Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
My free dinner and sales pitch
Old 07-24-2015, 11:00 AM   #81
Full time employment: Posting here.
Dog's Avatar
 
Join Date: Apr 2006
Posts: 781
My free dinner and sales pitch

I went to a CPA/PFS in April 2014 for the purpose of him vetting my financial plan to retire in the next year or two.
Provided him all the details and he provided a nice multi-page document that showed we could retire that day based on our desired spending goals (in fact we could increase the spending goals).
He spent about 10 minutes reviewing this with me and then launched into a suggestion to use DH's TSP to purchase an annuity for each of to allow more guaranteed income -Allianz 222 Annuity.
DH will a smallish FERS pension and we both will collect SS covering our core expenses, so I told him it wasn't necessary. He then went into a pitch about his Madrona Fund that he had recently launched and how it would beat index funds. I let him know that I was very comfortable with my Vanguard investments and that they matched my investment comfort level.
I never heard from him again although he now has a 30 minute slot on a local AM station to talk about planning for retirement


Sent from my iPhone using Early Retirement Forum
__________________

__________________
"Tell me, what is it you plan to do with your one wild and precious life?" - Mary Oliver
Dog is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-24-2015, 11:07 AM   #82
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by ERD50 View Post
I've never done a deep dive into the details either, but the engineer in me says that if someone is going to offer me a product that offloads my risk onto them, I will need to pay for that risk reduction. TNSTAAFL.

And from what I've read from so many sources, these are high fee products (which is why they are pushed by salespeople). The customer pays those fees. And they are complex, and I like transparency.

It's a bit like someone offering to show me a perpetual motion machine. I know it can't work, do I want to spend any time listening to their explanation? Maybe for twisted 'entertainment', but I generally have better things to do.

-ERD50
The base product is always some twist on a chunk of fixed income that is held to maturity with the coupons invested in a bull call spread of some sort (lots of different variations to confuse people). The they layer on various overpriced riders that are complicated, but always about the sizzle rather than the steak.
__________________

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 07-24-2015, 11:41 AM   #83
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 7,142
A few of us at work (when I was full time) were pitched a VA from a FA (insurance salesman, of course) and got our hands on the 80+ page contract. Over a few hours in our conference room and a chalk board, we uncovered about 3.5% in annual fees scattered about. You have to be nuts to touch one of these.

Well, with 80 million seniors hitting the retirement ranks in the next ten years, there will be a golden opportunity for insurance companies to pounce on them and collect a LOT of immediate cash and hand it slowly back (some of it) over decades.

I'd love to see Ameriprise's internal business plan on these instruments.
__________________
......."Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson.
aja8888 is offline   Reply With Quote
Old 07-24-2015, 12:59 PM   #84
Full time employment: Posting here.
 
Join Date: Sep 2007
Posts: 716
I got a copy of a contract for one of these from a Merrill Lynch dinner. The dinner was good -- and I won a set of golf balls.
Reading the contract the next day, I found about 5% in fees. As you said, scattered all over the document, most of them buried in a footnote somewhere. Might have been more, I stopped adding them up what I hit 5%.

For anybody who would like to seen the detailed workings of an IUL -- and especially if you'd like to see how it compares to a S&P500 index fund -- here is a spreadsheet: https://www.dropbox.com/s/cbzvg74iye...d-IUL-test.xls

I developed this a couple of years ago after some discussion & challenge by an IUL proponent. After a bunch of handwaving (by all parties, both pro and con) the engineer in me had to work up a spreadsheet to backtest with historical S&P500 data. The original scenario was a start in 1975 with $15K, then adding $150/mo until 2003, then withdrawing $1500/mo. Someone provided us with an actual Allianz policy proposal and that is also incorporated into the sheet.

It's really bad. Really really bad.
After 40 years, the S&P account value is $1,000,000 (and rising) and the IUL account value is $100,000 (and falling).

The two things that kill an IUL are the fees and the annual cap. Turns out that the annual "no loss" floor helps a bit, but the 12% ceiling cap hurts a lot.
__________________
rayvt is offline   Reply With Quote
Old 07-30-2015, 03:15 PM   #85
Thinks s/he gets paid by the post
Lakewood90712's Avatar
 
Join Date: Jul 2005
Posts: 1,316
We are all waiting for the final outcome...........
__________________
Lakewood90712 is offline   Reply With Quote
Old 07-30-2015, 04:52 PM   #86
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 1,823
Quote:
Originally Posted by Lakewood90712 View Post
We are all waiting for the final outcome...........
Me too. But as I stated earlier, I suspect this guy is going to disappear on me rather than following up with the prospectus he promised me. It's been seven days since our meeting and I haven't heard a peep from him.
__________________
Ready is offline   Reply With Quote
Old 07-30-2015, 05:15 PM   #87
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 1,823
Well, I should have checked my mail before responding. I have the Allianz 360 brochure now. It looks like mostly a marketing piece, and I haven't fully digested it, but here are two things that immediately stand out so far:

"Allianz calculates and credits fixed interest daily, based on the rate we establish at the beginning of each contract year. We can raise or lower the rate annually, but it will never be less than .10% per year."

"Monthly Sum Crediting"

For this crediting method, on the last business day before your contract anniversary each month, we'll compare the index value to the prior month's value. We'll divide this monthly change by the prior month's value to get the monthly percent of change. Positive monthly changes are subject to a monthly cap or maximum; however, negative changes are not limited by the cap. We can raise or lower the cap each year, but it will never be less than .50%.

At the end of the contract year, we'll add up these monthly increases and decreases to calculate your indexed interest rate. If the sum is negative, you'll receive zero indexed interest for that year".

So, in return for locking up my money for ten years with heavy surrender charges, they guarantee me a minimum interest rate of .10%. And the stock market upside uses a convoluted formula that essentially only allows me to win if the market has twelve positive months in a row. Having even one or two bad months could easily wipe out all of the gains, even if the overall return for the year was very high.

I suppose my advisor has a few things to explain to me about all this.
__________________
Ready is offline   Reply With Quote
Old 07-30-2015, 05:23 PM   #88
Full time employment: Posting here.
Tailgate's Avatar
 
Join Date: Jul 2013
Location: Texas
Posts: 880
Jesse James used a gun... Pretty much the only difference..


Sent from my iPad using Early Retirement Forum
__________________
Tailgate is offline   Reply With Quote
Old 07-30-2015, 07:02 PM   #89
gone traveling
 
Join Date: Nov 2013
Location: Los Angeles
Posts: 202
What are the expected returns of index annuities? 2 - 5%.
2 - 5% is NOT investing! That's hiding under the covers.
What are the Real Returns of Indexed Annuities?
__________________
ETFs_Rule is offline   Reply With Quote
Old 07-30-2015, 07:11 PM   #90
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 7,142
Quote:
Originally Posted by Ready View Post
Well, I should have checked my mail before responding. I have the Allianz 360 brochure now. It looks like mostly a marketing piece, and I haven't fully digested it, but here are two things that immediately stand out so far:

"Allianz calculates and credits fixed interest daily, based on the rate we establish at the beginning of each contract year. We can raise or lower the rate annually, but it will never be less than .10% per year."

"Monthly Sum Crediting"

For this crediting method, on the last business day before your contract anniversary each month, we'll compare the index value to the prior month's value. We'll divide this monthly change by the prior month's value to get the monthly percent of change. Positive monthly changes are subject to a monthly cap or maximum; however, negative changes are not limited by the cap. We can raise or lower the cap each year, but it will never be less than .50%.

At the end of the contract year, we'll add up these monthly increases and decreases to calculate your indexed interest rate. If the sum is negative, you'll receive zero indexed interest for that year".

So, in return for locking up my money for ten years with heavy surrender charges, they guarantee me a minimum interest rate of .10%. And the stock market upside uses a convoluted formula that essentially only allows me to win if the market has twelve positive months in a row. Having even one or two bad months could easily wipe out all of the gains, even if the overall return for the year was very high.

I suppose my advisor has a few things to explain to me about all this.
When you have time, see if you can capture all the different fees. That should be fun!
__________________
......."Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson.
aja8888 is offline   Reply With Quote
Old 07-30-2015, 08:32 PM   #91
Thinks s/he gets paid by the post
Lakewood90712's Avatar
 
Join Date: Jul 2005
Posts: 1,316
"Allianz 360" So you loan Allianz your money , the insurer does well, the salesman , I mean "adviser" ,does well, and you go around in a 360 degree turn every year.

Nice. Remember,you can't loose money on this plan.
__________________
Lakewood90712 is offline   Reply With Quote
Brian? by chance
Old 07-30-2015, 09:18 PM   #92
Recycles dryer sheets
Happyras's Avatar
 
Join Date: Jun 2015
Location: Redmond
Posts: 219
Brian? by chance

Quote:
Originally Posted by Dog View Post
I went to a CPA/PFS in April 2014 for the purpose of him vetting my financial plan to retire in the next year or two.
Provided him all the details and he provided a nice multi-page document that showed we could retire that day based on our desired spending goals (in fact we could increase the spending goals).
He spent about 10 minutes reviewing this with me and then launched into a suggestion to use DH's TSP to purchase an annuity for each of to allow more guaranteed income -Allianz 222 Annuity.
DH will a smallish FERS pension and we both will collect SS covering our core expenses, so I told him it wasn't necessary. He then went into a pitch about his Madrona Fund that he had recently launched and how it would beat index funds. I let him know that I was very comfortable with my Vanguard investments and that they matched my investment comfort level.
I never heard from him again although he now has a 30 minute slot on a local AM station to talk about planning for retirement
We had Brian for our CPA for about 10 years, wherein he was investing our funds quite well, to a point. I one day realized in 10 years we had a total return of just over 4%, but he had collected over 10% in that time. He invested all our money into his 3 Madrona funds and proceeded to loose 30% in one fund alone. What a nightmare, only worsened by our Jump to RBC who sold my poor DW a Jackson Annuity that would no longer be available if we waited, an me a Citigroup junk bond that thank god is still paying 9%.

We jumped again by a steak dinner con ARS who after several meetings decided we needed to buy their Annuities for over 1/3 of our invested IRA's. Only after convincing us to liquidate the Jackson Annuity for a 7% haircut on top of the loss in performance for that year. Everyone wants a piece of our money without earning it. We moved to Sherwood Investments, and Eric did very well and was very aggressive beating the typical markets with mutual fund picks, but again the fee was high. Getting close to FIRE this year, we decided to go to a low cost bank manager, who has us very diversified, not so aggressive, but mostly a mix of specific stock picks and blend of foreign funds and commodities with some long short funds.

Bottom line, steak dinners are generally insurance pitches to poorly informed easily mislead folks like us. The jury is out on using a bank wealth manager, but the lower fees and lower risk investment structure seems to be a good fit for the first few years of my retirement. BTW, I really am torn on using Creative Planning, they could not compete on fees but offered a better personal consulting package covering all aspects of estate planning. I am tracking their asset allocation model against our current one, and the bank is winning even without considering the lower fees.
__________________
Happyras is offline   Reply With Quote
Old 07-31-2015, 09:50 AM   #93
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
I'm taking a guess here, but I'd think a bank wealth manager costs at least as much as a financial advisor, and maybe more. The difficult position for a consumer is that all of the costs and expenses are not well understood until you get to the end of the year, or beyond, and find that there trading costs. Or maybe you didn't realize you were going into mutual funds with very high fees. So, it is difficult to find all the fees ahead of time, and then do a reasonable comparison of two situations.
__________________
target2019 is offline   Reply With Quote
Old 07-31-2015, 10:18 AM   #94
Recycles dryer sheets
robertf57's Avatar
 
Join Date: Jun 2014
Posts: 329
The immunization against getting taken by these salesmen is knowledge. It helps to have knowledgeable "friends" at your beck and call through a few clicks on the keyboard. I wouldn't be too happy myself with a banker running my investments......Better to DIY in the long run. Can't guarantee that the returns will always be better, but you can guarantee that the costs will always be less.
__________________
robertf57 is offline   Reply With Quote
Old 07-31-2015, 10:21 AM   #95
Recycles dryer sheets
Happyras's Avatar
 
Join Date: Jun 2015
Location: Redmond
Posts: 219
Quote:
Originally Posted by target2019 View Post
I'm taking a guess here, but I'd think a bank wealth manager costs at least as much as a financial advisor, and maybe more. The difficult position for a consumer is that all of the costs and expenses are not well understood until you get to the end of the year, or beyond, and find that there trading costs. Or maybe you didn't realize you were going into mutual funds with very high fees. So, it is difficult to find all the fees ahead of time, and then do a reasonable comparison of two situations.
I know the fees we were recently paying for our TD accounts included a >1% advisor fee as well as an average fund expense of .8%, however our returns were strong, above market 19% overall in 2014. When we made the decision to move to a bank, it was under a "family" relationship fee, which is much lower even than the robo advisors offer. We struggled with evaluating advisors charging .8 to 1%, plus trade costs. The bank manager fee includes all trading costs. 1/3 of our investments are in individual stocks, with the remaining in low cost MF, bond funds, etc. with institutional fee structures generally below .5% expense. No 12b-1, no known kick backs to the manager that we know of. We were asked not to share the actual fee, as it is so low based on a very high value in assets managed. Not normally a fan of banks, but giving this a few months to prove out. I expect our nominal returns will be much lower, but in the first few years, I am hoping the downside risk will be less.
__________________
Happyras is offline   Reply With Quote
Old 07-31-2015, 10:31 AM   #96
Recycles dryer sheets
Happyras's Avatar
 
Join Date: Jun 2015
Location: Redmond
Posts: 219
Also, as I mentioned, when "Brian" our CPA started the Madrona funds, he moved all our investments into 3 funds he started, which had not only a very high expense for an ETF, but very little liquidity (market was his). When we dumped him, the sell side spread on the fund value was horrible as well as the loss on market value. We have been burnt enough on fees from every angle to know more now, but it took nearly 40 years of mistakes to get there. The bank we went with is using SEI as the custodian brokerage, which has a 1980's vintage web interface with lots of bugs. This is definitely a low cost outfit, I only hope their user interface is not an indication of performance.
__________________
Happyras is offline   Reply With Quote
Old 07-31-2015, 10:32 AM   #97
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,074
You seem very knowledgeable regarding fees and expenses, indicating you are well educated when it comes to investments. Why aren't you using that knowledge to manage your own investments and eliminate the unnecessary (and very costly) expense of a middleman/advisor?
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 07-31-2015, 10:46 AM   #98
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
Happyras,
Thanks for posting more details. You are fortunate to negotiate a reasonable deal like that. It's also meaningful that you have a "very high value in assets managed." Probably of great value to you to have a local person you can talk to.

In-laws pay about .67 of AUM, and this is to a well-known bank. AUM is low six figures. It is all index funds, so nothing exciting going on there. Just pick a strategy like "conservative" and they put the money in the house funds.
__________________
target2019 is offline   Reply With Quote
Old 07-31-2015, 11:18 AM   #99
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,261
Quote:
Originally Posted by REWahoo View Post
You seem very knowledgeable regarding fees and expenses, indicating you are well educated when it comes to investments. Why aren't you using that knowledge to manage your own investments and eliminate the unnecessary (and very costly) expense of a middleman/advisor?
+1

After all these years of admitted mistakes, why not just DIY? You appear to know more than enough at this point. Why pay any $ at all? What do you get for your money?

Even though you say the % is low, for a high $ portfolio it is still probably a high enough amount to buy some nice gifts for yourself each and every year.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 07-31-2015, 11:31 AM   #100
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,017
I have some assets with a big bank wealth management outfit. Fees are on the low side. One reason I do this is fear of going gaga. I discovered another benefit this week when I decided to add to my investment property portfolio. Hassle free mortgage setup with a greatly discounted interest rate.
__________________

__________________
Meadbh is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
A Sales Pitch From A Financial "Advisor" Zantastic FIRE and Money 18 04-05-2015 04:56 PM
Personal Capital pitch calmloki FIRE and Money 15 06-17-2014 12:07 PM
Pitch-drop experiment or watching grass grow hakuna matata Other topics 14 07-18-2013 03:56 PM
Sunday Dinner and Supper Danny Other topics 33 02-18-2009 08:01 PM
Join Gambling Club -> Free Casino Dinner, Gotchas? TromboneAl Other topics 26 10-18-2008 06:37 PM

 

 
All times are GMT -6. The time now is 01:10 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.