Selling FIA's

[bluemarlin08]

They couldn't produce it last year. I don't have any reason to deal with Allianz, good luck.

 

[indaville]

They are mainly going after CD's.

However, I do have a question for an annuity guru. I have a client that has a variable annuity that is now past it's surrender period. If they roll the entire amount to another annuity, would that create a taxable event?

CD money is some of the toughest to move. If you roll the VA directly to the FIA no taxes will be due. Check the fees on the VA, if they are high, or if the clients wants their money safer then a FIA might be a good alternative.

Matt

 

[Mr. Bill]

MWB, it should not be taxable as long as the transfer is done properly. Are you a 65 or otherwise licensed? That is where you can get into trouble (if you're not).

There are annuity companies that offer tax enahancements as a rider (LSW is one off the top of my head). I don't believe they generally apply to taxable gains in a transfer, they would apply to the gains from the starting amount. Check with the insurance company. That would be a great feature for someone who otherwise is uninsurable. There are usually waiting periods as well. If someone can think of another company that offers this feature, please post for the benefit of all.

 

[padthaiforlunch]

MWB, it should not be taxable as long as the transfer is done properly. Are you a 65 or otherwise licensed? That is where you can get into trouble (if you're not).

So if I do a 1035 exchange, I can get into trouble if I'm not a 65? It's not like I'm selling the variable. How do I avoid this Trouble, of which you speak?

There are annuity companies that offer tax enahancements as a rider (LSW is one off the top of my head).

Please elaborate on tax enhancement riders. Is this a life rider that covers income and estate taxes? LSW??? Who Dat?

Thanks

 

[Charpress]

Whether or not a producer who is not licensed as an investment advisor would get in trouble or not depends on who complains, why they complain, and what the future holds.

The argument is this: by looking at a variable (or any security) and suggesting a move to a fixed annuity, a broker could argue that this is investment advice. A producer would argue that it is common sense to advise a FIA if the client expresses a desire to get out of a risk position.

So, with a high enough amount being moved, and with a broker who is tired of losing accounts, it is more than possible that a complaint arises. But, so far (knock on wood), I don't think brokers have had too much success on this --there are certainly some good articles in Senior Market Advisor and other publications on this problem.

I think this is the scenario that Mr. Bill is talking about. Many of us have gone the Series 65 route just to avoid being a test case.

 

[Mr. Bill]

Yes. If you are not properly licensed, it doesn't matter what the clients says or signs, FINRA along with your state's DOI will consider you to have given "investment advice without a license" simply by doing the transfer. That's why I said get your 65. Just do it. Don't pass go, don't collect your $200, just do it.

LSW = Life of the Southwest

The riders are just a grossup on the taxable amount due. So for example (and I'm making this up, not using LSW), let's say the client puts in $100,000, and over time, the value increases to $200,000 (let's say this is non-qualified as well). Taxes would be due upon death on the $100,000 basis in the contract. The rider would provide a % increase to the amount of gains, let's say 35%, so the heirs would receive 1) 100,000 basis, 2) 100,000 gains and 3) 35,000 grossed-up for taxes due on gains, or total amount $235,000. The rider isn't specific for income or estate tax, it's just a bump up on gains.

 

[Winter_123]

Whether or not a producer who is not licensed as an investment advisor would get in trouble or not depends on who complains, why they complain, and what the future holds.

The argument is this: by looking at a variable (or any security) and suggesting a move to a fixed annuity, a broker could argue that this is investment advice. A producer would argue that it is common sense to advise a FIA if the client expresses a desire to get out of a risk position.

So, with a high enough amount being moved, and with a broker who is tired of losing accounts, it is more than possible that a complaint arises. But, so far (knock on wood), I don't think brokers have had too much success on this --there are certainly some good articles in Senior Market Advisor and other publications on this problem.

I think this is the scenario that Mr. Bill is talking about. Many of us have gone the Series 65 route just to avoid being a test case.

Anyone can complain about anything so there is no right conduct that will always prevent that from happening. Nevertheless I think that the FIA insurance agent is on somewhat safe ground if he simply asks 100,000 foot level questions about whether the client is happy with where he is now. If he is not and wants to consider a change and discuss the FIA option then the FIA person is acting on conclusions and motivations that the client already had in mind. If, however, the FIA person starts dropping down to a securities specific discussion or analysis of the clients portfolio as a means of comparing, contrasting, and recommending, then that is verboten without a securities license or 65 in my view.

Winter

 

[midwestbroker]

I do not hold my 65 license.

The client has both FIA and VA's in place right now. I was going to inform him that he can roll the money to a FIA without any tax implication, and that I could show him some FIA products.

 

[Mr. Bill]

Well, you have been warned.

 

[midwestbroker]

Let me correct that...I was going to do as mention before and put them in front of the persons who already are producing annuities. I do not know if they hold their series 65, but they would be the ones presenting the annuity.

Upsetting the DOI or any other department that uses initials is not my intention.