Variable Annuity Ideas -- Client

[crimsontideagent]

I've recently moved from a captive insurance company (mutual) and we were restricted to doing our own VA's - now I'm independent and have a client who is wanting a VA (they like the protection) - here is their situation...

Both 62 - have a LTC contract that is roughly $4k a year and they want to invest in a VA and withdraw the $4k a year to cover their LTC premium....

They have approximately $170,000 in non-qualified money and another $150,000 in qualified funds...

With all the VA choices I have now I'm looking for a little direction in regards to companies, specific annuities, etc... Thanks.

 

[Larry Tew]

There are many good ones such as Ohio National, Jackson, AXA, etc. No need to go into analysis paralysis, but I would choose one with a good income / benefit rider.

Does your BD have any suggestions?

 

[DHConcepts]

If you sell Indexed annuities you are doing a disservice to your customers!

 

[Larry Tew]

If you sell Indexed annuities you are doing a disservice to your customers!

Statement (minus) Facts (equals) Opinion.

 

[Full Throttle]

If you sell Indexed annuities you are doing a disservice to your customers!

DH,

Current case open: my client has all his money in fixed annuities, but wants a shot at a higher return with rates so low. He is risk adverse and not willing to lose a dollar, what do you suggest?

FT

 

[BNTRS]

If you sell Indexed annuities you are doing a disservice to your customers!

As someone who used to be of this opinion I'll challenge this statement a bit.

Place your money in a product that gives you a return based on the move in an index without risk of losing principal and without having any broker commissions or service fees deducted from your money. Your downside is a CDSC and the possibility that provisions of the contract won't yield what you would have realized if you were in the market.

With the average investor pulling off a stellar 4.5% annual yield on their mutual funds for the past 20 years, and the last decade being negative, the indexed annuity isn't always such a terrible choice.

Sure there are bad contracts out there, but this product as a category doesn't deserve all the controversy.

There are just as many bad fixed and variable annuities, mutual funds, and several other types of savings plans that can be much worse than indexed annuities.

 

[Larry Tew]

... The indexed annuity isn't always such a terrible choice.

I'm rethinking my position on this.

 

[Full Throttle]

FIA are simply for people who would otherwise be in a traditional fixed product, but would like to have the potential for a little more gain with a little more risk. However, the risk is not earning as much as a traditional fixed annuity, the risk is not losing the principal.

I'm presenting two options to my risk adverse client mentioned above: a VA with a GMAB rider (guarantee to not lose initial principal value over 10 years) and the FIA concept. If it were me, I wouldn't select either of them, but he is so risk adverse, he will sit in fixed annuities and CDs if the only other alternative was "the market".

 

[Freddie]

FIA are simply for people who would otherwise be in a traditional fixed product, but would like to have the potential for a little more gain with a little more risk. However, the risk is not earning as much as a traditional fixed annuity, the risk is not losing the principal.

I'm presenting two options to my risk adverse client mentioned above: a VA with a GMAB rider (guarantee to not lose initial principal value over 10 years) and the FIA concept. If it were me, I wouldn't select either of them, but he is so risk adverse, he will sit in fixed annuities and CDs if the only other alternative was "the market".

If your potential client is "so risk adverse" then a VA is not a good choice. How much is this GMAB rider?

FIA/EIA's are bond alternatives. You get more than a CD and about the same as a bond with no downside. If its is good company with good renewals then the client does alright.

I would say historically (more recent history 10 to 20 years):
Stock indexes 0 to 3%
Bond funds 4% This includes utility stocks, preferreds,MLPs.
EIA 5 to 7%
VA's probably worse than stock indexes due to expenses
REITs maybe 7% but lost of volatility

In addition: Bonds and REITs plus other income investments like utility stocks, pipeline LPs, Canadian oil sand stocks, etc will get hammered if interest rates go up. EIAs will not get hammered.

 

[nembra]

hmm interesting insights into variable annuities....gave me a lot of food for thought for my own clients