1)  moving towards 40% in fee based business with closed end and exchange traded funds making up the next portion.  I probably have 10 annuities on my book and none inside IRAs.  I don't have muni bonds inside the IRAs either.  A Jones guy would get a laugh out of that one. 

2)  from what I hear there was pressure from compliance and ultimately there was a meeting of the minds with the sales side still winning out.  You have brokers out there and if you are an insider you know who I am talking about that sell a good percentage 40% of annuities inside of IRAs.  The A share is a smoke screen to present to the regulators.  It is an attempt to say we do not sell annuities for the commission because we offer A shares.  We just feel that annuities are the right choice of investment for the client.  But I assume they leave out the revenue sharing element there too.

Next question??

Truth, how do you feel about Annuities that offer a dollar for dollar withdrawal with a GMIB rider at 6% in an IRA for a client who is currently withdrawing income?

Jones GP I cannot believe that you would defend an organization that sponsored the Van Pearcy/ Hartford funds roadshow. How much money did all those investors loose when their EDJ rep took them out of American Funds and put them Hartford for more revenue sharing money. I know of alot of now GP’s who did just that, and yes they were rewarded not condemned. You speak as if everything will be fine now. But according to the numbers on this discussion board there are 16000 people out there who were once EDJ brokers alot of them are bitter from the experience and willing to talk to authorities regarding EDJ salespractices. I believe it is far from over for Edward Jones.

[quote=formeredjbroker]Jones GP I cannot believe that you would defend an organization that sponsored the Van Pearcy/ Hartford funds roadshow. How much money did all those investors loose when their EDJ rep took them out of American Funds and put them Hartford for more revenue sharing money. I know of alot of now GP's who did just that, and yes they were rewarded not condemned. You speak as if everything will be fine now. But according to the numbers on this discussion board there are 16000 people out there who were once EDJ brokers alot of them are bitter from the experience and willing to talk to authorities regarding EDJ salespractices. I believe it is far from over for Edward Jones.[/quote]

What about the public who relied on the salespractices of EDJ reps?  They were steered into funds in which some of the fund families got into legal trouble ie Putnum.  Looks likely a major class action suit is brewing that will have legs!

BYSTANDER-  I don’t believe in annuities inside of IRAs period.  The vehicle is too expensive and the riders are only an enticement to push the product.  How long is the average variable annuity held?  Once you answer that question you will realize why these riders seem appealing.  The hold time is somewhere short of 6 years before some other salesman such as a Jones broker comes in and gets the client to 1035 it away.  Bottom line is the annuity companies charge for these riders and never expect to have to pay on them.  Does this answer your question?

Truth, I’m sorry but it did not answer my question, I asked you about a 6% GMIB rider that is dollar for dollar in which the client is currently taking withdrawals, you do understand how this works, correct?

I do but I was talking about riders on annuities in general.  In your example you are discussing 1 potential where you can make a case only because the 6% cannot be obtained in other secure investments as a supplement to withdrawals.  But I still will not sell these products because:  1) the clients very rarely understand how they work, let alone some reps  2)  the bullseye will be squarely on those that push variable annuities.

Those that live and die by annuities will look to the past 3 years in the market as a reason to push them.  I tend to look at a much longer horizon with also the understanding that the fees can and do eat away at the gains.

Truth, you still haven't demonstrated that you know how the rider works in conjunction with current withdrawals...

He's amswered your question. Simply put, the 6% GMIB is a gimmick. If you're client's rational and you have a clue about managing an income focused portfolio you can do better and the client will pay less.

Stan, what would be your counter proposal?

I didn’t know I was taking a test Mr. Bystander.  The rider speaks for itself.  I don’t know how to dumb it down.  How do you counter the tax situation on annuities when you take money out?

False,



A test for you:



How do you counter the tax situation on an IRA/401k when you take money out?



Maybe you better stop putting money in your 401k.



Make sense to you false?

The tax situation goes like this. Pay me now or pay me later when I’m in a lower tax bracket. I’ll take the annuity everytime. If you do the math it works out every time even with the increased expenses.

Everyone is entitled to their own opinion, but the bottom line is if you can sleep well out night knowing you sold a tax-deferred product inside of an already existing tax-deferred vehicle, then more power to you.  I would argue you are selling it for the commission and I think regardless of your riders or anything else you might throw out there, my argument is valid.  Well, at least the regulators will be siding with me on this argument.

But I guess your annuity beats a muni bond inside of an IRA.

Ok, time to give my two cents, or three, maybe four.

Truth,  drop the Orman book.  Don't let her suck you in. 

How much do you pay for the tax-deferral of an annuity that is already inside of a tax-deferred IRA?  Nothing.  So what's the problem?  I am sick and tired of the critics who think annuities are this God -awful investment.  If you ask me, they are usually the ones that have no clue how an annuity works or what there purpose is in a portfolio.  

Wake up people, the "tax-deferral" term of an annuity is not a rider, therefore the client isn't paying extra for it.  What some investors may want is the opportunity to particpate in the market while at the same time being able to sleep at night knowing that they have certain guarantees built in in case the crap hits the fan again.  I have had the spouses of clients whom were grateful their deceased spouse had the death benefit guarantees on their contracts in 01' and 02'.  Tell me that's not worth something.

Obviously annuities, whether in or out of an IRA, are not appropriate for everyone.  However, if I have a client that is willing to pay a little extra to have certain guarantees and those guarantees will help them sleep at night, I will not hestiate to offer an annuity.  Many of them like the idea of being able to annuitize at retirement.  Will they need it?  Maybe not, but what if they do.  I can't give those types of guarantees to my non-annuity clients.

Comparing an annuity to a muni bond in an IRA is narrow minded.

Never said anything you mentioned and I do know plenty about v. annuities.  Enough to know that #1 they ARE very expensive and the fees are difficult to explain to clients  #2 they are now the #1 target of the regulators as I am sure you know.  So why sell an inferior product that is very expensive?  Commissions would seem to be the logical answer.

Now to a few of the points that you made that are worth commenting on.  1)  I agree annuities MAY work for someone, but the issue is and what started all of this is guys that push variable annuities to every Tom, Dick and Harry that walk in the door.  And you know this happens.  Second, the reference to the muni bonds was an inside joke that pertained to Jones people.

I think it is pretty narrow minded to use '01 and '02 as the timeframe where clients were happy they had a death benefit.  How about use '03 and '04.  Or how about use a 10 year timeframe of your choice.  Annuities rarely utilize the 2 features they are designed for:  annuitization, hence the name of the product and #2 the death benefit.  Try selling some term life insurance next time.  Your client will understand it much easier.

Don't get your panties in such of a bunch next time!

____________________________________

Nothing hurts worse more than the truth

I didn’t know I was taking a test Mr. Bystander. The rider speaks for itself. I don’t know how to dumb it down. How do you counter the tax situation on annuities when you take money out?

[quote=The Truth]

Never said anything you mentioned and I do know plenty about v. annuities.  Enough to know that #1 they ARE very expensive and the fees are difficult to explain to clients  #2 they are now the #1 target of the regulators as I am sure you know.  So why sell an inferior product that is very expensive?  Commissions would seem to be the logical answer.

Now to a few of the points that you made that are worth commenting on.  1)  I agree annuities MAY work for someone, but the issue is and what started all of this is guys that push variable annuities to every Tom, Dick and Harry that walk in the door.  And you know this happens.  Second, the reference to the muni bonds was an inside joke that pertained to Jones people.

I think it is pretty narrow minded to use '01 and '02 as the timeframe where clients were happy they had a death benefit.  How about use '03 and '04.  Or how about use a 10 year timeframe of your choice.  Annuities rarely utilize the 2 features they are designed for:  annuitization, hence the name of the product and #2 the death benefit.  Try selling some term life insurance next time.  Your client will understand it much easier.

Don't get your panties in such of a bunch next time!

I hear ya, as I've had many of the same concerns in the past.

Yes it sucks that some folks in our biz sell VA's to everyone regardless of cost or benefit.

That being said I've recently come to the conclusion that  perhaps I don't appreciate how many folks need that 'security blanket' to take the (perceived) risk of investing in the market....and if they don't make the decision to BUY when the dow is at 7200 because they view risk as being too high, I've done them a disservice.

Food for thought!

____________________________________

Nothing hurts worse more than the truth

I understand what you are saying but who are you investing for?  I hear people say boy the heirs are sure glad we purchased a variable annuity the last couple of years.  And I say boy that poor old soul in the ground is excited too.  Sure some people do invest for their family and heirs, but the discussion centered around variable annuities in all cases.

[quote=The Truth]I understand what you are saying but who are you investing for?  I hear people say boy the heirs are sure glad we purchased a variable annuity the last couple of years.  And I say boy that poor old soul in the ground is excited too.  Sure some people do invest for their family and heirs, but the discussion centered around variable annuities in all cases.[/quote]

Yes Truth, and there are many folks out there who need equity exposure and aren't willing to take the risk without some sort of guarantee.  There are riders which can provide benefits to the owner while they are still living, btw.  You need to inform yourself a bit about the various GMWB and GMIB living benefit riders that are out there.

I do understand where you're coming from, as I used to feel much the same way.  I still think many over-use annuities, and I don't put many in retirement plans, but I have had a real change of heart regarding the product class.