Annuity Assets Under Management

[iceco1d]

Just curious for you guys that sell annuities, what kind of assets under management you have (just for annuities). If you wouldn't mind, specifying how much you have of each type of annuity.

For me...

Flexible Premium Fixed: $2 million

Variable: $3 million

Indexed: $0

SPIA: $0

MYGA: $0


Would like to get more flex premium fixed, and some indexed assets this year, and just wanted to see what some of you guys have accomplished.

Thanks in advance.

 

[bluemarlin08]

What do you see as the advantages of using Variable Annuities?

 

[Franz Kafka]

Are you managing these assets or at least being paid on trail option? Asset under management usually refers to getting paid annually for managing client's assets. What's so important about knowing how much annuity you have sold if you're not generating any income from them?

 

[iceco1d]

What do you see as the advantages of using Variable Annuities?

Variable annuities have more upside if we enter a secular bull market than indexed annuities. Variable annuities have some handy death benefit riders that I don't think indexed annuities have (although I could be wrong). Sometimes VAs have better "income now" riders (like Pacific Life).

In fact, I don't even see the two as competing products. Variable annuities are suitable as a replacement for (a portion of) the equity portion of a clients portfolio. Indexed annuities are suitable as a replacement for (a portion of) the fixed income portion of a clients portfolio.

VAs are good for people who are comfortable with the market, but would be more comfortable with a minimum guarantee of some kind (i.e. knowing their worst case scenario in advance). Whenever I use a VA, I ask the client if they are willing to take a more aggressive portfolio because they have the income/gmab rider backing them up.

EIAs are good for people who are not comfortable with the market at all, but are willing to risk getting no/less interest, in exchange for the chance to get more interest (than a MYGA fixed annuity or CD).

Sorry for the response delay, I was under the weather.
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Are you managing these assets or at least being paid on trail option? Asset under management usually refers to getting paid annually for managing client's assets. What's so important about knowing how much annuity you have sold if you're not generating any income from them?

I take the trail option on all annuities. I'm working on segmenting my book of business (which is primarily securities) into fixed life insurance/annuities - brokerage - fee-based.

I think a lot of my clients would be happier with a product that never goes down, which is why I've been asking a lot of EIA questions on this board. I can do these products direct (or with an IMO/FMO) and not through my b/d, which is attractive to me because I can a) get a higher payout, and b) don't have to worry about losing those clients if I ever want to change b/ds.

So I guess I'm curious to get feedback from some more annuity-centric producers, so I can figure out a good way to tailor my practice moving forward.

I'm just wondering if there are guys out there (on this board) with $5MM, $10MM, $15MM (or more) in fixed/indexed annuities on the books, and if they'd be willing to share "how life is."

As a primarily securities guy, having $5MM in fixed annuities, $5MM in indexed annuities, makes me a bit nervous. Maybe that's unjustified (and I hope it is).

If I could put $10MM in fixed/indexed annuities over the next 18 months, I'd have about $75K in trails (based on products I currently use) coming in, not tied to my b/d, which frankly would be awesome.

Sorry for the novel.
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I'd also like to note, the portion of my book that I have in fixed annuities right now is absolutely the LEAST STRESSFUL portion of my book. The only questions I get are "can I add more money to that account?" Which is freakin' refreshing!

 

[bluemarlin08]

I'm curious regarding the use of VA as part of an equity portfolio. Are there VA that offer a guarantee on the accumulation side? If you are going to be in equities, why pay for the insurance wrapper and lose the cap gain and step up advantages. I agree that VA should be part of your equity portfolio and FA and FIA should be part of your debt portfolio, the income riders seem to lag the income riders of FIA. I, to, would love to hear some input from seasoned annuity producers.

 

[bobwise23]

If you are going to be in equities, why pay for the insurance wrapper and lose the cap gain and step up advantages.

Fixed Indexed Annuities at least guarantee growth. 14% cap isn't too shabby either.

-Bob

 

[iceco1d]

I'm curious regarding the use of VA as part of an equity portfolio. Are there VA that offer a guarantee on the accumulation side? If you are going to be in equities, why pay for the insurance wrapper and lose the cap gain and step up advantages. I agree that VA should be part of your equity portfolio and FA and FIA should be part of your debt portfolio, the income riders seem to lag the income riders of FIA. I, to, would love to hear some input from seasoned annuity producers.

Mass Mutual used to have a GMAB where the client could walk away with their original deposit after 10 years (if contract value was lower and you need to use the rider), or 200% of contract value after 20 years. I don't know if they still have it.

It depends on what the client is looking for (GMAB or GMIB/GLWB), but Pacific Life has GLWB riders for less than 50 bps, and contract M&E at 1.15% (with discounts for large deposits). They aren't always 4% in expenses.

Even still, if you've got 3.5% in costs and put all of your clients equity money in the contract, your long term expected return on stocks should be 10 - 12%, so you're still talking 8% or more in expected return, with the protection of whatever VA rider you choose.

If a client is comfortable with equities, they have no real need for a VA.

I've found VAs are best used as a behavior modification tool. A client that may only let me put 20% of their account in stocks, would be willing to let me put 60% in stocks as long as their is a 10 year GMAB rider attached. Chances are, a 20/80 low cost portfolio will still be outperformed by a 60/40 high cost portfolio, over a period of 10 years.

This is just an example (and if they need the income, and get no growth after 10 years, they can still take their original deposit and buy a SPIA if needed).
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Fixed Indexed Annuities at least guarantee growth. 14% cap isn't too shabby either.

-Bob

CDs guarantee growth also, that doesn't make them an appropriate replacement for stocks.

I'm not aware of any FIA right now that has a 14% cap (without having some ridiculous spread or participation rate).

Not knocking FIAs at all, in fact, I'm trying to see to what extent they can fit into my practice.

 

[VolAgent]

I always found the GMAB from MassMutual to be weak. But then, I never saw a better one either.

So I give you my money for ten years, and you are going to charge me a fee. And the best you can promise me is that I walk away with what I started with? If I give it to you for twenty years, you'll double my money? All for 20 basis points a year (or whatever the rider cost), plus all the other fees?

No thanks. If you really think you'll need that rider, don't do it. Buy a fixed annuity, an indexed annuity, or some kind of income rider and forget about a lump sum.

 

[bobwise23]

Mass Mutual used to have a GMAB where the client could walk away with their original deposit after 10 years (if contract value was lower and you need to use the rider), or 200% of contract value after 20 years. I don't know if they still have it.

It depends on what the client is looking for (GMAB or GMIB/GLWB), but Pacific Life has GLWB riders for less than 50 bps, and contract M&E at 1.15% (with discounts for large deposits). They aren't always 4% in expenses.

Even still, if you've got 3.5% in costs and put all of your clients equity money in the contract, your long term expected return on stocks should be 10 - 12%, so you're still talking 8% or more in expected return, with the protection of whatever VA rider you choose.

If a client is comfortable with equities, they have no real need for a VA.

I've found VAs are best used as a behavior modification tool. A client that may only let me put 20% of their account in stocks, would be willing to let me put 60% in stocks as long as their is a 10 year GMAB rider attached. Chances are, a 20/80 low cost portfolio will still be outperformed by a 60/40 high cost portfolio, over a period of 10 years.

This is just an example (and if they need the income, and get no growth after 10 years, they can still take their original deposit and buy a SPIA if needed).
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CDs guarantee growth also, that doesn't make them an appropriate replacement for stocks.

I'm not aware of any FIA right now that has a 14% cap (without having some ridiculous spread or participation rate).

Not knocking FIAs at all, in fact, I'm trying to see to what extent they can fit into my practice.

With FIA we ask for nothing more than to supplement their retirement. By doing so, we inform our clients that it is a good idea to continue funding your 401K or IRA and take about 50% of that and put it into a FIA. So i agree, just having an FIA as your only retirement account is not sufficient enough.

-Bob
Life Insurance Illinois, Tax-Free Illinois Plans-Third Lake Financial Corporation.

 

[iceco1d]

I always found the GMAB from MassMutual to be weak. But then, I never saw a better one either.

So I give you my money for ten years, and you are going to charge me a fee. And the best you can promise me is that I walk away with what I started with? If I give it to you for twenty years, you'll double my money? All for 20 basis points a year (or whatever the rider cost), plus all the other fees?

No thanks. If you really think you'll need that rider, don't do it. Buy a fixed annuity, an indexed annuity, or some kind of income rider and forget about a lump sum.

Prudential used to have really great GMAB riders (GRO and GRO II), but they are discontinued. Most GMABs are more expensive now, too.

The thing is, over a 10 year period, a VA (with a heavy equity focus) will outperform a FIA the overwhelming majority of the time. FIAs only look as good as they do because of the crappy market over the past 10 years. If you do a monte carlo simulation on 1,000 rolling 10 year periods, a VA with 70% equity exposure will win 85% of the time.

The problem with the income riders is that not everyone wants income from their money.

That aside, would you be willing to share (here or via PM) what portion of your book is in FIAs and other fixed annuities?
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With FIA we ask for nothing more than to supplement their retirement. By doing so, we inform our clients that it is a good idea to continue funding your 401K or IRA and take about 50% of that and put it into a FIA. So i agree, just having an FIA as your only retirement account is not sufficient enough.

-Bob
Life Insurance Illinois, Tax-Free Illinois Plans-Third Lake Financial Corporation.

I think I use a similar concept. "We can guarantee $X,XXX in monthly income with this pool of money. Then put $X,XXX aside in a rainy day fun. And invest the rest of your money aggressively, knowing your income needs for the first 10 years of retirement are guaranteed (and could end up better if the market does well).

Care to share any info about your annuity biz? FIA or otherwise?