Annuities Investigation on Dateline this Sunday

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vulpro said:
I take it from the posts that I've read here that most of you are in the securities business. Stockbrokers, etc. Several comments brag that VA are a better choice. Here's a couple of questions:

1) While most of these EIA annuities pay a pretty decent one-time commission (5 to 8%), how does this compare to the average hidden fees consumers unknowingly pay that are a part of Variable Annuities (2 to 4% annually)? How does the one-time 5 to 8% commission compare to the average ongoing annual 1.5% trail earned by the average broker on an typical account? (plus round-trip commissions on every trade)

2) Everbody's making a big stink about the surrender charges. These annuities have always been long-term products, and any 'agent' who misleads or hides the surrender charge should lose his license. However, there is a positive side to them as well. At least with an EIA, the client has the ability to know up front what his costs are. He knows FOR SURE what his account will be worth next year. Why do 10 year CDs pay more interest than a money market fund? Because the money market fund is charging the client for the liquidity that is part of the MM account. No one would go with a ten year CD if they're also looking for check-writing privileges. How many folks have a big chunk of money they don't need, but instead of a ten year CD, they take 6 month CDs and roll them every 6 months. They are paying for liquidity (through reduced interest rates) just in case they might need the money for something! The point is this: if you need access to 100% of your money... 100% of the time, an annuity is a very poor choice. Most of these products do allow for 10% annual withdrawal without penalty, and more relaxed liquidity in the case of a terminal illness diagnosis, nursing home confinement, and other scenarios. This is more than enough liquidity for most folks.

Why pay for liquidity that you don't need? Those who decide to take more than the 10% out will pay a cost for that liquidity. It's their choice and they know the costs up front... (assuming an honest agent sold it to them)

3) In addition, what they failed to mention on Dateline is that most of the products they were talking about also paid the client an up-front 10% bonus to move their money. Then the client decides it was a bad idea a year later and wants to surrender the entire contract. 20% surrender charges apply, but it's pretty clear to see that half of that penalty is simply the company recouping their 10% bonus! Realistically, the worst that these surrender charges get is a net 10% penalty.

How many of your clients ever suffered a 10% loss? Was that loss voluntary or involuntary?

How many older folks do you know who hung on through the last bear market 2000 to 2002 while their broker convinced them to 'hang in there... the market always comes back"? How many of your clients hung in there and lost 48% of their nest egg following your buy and hold advice?

How many of your older clients holding a big bond portfolio lost 20% in principal value when interest rates went the wrong way? I'm sure they thought that bonds were 'safe'...

The fact is that the S&P has returned about 12% over time, yet Dalbar studies prove time after time that the average mutual fund investor sees only a 4% average annual return due to fees, expenses, trading costs and the #1 biggy... buying high while chasing performance and then selling low. Most investors would be waaaay better off if they fired their brokers and simply invested in the S&P500 for 18 basis points and forgot about it. For older folks who don't have the time to make up for 20 or 30% market losses, other alternatives are available.

For those in retirement or getting close, these annuities offer some stability and peace of mind that is not available from your local stockbroker who simply wants the client to stay invested no matter what. Many of these older clients like the fact that this nest egg of theirs will never go down in value, but only UP. You see, they no longer have the time to make up for losses than invariably comes with market volitility. They like ther fact that they can turn this nest egg into an income for life that they will never outlive... and without giving up control of the money!

Bottomline is this: there are unscrupulous, loser salespeople in every industry. That doesn't make every stockbroker, insurance broker or used car dealer a crook. And we all realize (I hope) that any media coverage of ANY issue is going to be biased or bent to satisfy their agenda. No one tells both sides of the issue any more.
Click to expand...

Are YOU one of those guys in the Dateline peice last night? Because you sound like an "EIA expert".........:p:p
 
vulpro, this forum is populated for the most part by DIY investors who, at best, have a limited tolerance for immediate annuities - but only in limited situations. Attempts to defend VULs, EIAs or their variants and offspring will fall on deaf and possibly hostile ears.

You may be convinced they are great products (and no doubt pay you excellent commissions when you sell them), but save your spiel for those who you might be able to convince with your "all investments are dangerous/risky - except mine" sales pitch.
 
No, I wasn't one of the guys on Dateline!!!!!! And I'm also not one of those guys to say that everything you sell is crap... I do, however, believe that different products or strategies serve different purposes. Option trading is fine for some investors... not so good for the risk adverse. CDs are ultra safe but offer very little growth. All I'm saying is that EIAs do offers some benefits that some folks find very appealing.

I'm no expert. but I do have a little background however. I've been 'in the business' for 30 years, securities licensed for 12, and I own a couple of these Index Annuities for myself.

Hey, I just saw a lot of people get hurt by market volatility (including myself) and went looking for a safer way to participate in the returns offered by the market without all the stress of the downside risk. And because I have no intention of using the dollars in my retirement plan for many years, the surrender charges were a non-issue for me.

For the people who eventually want their nest egg to provide an income they won't outlive, they can be a pretty neat deal.
 
REWahoo said:
vulpro, this forum is populated for the most part by DIY investors who, at best, have a limited tolerance for immediate annuities - but only in limited situations.
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I have very little tolerance for immediate annuities as well. They serve a very limited purpose for the most part. I never liked how when you die, the insurance company keeps your money! Index Annuities are not immediate annuities however.

And with the current generation product, if you select an income 'for life', you are in control, you can turn the income on or off, your monthly check is locked in for life but can always increase if market performance is good. BEST PART: when you die, whatever's left goes to your beneficiaries.
 
Definition of a really sleazy salesperson: sell the sizzle, not the steak.
 
vulpro said:
And with the current generation product, if you select an income 'for life', you are in control, you can turn the income on or off, your monthly check is locked in for life but can always increase if market performance is good. BEST PART: when you die, whatever's left goes to your beneficiaries.
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:rolleyes:

REWahoo said:
You may be convinced they are great products (and no doubt pay you excellent commissions when you sell them), but save your spiel for those who you might be able to convince with your "all investments are dangerous/risky - except mine" sales pitch.
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What is it with insurance salespeople who refuse to take a hint from "No thank you, I'm not interested"?

Anyone want to venture a guess as to my favorite scene in the movie "Ground Hog Day"? ;)
 
REWahoo said:
Anyone want to venture a guess as to my favorite scene in the movie "Ground Hog Day"? ;)
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The part where Bill Murray beats the **** out of an obnoxious annuity salesman?
 
vulpro said:
I have very little tolerance for immediate annuities as well. I never liked how when you die, the insurance company keeps your money!
Click to expand...

Well, I guess you don't know everything about SPIA's or you would not be making this broad-based, incorrect statement (apparently you don't "sell" them).

I believe "the group" would not touch a VA ever, while tolorate and have pity for "poor souls like me" that have an SPIA (yes I do; yes I like it; yes - I'm one of the few for which it makes sense :cool: ).

- Ron
 
I am a learning, DIY investor.

It is apparent to me, with a little reading and research, that layers (like insurance sales people) add cost only. I would rather read/research a little bit and IF I wanted something similar to what is being spouted/praised/etc, I could get it on my own for a lot lower costs, at a minimum.

Sometimes I can get it with more reward potential as well.

What this seems to be about, to me, is profiting from ignorance.

Information is power and money. The EIA insurance salespeople are turning the lack of information (or ignorance of elderly) into their own pockets.

Like brewer had in the other thread, you can at least replicate the results with CD's and options. Certainly lower cost and fees. Plus, you can have more liquidity than the EIA products being sold.

It seems there is not an economy of size. The insurance companies are not getting some better deals due to volume that one can not get for oneself.

It actually is a little scary at how uninformed many people are.

I don't think that it is morally right to do this to elderly - but that's my morality.
 
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vulpro said:
I have very little tolerance for immediate annuities as well. They serve a very limited purpose for the most part. I never liked how when you die, the insurance company keeps your money! Index Annuities are not immediate annuities however.
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With a comment like that, there's NO WAY you've been in the business for 30 years, or Series 6 for 12 years or whatever...........:p

Some SPIAs have an option where you can get a refund of unused income streams. Maybe you can Google it so you don't sound so ignorant next time you post......;)
 
I hate sting programs, NBC ought to be ashamed. On the bright side maybe better programming will come out on this subject. As far as I can tell, enough people will willingly buy annuity products with full disclosure, so why not disclose in a clear-cut manner, and avoid the lawsuits?

Both the salespeople and Dateline used the hypothethical $100,000 CD comparison without disclosing that if interest is keep in the same account, the interest would not be insured by the (so called F-) FDIC.
 
CuppaJoe said:
I hate sting programs, NBC ought to be ashamed. On the bright side maybe better programming will come out on this subject. As far as I can tell, enough people will willingly buy annuity products with full disclosure, so why not disclose in a clear-cut manner, and avoid the lawsuits?

Both the salespeople and Dateline used the hypothethical $100,000 CD comparison without disclosing that if interest is keep in the same account, the interest would not be insured by the (so called F-) FDIC.
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Yeah, but that doesn't sell ads...........;) I already pointed out earlier today that at least one HUGE bank (Chase), has an early surrender penalty of 3% on CDs of what you put in, making it very easy to lose principal in the first year..........;)
 
vulpro said:
No, I wasn't one of the guys on Dateline!!!!!! And I'm also not one of those guys to say that everything you sell is crap... I do, however, believe that different products or strategies serve different purposes. Option trading is fine for some investors... not so good for the risk adverse. CDs are ultra safe but offer very little growth. All I'm saying is that EIAs do offers some benefits that some folks find very appealing.

I'm no expert. but I do have a little background however. I've been 'in the business' for 30 years, securities licensed for 12, and I own a couple of these Index Annuities for myself.

Hey, I just saw a lot of people get hurt by market volatility (including myself) and went looking for a safer way to participate in the returns offered by the market without all the stress of the downside risk. And because I have no intention of using the dollars in my retirement plan for many years, the surrender charges were a non-issue for me.

For the people who eventually want their nest egg to provide an income they won't outlive, they can be a pretty neat deal.
Click to expand...

Let me get this right. You bought an annuity in your retirement plan? Does that make any sense?
 
I have been in the industry for a long time. I can do funds or life products. This is nothing more than a news story to create news. Annuities are great for many people. I would not buy from the companies that were in this news article, because they are on the bottom of the pile. There are some great products out there. Their are 1,3,4,5,6,7,8,9,10+ year annuities. Those guys were nothing more than life only agents who only represented one product, the one with the highest commissions.
The other guy that talked about fees in other products was right on, I can make more long term doing other things, but it is not about what I make. It is my job to do what I think is best for the client. This news article at most just highlighted what is in reality a handful of bad apples.
Do a search on google for a youtube video by Suzie Orman ripping annuities, she gets busted pretty good from the first caller.
I have some well to do friends in the business, who have been investing for a long time who still chose variable annuities. There is a place for just about every thing out there.
For the guy who mentioned something about a 50% surrender charge-I have never heard of anything like that in anyway, the shame would go to the insurance commissioner who approved that product. You guys just confirm that you do not know anything about annuities, you saw one video clip and your an expert.
Did you know ben bernake has a large amount of money in annuities? Did you know many government plans and retirment plans are in annuities?
There are many annuities I would not touch with a ten foot pole, there are many I would recommend.
The one advisor who was against it across the board, is probably just trying to build his mutual fund business.
 
i like the idea of immeadiate annuties as the big pile of dead people is something i cant do on my own which enhances the return beyond what i can get on my own. i do like brewers self made index linked cd and am going to try it myself. THANKS BREWER, very nice strategy. im going to try the 55% participation idea.
 
mattburk said:
I have some well to do friends in the business, who have been investing for a long time who still chose variable annuities. There are many annuities I would not touch with a ten foot pole, there are many I would recommend.
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Well, recommend a few. I already own some VA's and am looking for a place to go with that money. I suppose you can't without knowing exactly my needs. Let's just say I want the highest return possible with risk being a very high concern. Conservative investor not needing any home runs.
 
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