Scott Burns Article........

[Art G]

Quote:

Originally Posted by Marquette How about if we agree to continue this discussion in two years?

It's a date! Hope neither of us dies though, because then the annuity comes out way ahead.

[cute fuzzy bunny]

Pssst...(no, not wellesley)...if you die the annuity stops paying and thats that. If Marquette dies, his heirs get the VFINX stepped up in basis to the day of his death.

Seems like the latter is somewhat better. Unless of course an insurance company is the best recipient of your wealth that you can think of.

[HFWR]

Ding! Ding! Ding!

[cute fuzzy bunny]

That'll be a check for 50c for royalties, please.

[Helena]

Quote:

Originally Posted by FinanceDude He discusses using part of your money to buy a life annuity to help you not outlive your money........

How solvent are the annuity companies ?


~

[samclem]

Quote:

Originally Posted by FinanceDude Doing work for a "few percent"? FEES are comissions in another form..... Sorry folks, your "hero" is just an FA now...............

I was referring to commissions/fees/holdbacks/incentives or whatever other euphemistic term FA's now use to describe the kickbacks they receive from the mutual fund companies and other purveyors of financial products. These payments, which clearly encourage FA's to recommend products that are not in the best interests of clients, are much more egregious than a simple (and openly declared) fee of a fixed percentage of assets under management.

And, no, I don't have any problem with Burns charging people for the service he provides. I think it is very refreshing that he admits they could do it themselves, tells them how to do it, then lets them decide if they want to pay him to do it for them. It's more honest than "You could never in a million years do this for yourself. Pay me 2% and I'll go behind the magic curtain, turn on my proprietary asset transmogrifier, and hand you the wonderful finished package. Please don't look inside."

[clifp]

Quote:

Originally Posted by Art G How about if you just send me the difference? Since you don't mind the losses. Do you realize what it takes to make up the difference between 6% to the positive vs. 11% to the negative? Add that to next years guaranteed growth rate of 6%.......well, perhaps you're not familiar with the purpose of investing.

Art which would your kids (or your favorite charity) want you to own?

Pretty sure that would be VFINX.

[Finance Dave]

Quote:

Originally Posted by Art G What the article states is that because of the dying out of pensions, a life annuity is beneficial. Can we all agree on that?

Depends. I say you can create your own annuity. If we define annuity as "any mathematical scheme that insures income for longer than any reasonable measure of life expectancy", then I say I agree. (that's just a definition I made up ).

If I can put my money in an investment held to maturity and get 5%, I'm very close to what any annuity can pay, and I can withdraw 4% per year and maintain my revenue stream until I die. I don't see annuities as doing very much that we can't all create ourselves with a little upfront work.

[samclem]

Quote:

Originally Posted by Art G How about if you just send me the difference? Since you don't mind the losses. Do you realize what it takes to make up the difference between 6% to the positive vs. 11% to the negative? Add that to next years guaranteed growth rate of 6%.......well, perhaps you're not familiar with the purpose of investing.

Those thoughtful insurance companies. How do they do it!!? They apparently pay out more to their clients than they take in, and still have enough money to buy skyscrapers to provide shade for those poor urban dwellers.

[samclem]

Quote:

Originally Posted by Art G Surprisingly, you feel it's now fair for him to charge for these services?

Yep. And a lot more honest than the approach of many FA's.

A client goes to Mechanic A complaining because his dashboard lights don't work. Mechanic A says "First, check your fuses. If they are okay, it's probably the rheostat that controls the brightness of your lights--they burn out a lot on Chevys like yours. Get the Hanes manual and it will show you how to change it, it will take you about 30 minutes. If it's not that, it might be a wire, which will take you a long time to find. If you want me to just check the fuses, change the dimmer if needed, and see if it's something more involved, that will cost $30."

He then goes to mechanic B: "Well, electronics are really complicated on these new cars. The electronic waves inside the wires travel almost the SPEED OF LIGHT, and nothing goes faster than that! I know how to fix these dash lights--you would be smart not to mess with them yourself. Let me put my expertise to work to solve your problem. $30 please."

I like Mechanic A.

Quote:

Originally Posted by Art G As to his change on annuities, I'd say it has more to do with the changing of annuities. Paying income for life is a fairly new benefit and one that even he recognizes the value of. JMO

Annuities that provide an income for life are a new thing? To who? What did they do in the past--kick you in the belly and take your lunch money?

[cjking]

Quote:

Originally Posted by Finance Dave Depends. I say you can create your own annuity. If we define annuity as "any mathematical scheme that insures income for longer than any reasonable measure of life expectancy", then I say I agree. (that's just a definition I made up ).

I would define an annuity as an agreement among a group of people that those who die sooner than expected will leave their money to those who live longer than expected.

With this agreement in place you do not need to plan to make your money last 5/10/15 years past your life expectancy, therefore your income is much, much higher than it would be without the agreement.

It is completely impossible to "create your own annuity", if you go it alone your income will unavoidably be significantly lower.

(When comparing returns from traditional annuities with the income you generate from investing yourself, remember to assume you self-invest in the same kind of assets, typically government bonds. Otherwise you are not comparing like with like, in terms or risk and return.)

Some people are rich enough that they can be fairly sure they won't go through all their money no matter how long they live, and the value to them of leaving bequests is higher than the value they place on increasing their standard of living. These are people for whom not buying an annuity is sensible.

[rmark]

"If we define annuity as "any mathematical scheme that insures income for longer than any reasonable measure of life expectancy"

Heck, that describes a individual 30 year tresuary bond bought at age 90.


From dictionary.com

Annuity
1.a specified income payable at stated intervals for a fixed or a contingent period, often for the recipient's life, in consideration of a stipulated premium paid either in prior installment payments or in a single payment. 2.the right to receive such an income, or the duty to make such a payment or payments.

[Sarah in SC]

Quote:

Originally Posted by Helena How solvent are the annuity companies ? ~

Ding! Ding! Ding!

...royalty for 50c forthcoming, CFB

[HFWR]

Check's in the mail...

[FinanceDude]

Quote:

Originally Posted by samclem I was referring to commissions/fees/holdbacks/incentives or whatever other euphemistic term FA's now use to describe the kickbacks they receive from the mutual fund companies and other purveyors of financial products. These payments, which clearly encourage FA's to recommend products that are not in the best interests of clients, are much more egregious than a simple (and openly declared) fee of a fixed percentage of assets under management.

You crack me up.... What Burns is doing is no different than Adam Bold or anyone else that sells "wrap accounts". A "wrap account" is when you charge a fee to buy mutual funds. They were quite the big thing in the 90's.......... There's nothing "new or different" about his approach. It takes little to no research, much like index fund investing. If anyone on here wants to pay me 30 to 50bp a year to pick some Vanguard funds and ETFs for them, PM me and I'll send you the paperwork to get started........

Seems darn funny to me you DIY guys are against load funds and trading commisisons of any kind but would pay a guy fees for 20 years........

And, no, I don't have any problem with Burns charging people for the service he provides. I think it is very refreshing that he admits they could do it themselves, tells them how to do it, then lets them decide if they want to pay him to do it for them. It's more honest than "You could never in a million years do this for yourself. Pay me 2% and I'll go behind the magic curtain, turn on my proprietary asset transmogrifier, and hand you the wonderful finished package. Please don't look inside."[/quote]

[FinanceDude]

Quote:

Originally Posted by cute fuzzy bunny if you die the annuity stops paying and thats that.

That's not true in all cases. It depends on how you set them up. Just wanted to point that out.......

[Art G]

Quote:

Originally Posted by cute fuzzy bunny Pssst...(no, not wellesley)...if you die the annuity stops paying and thats that. If Marquette dies, his heirs get the VFINX stepped up in basis to the day of his death. Seems like the latter is somewhat better. Unless of course an insurance company is the best recipient of your wealth that you can think of.

Let's see, where to start.....

Bunny, in this case, the Vanguard fund holders heirs get the remaining value with the 11+% loss, so there's no stepped up value, it's stepped down in fact.
The annuity holder's heirs get the original balance PLUS the 6% gain, that they can either take now and walk away, or else continue on at the stepped up value.
It seems on these boards, people have made their minds up without knowing all the facts. It's much easier to just doubt it's possible, than to research the possibilities. Ashame since there are some pretty clever people around here.

Quote:

Those thoughtful insurance companies. How do they do it!!? They apparently pay out more to their clients than they take in, and still have enough money to buy skyscrapers to provide shade for those poor urban dwellers.

Sam, sure they make money. As does Vanguard, your doctor, McDonalds, Casinos and so on. Somehow they all manage to serve you and still can afford those buildings. Go figure!
BTW, don't you want them profitable if you have your money with them? Which brings me to the next question....

Quote:

How solvent are the annuity companies ?

Excellent question! And my biggest concern. Which is why it's very important to research what percentage of insurance business is in living benefits, IMO.

[REWahoo]

Not very hard to determine who sells annuities around here, is it?

[FinanceDude]

Quote:

Originally Posted by REWahoo Not very hard to determine who sells annuities around here, is it?

I need to start offering wrap accounts, it seems there's a sudden surge in interest..........

Charging a fee to buy index funds........not that's a hoot..........

[Art G]

Quote:

Originally Posted by samclem I was referring to commissions/fees/holdbacks/incentives or whatever other euphemistic term FA's now use to describe the kickbacks they receive from the mutual fund companies and other purveyors of financial products. These payments, which clearly encourage FA's to recommend products that are not in the best interests of clients, are much more egregious than a simple (and openly declared) fee of a fixed percentage of assets under management. And, no, I don't have any problem with Burns charging people for the service he provides. I think it is very refreshing that he admits they could do it themselves, tells them how to do it, then lets them decide if they want to pay him to do it for them. It's more honest than "You could never in a million years do this for yourself. Pay me 2% and I'll go behind the magic curtain, turn on my proprietary asset transmogrifier, and hand you the wonderful finished package. Please don't look inside."

You really should look at long term results. Give me just about any American Fund over those Vanguard funds, as their management fees are very low and unlike Vanguard, they actually do some managing.
As to Burns, why are you OK paying him to "watch over" your funds, and not an FA to actually manage them? Do you really believe Burns and his buddies do it for free?
BTW, the ongoing management fee is quite a bit higher than what most mutual funds pay in trail commissions. But, that's ok because.....well, I can't even think of a smart aleck answer as to why it's ok. The guy himself has told you that you don't need anyones help!