Would You Promote This Product?

[crons79]

We are designing a product that brokers can sell to clients and receive a commission on. I wanted to know what agents thought about this product and if they would promote it?

Clients benefits:
1. Earns a 7% annual rate of return for 10 years
2. Can receive a monthly check for principal & interest, interest only, or no monthly payments, but doubles their money in 10 years
3. Investment is secure by real estate
4. Clients may redeem investment after two years, without penalty, due to hardship.
5. Upon death of investor, beneficiary can decided to continue contract payouts in their name or redeem investment in full.

Agent/Broker benefits:
4% commission on any money invested in our program

This is really a safe investment geared to investors who want to make more money than banks are currently paying on C.D.'s, Money Market Accounts, and Savings Accounts.

This isn't meant to go into great detail of the program right now, but to find out what agents think about this. Is the interest rate enough? Is the commission enough? Please, let me know what you think and if you would like to be added to out Brokers list, so we can contact you when we get this up and running, please PM me.

(I put this in the annuity section because we don't have an "Investments Section". I also think we could use a "Real Estate" section too.) Have a great day!

 

[Franz Kafka]

This isn't meant to go into great detail of the program right now, but to find out what agents think about this.

Agents won't know what to think until they have the details. If you truly have nothing to hide, don't be afraid to discuss all the details.

 

[scrabble]

We are designing a product that brokers can sell to clients and receive a commission on. I wanted to know what agents thought about this product and if they would promote it?

Agent/Broker benefits:
4% commission on any money invested in our program

This isn't meant to go into great detail of the program right now, but to find out what agents think about this. Is the interest rate enough? Is the commission enough?

Interesting plan, ask general questions and see if the consensus can create a profitable product. Beats putting your own effort into it I guess.

I'm with kaf, how can you realistically expect anyone to answer this question without knowing the details.

 

[VolAgent]

One of the big questions has to be, are there any guarantees on the product? Does the client still get the 7% per year even if the real estate market sucks? What if the market does great, can the client get an even higher rate?

Remember, you are going to be competing against annuities, and there are some that can do everything you mentioned, and then some.

 

[crons79]

I am looking for positive and honest feedback. I don't want to disclose everything on a public forum because I don't want anyone copying what we are planning on doing.

"are there any guarantees on the product?"

A guarantee is nothing more than a promise to do something. In that sense then yes. The guarantee will be 7% rate of return and the payout will be as structured in the beginning. (Can receive a monthly check for principal & interest, interest only, or no monthly payments, but doubles their money in 10 years). In the event of non-payment or default (which won't happen) the investor will then own to property that is backing it and be able to sell it to recoup their principal.

Does the client still get the 7% per year even if the real estate market sucks?
Yes. Real estate market fluctuations, appreciations, downturns, etc. really have no bearing on the performance and guarantee of this product.

What if the market does great, can the client get an even higher rate?
No. The client cannot earn anything more than the stated interest rate and upfront designed payment structure.

Remember, you are going to be competing against annuities, and there are some that can do everything you mentioned, and then some.
This is designed very much like an annuity, but it is not an annuity.
It is an investment vehicle.
It is backed by a secured investment.
It can provide a stream of income.
It can be tax deferred.
The 7% rate of return is a true rate of return.
It is simple to understand. Not a lot of moving parts either.
Doesn't carry the negative stigma associated with annuities.

I have showed it to a couple of clients and gotten their feedback on it and I must say it has been very positive. Thanks guys for your questions. Keep them coming.

Is the 4% commission enough for the insurance agent? I believe that is what an agent would get from a fixed annuity. I don't believe we will go higher than that, but I like to get feedback either way.

 

[bluemarlin08]

Of course folks would love to get a guaranteed 7% return, but in today's environment that type of return only comes with risk, substantial risk.
When guaranteed returns are in the 3% range, who is going on the risk on a product guaranteeing over twice that return?

 

[VolAgent]

No, a guarantee is a written, contractual and legally enforceable promise. Your's sounds like a "wink, wink, trust me" kind of promise.

What you are describing sounds like a security to me, in fact it sounds like a CMO. I believe you need at minimum a series 7 to sell those. So now you are competing against not only annuities, but REITs and other investments. Also, at least if I buy a CMO, I don't get stuck with the property if it all goes south.

I suggest you call your DOI and see what they have to say, something tells me they are going to suggest you talk to whoever regulations securities in your state.

PS I should add, if this is a security, I believe it will fall under Reg D. You'll only be able to offer it to accredited investors. I guarantee that is not who you've been talking to. They'll likely have the same concerns and run from it.

 

[crons79]

"No, a guarantee is a written, contractual and legally enforceable promise. Your's sounds like a "wink, wink, trust me" kind of promise."

I agree completely with your first sentence. It still boils down to a promise. I don't like the "wink wink" part. Every investment and relationship involves a great deal of trust.

I can tell you are up on most of your stuff. We are in the process of talking to an SEC attorney, Department Of Insurance, and some local banks. I have my series 6 and 63 right now. You may be right about the series 7, but I may not need it either. That is what we are looking into. Also, I don't believe we will only be able to offer this to accredited investor, but also non-accredited investors. I believe you can't mix the money and you typically offer a slightly higher rate of return for the accredited investor.

Of course folks would love to get a guaranteed 7% return, but in today's environment that type of return only comes with risk, substantial risk.
When guaranteed returns are in the 3% range, who is going on the risk on a product guaranteeing over twice that return?

Lots of people.

Seriously though... I put people's money into a product that was paying 8% return, backed by real estate, and was invested in an oil and gas hedge fund before. This company's business plan was super solid and I felt safer putting my money in that company's plan then any bank. Risk is real. It should be accounted for. On the other hand, it is only perception.

 

[Larry Tew]

No. A 7% "guarantee" backed by real estate?. A variable annuity with a guaranteed withdrawal or income benefit rider is as risky as I would do for a client. If they want more risk, they will have to get it from someone else.

 

[VolAgent]

I agree completely with your first sentence. It still boils down to a promise. I don't like the "wink wink" part. Every investment and relationship involves a great deal of trust. [/color]

I can tell you are up on most of your stuff. We are in the process of talking to an SEC attorney, Department Of Insurance, and some local banks. I have my series 6 and 63 right now. You may be right about the series 7, but I may not need it either. That is what we are looking into. Also, I don't believe we will only be able to offer this to accredited investor, but also non-accredited investors. I believe you can't mix the money and you typically offer a slightly higher rate of return for the accredited investor.

I would drop the word guarantee from your pitch then. Unless you are prepared to protect investors from loss, then there is no guarantee. And giving them the underlying real estate is not protecting them from loss.

But honestly, why should I invest in your product versus a REIT? Yes, I don't do REITs, but I really don't see much difference between what you are suggesting and a REIT. In that case, I might as well just stick with a commonly accepted investment.

It sounds like you a setting yourself up for lawsuits down the road with how you are pitching this product. How you want to present it, and how it functions are completely different. I imagine the SEC attorney, DOI and banks will give you the same advice. Also, I doubt anyone will sign off on your marketing material as is.

Finally, you aren't looking for insurance agents to sell this, but RRs. Again, why sell this when there are so many better options, that pay better commission too.