Insurance Agent Forum

[JimMerrick]

Equity Indexed annuities are extremely expensive and have restrictions that are not in the best interest of the annuitant. Variable annuities however allow for the annuitant to have principal guarantees and benefit from market upside with a minimum floor of appreciation. If the markets do not perform to the level of the floor then the insurance company is on the hook. My company specifically forbids selling equity indexed annuities but will allow the sale of the variable products.

[Winter]

Originally Posted by JimMerrick

Equity Indexed annuities are extremely expensive and have restrictions that are not in the best interest of the annuitant. Variable annuities however allow for the annuitant to have principal guarantees and benefit from market upside with a minimum floor of appreciation. If the markets do not perform to the level of the floor then the insurance company is on the hook. My company specifically forbids selling equity indexed annuities but will allow the sale of the variable products.

Uh. Okay. Sounds like you got your information and training from a company that does not sell equity indexed annuities because they compete with its propriety products. Nothing new there.

Winter

[Charpress]

In answer to the post further back about indexed annuities not performing head-to-head with the market:

Does anyone actually think it possible for an insurance company to take all the risk and then pay exactly what the market returns?

A bit unrealistic. How about this:

7.2% guaranteed minimum growth or the index, whichever is higher, in the growth account. Start taking out income that is guaranteed for life. If you become disabled, the income stream doubles for life.

More good products coming out every day.

[Winter]

Originally Posted by Charpress

Does anyone actually think it possible for an insurance company to take all the risk and then pay exactly what the market returns?

.

The annuity pays better than the market in many instances. While it is true that the market on average pays about 11.5% over a thirty year period, the average investor is not in for 30yrs so how the annuity performs depends on the period you are in. If you were in an indexed annuity right before the high tech/911 crash you would have significantly outperformed the S and P for the next six years just by not losing ground. Those who have been in the market since and achieving double digit growth came in at the bottom of crash. Those who were in the market before the crash have waited years just to get back to where they were before. Yes, it is true that many funds ourperformed the S&P because that is only an average but many have underperformed too eh?

Winter

[URDRWHO]

I think the boomer's are reaching the age that they will start to consider those words by Will Rogers, " "At this point in my life I am more concerned with the return of my money than the return on my money." In ten years I'll be 65 and really don't want to take any big hits at this time in life.

For 15 years, I too was a licensed securities person (ended in 2000) then spent 2 years as RIA. The market saw historical good times. If you take time to view the charts, around 1994 the monumental climb started. I am not sure we will see that again.

I still want to see returns but consider safety to be worthwhile to buy. So in recent years I've moved some funds into an FIA.

Originally Posted by sman

Winter,

Either I am misunderstanding you or you are misunderstanding me. I stated that one could likely expect an IA (Index Annuity) to average 4%-6%. This is of course assuming a 7-10 year period.

You stated that it depends on when one bought into the markets. And then referenced a 45% downturn. If you know anything about IA's, you know that you don't experience negative returns.

And while we're on this topic, what funds are you investing in, where you've not even gotten back to pre-9/11 balances? Everyone of my investment clients (those in the markets) are well ahead of their pre-9/11 balances. Of course, I use American Funds almost exclusively and they have a great track record.

This is not an endorsement for IA's. I am an equities guy. I would much rather see someone stay invested in the markets. Simply because I believe that over the long haul, it's the place to be. But there are times when someone was the safeety of not losing their money. They are more concerned about the return OF their money than they are the return on their money.

[Mr. Bill]

The devil is in the details, as always. Start with a $100,000 masterdex, beneficiaries couldn't get their hands on it fast enough, $10,000 free withdrawal. After 4+ years, client dies. Allianz says here's your choice. $90,000 walkaway or $114+k over 5 years. Kinda big diff, eh?

Guess it's just like Mark Victor Hansen says (or somebody else I forget): Begin with The End in Mind.....Sadly, what many agents didn't think about with Allianz, and are not thinking today.

[JMO Fan]

SEC says time's about up.

SEC To Move On Indexed Annuities BY LINDA KOCO NU Online News Service, June 16, 2008
“Possibly as early this month, we’ll consider a proposed rule to deal with the long-standing investor protection issue of equity-indexed annuities, and when they should be treated as securities,” SEC Chairman Christopher Cox said recently ...

National Underwriter Life & Health

[Delta76]

I'm of the belief that there are situations where just about any product can be the right fit. That being said, I think many would agree that the way most FIA have been sold is not prudent. Here is my take:

FIA: great for the CD investor or fixed annuity investor willing to take a little more risk for potential gain without losing the principal. To say that an "investor" could "capture the upside of the market without any downside risk" would be terribly misleading.

VA: great for investors looking for a guaranteed retirement income with upside potential. They pay a price for the guarantees, nothing wrong with that.

[padthaiforlunch]

Originally Posted by Delta76

FIA: great for the CD investor or fixed annuity investor willing to take a little more risk for potential gain without losing the principal. To say that an "investor" could "capture the upside of the market without any downside risk" would be terribly misleading.

Think I must disagree with you, but I may just need more info. What do you mean when you say the above statement would be terribly misleading?

VA: great for investors looking for a guaranteed retirement income with upside potential. They pay a price for the guarantees, nothing wrong with that.

Are you selling a VA that has no downside? I thought the equity sub-accounts can gut a VA in a down market? Please elucidate.

[JMO Fan]

Notice this is from the Secretary of State, not connected with the insurance dept.

Missouri lists Top 10 investment scams

By PAUL WENSKE The Kansas City Star
Missouri Secretary of State Robin Carnahan’s Top 10 List of investment scams reflects current tough economic times.

They all prey on consumer anxieties, with the top concern being pseudo financial gurus who go after seniors with high-sounding but empty, self-promoting titles. ... Here’s her list of this year’s Top 10 investment scams in Missouri:

•“Senior Specialists:” These individuals assume professional designations “to create a false level of comfort among seniors.” But most of the time their only training is in how to sell to seniors.
...•Free lunch offers: These often target seniors by inviting them to retirement seminars, promising “high returns and no risk.” But consumers soon regret getting stuck in unsuitable investments.
...
•Variable and equity indexed annuities: Though these complicated products can work for some people, they are often unsuitable for older investors because of high fees and long surrender periods.
...
© 2007 Kansas City Star and wire service sources. All Rights Reserved.

www.kansascity.com | 06/13/2008 | Missouri lists Top 10 investment scams

[xrac]

Selling fixed indexed annuities may be a thing of the past unless you have a securities license if the feds have their way:

SEC OKs proposed annuity rule

SEC OKs proposed annuity rule - InvestmentNews

[healthagent]

and the downside would be.....

[xrac]

Originally Posted by healthagent

and the downside would be.....

Obviously you don't sell them and neither have I but the downside I could see would be:

1)Fewer offerings to solve clients situations. Some places they are appropriate, needed, or desired.
2)Loss of products for agents who depend upon them for a lions share of their business.
3)Federal intrusion deeper into the whole financial/insurance business. The next area to come under greater federal regulation will be RIA's.
4)Necessity of bending over for the feds and coming under the jurisdiction of broker dealers and a lot of the unnecessary compliance. Results are more paperwork, more effort, loss productivity, and higher costs.
5)Loss of commission to the B/D's who will then take a big cut of the business.

Whether you embrace or disregard FIA make no mistake that this move is about control and money, not protecting the public. Remember that FINRA is about the B/D's keeping their cut of the pie.

[healthagent]

If I was an agent who depended on them for a lion's share of by business I guess I'd get licensed.

[Winter]

Originally Posted by xrac

Obviously you don't sell them and neither have I but the downside I could see would be:

Whether you embrace or disregard FIA make no mistake that this move is about control and money, not protecting the public. Remember that FINRA is about the B/D's keeping their cut of the pie.

In part. Realistically, there are a lot of consumer complaints and fraud in this area and a lot of outrage related to predatory practices hitting on seniors. Regulators have a lot of pressure from the public and senior advocacy groups to fix it. It is not all backroom b/d maneuvering even if that is a component.

Winter