Index Annuities
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Dec 1, 2008 9:46 pm
Did anyone lose any money in an index annuity today?
Most of my clients have taken a hit, but at least they........
-Don't have an annual cap -Don't have a participation rate -Get to keep their dividends -Aren't locked in for 10-15 years -Don't have a surrender charge -Have an advisor with a securities license[quote=rankstocks]
Most of my clients have taken a hit, but at least they........
-Don't have an annual cap. It's for money that doesn't need market risk. Reaching the annual cap would be icing on the cake. -Don't have a participation rate. Same as above. -Get to keep their dividends. Get to keep their interest. -Aren't locked in for 10-15 years. 5, 7, and 10 year contracts. The client chooses the length of the contract. -Don't have a surrender charge. A surrender charge is only a problem when taking out more than 15% per year. Although, come to think of it, had a client needed to liquidate the entire account, would they rather pay a 9% penalty on 85% of the money or would they be better off selling out when they are down 40% in the market? -Have an advisor with a securities license. Ahhh, something we have in common. [/quote][quote=rankstocks]
-Have an advisor with a securities license[/quote] And what has that done for your clients exactly? You lost them only 45% or their portfolio instead of 50%? LOL! I thought this market should've put an end to the naysayers of EIAs, apparantly not.[quote=etj4588]
I thought this market should've put an end to the naysayers of EIAs, apparantly not.[/quote] Quite frankly, I would like FIA's to continue to fly under everyone else's radar. For selfish reasons of course.[quote=snaggletooth][quote=etj4588]
I thought this market should've put an end to the naysayers of EIAs, apparantly not.[/quote] Quite frankly, I would like FIA's to continue to fly under everyone else's radar. For selfish reasons of course.[/quote] +1 to that. The rest of you guys and gals out there, annuities are BAD...ALL ANNUITIES...variable, indexed, fixed. When you hear the word "annuity", RUN the other direction and FAST!!![quote=Indyone][quote=snaggletooth][quote=etj4588]
I thought this market should've put an end to the naysayers of EIAs, apparantly not.[/quote] Quite frankly, I would like FIA's to continue to fly under everyone else's radar. For selfish reasons of course.[/quote] +1 to that. The rest of you guys and gals out there, annuities are BAD...ALL ANNUITIES...variable, indexed, fixed. When you hear the word "annuity", RUN the other direction and FAST!!![/quote] I am going to a CPA's office today that is looking to move $280k in a fixed annuity of his father's money into a FIA. You can be sure I'll mention the fact that MER, SB, UBS, MS, and EDJ, can't help there clients this way. He understands the concept, which I taught to him, so the possibility for me to move to Referral City is alive and kicking...S&P 500
1989
31.69%
1990
-3.11%
1991
30.47%
1992
7.62%
1993
10.08%
1994
1.32%
1995
37.58%
1996
22.96%
1997
33.36%
1998
28.58%
1999
21.04%
2000
-9.11%
2001
-11.89%
2002
-22.10%
2003
28.68%
2004
10.88%
2005
4.91%
2006
15.79%
2007
5.49%
2008
-37.00%
Could someone tell me how many years an EIA pegged to the S&P 500 would have outperformed the S&P 500 over the last 20 years and by how much. If I'm capped at 10% and have a 80% participation rate and a floor of 3%, if the S&P does 28% like in 2003 were does the rest of that go?
[quote=jkl1v1n6]
S&P 500 1989 31.69% 1990 -3.11% 1991 30.47% 1992 7.62% 1993 10.08% 1994 1.32% 1995 37.58% 1996 22.96% 1997 33.36% 1998 28.58% 1999 21.04% 2000 -9.11% 2001 -11.89% 2002 -22.10% 2003 28.68% 2004 10.88% 2005 4.91% 2006 15.79% 2007 5.49% 2008 -37.00% Could someone tell me how many years an EIA pegged to the S&P 500 would have outperformed the S&P 500 over the last 20 years and by how much. If I'm capped at 10% and have a 80% participation rate and a floor of 3%, if the S&P does 28% like in 2003 were does the rest of that go? [/quote] Oh Lord. There are different crediting methods, so you're 80% of 10% isn't really a valid comparison. If you are independent, just call up your JNL guy and have him explain it to you. They have all those side by side comparisons that you can plot on Excel all day long if you want.Geez. In defense of EIA's (and I don't use them), they really shouldn't be used for people trying to beat the market (or even "match" the market). They should be used for people that want guarantees and a little better rate than fixed interest investments.
If that's what a client wants, and if they COMPLETELY understand the drawbacks (surrenders, caps, etc.), then what's wrong with giving it to them? But you need to compare them to alternatives. If an EIA's cap is 8, it's floor is 3, and it has all the long surrenders and everything, and other fixed investments are paying 6.5%, I'm not sure the EIA is the best alternative. However, right now, when fixed investments are paying 0.5 - 5% (unless you are OK with a long bond), an EIA might make a whole lot of sense. Of course (here comes the slam...) they wouldn't pay you guys 8%, so "some advisors" might "overlook" other options.[quote=B24]
Geez. In defense of EIA's (and I don't use them), they really shouldn't be used for people trying to beat the market (or even "match" the market). They should be used for people that want guarantees and a little better rate than fixed interest investments.
If that's what a client wants, and if they COMPLETELY understand the drawbacks (surrenders, caps, etc.), then what's wrong with giving it to them? But you need to compare them to alternatives. If an EIA's cap is 8, it's floor is 3, and it has all the long surrenders and everything, and other fixed investments are paying 6.5%, I'm not sure the EIA is the best alternative. However, right now, when fixed investments are paying 0.5 - 5% (unless you are OK with a long bond), an EIA might make a whole lot of sense. Of course (here comes the slam...) they wouldn't pay you guys 8%, so "some advisors" might "overlook" other options. [/quote] Given the fact that the government is killing capitalism, I'm just trying to do my part to keep it alive.You kids can say what you want about EIA’s, but when the client hears that their money can only go up and never down, they like the way it sounds. It makes them want to move money from guy who loses money to guy who won’t lose them any money. In other words, from the guy who believes in putting their money at risk to the one who believes in keeping it safe.
[quote=Dick Butkus][quote=rankstocks]
Most of my clients have taken a hit, but at least they........
-Don't have an annual cap. It's for money that doesn't need market risk. Reaching the annual cap would be icing on the cake. -Don't have a participation rate. Same as above. -Get to keep their dividends. Get to keep their interest. -Aren't locked in for 10-15 years. 5, 7, and 10 year contracts. The client chooses the length of the contract. -Don't have a surrender charge. A surrender charge is only a problem when taking out more than 15% per year. Although, come to think of it, had a client needed to liquidate the entire account, would they rather pay a 9% penalty on 85% of the money or would they be better off selling out when they are down 40% in the market? -Have an advisor with a securities license. Ahhh, something we have in common. [/quote] [/quote] i guess i don't see how this is so earth shattering. for my clients who need me to manage money which is NOT suppose to be subject to market risk, it can definitely be done without an EIA. the problem lies with the advisors out there selling the EIA as an alternative to those $ which SHOULD be at market risk. i have no problem with EIA, but they should not be used to compete with equities. sell them against a fixed annuity, 30 year bond, or crappy CD's. i have NO PROBLEM with an EIA. i have a problem with an advisor who sells them in every case, no matter how old the client or how long the time frame. if my book is 100% individual stocks, i would bet i have a few people in an inappropriate investment, same goes for the EIA.These posts have sort of answered a question that I have. Most of the time I have ever heard of someone selling an EIA it was to have the upside potential of the market with no downside risk, same old story regardless of what the objective or who the client was.
My question about how an EIA fares against the index was an honest question. I'm open to new ideas and that is why I asked if over time my clients would be better off in an EIA versus another investment. If so I would definately look at them. I've never heard a definitive answer from anyone including a wholesaler. I'd like to see actual results. Guess I'll call JNL.[quote=snaggletooth][quote=jkl1v1n6]
S&P 500 1989 31.69% 1990 -3.11% 1991 30.47% 1992 7.62% 1993 10.08% 1994 1.32% 1995 37.58% 1996 22.96% 1997 33.36% 1998 28.58% 1999 21.04% 2000 -9.11% 2001 -11.89% 2002 -22.10% 2003 28.68% 2004 10.88% 2005 4.91% 2006 15.79% 2007 5.49% 2008 -37.00% Could someone tell me how many years an EIA pegged to the S&P 500 would have outperformed the S&P 500 over the last 20 years and by how much. If I'm capped at 10% and have a 80% participation rate and a floor of 3%, if the S&P does 28% like in 2003 were does the rest of that go? [/quote] Oh Lord. There are different crediting methods, so you're 80% of 10% isn't really a valid comparison. If you are independent, just call up your JNL guy and have him explain it to you. They have all those side by side comparisons that you can plot on Excel all day long if you want.[/quote] And to me this is part of the problem with EIA's. Too many ways to credit. I feel the insurance companies do this on purpose. I admit I truly do not understand these but if I just go back and look what the market did over the last 20 years I see 6 years on an individual year by year basis where being in the EIA would have been better than just the index. Please correct me.[quote=jkl1v1n6][quote=snaggletooth][quote=jkl1v1n6]
S&P 500 1989 31.69% 1990 -3.11% 1991 30.47% 1992 7.62% 1993 10.08% 1994 1.32% 1995 37.58% 1996 22.96% 1997 33.36% 1998 28.58% 1999 21.04% 2000 -9.11% 2001 -11.89% 2002 -22.10% 2003 28.68% 2004 10.88% 2005 4.91% 2006 15.79% 2007 5.49% 2008 -37.00% Could someone tell me how many years an EIA pegged to the S&P 500 would have outperformed the S&P 500 over the last 20 years and by how much. If I'm capped at 10% and have a 80% participation rate and a floor of 3%, if the S&P does 28% like in 2003 were does the rest of that go? [/quote] Oh Lord. There are different crediting methods, so you're 80% of 10% isn't really a valid comparison. If you are independent, just call up your JNL guy and have him explain it to you. They have all those side by side comparisons that you can plot on Excel all day long if you want.[/quote] And to me this is part of the problem with EIA's. Too many ways to credit. I feel the insurance companies do this on purpose. I admit I truly do not understand these but if I just go back and look what the market did over the last 20 years I see 6 years on an individual year by year basis where being in the EIA would have been better than just the index. Please correct me. [/quote]
Here's what you do: If you want to put people's money into the index, buy the index. If you want to put people's money into an EIA, buy an EIA.
[quote=jkl1v1n6]
And to me this is part of the problem with EIA's. Too many ways to credit. I feel the insurance companies do this on purpose. I admit I truly do not understand these but if I just go back and look what the market did over the last 20 years I see 6 years on an individual year by year basis where being in the EIA would have been better than just the index. Please correct me. [/quote] And here is the problem with the general public and some advisors. Jkl1v1n6, I will give you the benefit of the doubt here because you admitted you don't know enough about the FIA. When comparing the index to a FIA, you are comparing apples to oranges, two very different things. You are also looking at it in a vacuum. What happens in "real life", when client emotions are involved, and what happens in a text book are completely different.Hank you are absolutely zero help.
Snags, I agree that I am looking at it in a vacuum, especially with what has happened in in the last 8 years with two significant bear markets.[quote=jkl1v1n6]
Hank you are absolutely zero help.
Snags, I agree that I am looking at it in a vacuum, especially with what has happened in in the last 8 years with two significant bear markets. [/quote]Correct. You have overestimated my level of interest in helping you. I don't give a damn if you like EIA's or not. I don't feel anything that happens to you.