Source of Funds

[scagnt83]

Thats when you tell the client that the 8K that he will have access to isnt really that much money.
And tapping into a line of credit on his house, at his age, with his amount of assets would not be advisable.

How much will he get for the Harley?... $10K if he is lucky... so now he is up to $18K. Not bad, but the harley is not exactly liquid, and the bank wont give him a $10K loan on it, I guarantee you. And selling a bike quickly will not get top dollar. So lets be realistic and call it $8K at best if he goes and gets a loan or sell quickly.
So in reality we are at $16K liquid... kind of...

So thats 12% of his net worth thats liquid... after one year.
So I will revise my statement considering the Harley now; I would leave at least $5K in bond funds (bond funds because you want it to be there, and most quality conservative bond funds have very consistent returns; and he seems adverse to risk from what you said)

And I agree with BNTRS. Document this well. 5 years from now this guy might say "hey, i never wanted to sell my harley" .... you just never know.

 

[0b1kanobee]

So how exactly do you guys document this stuff. I make notes in the file myself. Other than the 4 pages of suitability questions which require, oh let me count, 19 client initials and 6 signatures.

In Florida, we also now have state paperwork, which is more suitability depending on the clients age. We can't even get Long Term care benefits here on most annuities as hey won't pass through the state.

 

[BNTRS]

Notes in your file will usually cover you. You could also make a memo to the file that states you've discussed the potential downside of putting this much money into the annuity and that the client has still insisted that it happen.

Wouldn't bother having client sign any addiitional piece that you type up, it won't hold much (if any legal weight) and it's likely not worth the time.

 

[scagnt83]

So how exactly do you guys document this stuff. I make notes in the file myself. Other than the 4 pages of suitability questions which require, oh let me count, 19 client initials and 6 signatures.

In Florida, we also now have state paperwork, which is more suitability depending on the clients age. We can't even get Long Term care benefits here on most annuities as hey won't pass through the state.

Make sure your notes are dated, and mark times of the meeting.
Write down a few quotes from the client on their thoughts.

Create an overview of the policy bought, reasons behind it, master plan discussed, etc. make a copy, then time and date both and have the client sign both, one for their records, one for yours.
- - - - - - - - - - - - - - - - - -

Wouldn't bother having client sign any addiitional piece that you type up, it won't hold much (if any legal weight) and it's likely not worth the time.

I would think it would help show due diligence... jmo.. im no legal expert
Clients seem to like the separate overview though.

 

[Freddie]

Isn't that the truth.

True story with some details left out. Do it yourselfer (DIY) knows someone who is sophisticated analyst (SA). The SA has a great system that has been reducing exposure for the past month. He really knows his stuff. He had been warning the DIY person. I know someone who knows both of them.

The DIY person on May 6th has ETFs from a famous low exp no-load fund family. You know the name - starts with a V. Watches them closely

On May 6th, I was watching the market at my desk while doing work with streaming data. The market went absolutely insane that day. I saw ETFs gap 30% down in a second. It looked like the end of the world. Some ETFs and stocks gapped down in seconds to .16 cents or less.

The DIY (know it all) is probably in late 60s. Probably has all his money in these ETFs. Well he must have been watching the market and panicked. He rushes to liquidate with market orders and gets filled at a penny! His probably $50 ETF gets sold out at one cent.
He probably had a heart attack. The next day the govt/SEC or NYSE busted all those trades.

He was lucky he got the penny, because if he was at say $50 and got sold at $14 - he owned it. His life would have been over at that point.

Annuities are far from perfect but split second devastation in the market is possible. The daily volatility over the last month has probably been killing little guys and blowing out all daily stop losses.

 

[Powder]

A lot of talk has focused on the suitability and the clients liquidity, or lack there of, if he puts all his money into an annuity. Many of the companies and most people on here are not advising it, and for the most part I agree.

My question is this: If the client were to put all his money into an annuity he planned on using to get an income for life, how is this any different than a teacher who has a pension which pays income for life and zero liquidity?

It appears as if one of these is acceptable and the other isn't. Why?

 

[0b1kanobee]

A lot of talk has focused on the suitability and the clients liquidity, or lack there of, if he puts all his money into an annuity. Many of the companies and most people on here are not advising it, and for the most part I agree.

My question is this: If the client were to put all his money into an annuity he planned on using to get an income for life, how is this any different than a teacher who has a pension which pays income for life and zero liquidity?

It appears as if one of these is acceptable and the other isn't. Why?

I see what you are saying or where you are going with this but truth be told, you are not comparing apples to apples. A teacher with a pension and no liquidity got that way with no planning or improper planning on her part. The teacher would have no 'saving' mentality along with possible other unforeseen things that could of ate up any liquidity she may have had assuming she had any.
Also, teachers do not have to take the pension option. They could choose the investment plan. When they retire or walk out vested (quit) whichever happens first, they will have a lump sum of money. I have seen it as high as 750k here in Florida. So out of that 750k, if that is all their liquid money, you wouldn't want to roll that into an annuity or even a laddered set of annuities without giving them cash somewhere they can grab when/if needed. It is all done by putting together a good financial plan.

 

[scagnt83]

A lot of talk has focused on the suitability and the clients liquidity, or lack there of, if he puts all his money into an annuity. Many of the companies and most people on here are not advising it, and for the most part I agree.

My question is this: If the client were to put all his money into an annuity he planned on using to get an income for life, how is this any different than a teacher who has a pension which pays income for life and zero liquidity?

It appears as if one of these is acceptable and the other isn't. Why?

Well, imo, the pension option isnt acceptable as a standalone solution.

How well has that really worked out for people throughout the years? Pensions being cut, or mismanaged and dried up, or just not being enough for retirement.

Pensions are a great benefit to offer and to take part in; but to rely on just a pension is foolish.

Plus, I spoke to someone just the other day who relies on a pension for retirement; they had to take out a loan because of unexpected expenses ($10K worth).
He is now going to have to cut back severely on his quality of living just to pay the loan off.

This is why you should keep as much control over your money as possible!

 

[0b1kanobee]

Yes it is stupid to just rely on the pension. That is why they have, especially teachers, the option of a 403b. If they start that early enough, there there retirement money also combined with social security will be pretty darn close to what they were making when teaching.
Teachers also have D.R.O.P. Some other proffesions do as well.

 

[BNTRS]

A lot of talk has focused on the suitability and the clients liquidity, or lack there of, if he puts all his money into an annuity. Many of the companies and most people on here are not advising it, and for the most part I agree.

My question is this: If the client were to put all his money into an annuity he planned on using to get an income for life, how is this any different than a teacher who has a pension which pays income for life and zero liquidity?

It appears as if one of these is acceptable and the other isn't. Why?

They can't blame you and me for the pension situation.

Actually, if you had a client who made automatic contributions to an annuity say in an IRA for years and that was the only retirement plan they had in place, FINRA and the SEC would be mum on that client's lack of diversification.
- - - - - - - - - - - - - - - - - -

Yes it is stupid to just rely on the pension. That is why they have, especially teachers, the option of a 403b. If they start that early enough, there there retirement money also combined with social security will be pretty darn close to what they were making when teaching.
Teachers also have D.R.O.P. Some other proffesions do as well.

Actually, if you were a New York State employee participating in state employees' pension, you could retire as early as your 30s and collected a six figure retirement check for the rest of your life. You don't even have to be earning that much when you retire.

Payback Time - Padded Pensions Add to New York?s Fiscal Woes - NYTimes.com