Scott Burns Article........

[cjking]

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]

How solvent are the annuity companies ?
~

Ding! Ding! Ding!

...royalty for 50c forthcoming, CFB

 

[HFWR]

Check's in the mail...

 

[FinanceDude]

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]

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]

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.

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....

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]

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]

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!

 

[cute fuzzy bunny]

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 another guy in the group siphoning money off all of the others and keeping whats left when they're all dead.

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.

True if you bought an inflation adjusted annuity and your spending/personal inflation rate matches the CPI. By doing that, your payments are much, much lower. Also, since part of your money goes to fund the insurance company's endeavors, your payment will also be much, much lower.

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

Fascinating. And I thought my system that produces superior and stable returns in all markets and will last for at least 50 years was a pretty good replacement with much higher returns than an annuity would pay me.

(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.)

Here comes the hamstringing of the alternatives, so as to assure the table is tilted. Do I get to add in the fees and expenses built into the annuity, and the loss of principal to the self generated income so we're comparing like with like?

Why wouldnt I add some equities to my investment, since they're demonstrated to improve returns without significantly changing risk? Why wouldnt I use a bucket strategy or a black swan strategy to greatly improve my long term returns without impacting my short term returns?

 

[Art G]

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

Pretty sure that would be VFINX.

The one that gives them the most money. In this market it's no contest the Annuity was the better investment. NONE!
How about your family? On $100k, Would they rather have
$106k or
$88,300?

However, just for funsies, lets just say the S&P was up 8.7% this year. My heirs would get about
$108,200 from Vanguard or
$107,000 from the Annuity.

Was it really worth the risk of not being protected?

 

[Art G]

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

Nor, who professionally offers all products so is willing to openly research them all.

 

[Art G]

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..........

Yeah, it's not enough the an Index fund is the only one guaranteed to underperform the Index, but now people want to pay another 1% per year to insure someone is watching it happen annually.

 

[REWahoo]

Nor, who professionally offers all products so is willing to openly research them all.

And with total disregard for which products offer the greater profits to the seller?

 

[Art G]

And with total disregard for which products offer the greater profits to the seller?

Absolutely! Apparently you've never been in sales. Any salesman worth a flip will tell you that they'd much rather take a bit less in commission and have a happy client than to rake them over and deal with someone who's pissed. You're not selling someone a steak dinner and then they're gone, you have to listen to them and take their calls when things don't work. Do you really think anyone wouldn't rather have the happy client who's going to refer them further business?

 

[cute fuzzy bunny]

The one that gives them the most money. In this market it's no contest the Annuity was the better investment. NONE!
How about your family? On $100k, Would they rather have
$106k or
$88,300?

However, just for funsies, lets just say the S&P was up 8.7% this year. My heirs would get about
$108,200 from Vanguard or
$107,000 from the Annuity.

Was it really worth the risk of not being protected?

How about if we compare the results over the last 15 years instead of the one or two that are unfavorable for one of the options?

$100k invested in the S&P 500 since 1993 would be worth about $340,000 today. An ER with $2M invested would have $6.8M

I'd feel pretty dang protected. My kids would probably be pretty happy with being financially independent when I was unable to spend all that money. Maybe my grandkids would end up with a good degree of protection.

Of course, you dont have to hamstring the non annuity side by just comparing it to an all stock index and then only for periods when that index didnt do well. Lets try it against Wellesley, Wellington and/or STAR. All of those produced more than 6% annually over the last 5 years and over a 15 year period thoroughly thumped 6% while offering a lot less volatility than the s&p 500.

 

[REWahoo]

Apparently you've never been in sales.

Fortunately, no.

So you're a sales guy who is only looking out for the best interests of his client and is concerned about customer satisfaction more than the amount of income you will earn. I know those types of sales people must exist, and I'm glad to discover one on the forum.

 

[haha]

And with total disregard for which products offer the greater profits to the seller?

It's like you guys all have children, yet managed to remain virgins. Didn't all of us who didn't have government jobs have to turn a profit, for ourselves or for our companies?

I don't get the problem with making one's living by selling goods or services that some people obviously want. Since when is it necessary that because you could do something yourself, you should do it yourself?

I could detail my car, but I pay someone to do it because I don't want to do it myself.

ha

 

[REWahoo]

I could detail my car, but I pay someone to do it because I don't want to do it myself.

...unlike Ernest Borgnine.

 

[haha]

...unlike Ernest Borgnine.

I believe you earn your living doing stand-up comedy. Pretty well too!

Ha

 

[2B]

I've abstained from joining this thread until now. Being an annuity thread, that's definitely amazing. As usual the annuities are championed by a seller. At least the seller will admit to it this time which is unusual.

The arguments are always the same. The seller/annuity advocate must bend longterm data into a pretzel to show their financial superiority or just rearrange facts to suit their need.

I'm tired of the topic but I'd sure hate to have a true newbie mislead down this path.

They only make sense if your name is Duncan MacCloud and you keep your sword skills up.

 

[FinanceDude]

Lets try it against Wellesley, Wellington and/or STAR. All of those produced more than 6% annually over the last 5 years and over a 15 year period thoroughly thumped 6% while offering a lot less volatility than the s&p 500.

Read my sig line.......... I'd be happy to do that fund-to-fund comparison for interested parties.......

 

[Art G]

Fortunately, no.

So you're a sales guy who is only looking out for the best interests of his client and is concerned about customer satisfaction more than the amount of income you will earn. I know those types of sales people must exist, and I'm glad to discover one on the forum.

No, I'm not a "sales guy" I am a client obligated individual who is paid to seek out and offer ongoing money management assistance for those looking to have financial freedom.
Don't make fun of sales people, they are the lifeblood of society and the economy. Without them, you have a bunch of salaried or hourly "clerks" who could care less about customer satisfaction, being that they get paid whether they do a good job or not.
Out of curiousity, when dealing with your money, do you really prefer calling Vanguard and having the phone answered by an anonymous clerk who will never speak to you again, over an ongoing relationship with a trusted advisor?
When you go into your bank, would you rather see Sally, the teller who has been there for years and recognizes you and calls you by name, or an ATM machine? When you go to restaurants, do you return to those which gave you a good meal last time, or do you constantly try new restaurants with plans never to return? When you go to your doctor, do you prefer a different one with each visit? Is there anyone in the world you trust, or go through life assuming absolutely everyone is trying to screw you, even the ones you hand select?

 

[Marquette]

Read my sig line.......... I'd be happy to do that fund-to-fund comparison for interested parties.......

What on earth does that have to do with annuities versus vfinx?

start yer own thread, I can barely keep track of this one!