Who Has the Most Leinant Suitabillity?

[EAJoe]

From what I have been told most states SGA will cover the income rider.

My understanding is that they will attempt to cover all guarantees made by the company, but you're only actually guaranteed the MGSV.

 

[scagnt83]

My understanding is that they will attempt to cover all guarantees made by the company, but you're only actually guaranteed the MGSV.

You are guaranteed the MGWB... hence the term "guaranteed". Semantics aside however, Income Riders are a grey area. I have been told by the SC SGA that any guarantees made by riders are covered... however, I have read the opposite...

But you are definitely guaranteed any interest that has accumulated. For annuities, the coverage is based on Accumulation Value, not Surrender Value, and certainly not MGSV.

 

[EAJoe]

You are guaranteed the MGWB... hence the term "guaranteed". Semantics aside however, Income Riders are a grey area. I have been told by the SC SGA that any guarantees made by riders are covered... however, I have read the opposite...

But you are definitely guaranteed any interest that has accumulated. For annuities, the coverage is based on Accumulation Value, not Surrender Value, and certainly not MGSV.

Edit: I take back what I said, it definitely seems like you'll get the full accumulation value as long as you're under the state's maximum limit. As scagnt83 said, income riders and death benefit riders don't seem to be very well protected by the guarantee fund.

https://www.nolhga.com/policyholderinfo/main.cfm/location/questions

 

[Pramfinancial]

Yes I agree with you all. Income and investment planning in annuities is the essential part. Income riders are good.

 

[WMG]

I have a 71 year old that has 30K liquid and a 25K annuity she currently is receiving income on and 80K that she would like to transfer into something with an income rider. So she has 135K in total assets and the 80K is after a 4.5% surrender.

Companies are requesting 50% of income liquid or at least 50K. I didn't realize they have got so strict on low net worth individuals.

Who would anyone suggest trying?

Thanks for the help in advance.

I am not going to speak to what's covered, what's not, etc., as that is an entirely different issue; and if you aren't aware of that, then you have more work to do.

That said, there is a reason why these standards and guidelines exist. They are there to protect the client and make sure the client's best interest is being put first and foremost. They are not there to find "ways around" or "lenient" ones. Now, if you think your recommendation is in the client's best interest, and very suitable, best for her, etc. -- and I am not saying it is -- then contact your compliance department, officer, etc. and the carrier and talk to them. Make a detailed case, in writing, and begin there. Prepare the comparison and look long and hard at it.

Taking a hit on the surrender charge is going to be a difficult hurdle to overcome, and it should be. There are reasons for this. It forces looking into current options, and while I am not saying you didn't, this is and should be about the client. Don't solve RMD problems or the like. It's about the client and what is best for her.

 

[DHK]

She is looking to turning it into an income stream. The current annuity does not have a income rider and the only way to get income out of it is to Annuitize. What would you suggest doing to avoid the charge.

If there is NO 10% withdrawal access to avoid surrender charges... then I would just annuitize the existing contract than to charge a surrender charge and move into a new product. BTW... annuitizing a product DOES turn it into an income stream. Just select a life + period certain payout option. Oh, and annuitizing SOLVES the RMD problem.

Better to avoid charges than to be faced with a complaint &/or lawsuit.

But I'm in California. It's not like the regulators are after you here.

Oh wait...

 

[scagnt83]

If there is NO 10% withdrawal access to avoid surrender charges... then I would just annuitize the existing contract than to charge a surrender charge and move into a new product. BTW... annuitizing a product DOES turn it into an income stream. Just select a life + period certain payout option. Oh, and annuitizing SOLVES the RMD problem.

Better to avoid charges than to be faced with a complaint &/or lawsuit.

But I'm in California. It's not like the regulators are after you here.

Oh wait...

The 10% free withdrawal feature is the obvious solution here if the product has it.

Also, you most likely could do a 5 year payout option instead of lifetime. Roll the payouts into a new IRA/Annuity, pay RMDs for those 5 years, then do a lifetime Annuitization from the new product. And the client doesnt take a 4% reduction to her assets.

 

[Golfnut2112]

If there is NO 10% withdrawal access to avoid surrender charges... then I would just annuitize the existing contract than to charge a surrender charge and move into a new product. BTW... annuitizing a product DOES turn it into an income stream. Just select a life + period certain payout option. Oh, and annuitizing SOLVES the RMD problem.

Better to avoid charges than to be faced with a complaint &/or lawsuit.

But I'm in California. It's not like the regulators are after you here.

Oh wait...

ANNUITIZING WOULD BE THE LAST THING I DO!!!!

Why not set up free systematic withdrawls until the surrender charge period ends then reevaluate her situation? Taking a 4.5% penalty or annuitizing the $80,000 (and losing control of the money) in todays low intrest rate environment may not be a good idea. You may also want to get a security license ( if you dont already have one) so you can offer more solutions in the future.

 

[Tahoe Ray]

ANNUITIZING WOULD BE THE LAST THING I DO!!!!

Why not set up free systematic withdrawls until the surrender charge period ends then reevaluate her situation? Taking a 4.5% penalty or annuitizing the $80,000 (and losing control of the money) in todays low intrest rate environment may not be a good idea. You may also want to get a security license ( if you dont already have one) so you can offer more solutions in the future.

This is the type of case that most securities guys I know wouldn't touch with a 10 foot pole...

 

[DHK]

ANNUITIZING WOULD BE THE LAST THING I DO!!!!

Why not set up free systematic withdrawls until the surrender charge period ends then reevaluate her situation?

That was the first part of my post regarding taking withdrawals, unless it wasn't an available option.

Taking a 4.5% penalty or annuitizing the $80,000 (and losing control of the money) in todays low intrest rate environment may not be a good idea. You may also want to get a security license ( if you dont already have one) so you can offer more solutions in the future.

Poor advice. First, the OP was already asking for the lowest suitability standards (a bad idea to start with) and you want to recommend a securities license? A compliance offer would have a field day on this.

Not every annuity is set up the same. I remember years ago sitting with someone regarding their GALIC annuity. It was the strangest thing I had ever seen. No free withdrawals available and the annuity was well past the surrender period.

(Looking back now, I *think* it might've been set up as a TSA/403b with continuous contributions - which means ongoing surrender charge schedule based on new premiums being added to the contract. I think I was looking for a rollover transaction and I wanted to be sure that it would work out.)

Anyway, as we talked and called the company, we asked about various options and it made the most sense to just annuitize the contract and guarantee the entire payout back to the contract owner, rather than pay any surrender charges or try to move it into something else.