Why Keep A VUL Whose CV is More Than The Original Coverage.

[James]

Yes, but you miss the point of what people do with annuities. They tend to do two things, 1. they don't touch them or let them ride to the next generation, 2. they take payments as in a form of income. Now obviously the income stream would then determine the tax. Which could be lower then 28%, maybe not depends what tax bracket the reciever is in at the time of payment out of the annuity.

Now if the annuity passes to the next generation is not good. This should not happen and if the participant expects this they should quickly turn the annuity over to a LI Contract.

 

[Crabcake Johnny]

The more you actually read about annuities the more it becomes clear that the winner is the life insurance company. Obviously no company can afford to pay a 10% commission on a $50,000 investment so annuities just sneak that into the M&E charge and hope clients don't catch that their agents are making $5,000 off that sale and they end up paying for it. Horrible disclosure. You buy mutual funds direct, don't pay a load or 12B-1 fees and you're at half the expenses of the average annuity. And if it's an index fund then obviously your matching returns - just far more expenses with an annuity AND you don't share in the upside.

The annuity only offers "no guaranteed loss" - normally stating they can't go lower than 1.5%. But no life insurance agent tells their client that the S&P over any 10 year period has never lost money. It might lose money in the short-term but then again annuities are long-term investments. So I don't see any need for them. Interesting to note that the only people who tout annuities are life agents.

 

[Sam]

John,
1. Not all annuities, even indexed annuities, pay 10% commission. Most are lower than that. I will grant you that there are some seriously screwy companies out there, but there are some legit ones, that take a very small margin, and don't pay crazy fees.
2. You don't yell at banks for writing cd's, even though old people could do much better in the market, because the bank is just giving people what they want. They want downside protection, and that is what they get. Likewise with an indexed annuity, many people don't have the stomach to wait for the s&p to bring them back above their initial investment, even if it takes 10 years. Especially if they are taking income from it.

 

[J.R.]

John,
1. Not all annuities, even indexed annuities, pay 10% commission. Most are lower than that. I will grant you that there are some seriously screwy companies out there, but there are some legit ones, that take a very small margin, and don't pay crazy fees.quote]

Would you offer the names of the companies you are talking about w/ low fees and commissions?

 

[Crabcake Johnny]

The debate here seems to be Jame's ascertion that desite what investment you might have an annuity is going to beat it when all the dust settles. Nothing could be further from the truth. There is a HUGE price to pay for "no downside" and that price is almost zero upside. That's fine that some people want a safe place to put money, but there's many vehicles to discuss besides an annuity. The problem is life agents can't offer those products so what ends up happening is they bash them in order to secure a sale.

Also, annuities, unlike CDs offer no guarantees. Annuity contracts are as good as the life insurance company who writes it. And where will that life company be in 20 years? Who the hell knows.

Not like CDs which are federally insured and guaranteed safe. If it's only safety you'e after, a CD is the proper choice - never an annuity.

 

[James]

The more you actually read about annuities the more it becomes clear that the winner is the life insurance company. Obviously no company can afford to pay a 10% commission on a $50,000 investment so annuities just sneak that into the M&E charge and hope clients don't catch that their agents are making $5,000 off that sale and they end up paying for it. Horrible disclosure. You buy mutual funds direct, don't pay a load or 12B-1 fees and you're at half the expenses of the average annuity. And if it's an index fund then obviously your matching returns - just far more expenses with an annuity AND you don't share in the upside.

The annuity only offers "no guaranteed loss" - normally stating they can't go lower than 1.5%. But no life insurance agent tells their client that the S&P over any 10 year period has never lost money. It might lose money in the short-term but then again annuities are long-term investments. So I don't see any need for them. Interesting to note that the only people who tout annuities are life agents.

No John it isn't just Life Agents that promote the use of Annuities. In fact most FP'ers will use Annuities in one degree or another. Plus you also tend to paint with a broad brush, most annuities pay less then 5% commission, in fact the Horizon Annuity from AIG pays 2-4% for most of the cases I write through them. Plus I never sell an Annuity without suggesting the client check with their FP'er or whatever they use for investment advice, hopefully someone that doesn't have an agenda against insurance. Yet it is a Insurance Product for the most part, so it is naturall that most Annuities go through Insurance Agents, that is a no brainer.

 

[James]

The debate here seems to be Jame's ascertion that desite what investment you might have an annuity is going to beat it when all the dust settles. Nothing could be further from the truth. There is a HUGE price to pay for "no downside" and that price is almost zero upside. That's fine that some people want a safe place to put money, but there's many vehicles to discuss besides an annuity. The problem is life agents can't offer those products so what ends up happening is they bash them in order to secure a sale.

Also, annuities, unlike CDs offer no guarantees. Annuity contracts are as good as the life insurance company who writes it. And where will that life company be in 20 years? Who the hell knows.

Not like CDs which are federally insured and guaranteed safe. If it's only safety you'e after, a CD is the proper choice - never an annuity.

No John, you are basically arguing with yourself. It doesn't matter what a I say you need the attention of posing as some guru. The fact is I never suggested an Annuity as a good growth vehicle. What I did was prove that most Mutual Funds will not outperform a good annuity or not outperform it in any major way. It was you that went from MF's, to Stocks to Drip's and now CD's? All the while I attempted to stick with one product outside of ones own true growth investment and that would be their natural talent.

 

[Crabcake Johnny]

Me posing as a guru? And your vast financial training and experience comes from where?

Neither one of us has any formal financial training yet one of us has no problem selling annuities and comparing them to other financial products.

Many companies have tried to suck me into selling annuities. All of them wanted me to throw some dinner or seminar where the goal was the bash current investments and get people to cash them out to purchase annuities.

But without formal training how can I look at any client and make any kind or recommendation? How can I look at their current portfolio? Yet, the life companies really don't give a rat's ass about a proper consultation.

We can argue these points all we want and no one gets harmed. But people get harmed if agents like James run around with zero formal education, zero training on financial products yet bash them with almost no understanding of what he's doing.

I'll readily admit that I'm in no postion to give anyone financial advice. James has no problem with it. "Just cash in those mutual funds, those CDs and those stocks maam and come follow me!!!!"

Hopefully one day annuities will require a financial license. In the meantime we have uneducated life insurance agents putting on a financial hat and all of a sudden they're financial experts.

 

[James]

Me posing as a guru? And your vast financial training and experience comes from where?

Neither one of us has any formal financial training yet one of us has no problem selling annuities and comparing them to other financial products.

Many companies have tried to suck me into selling annuities. All of them wanted me to throw some dinner or seminar where the goal was the bash current investments and get people to cash them out to purchase annuities.

But without formal training how can I look at any client and make any kind or recommendation? How can I look at their current portfolio? Yet, the life companies really don't give a rat's ass about a proper consultation.

We can argue these points all we want and no one gets harmed. But people get harmed if agents like James run around with zero formal education, zero training on financial products yet bash them with almost no understanding of what he's doing.

I'll readily admit that I'm in no postion to give anyone financial advice. James has no problem with it. "Just cash in those mutual funds, those CDs and those stocks maam and come follow me!!!!"

Hopefully one day annuities will require a financial license. In the meantime we have uneducated life insurance agents putting on a financial hat and all of a sudden they're financial experts.

Once again John you are painting with a broad brush and now you are throwing in all Insurance Agents as devils in disguise. Guy, you have a problem, you seem to like to debate yourself. As I stated it doesn't matter what I say or anyone says, it all falls on deaf ears and you continue your ranting and raving all awhile jumping around like a cat on a hot tin roof from one sample of this to that back to this. I at times in this discussion wonder what you was going to come up with next. Now all you have to do is claim I personally attack you and delete the replies you don't like.

Yes John we all know all Annuities pay 10% commission, they all have 15 years plus surrender charges, they all have 2% ME charge? That was funny, you come up with a average of 1.3, then compare them to the 1.5% fee of MF's and then suggest all Annuities are extreme with there near to 2% ME charge. I mean how can I keep up? Okay, you threw in the variable annuity, which to sell you have to have a securities related license, a 6 or 7.

What is really funny is this, you suggest that Insurance Carriers can't be trusted as a safe harbor compared to the Banking Protection of the Federal Government even though that could be disputed. Yet though you have no problem in trusting Insurance Carriers to pay and assume financial risk of ones health. In all reality, one would be hard press to find a safer "Safe Harbor" then one can find with a solid Insurance Company, may that be AIG, ING, Allianz, Mass Mutual, NYL, Sun Life, Guardian etc etc..

Two most powerful things of the Annuity is simple,
1. Safe Harbor
2. Income Stream

Then you have deferred taxation bringing up the rear. Even though I never suggested that the Annuity is the best savings vehicle from a taxation stand point. Just to set that clear, that would obviously be W/L and or the U/L.

 

[Crabcake Johnny]

Health insurance companies don't put me in the situation of having me compare what I have to offer against products I can't sell and are not trained on. I can compare what my client has against what I offer since I sell what they have.

Not so, in general, with annuities where the vast majority of life agents don't hold financial licenses. True that you need a securities license to sell a variable annuity but what's touted more often is EIAs.

Now life insurance agents are in the uncomfortable postion of trying to analyize their client's current portfolio to see if an annuity is a proper sale. Just one problem - they don't know what they hell they're looking at.

You cannot say that there are not HUGE problem with the annuity industry regarding unethical sales. Just Google seach it - the results are insane.

What's the bottom line? Don't recommend anything to your client unless you're formally training on what they have. Just refer it to someone who actually knows what they're talking about.

I think we can close the case on this discussion since it's turning circular. To all watching; if you aren't formally trained then don't discuss security products or compare security products with your life clients.