Why Bother with Fixed if Variables Have Lock-ins?

[JFBAgent]

Since my last post, I seen 4 more clients who have variable annuities who have no idea what they have.

Take yesterday's case...

This guy gave a famous bank attached firm $100,000 3 years ago and believed they were sending him a check for $5,000 interest every year. He thought he wasn't touching the principal and just living off the interest.

He invited me to look at his statement from them, which he couldn't understand since it was 8 pages. I showed him he had a variable annuity and it wasn't 5% interest he was getting, it was a 5% withdrawal...

His $100,000 was down to $70,000. His jaw literally dropped as he sat there silently for a minute. Especially since he has been battling serious health issues for a while and will not live to his life expentancy...i.e., he will not be passing on to his family anywhere near what he thought he would in a few years.

The shame of it is, that he could have gotten exactly what he wanted several years ago...a MYG fixed annuity paying around 5% interest and never touch the principal.

BTW, looked up all four clients' advisor who wrote the VA's. All four were within their first 2 years in the business when they wrote those VA's.

 

[dgoldenz]

Since my last post, I seen 4 more clients who have variable annuities who have no idea what they have.

Take yesterday's case...

This guy gave a famous bank attached firm $100,000 3 years ago and believed they were sending him a check for $5,000 interest every year. He thought he wasn't touching the principal and just living off the interest.

He invited me to look at his statement from them, which he couldn't understand since it was 8 pages. I showed him he had a variable annuity and it wasn't 5% interest he was getting, it was a 5% withdrawal...

His $100,000 was down to $70,000. His jaw literally dropped as he sat there silently for a minute. Especially since he has been battling serious health issues for a while and will not live to his life expentancy...i.e., he will not be passing on to his family anywhere near what he thought he would in a few years.

The shame of it is, that he could have gotten exactly what he wanted several years ago...a MYG fixed annuity paying around 5% interest and never touch the principal.

BTW, looked up all four clients' advisor who wrote the VA's. All four were within their first 2 years in the business when they wrote those VA's.

I am shocked....shocked!

 

[VolAgent]

I am shocked....shocked!

Now if that was Met's VA. He'll do well. Not only will he have gotten his 5%, but his family would still get the 100,000.

Also, did any one check to see if there was a death benefit rider on the contract too? That can certainly change things. Also, does the guy have foggy memory, maybe he was told all this, but has since forgotten.

 

[Norwayguy]

Also, did any one check to see if there was a death benefit rider on the contract too? That can certainly change things. Also, does the guy have foggy memory, maybe he was told all this, but has since forgotten.

X2 .... I know for a fact what I've told clients doesn't remain with them. I've sold products and discussed features, I send a letter after appointments highlighting what we discussed, I do annual reviews and I know for a fact it seems like every year the clients gets a relevation as to what the product I put him in does for him.

 

[JFBAgent]

Nope...no death benefit rider on the contract.

Also, he didn't know he is in a fee based account. Gave this guy $100,000 but only $98,000 went into a variable annuity and $2,000 went into the sweep account from which the fee is deducted. So he gets to send off a check every year to have the VA inside an advisory account. Cool.

Happens on Indexed side too. Saw a lady last week who believed she was making 7% (American Equity), so she has been withrawing money every year.

 

[VolAgent]

Unless it is a no-commission VA, I would love to hear from the agent why a VA went inside a fee account. I bet some regulators would be interested in hearing that too.

 

[0b1kanobee]

Just got back from an appointment with one of my annuity clients. I had to explain the whole 10% crediting AGAIN. This is about the 5th time. It's on a FIA I have with her.

Anyway she whips out a Metlife VA I didn't know existed and I created her financial plan which just goes to show clients don't always tell you everything. I'm sitting there trying to figure out where she can pull some money from and yeah, she whips out about 140k out of nowhere between this VA and more stocks she never told me about.

Anyway in 12/06 $82,000 went into the VA. It is now valued at $104,000 She apparently knows how this one works better than my FIA It has all the bells and whistles on it too, fully loaded.

 

[MAnnuity]

I wonder what percentage of people buying VAs even have a clue how they work.

I wonder what percentage of people selling VAs even have a clue how they work. Or WANT to know how they work.

 

[0b1kanobee]

Just got back from an appointment with one of my annuity clients. I had to explain the whole 10% crediting AGAIN. This is about the 5th time. It's on a FIA I have with her.

Anyway she whips out a Metlife VA I didn't know existed and I created her financial plan which just goes to show clients don't always tell you everything. I'm sitting there trying to figure out where she can pull some money from and yeah, she whips out about 140k out of nowhere between this VA and more stocks she never told me about.

Anyway in 12/06 $82,000 went into the VA. It is now valued at $104,000 She apparently knows how this one works better than my FIA It has all the bells and whistles on it too, fully loaded.

I need to make a correction here. When I was showed the Metlife on this day, what I saw was her journal. She keeps very good records on all her investments. Unfortuanately she does a terrible job with the actual papers from the company.

I went back yesterday and she had found her VA contract and statements. Turns out she has been looking at the "accumualtion benefit" not the "actual account value". I had asked if we could call the company when I was there the first time but she didn't want to or else I would of caught this without paperwork.

She hasn't taken income and had it since late 2006. She's about 18k in losses but her accumulation value is 23k more than she first deposited. She isn't very happy about it because she was told that couldn't happen actually lose real money.....she confused it with how the annual reset works/greater account value). I had to let her know that she must have misunderstood what he said because she isn't the only one this happens to. If advisers were all out there doing this on purpose well.........plus he doesn't make money when that account goes down in value nor does he make many friends.

Anyway she now wants me to do something with it but there isn't much I can do unless that VA gets a good boost which it could based on some other recent statements she found. She acted like she wanted to call her local adviser (keep in my I have more with her than him now but I have been peeling away at it under the radar). I told her not to just let me take care of it. I don't need him knowing about me just yet. By the time he finds out it will be too late for him.