by Guest » Mon Jan 04, 2010 06:52 am
I'm currently studying for my health and life insurance licensing exams. At the same time, I'm curious to know if the economic recession has affected your performance as a life insurance agent.
Posted: Wed Jan 06, 2010 03:52 pm Post Subject:
The post from the other Guest 1 is the exact problem with Indexed annuities. They are good products when sold appropriately, but sometimes the sellers aren't completely upfront with all of the facts.
Posted: Wed Jan 06, 2010 04:25 pm Post Subject:
bayshoreannuity.com/BPA.pdf
Do I have to hold your hand when you pee too? Just like all the other posts you make BNTRS they are narrow minded and without merit. Indexed annuities are great products. I just hate when guys who sell securities bash the guys who sell indexed annuities. At least with an indexed annuity the client doesn't have to worry about losing their money. How can you look your client in the face and say to them oops I lost your money. You or anyone else in this forum, are not smart enough to predict what the market is going to do. Therefore, an indexed annuity is a perfect product for individuals who want to participate in the market gains without the risk. The ONLY reason you don't like indexed products is because so much money is going into them. I agree that the agent needs to know his or her product and represent it with 100% honest and integrity, but for a registered representative to bash the product is just negligent. There is a reason why so much money is being invested into these products, its because the consumers out there are sick and tired of losing money in the market. There is too much fraud and misreprestation going on with securities. At least with a fixed product the client knows exactly how much it will cost him or her if they want or need to get out of the product. Because of market risk with other investments, indexed or fixed annuities (not including C.D's.) are the only investment that the indivduals knows upfront how much it will cost.
Posted: Thu Jan 07, 2010 01:37 am Post Subject:
Well, I guess you told me.
I read the borchure, I see no mention of anything guaranteed at 8%--maybe I missed it. I saw a guarantee to increase premium to 114% after 12 years, that's 1.1% annualized.
I saw something that I found very interesting in the Excess Interest Guarantee paragraph. If I'm reading this thing correct, the interest credited during the first 12 years (the surrender period) is the guaranteed rate. Gains received by the indexed side of this doing it's job are not "locked in" until after surrender is over. Does this mean the indexing interest--effectively 50% of the S&P plus AVIVA's declared rate--I get has to beat the guaranteed rate after the first 12 years or else I just get the guarantee? This seems terrible to me. I know Aviva is notorious for strange waiting periods--or should I say "indexing strategies"--but this would be by far the worst I ever seen.
The bonus piece is fascinating. That's the longest recapture period I ever seen on a bonus product. In fact I never seen a fixed bonus product that had a recapture fee, excuse me "vesting schedule." AND it costs money? They charge an annual percentage for a bonus that is also subject to recapture? I don't need you to help me pee, I need to you help me find someone. Not someone dumb enough to buy this thing. No, my friend I need to help me find someone dumb enough to sell it.
Now, you charge me with negligence for bashing indexed annuities. You say:
At least with a fixed product the client knows exactly how much it will cost him or her if they want or need to get out of the product.
Really? Perhaps you should go back and reread that MVA part. The part that says oh yeah, in addition to a surrender charge, there may also be this other fee you have to pay which takes a page to explain the process of figuring out. Tell me, if I had $250,000 in this annuity right now with 8 years left before surrender, what would my MVA be I wanted to surrender it as of last Wednesday?
There is too much fraud and misreprestation going on with securities.
Right, and the indexed annuity industry has been just peachy. Both have their fair share of problems and disingenuity. Quite with the sensationalist fodder about people sick of losing money and all that other BS.
At least with an indexed annuity the client doesn't have to worry about losing their money.
The minimum guarantee made on this product is 1.1% annual return over a 12 year period. What do we know the historical average rate of inflation to be? If you don't know I'll go visit the bathroom--no worries I don't need you to join me--and you can look it up.
How can you look your client in the face and say to them oops I lost your money.
Never done it; I've never had to. I didn't lose anything. They made a choice, it involved risks, they signed off on all those risks. I merely provide guidance and answer questions until they decide what they want to do.
Because of market risk with other investments, indexed or fixed annuities (not including C.D's.) are the only investment that the indivduals knows upfront how much it will cost.
Again, the MVA thing sort of flies against you here.
You or anyone else in this forum, are not smart enough to predict what the market is going to do.
Here's something on which I agree with you. However, "BPA provides you with the ability to track your values daily and the ability to lock lock in and protect your interest at any time." If I don't know where the market is going, you don't know where the market is going, and our clients surely don't know where it's going, why on earth do they bother with this? How do you look your client in the eye and say, "Oops, I lost you money by locking in too soon, too late, too whatever?"
Now let me share something with you that you might find shocking. :!:
I place a boat load of fixed annuity business. I hate stocks and own very few personally--less than 1% and at my age most would tell me I could own more than I do.
I love bonds, fixed annuities, and whole life insurance.
This all being said, I completely understand that strategy (by which I mean plan not length of time it's going to take before the credit from the index actually gets credited to an account) behind buying stocks, or equity backed mutual funds.
My recommendations remains grounded in lower risk, kind of slow and steady wins the race sort of stuff. I also don't believe that increasing risk exposure is an answer to someone's retirement woes. I know a ton about interest rates, and lot about valuation of securities. I've got probably a small text book worth of statistics that show me risk vs. return is not a linear function where risk is the independent veriable and return the dependent. In fact even during the boom market of the 80's and 90's it was less true that high risk equaled high return.
Here's my issue, and I'm even willing to give indexed annuities a 5th chance if you can convince me. The products are designed to look attactive, and that's about it. The mechanics behind what are actually going on are barely understood by the agents who sell them let's not even mention the clients who buy them. Agents selling them have a rudementary understanding of the stock market and the securities industry at best. How on earth can it follow that they are able to understand how the indexed annuity works? It's not nearly as simple as when the market goes up, your crediting rate goes up. I'd sooner get the maximum mandatory short term disability benefit from the state of CA than get the maximum, or anything close to the illustrated values of an indexed annuity.
Tell me this? How does Aviva make money on this thing? Seriously what do they do with the money they get from the client? And how does that translate into an ability to guarantee a rate of return?
I love guarantees, the higher the better, that's why I hate indexed annuities. Change me, I'm all open to enlightment. [/quote][/i]
Posted: Thu Jan 07, 2010 05:35 am Post Subject:
I merely provide guidance and answer questions until they decide what they want to do.
That's what a responsible agent has to do under all circumstances. A good agent has to help the prospective client know the unforeseen risks. Once the agent performs his tasks, then it's up to the client to take his decisions. The agent can't take decisions and so the fall out of a bad decision has to be owned by the client himself.
Posted: Fri Jan 08, 2010 05:27 am Post Subject:
Roddick
You could be a good insurance adviser, but when it comes under a recession you might as well need to play the role of a financial adviser.
I couldn't agree more with you.
You'd need to show them the right way.
Check if they have enough cash value for their life insurance. This cash value could be used by them to pay off their credit cards that bear a high rate of interest. The same applies for a high interest auto loan. They'd be glad to pay back to themselves, rather than someone else. In doing so they'd be able to save the money that they'd have otherwise spent in terms of interest.
Posted: Sat Jan 09, 2010 05:14 am Post Subject:
Check if they have enough cash value for their life insurance.
See, if you could help them avail discounts out of their home, liability and car insurance by obtaining these policies from the same carrier.
Also see, if they could borrow from their 401k and meet their credit card debts.
Posted: Sat Jan 09, 2010 12:14 pm Post Subject:
Check if it's possible for the client to get their existing policy premiums lowered with their carriers. If they can do this, their cash flow would be improved. They'd then be able to use the extra money towards paying off their debts.
Posted: Sun Jan 10, 2010 03:15 am Post Subject:
Also see, if they could borrow from their 401k and meet their credit card debts.
I don't know, in a world where job security isn't, I'd be very nervous about making this sort of recommendation to a client. If the client and the job part ways, that loan is due very quickly.
Life policy loans, not such a bad idea. Distrubutions from a Roth IRA or Non Q annuity that has lost value and has no gains is another option. If the client is older, a 72t might also be useful, either RMD or using a really low assumed interest rate on an amortization method.
Posted: Fri Jan 15, 2010 01:45 pm Post Subject:
Who said they had any debt? Where did that come from. I agree with BNTRS. Bad idea to borrow from 401K
Posted: Sat Jan 16, 2010 12:01 am Post Subject:
BNTRS . . .
Sorry I missed seeing your earlier, longer post on indexed annuities sooner. You nailed it 100%. Many of the IAs so closely resemble the true MVAs, in both complexity and contract language, that they genuinely deserve to be regulated as securities. And you're right, too, that despite all the first year and/or bonus interest hype, 1% is all that's there in the guarantee.
The whole brouhaha over Reg 151A has to do with the marketing of the product, not the inner workings. What agents love to say is "You get all of the upside of the market with none of the downside." Which, as most of us know, and as you eloquently tried to point out, is a load of horse manure. Tie together participation rates, rates caps, and the "funny banking" rules that determine when or how interest actually gets credited, and you get something that even the insurance company executive has a difficult time explaining.
What baffles me about Reg 151A is how Equity Indexed Universal Life Insurance was entirely left out of the discussion (where the guarantees range from 0-2% at best, with 1% being the most common). It's exactly the same product for the other side of the "When will I die?" coin -- heads, I die too soon (life insurance), tails, I live too long (annuities). Just another reason why Christopher Cox was such a baaaaad choice as Chairman of the SEC.
To properly understand annuities, all agents should be forced to read Stephen Pollan's book Die Broke. After years of being misled by marketing dept wonks, when I read it in 1998, it completely overturned my thinking about fixed annuities. I'm right there with you, bud! I tend to be a fan of term for younger persons, however, and whole life for the estate planning needs later in life. I'm looking forward to 2011 as a good year for estate planning life sales, since it's highly unlikely that Congress will extend this year's unlimited exemption, and can simply do nothing and let the rules return to the 2001 formula.
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