[quote=rankstocks]Here’s the conversation I envision from a snake oil, I mean annuity salesman.

"What if your account value at that other firm goes to 0? We're probably in the next great depression! I don't want to see you run out of money before you die. You've seen the stock market the last year, I think it could go to zero, don't you want to guarantee an income and your principal? Do you wan't your money insured, or uninsured? Let's cash out of that investment strategy you've got and buy this great variable annuity with all these guarantees.  Don't worry, there's no commission because the insurance company pays me  for finding them business.  Let's not discuss costs, because their irrelevant anyway, after all your money is guaranteed, and so is this income at a guaranteed rate of 7% annually compounded.  You can take plenty of income out of this annuity at anytime, just try and keep it below 10% for a few years.  You might not hear from me again for a while (5-7 years), but when I do talk to you again, all these guarantees will be bad because there will me much better ones available then.  I know the choices seem somewhat limited, and I know you wanted some bonds and CD's, but trust me, that doesn't matter with the guarantees."   .....If the client only knew that the chances of them needing to use the GMIB's or GMWB's was actually smaller than the chances of the insurance company going out of business and not being able to honor those same guarantees.[/quote]

I'm sorry that you assume that people are stupid. Did you know that the best way to close a deal is to explain all the "bad" stuff up front? It makes people trust you immediately and they will do business with you.

So Rankstocks, having never sold a VA has a “vision” of how they are sold. 

  Me.....having been a EDJ rep for about 5 years , I don't need a "vision" to know how the company slams people into low rate long term bonds without explaining fully that the "call feature" is most likely never to be used.   Most of the new brokers swallowed the EDJ story hook line and sinker and never questioned or even understood the relationship between a low interest rate long term bond and the likelyhood of it being called in a rising rate environment, much less the effect on the market price of that bond.   Just call and "if you have some money available I think you should buy this bond TODAY!".  Woo hooo Super Shamrock calling sessions!!   Made me sick and was one of the main reasons I left.   My clients know how the markets and interest rates work IF we buy a bond.  They know just exactly the costs of a VA are . They also know how the various guarantees work before they commit to a VA and decide if they are valuable to them are not.   VA's represent about 10% of my book of business and are mostly IRA and 401K Rollovers precisely for the income guarantees.   No one in their right mind or who isn't in DIRE financial straits is planning to take a lump sum from qualified money and generally is looking for that supplimental income stream in retirement.   My clients also clearly understand the concept of an "income pool" versus the actual contract value.   If they forget, we go over it at their semi annual account reviews.   Are there sleazy VA sales people out there?  Of course. But they are the minority of our profession since most of us do more than just sell annuities and you can't keep your clients or get new ones if your reputation is garbage.   So, Rank....until you stop having "visions" and know WTF you are talking about I suggest you discuss things you know.  

[quote=babbling looney]So Rankstocks, having never sold a VA has a “vision” of how they are sold. 

  Me.....having been a EDJ rep for about 5 years , I don't need a "vision" to know how the company slams people into low rate long term bonds without explaining fully that the "call feature" is most likely never to be used.   Most of the new brokers swallowed the EDJ story hook line and sinker and never questioned or even understood the relationship between a low interest rate long term bond and the likelyhood of it being called in a rising rate environment, much less the effect on the market price of that bond.   Just call and "if you have some money available I think you should buy this bond TODAY!".  Woo hooo Super Shamrock calling sessions!!   Made me sick and was one of the main reasons I left.   My clients know how the markets and interest rates work IF we buy a bond.  They know just exactly the costs of a VA are . They also know how the various guarantees work before they commit to a VA and decide if they are valuable to them are not.   VA's represent about 10% of my book of business and are mostly IRA and 401K Rollovers precisely for the income guarantees.   No one in their right mind or who isn't in DIRE financial straits is planning to take a lump sum from qualified money and generally is looking for that supplimental income stream in retirement.   My clients also clearly understand the concept of an "income pool" versus the actual contract value.   If they forget, we go over it at their semi annual account reviews.   Are there sleazy VA sales people out there?  Of course. But they are the minority of our profession since most of us do more than just sell annuities and you can't keep your clients or get new ones if your reputation is garbage.   So, Rank....until you stop having "visions" and know WTF you are talking about I suggest you discuss things you know.  [/quote]

Rankstocks is an EDJ broker?

Oh.... Is he not?   I thought he was from this statement about being on a Diversification Trip.  Maybe other broker dealers call their prizes for selling Diversification Trips?   Sorry everyone, I was out of the country on a Div Trip.  Hammered out over 50 calls each of the last 2 days though.
Either way, my statement about the unscrupulous EDJ bond sales and his total lack of understanding about VAs stands.

[quote=babbling looney]

Oh… Is he not?   I thought he was from this statement about being on a Diversification Trip.  Maybe other broker dealers call their prizes for selling Diversification Trips?   Sorry everyone, I was out of the country on a Div Trip.  Hammered out over 50 calls each of the last 2 days though.
Either way, my statement about the unscrupulous EDJ bond sales and his total lack of understanding about VAs stands.[/quote]

I'm not arguing. I really didn't know that he was with EDJ. That explains a lot. Doesn't EDJ put a cap on annuity commissions to the broker, regardless of the GDC (haircut)?

[quote=Frank Marino] [quote=babbling looney]

Oh.... Is he not?   I thought he was from this statement about being on a Diversification Trip.  Maybe other broker dealers call their prizes for selling Diversification Trips?   Sorry everyone, I was out of the country on a Div Trip.  Hammered out over 50 calls each of the last 2 days though.
Either way, my statement about the unscrupulous EDJ bond sales and his total lack of understanding about VAs stands.[/quote]

I'm not arguing. I really didn't know that he was with EDJ. That explains a lot. Doesn't EDJ put a cap on annuity commissions to the broker, regardless of the GDC (haircut)?
[/quote]
They did when I was there.  Annuity at Jones =2.5 or 3% % commission  vs same annuity outside of Jones 5 to 7%.   I believe that Jones kept the difference in pay out.  In addition they limited the sub accounts in some annuities to reflect the "prefered" funds.  I lost a 2 million dollar 403B group annuity account because the Hartford Annuity that EDJ allowed me to present was pitiful next to the very same Hartford annuity presented by another broker.    Maybe this has changed now, but possibly this is why Rank has such a dim view of VAs.  He has only seen the  shitty crippled ones that EDJ allows them to sell.      Also the fixed annuities (not EIAs which were the devil's spawn) sucked big time.  The rates were not competetive at all.  I sold a couple of them and after going Indy have found out that they were a "special" annuity just for Jones and I couldn't be agent of records.  Ah well... they are reaching maturity and nose diving to the minimum interest rate now.    I've been licensed to sell insurance for about 20 years now and have some basis of comparison.  EDJ  insurance sucks.  Annuities or life insurance.

[quote=rankstocks]Snaggletooth stated, “The purpose for buying most of today’s annuities is for the living benefit.  I do hope you understand how these riders work, both tangible and intangible.  I’m sure you haven’t read any of Moshe Milevsky’s reports or Ibbotson’s studies.”

  An exerpt from Milevsky's key study "The Titanic Option; Valuation of the Guaranteed Minimum Death Benefit in Variable Annuities and Mutual Funds", by Milevsky, Moshe and Steven Posner, as published in the Journal of Risk and Insurance, 2001, Vol. 68. No. 1, 91-126, Professor Milevsky thoroughly demonstrates the cost solely associated with the mortality guarantee (GMDB) is typically less than 15 basis points.  Therefore, while the GMDB is worth only 15 basis points or less, the Mortality and Expense charged by the insurance company (M&E) is usually greater than one hundred basis points and is invariant to factors which affect mortality risk."   Also, which living benefit's are you talking about?  GMIB, GMWB, or GMAB.  All are different, all but the GMAB are smoke and mirrors.  You have to Annuitize to capture the GMIB, and the GMIB annuitization tables used for this calculation are significantly worse than a lump sum immediate annuitization using cash.  GMWB's usually are offered at 4-5% annually unless you are over 65 or 70, at which point the chances of your account value going to 0 is almost non-existant.   After all, if we're using fear tactics to sell these annuities, keep in mind that these guarantees (which are smoke and mirrors) are only as good as the company backing them........[/quote]   You are a little out of date.  I do use GMWB riders which do not require annuitization as previously stated and guarantee income higher than what you said.   Also, regarding Moshe Milevsky's article, maybe you should find "Confessions of a VA Critic", which is more current reading than what you have been doing.  In it, he believes that some of the living benefits on the annuities might actually be undervalued.    For the complete Ibbotson report, you might be able to google Ibbotson Morningstar Variable Annuity + GMWB and find it.  You are missing out and will lose clients to advisors who do have this in their toolbox.    I am utterly amazed that you have locked yourself up in a bomb shelter and have seemed to avoid civilization regarding annuities.  Is it for selfish reasons in that you don't get paid as much on them?

[quote=babbling looney]So Rankstocks, having never sold a VA has a “vision” of how they are sold. 

  Me.....having been a EDJ rep for about 5 years , I don't need a "vision" to know how the company slams people into low rate long term bonds without explaining fully that the "call feature" is most likely never to be used.   Most of the new brokers swallowed the EDJ story hook line and sinker and never questioned or even understood the relationship between a low interest rate long term bond and the likelyhood of it being called in a rising rate environment, much less the effect on the market price of that bond.   Just call and "if you have some money available I think you should buy this bond TODAY!".  Woo hooo Super Shamrock calling sessions!!   Made me sick and was one of the main reasons I left.   My clients know how the markets and interest rates work IF we buy a bond.  They know just exactly the costs of a VA are . They also know how the various guarantees work before they commit to a VA and decide if they are valuable to them are not.   VA's represent about 10% of my book of business and are mostly IRA and 401K Rollovers precisely for the income guarantees.   No one in their right mind or who isn't in DIRE financial straits is planning to take a lump sum from qualified money and generally is looking for that supplimental income stream in retirement.   My clients also clearly understand the concept of an "income pool" versus the actual contract value.   If they forget, we go over it at their semi annual account reviews.   Are there sleazy VA sales people out there?  Of course. But they are the minority of our profession since most of us do more than just sell annuities and you can't keep your clients or get new ones if your reputation is garbage.   So, Rank....until you stop having "visions" and know WTF you are talking about I suggest you discuss things you know.  [/quote]   Babs, do you want to have my baby?

I swear, these annuity salesman just don’t know when to quit.

  I opened an email today from Raymond Ohlson in which he proclaims to possess a little-known annuity strategy. His latest scheme is to convince folks who own annuities  that they are holding a "ticking tax bomb." *Keep in mind that this is coming from one of the biggest proponents of convincing people to buy annuities that exists.   Here's a summary of his little-known strategy:   1. Sell annuities to as many people as possible by emphasizing all the woderful benefits of tax deferral, guarantees, income benefits, death benefits, etc. 2. Call those clients after a few years and explain to them that they are holding a ticking tax bomb, and upon their death, they will very likely bump their heirs into a higher tax bracket if they don't take immediate action. 3. Convince them to buy a single premium life policy with a 10% "upfront bonus" to help offset surrender penalties and taxes on the gains. 4. Get a fat commission for selling the life insurance policy. 5. Repeat over and over and over until you don't have to work anymore because flipping annuities has made you extremely wealthy.    Just when you think you've seen it all...    

snaggletooth,

    You stated, "You are a little out of date.  I do use GMWB riders which do not require annuitization as previously stated and guarantee income higher than what you said."   Of course GMWB's don't require annuitization. GMIB's generally do.  So I really don't understand what you are trying to say.    Babbling Looney:  I will concede to your point that some advisors at Jones sell the call date on long term paper.  I'm glad you disclose everything I have been talking about on VA's.  If a few other advisors were selling the call and that was one of the main reasons you left Jones, it must not take much to set you off.   Borker Boy: I've got a subscription to Annuity Monthly (or something like that, can't remember the exact title) that comes to my office.  I literally feel like I need a shower after I skim through it.  It's got more sleeze than Hustler magazine.

[quote=rankstocks]snaggletooth,

    You stated, "You are a little out of date.  I do use GMWB riders which do not require annuitization as previously stated and guarantee income higher than what you said."   Of course GMWB's don't require annuitization. GMIB's generally do.  So I really don't understand what you are trying to say.   [/quote]   I was just saying that it seems you might be out of date a little bit based on some things you've said, and in regards to Milevsky's article, it isn't one of his more current writings.   As far as GMWB, you had asked which living benefit I was talking about, and I said the GMWB is what I use.

[quote=rankstocks]snaggletooth,

    You stated, "You are a little out of date.  I do use GMWB riders which do not require annuitization as previously stated and guarantee income higher than what you said."   Of course GMWB's don't require annuitization. GMIB's generally do.  So I really don't understand what you are trying to say.    Babbling Looney:  I will concede to your point that some advisors at Jones sell the call date on long term paper.  I'm glad you disclose everything I have been talking about on VA's.  If a few other advisors were selling the call and that was one of the main reasons you left Jones, it must not take much to set you off.   Thank you.  Will you also concede my point that the Variable annuities that Jones allows (allowed? maybe it has changed since I left Jones) were crippled and tailor made just for Jones?  And that the reason you probably don't do VAs is that you haven't been educated or exposed to "good" products.  Also that the fixed annuities were specially made for Jones and are non competetive in the real world.   Again, VAs comprise only about 10% of my product mix so don't go thinking that I'm in "love" with the product and sell them at the expense of more suitable investments.   It's just that as an advisor, it is incumbent upon you to be aware of and educated about ALL the available strategies and avenues for your clients.  If you blindly refuse to be a well rounded advisor, you can be doing considerable harm .   What ticked me off was the training of the new IRs by people who should have known better or who were deliberately deceptive.  Encouraging the new IR who was a former beer truck driver or RV salesman to slam people into an investment WITHOUT even bothering to educate the IR of the consequences.  It became abundantly clear to me that Jones itself, didn't give doo squat about the ramifications on the client or the IR's reputation or future when these investments were to go sour.     The poor deluded but well meaning IR was just doing what he/she was trained to do.    I met many very fine people while at Jones.  Jones, the company, doesn't care how many IRs they burn out or really what happens to their clients. It's all about profit.......as it should be in any business.  But puleeeeze......give up the holier than thou, sainthood pretense that EDJ cares  more about its clients than others or even  that it really cares about its employees.    Borker Boy: I've got a subscription to Annuity Monthly (or something like that, can't remember the exact title) that comes to my office.  I literally feel like I need a shower after I skim through it.  It's got more sleeze than Hustler magazine.   I have to agree here.  The worst are the EIA salesmen and their publications.  Again.  It's all about being educated about all products and all of the techniques being used whether you use them or not.[/quote]   Nobody ever learned anything with a closed mind.

I am an EDJ advisor, and I love VA’s in qualified contracts for the Lifetime Income Guarantee. Believe me, it helps our clients sleep better at night. I always explain

they are sacrificing some performance, when compared to a Mutual fund due to the internal costs carried by the VA for the guarantees, but most people that I am talking with that are at the Retirement stage, when chosing between investing the equity portion of their portfolio in mutual funds vs VA's with Lifetime income guarantees are choosing the VA. It gives them more peace of mind in an uncertain and unstable world. Sure it costs something, but for many people the price is worth it.

Does anyone have a good analogy for explaining the marketlock-like features of the different VAs, i.e., show one column as the “walk-away” amount and one column as the “pension” amount, etc.?

  I've never developed a good analogy for the GMIB, and most folks glaze over 45 seconds into my presentation.

[quote=Borker Boy]

 …and most folks glaze over 45 seconds into my presentation.[/quote]

Are you focusing too much on the numbers and too little on the emotions (client will never outlive their $$$)?

[quote=Borker Boy]Does anyone have a good analogy for explaining the marketlock-like features of the different VAs, i.e., show one column as the “walk-away” amount and one column as the “pension” amount, etc.?

  I've never developed a good analogy for the GMIB, and most folks glaze over 45 seconds into my presentation.[/quote]   We've already discussed multiple sales stories, analogies, etc. for the VA's living benefits on the more productive site, RegRepsDotCom.  You should check those out.   If people are glazing over in the first 45 seconds, you're talking at them and not finding their pain.   Nick Murray says it best.  "It's not a principle problem, it's an income problem".  Get people to understand how income distribution works in accounts.  Use dollars so they understand it.  $50,000 means more to most people than 5%.    If you use a hypothetical illustration, you can write "mutual funds" above the contract value column and "Pension" above the MGWB or whatever rider column.  They need to know the contract value is their "take the money and run after surrender period" amount and they will get a $ figure for life from their pension side.   If you're good enough to not use a hypothetical illustration, then draw it out on a piece of paper, or describe it using your hands (one hand is contract value, the other is the pension).    Also, if you start by describing a worst case scenario, it makes it easier to understand how real returns factor into it.

Rank - from one Jones guy to another, you need to have your AIG guy take you to lunch and have him explain the living benefits to you.  They make total sense for a portion of your clients portfolio if they are taking income.  Even if they aren’t taking it yet, that 7% step up, guaranteed for 15 years is a big benefit.  Is there another investment we have access to that will GUARANTEE your clients can get an automatic raise?  I can’t find one.  They’re not for everyone.  But you’ll lose clients to the bank or other advisors who your clients come into contact with.  I lost a $1 mil referral to the bank last year because she was shopping for an advisor and he showed her one before I got the chance to.  And it was a B share, not an A share.  You talk to a prospect or client that has an old B share annuity and you can come awfully close to guaranteeing not just their death bene, but an income bene for the expense they are already paying. 

  I don't know that I have a large IRA that my client is using for income that we haven't had a discussion about living benefits.  Some say no thanks, some say sign me up.  All of them are thankful.  And all of them have heard about it from me first.    Think about it like the LTC discussion.  You HAVE to talk to you clients about it or else their kids may haul your  butt to arbitration.  What if you have an strategy to GUARANTEE income for the rest of your clients life, but choose to use traditional funds instead.  20 years down the road, the worst case actually happens and that client is out of money.  Now the kids have to use their retirment plans to supplement that income.  Somehow they find out about annuities with living benefits and ask you why you didn't offer their parents one?  You hem and haw, but at the end of the day you don't have a great answer other than you didn't think they were appropriate.  Well, the next week you get  a letter in the mail inviting you to an arbitration hearing.  I'll bet it wouldn't go very well.    Just my thoughts, but you might want to at least have lunch with one of our vendors (I'd recommend the AIG product) and get the details.   

I put a fair amount of qualified money into VA's.  However, I don't try to sell VA's.  Instead, they are just an option that I give to my clients.  They have pluses and minuses.  It makes no difference to me whether they buy one because I'm going to get paid regardless of the investment. 

The worst case scenario with a VA is much better than the worst case scenario with mutual funds.  The client needs to know this.   On the other hand, the expenses can be a big drag on performance and the client also needs to know this.  Present a fair picture of annuities and you'll make plenty of annuity sales.

It appears to be a no-win situation:

      "You inappropriately sold my mother an annuity! We're going to arbitration!"                                                    -or-   "You failed to sell my mother an annuity! We're going to arbitration!"

I disagree.  If it is sold appropriately, even if you are taken to arbitration, you'll have a legitimate case for why you did it.  I think it's easier to argue "here's why I did it" than it is "here's why I didn't."