[quote=Broker24] My clients likely do just as well as others, based

on what I see come over from other firms.
[/quote]



There is hidden self-selection bias operating, since clients who’s
assets are well managed probably aren’t ACAT’ing over to you.

[quote=footsoldier]

Look at the DFA website. www.dfaus.com.  Plenty of ammunition to support Starka’s point.

When one takes trading costs (which are not calculated ) into the true cost of ownership, www.personalfund.com, it is difficult but not impossible to make the case for active management vs. passive.[/quote]

The only managers who consistantly excel are going to be strict deep value managers. But these days you can own shares of the S&P pure value ETF's and get the same performance for much less.

[quote=Broker24] [quote=Starka] By law, no one can know anything

that no one else

knows.[/quote]



There are things much more important than performance. For example,

in the distribution years of retirement, you can’t afford the std deviations

you get from the indexes. In addition, when the market gets thrown all

out of whack (i.e. the late '90’s, then the early 20’s), indexes are

extremely inefficient. They can’t adapt since they are not managed. I am

not saying that every MF manager knows the right answers in every

situation, but there are certain money managers I trust to manage my

clients money more than I do the wisdom of the “market”. Yes, you can

re-balance what indexes you hold, but then you are betting your skilss

against talented money managers. Not a bet I want to make.



I manage to minimize risk, not beat some arbitrary index.

[/quote]



Then why don’t these talented money managers consistently beat the

indices? People invest with us for one reason and one reason alone…to

increase their net worth. Period. To believe anything else is simply

foolish.



I agree with the statement that if you were my finanacial advisor and you

said simething as stupid as the above, you’d be fired in a flash.

People invest with us for one reason and one reason alone...to
increase their net worth. Period. To believe anything else is simply
foolish.

Count me as a fool.  Many of my clients are business owners.  They get a much better return by investing in their own business than they can get in retail investments.  They don't need us to increase their net worth.  They got wealthy without us.   

Outside of their business, they are often looking for protection, savings, and guarantees.

Ok.



You’re a fool.

[quote=anonymous]

They don’t need us to increase their net worth.  They got wealthy without us.   

Outside of their business, they are often looking for protection, savings, and guarantees.

Here's some more foolish talk on my end.  My clients who are getting ready for retirement or are already in retirement care more about making sure that they don't outlive their money than they care about their net worth.

Let's add to the foolish talk.  Many of my clients buy significant amounts of whole life insurance.  This lowers their net worth.

[quote=anonymous]

Here's some more foolish talk on my end.  My clients who are getting ready for retirement or are already in retirement care more about making sure that they don't outlive their money than they care about their net worth.

Let's add to the foolish talk.  Many of my clients buy significant amounts of whole life insurance.  This lowers their net worth.

[/quote]

Insurance is a whole 'nother breed of cat, but do you honestly believe that whole life decreases one's net worth?  You need to ask the tax man that question.  I'm sure he'll let you know that death benefit is added to a person's estate.

You really DON'T seem to know what you're talking about!

I'm sure he'll let you know that death benefit is added to a person's estate.

But not until you are dead.  Until then you are paying out more money than you have in cash value accessible to you, therefore lowered net worth.

[quote=Starka][quote=anonymous]

Here's some more foolish talk on my end.  My clients who are getting ready for retirement or are already in retirement care more about making sure that they don't outlive their money than they care about their net worth.

Let's add to the foolish talk.  Many of my clients buy significant amounts of whole life insurance.  This lowers their net worth.

[/quote]

Insurance is a whole 'nother breed of cat, but do you honestly believe that whole life decreases one's net worth?  You need to ask the tax man that question.  I'm sure he'll let you know that death benefit is added to a person's estate.

You really DON'T seem to know what you're talking about!

[quote=joedabrkr] [quote=Starka][quote=anonymous]

Here's some more foolish talk on my end.  My clients who are getting ready for retirement or are already in retirement care more about making sure that they don't outlive their money than they care about their net worth.

Let's add to the foolish talk.  Many of my clients buy significant amounts of whole life insurance.  This lowers their net worth.

[/quote]

Insurance is a whole 'nother breed of cat, but do you honestly believe that whole life decreases one's net worth?  You need to ask the tax man that question.  I'm sure he'll let you know that death benefit is added to a person's estate.

You really DON'T seem to know what you're talking about!

[/quote]

If one structures the policy ownership properly the value of the death benefit can be kept out of the estate, no?
[/quote]

Generally, yes, by using an ILIT.

Insurance is a whole 'nother breed of cat

If we are doing planning, we can't talk help someone with their investments without looking at their whole financial situation and we can't do this without looking at insurance issues.

but do you honestly believe that whole life decreases one's net worth? 

Who owns the policy?  If it is in a trust, every premium payment will lower the person's net worth by the same amount.  If the payer owns the policy, it will certainly lower their net worth for several years.  Even once the cash value is giving them a greater than 0% return, the return may be less than they'd be getting in investments.

You need to ask the tax man that question.  I'm sure he'll let you know that death benefit is added to a person's estate.

The tax man won't let me know that.  Instead, he will let me know that the death benefit is only added to the person's estate if the owner and the insured are the same person.   

You really DON'T seem to know what you're talking about!

If you can point out what place where I posted something not correct, I'd appreciate it.  I like the learning opportunity and you'll enjoy me eating crow. 

You need to ask the tax man that question.  I'm sure he'll let you know that death benefit is added to a person's estate.

The tax man won't let me know that.  Instead, he will let me know that the death benefit is only added to the person's estate if the owner and the insured are the same person.   

Speaking as a former loan officer, you need to make the distinction between net worth and estate valuation.   Net worth is the amount you are worth now.  Estate value is what you are worth dead. 

As a loan officer I can include the cash value of life insurance policies in the total net worth of the client as an amount of net worth that could conceivably be used as loan repayment.  Obviously I would not seriously consider or hope, that a client cashes in their insurance to repay a loan, but nevertheless, it is part of the net worth. 

The cash value of a life insurance policy is less than the actual cash that has been contributed.  The net worth of the client has been reduced by the difference contributed subtracted by the cash value accumulated.  The death benefit is not part of net worth.

Mr A is correct.

The cash value of a life insurance policy is less than the actual cash that has been contributed.

The rest of your post is correct.  This part may or may not be correct.  Typically if the policy is less than about 10 years old this is true, otherwise, the cash value is usually higher.

Typically if the policy is less than about 10 years old this is true, otherwise, the cash value is usually higher.

I stand corrected.  Most policies I have experienced as loan officer material were less than the amount contributed or very close to the amount contributed.    The main point of my posting being to highlight the difference between net worth and estate value as there seemed to be some confusion.

[quote=Spaceman Spiff]

[quote=Kargon]I do know that a Jones broker will liquidate some old ladies Metlife annuity (with a 5% surrender fee without telling her) that is performing well to roll into an IRA and then invest in American Funds A shares, again without telling her.[/quote]

Are you kidding!?  I know a lot of Jones brokers and none of us would do that.  Most of us would keep a good Met annuity.  The only person I've ever heard of doing that was the local US Bank guy. 

First, Field Supervision wouldn't let it happen because the surrender is too big.  We have to prove that it's beneficial to the client to liquidate an annuity.  Then we have to have the client sign all kinds of acknowledgement letters that says they understand.  We haven't even talked about the death benefit yet. 

Second, unless it's already qualified money you can't just roll it into an IRA.  I'll give you the benefit of the doubt and assume you know that.  We may use American Funds A shares, we may not.  I like Goldman and Franklin right now. 

Finally, we'd explain the whole thing to the client before we did it.  A shares and all.  And if it is an IRA, unless the little old lady really wants the death benefit of an annuity or to annuitize, the mutual funds would be cheaper for her in the long run.  No M&E charges.

Maybe there are some IRs out there that are struggling enough that they'd try that hoping they don't get caught, but they are certainly the minority.     

[/quote]

Trust me, the client was never informed and I had to run around and work to get the annuity reinstated, but because the Jones broker had invested in A Shares and taken 10k in commissions, I couldn't get the annuity reinstated.  My firm would have fired me if I had done this to this lady.

[quote=babbling looney]

You need to ask the tax man that question.  I'm sure he'll let you know that death benefit is added to a person's estate.

The tax man won't let me know that.  Instead, he will let me know that the death benefit is only added to the person's estate if the owner and the insured are the same person.   

Speaking as a former loan officer, you need to make the distinction between net worth and estate valuation.   Net worth is the amount you are worth now.  Estate value is what you are worth dead. 

As a loan officer I can include the cash value of life insurance policies in the total net worth of the client as an amount of net worth that could conceivably be used as loan repayment.  Obviously I would not seriously consider or hope, that a client cashes in their insurance to repay a loan, but nevertheless, it is part of the net worth. 

The cash value of a life insurance policy is less than the actual cash that has been contributed.  The net worth of the client has been reduced by the difference contributed subtracted by the cash value accumulated.  The death benefit is not part of net worth.

Mr A is correct.

[/quote]

So what you're saying is that by funding a whole life contract,  A is NOT materially increasing the client's net worth?

No BL, neither one of you are correct.

Example so that Starka can understand.

Junior has no debts and no assets other than the $10,000 that he has sitting in the bank.  He has a net worth of $10,000.

Junior decides to buy a $1,000,000 whole life policy.  The premium is $10,000/year.  He pays the annual premium leaving nothing in the bank.  The cash value of the policy is $0.  He now has a net worth of $0.

[quote=anonymous]

Example so that Starka can understand.

Junior has no debts and no assets other than the $10,000 that he has sitting in the bank.  He has a net worth of $10,000.

Junior decides to buy a $1,000,000 whole life policy.  The premium is $10,000/year.  He pays the annual premium leaving nothing in the bank.  The cash value of the policy is $0.  He now has a net worth of $0.

[/quote]

And Junior's estate is what?

Like I said before Kid...you haven't a clue.

As long as he's alive, he doesn't have an estate.  What's your point?

Since when does someone's estate at death have any bearing on their net worth while alive?