Invest a rollover!
96 RepliesJump to last post
Subaccounts may have similar expenses to their mutual fund counterparts, but once you wrap a subaccount with the M&E, it is going to underperform in most instances. Exceptions to this would be short time frames and A share mutual funds below any breakpoints. B share annuity contracts have higher internal expenses than A share annuity contracts. So the exceptions I listed almost never apply because of surrender charges and who puts $10m into an annuity? I do not claim to have run a hypo on every annuity subaccount compared to its MF counterpart, but every single one I have run, the subaccount underperformed. If anyone could give me a specific example showing the opposite, I would be very interested.
I put every single client in CD’s. That is because they are FDIC insured. LOL!
[quote=Primo]Subaccounts may have similar expenses to their mutual fund counterparts, but once you wrap a subaccount with the M&E, it is going to underperform in most instances. Exceptions to this would be short time frames and A share mutual funds below any breakpoints. B share annuity subaccounts have higher internal expenses than A share annuity subaccounts. So the exceptions I listed almost never apply because of surrender charges and who puts $10m into an annuity? I do not claim to have run a hypo on every annuity subaccount compared to its MF counterpart, but every single one I have run, the subaccount underperformed. If anyone could give me a specific example showing the opposite, I would be very interested.[/quote]
B share annuity subaccounts and A share annuity subaccounts? Do you have any clue as to how ignorant you have just proven yourself to be? Did I just ask a dumb question? Of course, you have no clue.
You are right, post was wrong. Change subaccount to contract. Nice catch. Now, wanna take a stab at a subaccount that outperforms its related mutual fund? It is amazing to me Bobby how you always post such bluster, but there is never any substance to back it up. Typical annuity slinger.
[quote=Primo]
You are right, post was wrong. Change subaccount to contract. Nice catch. Now, wanna take a stab at a subaccount that outperforms its related mutual fund? It is amazing to me Bobby how you always post such bluster, but there is never any substance to back it up. Typical annuity slinger.
[/quote]How can I show substance to someone who is unable to recognize it?
this is flowing pretty nicely into what nick murray calls investor performance vs. investment performance. is generating .5-1% per year over and above some arbitrary index going to guarantee any of our clients a successful PLAN? if they get a long term return of 7.8% and their neighbor gets 8.7% did they somehow lose the game? maybe some of these living benefits simply allow them to participate and get the 7.8% when they otherwise would have taken the latest “special rate” at the local bank, giving them the wonderful 5%. why is performance the ONLY thing we ever seem to care about (not everyone, but most anti-insurance people) anyone have clients who have done the most STUPID things ever at the wrong time, like 2-3 months ago? we all have those clients that no matter how many times we would show them charts and diagrams of long term market performance they will run for the hills in a down market.
my biggest concern is that the riders/benefits are not being priced properly and could cause problems down the road.I believe that’s why the majority of them have the ability to reprice that rider every contract anniversary. It would be horrible to see this living benefit situation turn into something akin to LTC providors. There were a lot of them that didn’t price things the right way and are now out of business. And their former clients are left to fend for themselves. While I don’t see that happening with the insurance companies, I can understand the concern.
Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.Let's see what happens when all those annuity income riders start coming due. The riders are great for the clients, as long as economic armeggedon doesn't come. I wonder if the insurance companies all ran hypotheticals on a prolonged bear market, (i.e. the 70's) to see what would happen if all these Baby Boomers tried to cash in on those guarantees. Don't get me wrong, they products are great. I just worry about the worst-case scenario. That's why insurance providor selection and diversification of providors is important. Many of the advisors I knwo that sell annuities are starting to use multiples providors just to defend against this. But I suppose if Hartford or Met or Lincoln or the other big ones fail due to over-redemption, we are likely all screwed anyway.I believe that’s why the majority of them have the ability to reprice that rider every contract anniversary. It would be horrible to see this living benefit situation turn into something akin to LTC providors. There were a lot of them that didn’t price things the right way and are now out of business. And their former clients are left to fend for themselves. While I don’t see that happening with the insurance companies, I can understand the concern.
[quote=Spaceman Spiff]I believe that’s why the majority of them have the ability to reprice that rider every contract anniversary. It would be horrible to see this living benefit situation turn into something akin to LTC providors. There were a lot of them that didn’t price things the right way and are now out of business. And their former clients are left to fend for themselves. While I don’t see that happening with the insurance companies, I can understand the concern. [/quote]
“Majority of them?” Do this…name ONE company that can reprice every contract anniversary.
[quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.Let's see what happens when all those annuity income riders start coming due. The riders are great for the clients, as long as economic armeggedon doesn't come. It's good to see that you see that annuities are great, with the qualification that we're able to stave off Armageddon. I wonder if the insurance companies all ran hypotheticals on a prolonged bear market, (i.e. the 70's) to see what would happen if all these Baby Boomers tried to cash in on those guarantees. Don't get me wrong, they products are great. I just worry about the worst-case scenario. That's why insurance providor selection and diversification of providors is important. Many of the advisors I knwo that sell annuities are starting to use multiples providors just to defend against this. But I suppose if Hartford or Met or Lincoln or the other big ones fail due to over-redemption, we are likely all screwed anyway.[/quote][quote=Spaceman Spiff]I believe that’s why the majority of them have the ability to reprice that rider every contract anniversary. It would be horrible to see this living benefit situation turn into something akin to LTC providors. There were a lot of them that didn’t price things the right way and are now out of business. And their former clients are left to fend for themselves. While I don’t see that happening with the insurance companies, I can understand the concern.
You do understand that not everybody will access the benefits at the same time, don't you? It doesn't sound like it.
[quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote]Do you understand that there are a LOT of people who are willing to sacrifice one thing to get another? It doesn't seem like you do. There are a LOT of people who are not interested in assuming enough risk to TRY to make a higher return when a guarantee outcome is offered to them.
No, I realize that. And I doubt this would even happen anyway. My point was if we entered financial “chaos” and the insurance companies had to start recording guarantee liabilites on their books above their internal market returns for extended periods, we would be in trouble. However, I am not sure what type of reserves they must maintain on the income guarantees, so I don’t actually know the likelihood of this happening. I liken it to what has happened with the sub-prime writedowns - all of a sudden all these financial companies are writing down their assets to the point of insolvency. This is what I am speculating could happen with income guarantees (again, I don’t know the likelihood).
I woudl be curious to know what type of re-insurance exists on these income riders. Sort of the insurance industry's version of FDIC.[quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote] You are correct. I was merely pointing out the reasons that subaccounts may very from retail funds. And I generally separate the insurance costs from the investment performance. I will say to people, "do you want the chance to earn 7%, or a guaranteed 7%, and it will cost you 1.5%". I am very clear that you are basically buying insurance on your investments. However, what if you take advantage of that guarantee when the market is in the toilet? What if your subaccounts lose 18% when you are taking income? Which one comes out ahead? I can tell you, during the income phase, variable annuities can absolutely outperform mutual funds, straight-up (including COI). Mind you, I am NOT a big annuity guy, but you can't just look at these things during bull-market accumulation years. You have to consider all market cycles and investor life cycles. And how many retirees would invest as aggressively OUTSIDE a VA? VA's give you the ability to invest more aggressively than you otherwise would. Lot to think about....[quote=VA Salesman] [quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote]Do you understand that there are a LOT of people who are willing to sacrifice one thing to get another? It doesn't seem like you do. There are a LOT of people who are not interested in assuming enough risk to TRY to make a higher return when a guarantee outcome is offered to them.
[/quote] I do understand and actually agree with your post save one word. LOT. Your opinion and my opinion differ on this. While I do 10% annuities, and you do 100% annuities, most likely I am underutilizing this investment and you are overutilizing annuities. I don't believe that 100% of anyones (assuming full service brokerage that have access to various investment choices) book should be in one type of investment, unless you can do no other type of business because of your b/d or you turn away a good portion of business that the investment is not appropriate for. As far as performance of SA vs. MF, my question was in response to an earlier post that said SA's outperform MF's. This is not a performance argument. I would just like an example of the previous claim.
[quote=B24]No, I realize that. And I doubt this would even happen anyway. My point was if we entered financial “chaos” and the insurance companies had to start recording guarantee liabilites on their books above their internal market returns for extended periods, we would be in trouble. However, I am not sure what type of reserves they must maintain on the income guarantees, so I don’t actually know the likelihood of this happening. I liken it to what has happened with the sub-prime writedowns - all of a sudden all these financial companies are writing down their assets to the point of insolvency. This is what I am speculating could happen with income guarantees (again, I don’t know the likelihood).
I woudl be curious to know what type of re-insurance exists on these income riders. Sort of the insurance industry's version of FDIC.[/quote]I don't think you're curious. I think you want to argue about something that you feel threatened by.
[quote=Primo][quote=VA Salesman] [quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote]Do you understand that there are a LOT of people who are willing to sacrifice one thing to get another? It doesn't seem like you do. There are a LOT of people who are not interested in assuming enough risk to TRY to make a higher return when a guarantee outcome is offered to them.
[/quote] I do understand and actually agree with your post save one word. LOT. Your opinion and my opinion differ on this. While I do 10% annuities, and you do 100% annuities, most likely I am underutilizing this investment and you are overutilizing annuities. I don't believe that 100% of anyones (assuming full service brokerage that have access to various investment choices) book should be in one type of investment, unless you can do no other type of business because of your b/d or you turn away a good portion of business that the investment is not appropriate for. As far as performance of SA vs. MF, my question was in response to an earlier post that said SA's outperform MF's. This is not a performance argument. I would just like an example of the previous claim.[/quote]
You seem to form a lot of opinions, based on assumptions that haven't been verified. This makes you look more stupid than you really are.
[quote=VA Salesman] [quote=Primo][quote=VA Salesman] [quote=Primo][quote=B24]Actually, there are some annuity sub-accounts that do outperform their retail brethren (before M&E, riders, etc.). This typically happens in a bloated retail fund. I don’t have any current examples, and don’t have time to search for one, but at one time I did come across this. It happens because they are separate funds. Let’s say the retail fund is a $25B fund and the annuity subaccount is a $500mm fund. Which one has the easier time finding good ideas and making them meaningful? Also, cashflow in and out of the respective funds will have an impact on level of invested cash. So it will also vary depending on an up market or down market.
Now, I don't know if all subaccounts are managed separately from their retail funds like this. But the ones that I see frequently do maintain separate funds.[/quote] Until you can purchase the subaccount outside the annuity, this is an invalid argument. The M&E is part of the investment. Returns sans M&E may be incrementaly (sp?) better in some or maybe most cases, but the return to client is lower in every example I have seen. I invite anyone with a specific example showing I am wrong to please post it.[/quote]Do you understand that there are a LOT of people who are willing to sacrifice one thing to get another? It doesn't seem like you do. There are a LOT of people who are not interested in assuming enough risk to TRY to make a higher return when a guarantee outcome is offered to them.
[/quote] I do understand and actually agree with your post save one word. LOT. Your opinion and my opinion differ on this. While I do 10% annuities, and you do 100% annuities, most likely I am underutilizing this investment and you are overutilizing annuities. I don't believe that 100% of anyones (assuming full service brokerage that have access to various investment choices) book should be in one type of investment, unless you can do no other type of business because of your b/d or you turn away a good portion of business that the investment is not appropriate for. As far as performance of SA vs. MF, my question was in response to an earlier post that said SA's outperform MF's. This is not a performance argument. I would just like an example of the previous claim.[/quote]
You seem to form a lot of opinions, based on assumptions that haven't been verified. This makes you look more stupid than you really are. Again all bluster, no substance. Please explain assumptions that haven't been verified.
[/quote]
[quote=VA Salesman] [quote=B24]No, I realize that. And I doubt this would even happen anyway. My point was if we entered financial “chaos” and the insurance companies had to start recording guarantee liabilites on their books above their internal market returns for extended periods, we would be in trouble. However, I am not sure what type of reserves they must maintain on the income guarantees, so I don’t actually know the likelihood of this happening. I liken it to what has happened with the sub-prime writedowns - all of a sudden all these financial companies are writing down their assets to the point of insolvency. This is what I am speculating could happen with income guarantees (again, I don’t know the likelihood).
I woudl be curious to know what type of re-insurance exists on these income riders. Sort of the insurance industry's version of FDIC.[/quote]I don't think you're curious. I think you want to argue about something that you feel threatened by.
[/quote] ?? WTF does that mean? I know they have re-insurance, I am just curious how it would work in this case. If you actually read my threads, you'd see I am not really "threatened" at all. It was more of an academic conversation if anything. I highly doubt the probability of insurance failures, but I am interested in the "what-if" factor. As I said previously, I like a lot of the new income products out there, and have started using them. Not sure why you have to act like such a pr!ck about it.