48 y.o. in Rowland Heights, CA. Found you looking for Aviva IncomeAdvantage 8% return

[haiku254]

Hello Everyone,
I found your site looking for information on Aviva's BPASelect Income Advantage. I dropped in on an Ing Independent Broker yesterday and was pitched this annuity while asking about my 86 y.o. father's portfolio.

He has about $350K in IRA funds invested with Fidelity and another $150K in after tax money in some Magellan and other mutual funds. He was approached by a Fidelity rep who wanted to manage his funds for 0.78% per year, buying/selling his assets so that he could balance his funds. Being a little informed about financial matters, he asked me my opinion on the topic. I thought that with some information, we could probably do something basic and forego the annual expense. I also wanted to know if that commission was standard for an account of that size.

When I saw this Ing Independent Broker open up in a strip mall, I dropped in and posed my question about my dad's situation. She suggested that I think about this Aviva Annuity, touting a minimum 8% return and unlimited upside if the S&P does better in the future years. I only had about 15 minutes to talk to her so I asked her for a brochure on the product. She also steered me to look at FPRIX, Franklin Double Tax-Free Income Mutual fund, with a YTD return of 6.07%.

When I started reading some posts about Aviva, I saw some warning signals about the 8% really not being a return but some sort of credit to an account that I can't really get access to or redeem. I would appreciate any feedback that you have in this topic or on FPRIX. Of course, she seemed nice and genuine, but I am wary of her motives, as in anything that is related to money.

I'm glad that I found your site and hope to learn much more as I start reading the posts.

Cheers!
John

 

[REWahoo]

John, congratulations on having the wisdom to investigate before investing - and your suspicions are well founded. Take a look at a discussion of this annuity from a few months ago: http://www.early-retirement.org/forums/f28/annuity-with-a-guaranteed-8-annual-return-48973.html

 

[haiku254]

Thanks, REWahoo! That post was the one that warned me about Aviva. I'm sure I'll get a follow-up call from her soon. I plan on asking her for a prospectus on the product .... or should I even bother?

 

[REWahoo]

Thanks, REWahoo! That post was the one that warned me about Aviva. I'm sure I'll get a follow-up call from her soon. I plan on asking her for a prospectus on the product .... or should I even bother?

I would tell her "we've decided to go another direction" and do just that. This saleswoman has only her financial interest in mind, not your dad's.

 

[REWahoo]

John, here is a recent article from Forbes regarding Equity Indexed Annuities like the one in question: The Truth About Equity-Indexed Annuities - Forbes.com

 

[haiku254]

Thanks, again. I'll read the Forbes article later on.
What do you think I should do to help my dad? Any suggestions? I'll send him this thread so that he can follow it and explore on his own.
Any experience with the Fidelity, TDAmeritrade-type of wealth management?
Any thoughts about Double Tax-Free Income mutual funds or that class of investments?

Any/all comments welcome. TIA.

 

[REWahoo]

What do you think I should do to help my dad? Any suggestions?

Without knowing more about your dad's objectives for his investments (income needs, desire to leave an inheritance, etc.) it is difficult for anyone to give you specific advice. The best option for now might be to do nothing until you and your dad educate yourselves a little more about investing. Most (but not all) of us on this forum are DIY types and don't pay others to manage our portfolios.

I strongly recommend you do some reading (see here) and get at least a basic understanding of investing. Whether you pay someone to manage your dad's money or do it yourself, at least you'll be able to ask coherent questions and understand if the investments make sense for someone your dad's age.

 

[Dimsumkid]

She also steered me to look at FPRIX, Franklin Double Tax-Free Income Mutual fund, with a YTD return of 6.07%.

I would question why she's steering you to a fund that has a front end load of 4.25% and expense ratio of 0.69%. I would suggest going to the library (I can access online thru my local library) and utilizing the morningstar books on mutual funds. This fund falls in the Muni National Long category. This is rated a 3 star fund out of 5.

 

[kyounge1956]

John, here is a recent article from Forbes regarding Equity Indexed Annuities like the one in question: The Truth About Equity-Indexed Annuities - Forbes.com

While you're at it, why not read the other five articles in the series, and the related threads over at the Bogleheads? A search for Forbes AND Annuities AND Part will bring up all six of them.

 

[REWahoo]

While you're at it, why not read the other five articles in the series, and the related threads over at the Bogleheads? A search for Forbes AND Annuities AND Part will bring up all six of them.

I'll save you a search - they are all linked here: Forbes.com - Mel Lindauer

 

[caninelover]

Hi Haiku,

Welcome to the forum. Lots of good advice here.

I would question why your 86 yr old dad would "need" this much investment advice anyway. At 86 yrs old he doesn't have too much "longevity risk" to worry about. I'm assuming he has social security and maybe some other CDs or something for his day to day expenses. So is this extra money that he is hoping to will to his heirs, or is this money he needs or may need to draw on to pay expenses?

If its money he needs or may need, frankly I would ladder it into CDs right now. Not paying much so I would do 2-3 yr CDs and then roll them into (hopefully) higher yielding CDs in the future as they mature. But at 86 yrs old, I would rather keep the bulk of it safe and sound, just be sure the accounts are spread out to get FDIC insurance.

If its money he wants to will to his heirs, just a simple allocation in some plain Vanguard or Fidelity low-cost index funds would suffice.

No need to get so fancy with investments for an 86 yr old, in my opinion! Annuities? 0.78% for Asset Mgmt? Fubar, if you ask me.

 

[caninelover]

Thanks, again. I'll read the Forbes article later on.
What do you think I should do to help my dad? Any suggestions? I'll send him this thread so that he can follow it and explore on his own.
Any experience with the Fidelity, TDAmeritrade-type of wealth management?
Any thoughts about Double Tax-Free Income mutual funds or that class of investments?

Any/all comments welcome. TIA.

Re: Double-tax free income mutual funds, may be ok, just watch the expense load on the fund. Would depend on your dad's income tax bracket, unless he has significant social security/pension income it may not be beneficial. Also these usually invest in municipal bonds which aren't yielding much right now anyway. Still think that laddered CDs for a significant portion of the assets is the way to go at 86.

Sometimes the best investing is the simplest kind. No need to get fancy unless you have to, and at 86 seems like papa is pretty well set. I would really stress to keep the money safe and sound for him if this is money he may need in the future.

 

[haiku254]

I tend to agree with you caninelover.... simplest kind of investing is sometimes the best. He and my mom are set with their finances and just need to keep it from a plunging stock market.

I'll also read the Bogleheads threads to get more informed. I think that as time goes on, he doesn't want to make any mistakes and is unsure of his decisions.

Thank you all for your input! ..... keep it coming if you get more ideas.

My dad has apartment buildings that is being managed for him and has a positive cash flow, so I don't think that he is depending on the stock investments for income. I'm sure that his thinking is about us kids ... I have two other siblings ... and wanting to keep his assets intact for us.

 

[73ss454]

The plunging stock market has a shot at coming back but the fees you'll give that broker you'll never see again.

 

[Ed_The_Gypsy]

CDs. With POD assignment to his kids. I can't even imagine a good reason for anything else.

 

[haiku254]

Thanks, Ed and 73ss...for posting your views.
John

 

[Koolau]

Since your dad's main goal is to pass his wealth to his children, I'm guessing he wants to maintain the principal and/or grow the principal. I would ask him to add the goal of emergency funds for himself (longevity and/or long term care needs).

With that in mind, you (and he) seem plenty qualified to manage this yourself. A good mix of low cost mutual funds (probably weighted toward bonds) might be a good thing to consider. I personally prefer Vanguard to Fidelity, but FIDO has plenty of good funds to choose from as well. My opinion is that you don't need to pay anyone to do this for you. Just my 2 cents worth (and possibly not worth that!) Your dad is lucky to have you looking after his interests.