trying to insult anyone.  I guess I am just percieving that there are some small cracks in your understanding of these things, which I guess we all have room for improving our understanding of financial products.  Either way, it's cool you have interest if your not in the biz.

100% total return in three years is 23.3% annual compounding rate of return.

Hope that helps

Also

33% annual compounding return over 3 years is 165% total return.

big difference. 

Joe,

Point taken.  We have not broken the all time highs so I guess we're in a secular bear market with the recent 3 years being a cyclical bull.  Anyway I tend to believe that up is the direction from here.  And my points about VA's are still valid, which is really my main focus here.  I think you'd agree?  Not much interest in debating the minutia (hope that's spelled right). Thanks for correcting me though.

[quote=scrim67]

Me,

If it was a family member of yours, how would have you recommened they allocate their assets?

Scrim

[/quote]

It depends on the family member.

Can you please tell me my family member's, age, income, net worth, investable assets, investment objective, risk tolerance...

[quote=mikebutler222]

Your family members are "a market"? You wouldn't explain to them what an absolute waste that "guarantee" is to long term investors?

Wow, that insurance company you work for did a great job on your head, pal  

[/quote]

scrim, Mike, and dude

Obviously you three work at a wirehouse that preaches "annuities are the anti-christ".

Now, scrim...you have already stated that your father is intelligent, analytical, and doesn't make rash decisions.  As such, I can reasonably presume that he was well informed and asked several questions when he purchased his equity indexed annuity.  Obviously he saw value in the product.

Further, you stated that you will wait until the contract is beyond surrender to pitch your asset allocation concept.  Why?

Can't you convince your analytical father of the lost opportunity cost of sitting in that "wasteful" EIA? 

Can't you articulate how he can cash it now and still redeem .93 on the dollar (assuming a 7% surrender) and how your asset allocation program will earn his 7% back...and then some...over the next 7 years (assuming 7 years left in the EIA contract)? 

Can't you guarantee that your asset allocation program is better? 

Won't he buy because your management fees are cheaper and he gets a better return on his money if you achieve the exact same rate of return (less fees)?

The only reason I assume that you don't articulate this to him is:

1)  You are not a very good salesman.

2)  You cannot guarantee your performance and your father sees a greater value in the guarantees (even with a reduced performance).  He prefers guarantees over potential growth.

3)  The EIA is actually a much better fit for his risk tolerance.

4)  Your asset allocation program is BS and cannot outperform an EIA.

5)  All of the above.

In closing...

...remember...

...cheaper isn't necessarily better.

If I articulate that a certain guarantee costs .5% more to manage and the person purchases that guarantee...guess what?  They see a value in the guarantee (whether the value is real or perceived is not the issue).

Me said:

scrim, Mike, and dude

Obviously you three work at a wirehouse that preaches "annuities are the anti-christ".

Reply:

Obviously you are clueless.  I have worked in both the bank and wirehouse environments.  My opinions have remained the same, since I actually understand these products. 

Obviously you are clueless.  Wirehouses do not preach that annuities are the antichrist.  This is the most ignorant thing I've heard you say.  I've worked for two different wirehouses, both with a much larger and sophisticated VA platform than the bank I worked for.  In fact it's easier for me (less compliance headache) to sell a VA at a wirehouse than at the bank.

Me said:

Now, scrim...you have already stated that your father is intelligent, analytical, and doesn't make rash decisions.  As such, I can reasonably presume that he was well informed and asked several questions when he purchased his equity indexed annuity.  Obviously he saw value in the product.

Reply:

Me, you really are getting desperate here.  If you think that your clients really fully understand what you are selling them (no matter how informed they are), then you are really, really stupid.  I have worked with many very intelligent people who owned annuities when they came to me and were confused by the product, hell I get confused sometimes when I'm looking at these pieces o' sh*t.  

I've got a retired GE executive as a client (if you're not familiar with the standards GE requires for their managers, let's just say cream of the crop) who ran a joint venture with Boeing in their jet engine division.  Point is he is a very smart guy.  Anyway, I put him in a simple 60/40 stock and bond portfolio and I still have to engage in continuing education to keep him comfortable.  This investment is waaaay easier to understand than a VA let alone an equity indexed annuity.

Equity indexed annuities are even greater peices of sh*t.  They pay us more and get clients less return!!!

Generally speaking EIA return's look like this: quarterly average of the s&p500's gain.   F*ck'd up!!!!!.  I ran the numbers on a couple of these and when the stock market was up say, 10% annually over the relative time period, the annuity would have paid about 5% to 6%.  Two important factor 1) quarterly average 2) index "price" (not including dividends)

Me,

I don't like to be rude and insultative (you took the first shots bud), but you are venturing into waters here that expose either how nieve you are or how dishonest you are.  Pick one.  Keep on hiding behind the B.S. political speak of "features that benefit the client" blah, blah, blah.  Also you expose your self when you make points like:

"1)  You are not a very good salesman."

To poke at scrim for not convincing his father to get raped by the withdrawal penalty on a product which is pure, unrefined,disease ridden, menotellname infested dogsh*t, is really really stupid.  It's probably because waiting a year makes the most financial sense and opportunity costs are harder quantify than "penalty" costs.  You are boiler room material.

cheaper isn't necessarily better, but to use that as a justification for bullsh*tting the client is sleazy.  If you don't believe that liquidity is one of the most important elements to a clients' financial security (which needs to be accounted for in their "risk tolerance") well, I think everyone here get's the point.   

I'm wasting my time here.

If a man needs to eat you can sell him a fish or a stove.  Think about that long and hard. 

I am not arguing that annuitties will outperform a mutual fund portfolio they probably won't (assuming you're not using a mf wrap account w/1.5% fee).  What I am arguing is different strokes for different folks.  It's that easy.  Yes some annuitties can get very complicated, others aren't that complicated at all. 

You want to talk about complicated, explain to a client where his money/wealth went and how your going to help him earn it back.  Fat chance.  There is a reason the average Mutual fund is held three years and it isn't because advisors are moving the money into better funds for whatever reason.  It is because stupid advisors think they know what people want and need.  Ask your next prospect Mr. Jones say the market turns south, what point are you going to dump my portfolio and do something different what you feel is right.  I ask this question to everyone I meet with, some people say you mean you have lost people money?  I am amazed.    

Let's put this into perspective:

If you bought the Vanguard 500 (S&P index fund) at the peak in March of 2000 and were dumb enough to not diversify into other asset classes (mid cap, sm cap at least) then you are about even as of today (O.K. your down by -1.3%, I'm not splitting hairs here ) including reinvested dividends.  Yeah who's to say it will be permanent, but we still have 4 years to go before you've held it ten years and you have broken even at year 5 being really stupid (not diversifying) during the 2nd worst bear market in history!!! Look at your Ibbotson chart and tell me how many BIG drops you see and how far apart are they (3 big drops about 30 to 40 years apart). Now if you had been smart and diversified among capitalizations, bonds and reits, you most likely broke even with a little extra by the end of 2003.  Who needs a guarantee.  This makes $ for the insurance companies (and us) for a reason.

I'm getting tired and going home (It's 9:11pm Pac Time) have a good night.

dude,

You're in the wrong ballpark.  Nobody here is arguing rate of return except you.

The argument is that a VA has a place for certain clients that are risk aversed.  Your illogical rationale is that there is no place for a VA.

You, sir (and I use the term quite loosely), are very stupid to believe otherwise.

The clients that buy VAs and EIAs don't want the "best" return.  Hell...nobody can offer them the best return.  EIAs and VAs that are sold properly offer a better upside potential than a fixed annuity or CD without the downside potential of a pure equity account.  I believe that this concept is easy enough to understand for somebody with average intelligence (this is where you are excluded).

P.S. - I don't believe scrim likes you implying that his daddy is stupid.

People DO want guarantees.  They WILL pay for them.  VA's are excellent investment vehicles for the risk adverse whose situation warrents them being in equities.

[quote=BankFC]

People DO want guarantees.  They WILL pay for them.  VA's are excellent investment vehicles for the risk adverse whose situation warrents them being in equities.

[/quote]

People are often talked into or sold things they  don't need by dishonest sales people and/or salepeople willing to take advantage of the customer's unfounded fears (imho, the two sales people are both dishonest).

People don't walk into an office and say "By golly, I'll have me one'a them guaranteed annuity thingees". What happens is some salesman hears the uninformed buyer talk about his fears of the market, and instead of explaining how diversified long term investors really don't face the dangers the customer thinks, the saleman plays on that unfounded fear, hands the customer a propaganda piece from an insurance carrier DESIGNED to take advantage of that unfounded fear and he writes a big commission annuity ticket.

I can count on one hand the number of times someone walked into my office and wanted a VA.   I'll do my best to show them the full story and if at the end of my presentation they still want a VA I'll provide them one.

About a month ago one of my clients (of only 4 months) was almost talked into liquidating their account to a competitor for a VA.   I showed them the full story and afterwards they decided to stay put.   I told them specifically after I'm done explaining the true story of VA's if you still want it I have the same exact VA product.  

I imagine going forward they will view me as their trusted advisor and the chances of me losing their biz in very small.

That's my story for the day.

scrim

[quote=menotellname][quote=mikebutler222] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Your family members are "a market"? You wouldn't explain to them what an absolute waste that "guarantee" is to long term investors?

Wow, that insurance company you work for did a great job on your head, pal   <?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />

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scrim, Mike, and dude

Obviously you three work at a wirehouse that preaches "annuities are the anti-christ".

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I have no idea how someone who’s ever BEEN in a wirehouse (or ever been a broker, fot that matter) could entertain such a bizarre idea. Wirehouses LOVE annuity sales. The informed members of the sales force, OTOH, knowing better and having more product choices than you, the insurance agency guy have, don’t like them all that much.

[quote=menotellname] If I articulate that a certain guarantee costs .5% more to manage and the person purchases that guarantee...guess what?  They see a value in the guarantee (whether the value is real or perceived is not the issue).

[/quote]

They “see” a value that doesn’t exist because you, the insurance agent, decided to prey on their ignorance rather than fulfill your professional obligation to educate them. I suspect the fact you have nothing else to sell tham AND the big commission check was the motivation.

[quote=menotellname]

The argument is that a VA has a place for certain clients that are risk aversed.  Your illogical rationale is that there is no place for a VA.

[/quote]

“Risk aversed” (sic) or propagandized by a salesman and his annuity literature all designed to play up the “benefit” of the guarantee everyone here knows he doesn’t need?

The day I see some annuity literature that says something like “You really don’t need this, but if you can’t sleep at night without it” I’ll think better of the insurance company and the flacks they hire. Until then it’s obvious that they play on and play to unfounded fears for big, big commission checks. Nothing more than the guys who sell “credit life” to suckers paying 29% on credit card debt.