Annuity Assets Under Management

[Franz Kafka]

Are you both an RR and an IAR (you mentioned fee base)?

Some go with B/D just to sell VAs.

Some just sell fixed/index to avoid B/D.

Few sell both but none of them run a fee based business on top of commissioned annuity business.

Why do you feel that you need to segment your business? Don't you think you can be more successful by concentrating on one or the other?

 

[VolAgent]

I made no assumptions. I asked some genuine questions directed at those doing significant FIA business. You are trying to engage me in some type of variable annuity GMAB debate and/or internet shlong measuring contest. Again, I'm not interested in that.

Not sure where you got that. I stated that I don't like GMABs and why I don't like them. Don't blame me that you took it personally. Unless you are the guy who designed the original GMAB, who cares.

 

[xrx1109]

I liked Met's. I understand they made some changes, but it was a very strong contract with the GMIB and death benefit rider. The fees were high of course, but you got a lot for it.

Of course, you can get almost everything regarding riders with a FIA now. Give up a lot of upside potential, but no market risk to principal either. That said, if you buy an annuity with income rider, you better not even have a thought of cashing out. And that is the same whether VA or FIA.

Yeah MET's was awesome a couple months ago when they would guarantee 6% income and 6% annual accumulation. They sold a ridiclous amount of the product and it was only available like this for 6 months in 2011.

They cut it back to 5% and cut the commission to stop selling so much.

The key with the VA's is to carve off some money and put in in a SPIA so the VA can sit untouched for 4 to 5 years. if you can get some gains in tht time you might stand a chance of not having to annuitize at some point. they dont annuitize you keep trails.

 

[mjhprep]

Are you both an RR and an IAR (you mentioned fee base)?

Some go with B/D just to sell VAs.

Some just sell fixed/index to avoid B/D.

Few sell both but none of them run a fee based business on top of commissioned annuity business.

Why do you feel that you need to segment your business? Don't you think you can be more successful by concentrating on one or the other?

I dont want to speak for Ice, but I am considering similar options. I'm RR & IAR. Not interested in segmenting business so much as having all the tools available to help a client.

Want guaranteed interest rate higher than CDs - Fixed Annuity

Want the potential for higher income, but still need the guarantees - Fixed Index Annuity

Need more growth than you can get from Fixed products, but cant stomach market risk - VA w living benefit riders.

It's not trying to concentrate on 1 product or another, but knowing & using the best product for clients with varying needs & risk tolerances.

 

[iceco1d]

Are you both an RR and an IAR (you mentioned fee base)?

Some go with B/D just to sell VAs.

Some just sell fixed/index to avoid B/D.

Few sell both but none of them run a fee based business on top of commissioned annuity business.

Why do you feel that you need to segment your business? Don't you think you can be more successful by concentrating on one or the other?

That's what I'm seeing as well (not many people doing all 3). Like MJH said, I want to have every tool available in my toolbox to help my clients.

I work the 403(b) market primarily, so most of the clients that I prospect are good annuity candidates (a lot of fixed annuities during accumulation, then something with an income rider upon retirement). I've used VAs mostly for income riders because my b/d used to charge an extra fee for FIA business (before 151a got stomped, thank goodness). Now I'm thinking a lot of my VA clients would be even more comfortable with a FIA with an income rider, and NEVER have to see their principal go down.

Not all of my clients are like this, but a lot of them fit this bill.

Even though I mainly prospect teachers, I do run into a fair share of HNW and UHNW investors. These people are not (generally) annuity buyers. In fact, a lot of them aren't mutual fund buyers either. They need/want something unique. They also require a different level of service than a teacher with $150K in a FIA/VA and $25K in mutual funds.

I'm looking to separate those pieces of business, so that I can seek out the best products for those types of clients. I'm also looking to have more control over my business, and not be dependent on my b/d's insurance agency, corporate RIA, and broker/dealer. That way, if a b/d ever crosses me, it's just brokerage clients that need moved. If an FMO decides to try and bend me over with no lube, it's just insurance/FIA clients that need moved. If an RIA custodian implements a piss poor fee structure or policy, it's just advisory clients that need moved. And on and on. Don't want 100% of my income predicated on my association with 1 company (my b/d).

Plus eventually, I'd like to grow out of the 403(b) market. I think that market will consolidate over the next 10 years, and become much like the single provider ERISA 401(k) plans we see today. And I kind of fell into that business on accident when the regs changed. I really had no intention of working K-12, nor do I really enjoy it that much. For now though, it pays the bills. Eventually I'd like to swim upstream and focus on discretionary money management for HNW individuals and entities.

Again, sorry for the novel.

By the way VolAgent, I agree with you 1,000% regarding buying a VA/FIA for the income rider (i.e. don't plan on cashing out). It's tough to get clients to realize that when they retire, their days of raiding 20% out of their retirement accounts to "buy a boat...just this one time" HAVE to be over, or else they are going to have to work at Walmart when they're 75.

 

[bluemarlin08]

The big problem, IMO, is most people that buy these annuities don't really understand. All they can remember is they are guaranteed 8%.

 

[iceco1d]

The big problem, IMO, is most people that buy these annuities don't really understand. All they can remember is they are guaranteed 8%.

Yep. And the media then blames/assumes the broker/agent/advisor lied to them. In reality, the client probably forgot the specifics.

Not saying people don't get scammed, but I'm guessing it's usually the client that forgets.

 

[Franz Kafka]

Even though I mainly prospect teachers, I do run into a fair share of HNW and UHNW investors. These people are not (generally) annuity buyers. In fact, a lot of them aren't mutual fund buyers either. They need/want something unique. They also require a different level of service than a teacher with $150K in a FIA/VA and $25K in mutual funds.

Doing both won't work IMO.

It sounds like you're trying to diversify your risks by splitting your business between B/D, RIA and FMO. That doesn't really make sense. B/D and RIA keep your clients when you leave them. FMO doesn't unless you assign your commissions. There's no risk involved with FMO. I think reading Wayne Cotton will help you see at what stage of your career you're at currently.

 

[0b1kanobee]

The big problem, IMO, is most people that buy these annuities don't really understand. All they can remember is they are guaranteed 8%.

This is not just a problem from the clients end but on the advisers end as well. I got news. No matter how long you explain it. No matter how well you explain it. 9 out of 10 clients either won't remember it nor will they truly understand it.

My buddy is an electrical engineer for NASCAR over here where I live. He came over the other day and i was explaining to him how my lights dim in and out when I was using the space heater at times. Now most people would tell you to check the fuse box or something. Not this guy. He starts talking about capacitors and resistors ect. ect. I'm sure he did a really good job of explaining it to me. But do you think I remember 1/10th of WTH he said? In case you are wondering, no.
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Doing both won't work IMO.

I'll tell you what doesn't work and that is being all things to all people. What doesn't work is being an accumulation specialist and a distribution specialist. My buddy retired 23 people last year in the school system. That means they came to him with their social security, pension, sick vacation pay FICA alternative and whatever other money they could bring to the table and asked "what do I do now"? He's never helped anyone accumulate anything pertaining to wealth up to that point. Someone else did it.

IMO you either specialize in wealth accumulation or asset phase distribution. Very hard to be the best at both. With that said, there is nothing wrong with having the ability to put monies in safe places (not fixed products) and some not so safe places during the retirement phase. Some of his clients don't fully retire when he retires them. Some go on to open their own business. One teacher opened a day care center. One a bed and breakfast. Some do independent stuff with their acquired skills. Retirement for some doesn't mean sitting at home on the couch drinking beer and watching football. Many set off to do things they always wanted.

Back to the point though, some good retirement plans include some market exposure, even low risk and you can't get that just being an insurance agent UNLESS you partner with someone else of course which is what I do. I don't retire enough people to warrant a securities license and can't keep up with those products along with medicare and the other things I do.

That's like saying you can't do MAPD and sups together. B.S.

What I will tell you also is that some people should just stick to the easy stuff like term life, med sups, ect. Find something that you can do and do well. Annuities, especially the more complicated ones and not only how they work but how they fit into a plan just isn't something anyone should try. You either better be very passionate about it (does it give you a hard-on?), be extremely willing to learn and have a mentor and be dam good with numbers. If you can't sit on the potty and stroke one off to a prospectus then it isn't for you (at least that is the joke around the office).

 

[iceco1d]

Doing both won't work IMO.

It sounds like you're trying to diversify your risks by splitting your business between B/D, RIA and FMO. That doesn't really make sense. B/D and RIA keep your clients when you leave them. FMO doesn't unless you assign your commissions. There's no risk involved with FMO. I think reading Wayne Cotton will help you see at what stage of your career you're at currently.

As an RIA (when I own the RIA), I can custody assets anywhere I like. I could custoday assets at TDA, Schwab, and Pershing if I like. I own the assets, not the custodian.

The only captive assets I'd have would be at the b/d.
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This is not just a problem from the clients end but on the advisers end as well. I got news. No matter how long you explain it. No matter how well you explain it. 9 out of 10 clients either won't remember it nor will they truly understand it.

My buddy is an electrical engineer for NASCAR over here where I live. He came over the other day and i was explaining to him how my lights dim in and out when I was using the space heater at times. Now most people would tell you to check the fuse box or something. Not this guy. He starts talking about capacitors and resistors ect. ect. I'm sure he did a really good job of explaining it to me. But do you think I remember 1/10th of WTH he said? In case you are wondering, no.
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I'll tell you what doesn't work and that is being all things to all people. What doesn't work is being an accumulation specialist and a distribution specialist. My buddy retired 23 people last year in the school system. That means they came to him with their social security, pension, sick vacation pay FICA alternative and whatever other money they could bring to the table and asked "what do I do now"? He's never helped anyone accumulate anything pertaining to wealth up to that point. Someone else did it.

I had 12 people retire with me last year (and should improve on that this year). I also have several hundred households in the accumulation phase. I bring in about $80,000/month in new money, automatically, just from 403B flows, and Roth IRA DCAs.

I have the business model working nicely (over $5MM in new assets this year). My main concern is having too many clients in 1 place (and the b/d restricting what I can do, etc.).

Teachers (and other mass affluent) have simple accumulation (and distribution) needs. You can do both.

If you're going to work with $1MM, $5MM+ accounts, that's a different story. If I decide to do that someday, I'm sure I can unload a $10 or $20MM book of teachers, automatically contributing $100K/month, and collecting 1% in trails to a mid level FA for a princely sum!