- 1,802
Very well said.
Competing Against Bonds W/Fixed Annuities
- Thread starter insurehound
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- annuity fixed annuities
Very well said.
There are companies that will do that for you, for typically a percentage charge (usually 1%). They will do the transfer, liquidate securities, have the compliance conversations with the client, etc.
Seriously, this type of service is very useful and for the most part, worth the 1%. It could absolutely be a lifesaver if you're going to be out of town, on vacation, or simply too busy to monitor the process.
- 1,802
There is a company right now that has come under the scrutiny of the SEC; that will actually do this for "non-securities" licensed individuals.
I never understood the the risk associated with this, but they charge roughly 1%; and less for larger accounts.
Hello all
Great discussion, I found it very helpful.
I have an observation and some questions.
First the observation. I just finished Jack Marrion's book (Change Buyer Behavior and Sell More Annuities). I think the book would have benefited from clear discussion of the limitations on insurance-only agents. If that was in the book I either missed it or it didn't make a big impression.
I was already generally aware of the rules, but this discussion was very helpful.
Now the questions:
1) Is it ok to compare a fixed annuity to a cd?
2) At first I had intended to get securities licensed, but I wasn't sure it was worth it since I really want to just do insurance products (minus VAs). It would seem that it would make sense to get the 6 or 7 license just to be able to talk about the full range of options, even if you really don't plan on doing much with securities. (Especially if indexed annuities end up requiring a securities license).
3) Could an insurance agent get around the problem with a series 65 license, or is that limited to non-commissioned advice only?
4) In highlighting the "insurance" aspects of a fixed annuity, what aspects would you focus on? I understand that an annuity is an "insurance" product, but I have a hard time with specifics. I undertand the concept that an annuity protects against living too long, but since most people don't annuitize, I wonder if this is used in most discussions.
Thanks
Great discussion, I found it very helpful.
I have an observation and some questions.
First the observation. I just finished Jack Marrion's book (Change Buyer Behavior and Sell More Annuities). I think the book would have benefited from clear discussion of the limitations on insurance-only agents. If that was in the book I either missed it or it didn't make a big impression.
I was already generally aware of the rules, but this discussion was very helpful.
Now the questions:
1) Is it ok to compare a fixed annuity to a cd?
2) At first I had intended to get securities licensed, but I wasn't sure it was worth it since I really want to just do insurance products (minus VAs). It would seem that it would make sense to get the 6 or 7 license just to be able to talk about the full range of options, even if you really don't plan on doing much with securities. (Especially if indexed annuities end up requiring a securities license).
3) Could an insurance agent get around the problem with a series 65 license, or is that limited to non-commissioned advice only?
4) In highlighting the "insurance" aspects of a fixed annuity, what aspects would you focus on? I understand that an annuity is an "insurance" product, but I have a hard time with specifics. I undertand the concept that an annuity protects against living too long, but since most people don't annuitize, I wonder if this is used in most discussions.
Thanks
- 1,641
1. yes
3. talk about risk and tolerance.
4. Focus on what concerns the client. I believe the book touches on this.
3. talk about risk and tolerance.
4. Focus on what concerns the client. I believe the book touches on this.
- 429
911 on bonds or bond funds if you run into clients with bonds. The treasury securities sales by the U.S. Treasury are tanking with few buyers. This means rates will have to go up and bond values will go down. It is already happening. It is only going to get worse.
- 182
As a licensed broker, I would tell you a smart FA would place a client in an annuity if they felt it was suitable for the situation. What most insurance agents don't understand is that annuity commissions are much higher than that of a bond, so in most cases there is no incentive to sell a bond or bond fund over an annuity, unless there is a significant reason why.
One of the main reasons would be liquidity concerns, which is ussually the main reason I do this.
Unfortunately, I have most of my clients in bonds and would love to convert them to annuities, however I run into the ethical dilema of what is best for the client, and unfortunately I have to take a hair cut on my potential commissions. However, this is not a bad thing, doing the best thing for a client will always lead to a longer relationship and referrals, which is the life blood of many peoples practices.
One of the main reasons would be liquidity concerns, which is ussually the main reason I do this.
Unfortunately, I have most of my clients in bonds and would love to convert them to annuities, however I run into the ethical dilema of what is best for the client, and unfortunately I have to take a hair cut on my potential commissions. However, this is not a bad thing, doing the best thing for a client will always lead to a longer relationship and referrals, which is the life blood of many peoples practices.
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- 429
I am not pushing annuities or EIA but I would be very wary of an over concentration in bonds. Right now having a heavy concentration in bonds may not be the right thing for clients. Treasuries are not being sold and they need to sell trillions of them.
Rates will probably keep going up and bonds could get crushed. See Bill Gross and Gary Shilling (Forbes newsletters) who is outstanding.
- 1,271
Why would you love to convert their bond portfolio to annuities? Is it unfortunate because you're not getting as much commission or because bonds are not suitable for your clients' current needs?
Why is that unfortunate if bond is what is most suitable for your clients e.g. due to liquidity needs (like you mentioned)?
So where is this ethical dilemma you're speaking of? If selling them bonds is most suitable for their current needs, and if selling them something that's most suitable for them allows you more revenue in the long run, where is the frigging dilemma?
If they need short-term liquidity then bond is more suitable to their needs. Only way you can sell them annuity is either by lying to them or convincing them that they don't need short-term liquidity.
If they don't need short-term liquidity and prefer guaranteed protection on their principal then annuity is more suitable to their needs. Only way you can sell them bond is either by lying to them or convincing them that they need short-term liquidity and not the protection on their principal.
The dilemma only exists in your head.
- 182
For those who have a short term memory, you must read my entire post as one, not several seperate statements, all the statements together qualify the entire statement.
Also I know for the people who provide financial and insurance services for free, there is never an ethical delima, however, if you do enough reading and step outside your hollier than thou box, you would know that anyone who provides a product for a commission always has an ethical delima of choosing themselves or the client first. Following that, the forward thinking practitioners will realize that ultimately they are not taking a loss in commission, because as I stated you have a longer relationship = more commissions as situations change, and you get more referrals = more commissions.
Also on the ethical delima deal, any CFP practitioner will tell you that in the CFP training material it specifically calls out this fact, because they realize that you as a business owner, your job is to increase revenue (more income for you), and the only way for us to do this is either through more sales or higher commission sales. So back to the the statement longer relationship and more referal drives more sales growth, therefore you do not have to sale higher commission products to make a good living at this.
My goal was to get a simple point across without writing a thesis on the ethical delima between your goal to make money off selling products to someone versus doing what is best for them at all times, but in essence there really is no delima if you can be more long term oriented in your dealings with clients, but I guess that it is not possible for some people to understand things unless you completely spell them out.
Thank you though for having me clear this up for you, hopefully someone who reads this will learn something from it.
Also I know for the people who provide financial and insurance services for free, there is never an ethical delima, however, if you do enough reading and step outside your hollier than thou box, you would know that anyone who provides a product for a commission always has an ethical delima of choosing themselves or the client first. Following that, the forward thinking practitioners will realize that ultimately they are not taking a loss in commission, because as I stated you have a longer relationship = more commissions as situations change, and you get more referrals = more commissions.
Also on the ethical delima deal, any CFP practitioner will tell you that in the CFP training material it specifically calls out this fact, because they realize that you as a business owner, your job is to increase revenue (more income for you), and the only way for us to do this is either through more sales or higher commission sales. So back to the the statement longer relationship and more referal drives more sales growth, therefore you do not have to sale higher commission products to make a good living at this.
My goal was to get a simple point across without writing a thesis on the ethical delima between your goal to make money off selling products to someone versus doing what is best for them at all times, but in essence there really is no delima if you can be more long term oriented in your dealings with clients, but I guess that it is not possible for some people to understand things unless you completely spell them out.
Thank you though for having me clear this up for you, hopefully someone who reads this will learn something from it.
