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[quote=3rdyrp2]
Me too...the account in question though was an old 401(k) rolled into a VA. I have no idea of anything about this person, except she's a married female in her 30's. I couldn't tell you if a VA is appropriate at all for her or not. I don't condone anything the salesman did, considering the annuity we're talking about it one w/a 12 year CDSC and a REIT with a 16% surrender. I've never heard of a REIT like that, so this guy has to be shady as hell. The reason I asked about the living/death benefit is because although the investments are down 36% over the past year, the contract value may be much higher than that as long as the money stays in the annuity. If I were Hank I'd ask his sister what made them decide to go with the annuity. Was it the only option given to them? They signed the paperwork so it'd be nice to know what made them decide "Yes, this sounds like a great idea for my old 401(k)". Do you have that info, Hank?
[/quote] I think you do have enough information. Investor in their 30's with qualified money. 25-30 years before she will use the money. NO WAY a VA is appropriate. Insurance companies created variable annuities as a way to make money and they do that better for the insurance company than they do the investor.You’re probably right. I can’t think of a situation where it would be appropriate for a 30 something woman, but didn’t want to make the generalization in case I wrong. I don’t agree with the idea that annuities were created with insurance company profit in mind. They are very much appropriate in many situations.
They are appropriate in many situations. But if you think an insurance company is doing it out of the kindness of their heart, you’re wrong. It’s a business and the purpose of the business is to make money. Maybe they said “how can we better serve our customers and make money” but if they couldn’t make money they wouldn’t do it. We are talking about insurance companies here remember.
The real question here is why the hell is Hank Newbie's sister not working with him? Who are you going to trust more than your family?He is new into the business and I take it she wants to do business with him but can’t right now.
I am not a big VA guy, but they certainly have their place, and those who dismiss them out of hand may be doing themselves and certain clients a disservice.
For example, neither jkl1V etc. or Hank Newbie seem to want to address the very common issue of dealing with clients whose risk avoidance is so strong that the only way they will stay invested in equities is to have the living benefits guarantee in most recent VAs. That is why I said:
[quote=Morphius] Forget the unnecessary tax deferral canard - today’s
VAs are all about living benefit guarantees. Ask those clients with
living benefit guarantees inside an IRA over the past year or so if
they wish they had been in mutual funds instead. [/quote]
Living benefits are completely different than death benefits, Hank, so I’m not sure why you would say:
[quote=Hank Newbie]Thought about that too. I feel soooo much better
knowing that if she dies, my brother-in-law will have that much
more money to blow on his next wife.[/quote]
Do you know what the living benefit is on your sister’s VA?
Moving on.
[quote=jkl1v1n6]Do you really think a VA inside a Roth IRA is the most efficient way for a 30 year old to save for retirement? [/quote]
The VA is in a traditional IRA, not a Roth. REITS are in the Roths.
[quote=jkl1v1n6]Don’t need or want the death benefit or living benefit. That’s why they have life and disability insurance. [/quote]
I don’t know about your client base but I have yet to meet many people who don’t “need or want” death benefit, or more death benefit, especially those who are rated or uninsurable, and none who don’t want the guarantee of living benefits. The only issue is whether the cost is worth the benefit - many think it is. Many are perfectly happy to pay an insurance premium in order to insure some portion of their assets. Who are you to tell them that is not “efficient?”
And disability insurance has nothing to do with the typical VA purchaser, and I’m not sure why you would even bring it up in this context. Apples and oranges: two different tools, protecting two different things.
[quote=jkl1v1n6]They need growth and tax deferral. In 30 years when she retires then maybe but not now. [/quote]
Perhaps if you assume the client’s marginal tax rate will be lower in retirement - an assumption which may or may not turn out to be accurate, as we cannot know the future. Ask your client if they think it is likely the tax rates themselves are likely to go lower or higher in the future, especially with all the new government debt we are leaving for our children to pay. It’s certainly possible that you could be leading them to defer taxes only to find they will have a larger tax hit because of it. It may not happen, but the point is we won’t know for a long time, so don’t be too quick to simply accept the common assumptions. Think for yourself.
[quote=jkl1v1n6]This is why annuity salespeople get a bad name. Annuities are appropriate in certain circumstances but I will be hard pressed to believe this is best for her.[/quote]
Any product misused can be a problem, but it’s equally wrong to say that a product itself is always and inescapably bad because some recommend or sell it when perhaps they shouldn’t. Don’t confuse the product with the seller of the product. If you take that approach, they should make cars illegal, and those who sell them crooks, as they kill thousands each year. And don’t even get me started on motorcycles …
[quote=jkl1v1n6]I think you do have enough information. Investor in
their 30’s with qualified money. 25-30 years before she will use the
money. NO WAY a VA is appropriate. [/quote]
That is an opinion, not a statement of fact. For example, you give zero weight to the behavior modification value of VA living benefits, especially with the heightened fears people have over “losing everything” in these crazy markets. If the only way to get her to invest in equities for long term growth is to use a VA with the higher costs they entail, and the alternative is cash or money market where she will lose real purchasing power, it is certainly appropriate. It is only inappropriate if you assume that investors have the ability to invest and act rationally and without emotions. The last year has once again shown the folly of that misconception with many clients.
Finally, I presume 3rdyrp2 (below) meant to talk about putting an annuity inside an IRA, and not vice versa.
[quote=3rdyrp2]
By bolding the word “annuity” you came across as someone who has a
problem with putting an IRA inside an annuity. Most people who don’t
like the idea of an IRA inside an annuity use the reasoning of “Why
would we need an annuity if the IRA is already tax-deferred?”. [/quote]
Yeah, just got finished reviewing my sister’s accounts. Her “friendly local home-town RIA” rolled all of her previous 401K money into an IRA (Individual Retirement Annuity) with a 12% over 12 year CDSC. He also opened two roth’s for her and my brother-in-law, and deployed the money 100% into a private REIT with a 16% CDSC. If you ask me, this is why this industry has ended up where it is. You guys are wolves in sheep clothing…
The private reits we use(Inland, Cole, KBS) all have $250K networth(not including real estate,cars etc.. essentially investable assets) or $70K income and $70K networth.. and we are not allowed to put more than 25% combined into a reit.. and none of them have 16% CDSCs..
Secondly and this may have been covered but an RIA can only charge fees, so they get to buy into the three I listed at NAV so their would be no CDSC.
I echo morphius’ post… I used to be against all VAs(former Jones, i think we are programmed to believe they are bad) however as I have left them I find plenty of places to use them… Clients who need to be in equities but will never be without some guarantee. Clients who need the income because they didn’t save enough for retirement. There are tons more examples, as Morphius said, VAs need to be evaluated on a case by case basis…
Though they do get a bad rap because a lot of unqualified insurance guys sell them
[quote=Morphius] I am not a big VA guy, but they certainly have their place, and those who dismiss them out of hand may be doing themselves and certain clients a disservice.
For example, neither jkl1V etc. or Hank Newbie seem to want to address the very common issue of dealing with clients whose risk avoidance is so strong that the only way they will stay invested in equities is to have the living benefits guarantee in most recent VAs. That is why I said:
[quote=Morphius] Forget the unnecessary tax deferral canard - today's VAs are all about living benefit guarantees. Ask those clients with living benefit guarantees inside an IRA over the past year or so if they wish they had been in mutual funds instead. [/quote]
Living benefits are completely different than death benefits, Hank, so I'm not sure why you would say:
[quote=Hank Newbie]Thought about that too. I feel soooo much better knowing that if she dies, my brother-in-law will have that much more money to blow on his next wife.[/quote]
Do you know what the living benefit is on your sister's VA?
Moving on.
[quote=jkl1v1n6]Do you really think a VA inside a Roth IRA is the most efficient way for a 30 year old to save for retirement? [/quote]
The VA is in a traditional IRA, not a Roth. REITS are in the Roths. My bad, I missed that! Still her rollover should not have gone to a VA.
[quote=jkl1v1n6]Don't need or want the death benefit or living benefit. That's why they have life and disability insurance. [/quote]
I don't know about your client base but I have yet to meet many people who don't "need or want" death benefit, or more death benefit, especially those who are rated or uninsurable, and none who don't want the guarantee of living benefits. The only issue is whether the cost is worth the benefit - many think it is. Many are perfectly happy to pay an insurance premium in order to insure some portion of their assets. Who are you to tell them that is not "efficient?" Don't need or want the benefits provided inside the annuity when they could be achieved elsewhere. I'm pretty sure I said somewhere that annuities were used in certain circumstances, like uninsurable. If you discuss the costs and benefits to a thirty year old versus your other options, the clients I work with don't think it is worth it. In response to who am I to tell them it is not efficient, I am their advisor, it's what I get paid to do.
And disability insurance has nothing to do with the typical VA purchaser, and I'm not sure why you would even bring it up in this context. Apples and oranges: two different tools, protecting two different things. I use DI to protect against and replace lost wages. When an income rider is used, I use it to replace the income they are no longer receiving from wages.
[quote=jkl1v1n6]They need growth and tax deferral. In 30 years when she retires then maybe but not now. [/quote]
Perhaps if you assume the client's marginal tax rate will be lower in retirement - an assumption which may or may not turn out to be accurate, as we cannot know the future. Ask your client if they think it is likely the tax rates themselves are likely to go lower or higher in the future, especially with all the new government debt we are leaving for our children to pay. It's certainly possible that you could be leading them to defer taxes only to find they will have a larger tax hit because of it. It may not happen, but the point is we won't know for a long time, so don't be too quick to simply accept the common assumptions. Think for yourself. So do you tell your current clients that because you don't know for sure what tax bracket they'll be in or what they will even be in the future, it might be higher and you might pay more in taxes so we're just going to keep you in this taxable account. My guess is for most people tax deferral and the power of compounding returns will have them better off in thirty years.
[quote=jkl1v1n6]This is why annuity salespeople get a bad name. Annuities are appropriate in certain circumstances but I will be hard pressed to believe this is best for her.[/quote]
Any product misused can be a problem, but it's equally wrong to say that a product itself is always and inescapably bad because some recommend or sell it when perhaps they shouldn't. Don't confuse the product with the seller of the product. If you take that approach, they should make cars illegal, and those who sell them crooks, as they kill thousands each year. And don't even get me started on motorcycles ...You didn't read what I wrote. I said they ARE appropriate in certain circumstances, but this guy is the reason annuity SALESPEOPLE get a bad name. I think it is abundantly clear that I am not confusing the product with the seller.
[quote=jkl1v1n6]I think you do have enough information. Investor in their 30's with qualified money. 25-30 years before she will use the money. NO WAY a VA is appropriate. [/quote]
That is an opinion, not a statement of fact. For example, you give zero weight to the behavior modification value of VA living benefits, especially with the heightened fears people have over "losing everything" in these crazy markets. If the only way to get her to invest in equities for long term growth is to use a VA with the higher costs they entail, and the alternative is cash or money market where she will lose real purchasing power, it is certainly appropriate. It is only inappropriate if you assume that investors have the ability to invest and act rationally and without emotions. The last year has once again shown the folly of that misconception with many clients.You are correct it is an opinion and not a fact. It is a very large generalization of what is appropriate for the large majority of investors. If it is the only way to get a thirty year old to invest into equities you haven't done your job in educating the investor. You have to explain away the irrational thinking of "losing all your money". You have to explain to them investing, this isn't a crap shoot, we do this to increase wealth. You have to educate your clients in the beginning and all throughout your relationship with them. I believe if you educate your clients and do your job correctly a thirty year old investor would NEVER go into an annuity. Yes some EXTREME circumstances will pop up from time to time.
Finally, I presume 3rdyrp2 (below) meant to talk about putting an annuity inside an IRA, and not vice versa.
[quote=3rdyrp2] By bolding the word "annuity" you came across as someone who has a problem with putting an IRA inside an annuity. Most people who don't like the idea of an IRA inside an annuity use the reasoning of "Why would we need an annuity if the IRA is already tax-deferred?". [/quote]
[/quote]
Rather than get into an even more convoluted and hard to follow blow-by-blow response, jkl1v1n6, suffice it to say we do not share the same opinions on the VA issue or on client management.
You concede that your reasoning is a large generalization based on opinion rather than fact, yet you are adamant that no 30 year old should ever buy an annuity, except in “EXTREME” circumstances which you have apparently never encountered.
You apparently cannot conceive of any 30 year old legitimately being more - or less - risk averse that the typical 30 year old, and
see it as your duty to “explain away [their] irrational thinking.” In this you confuse typical with rational: just because one person may be more risk averse than what may be typical, it does not necessarily follow that they are therefore irrational.
But I won’t waste my breath belaboring this. Instead I’ll just repeat and emphasize what I said earlier:
[quote=Morphius]
I am not a big VA guy, but they certainly have their place, and those
who dismiss them out of hand may be doing themselves and certain
clients a disservice.[/quote]
I agree with everything that Morphius has said in this thread.
It is not very often that I sell a VA to a 30 year old for an IRA rollover. There are times however that I do. It's nice to be able to promise my client that they will double their money over 20 years as WORST CASE SCENARIO. I'm talking GMAB and not GMIB. This allows conservative clients to invest aggressively and stay invested aggressively. It is this change in investor behavior that makes all of the difference. If I put an aggressive investor inside of the same VA, the 20 year doubling of their investment is still a nice floor, but it comes with a huge decrease in the upside potential because of the expenses. The bottom line is that it can make sense depending upon the fact pattern.[quote=anonymous]I agree with everything that Morphius has said in this thread.
It is not very often that I sell a VA to a 30 year old for an IRA rollover. There are times however that I do. It's nice to be able to promise my client that they will double their money over 20 years as WORST CASE SCENARIO. I'm talking GMAB and not GMIB. This allows conservative clients to invest aggressively and stay invested aggressively. It is this change in investor behavior that makes all of the difference. If I put an aggressive investor inside of the same VA, the 20 year doubling of their investment is still a nice floor, but it comes with a huge decrease in the upside potential because of the expenses. The bottom line is that it can make sense depending upon the fact pattern.[/quote]And the commission is nice too
You still alive???? Breaking any ice?If you were starting brand new, no contacts, no rich family… and had 30 days to do $6K gross… what would you do…?
[quote=BerkshireBull] [quote=anonymous]I agree with everything that Morphius has said in this thread.
It is not very often that I sell a VA to a 30 year old for an IRA rollover. There are times however that I do. It's nice to be able to promise my client that they will double their money over 20 years as WORST CASE SCENARIO. I'm talking GMAB and not GMIB. This allows conservative clients to invest aggressively and stay invested aggressively. It is this change in investor behavior that makes all of the difference. If I put an aggressive investor inside of the same VA, the 20 year doubling of their investment is still a nice floor, but it comes with a huge decrease in the upside potential because of the expenses. The bottom line is that it can make sense depending upon the fact pattern.[/quote]And the commission is nice too
[/quote] Nice way to cut through the BS, Badger....
Putting the money into a fee based account and charging 1% a year will net me far more than the annuity. The commission is nice, but it’s not about that.
I am looking to do an additional $4k this by july 31st. Anybody have some ideas that are working in their market for drumming up new business/
An additional $4K. not just $4K… I have mostly feebased accounts that pay quarterly but I am looking to add an additional $4k this month from non-fee accts.
Fixed Annuities are very competitive vs. CDs in my market. Add onto that tax-deferral, creditor protection, and ability to annuitize, and it could be attractive to your conservative clients.
$120k @ 3% = $4k GDC