BE SURE TO READ GENE PASTULA’S ARTICLE IN SEPTEMBER CA BROKER MAGAZINE.


Thought for the day:

Contentment is not the fulfillment of what you want, but the realization of how much you already have.     -UNKNOWN

 

If you will read no further:

You have a choice from hundreds of marketing companies offering you all the same products from all the same carriers.  How do you choose? …besides finding someone you like on the other end of the phone.   As the quality and complexity of the insurance and annuity products continues to grow, it is even more important that your source be experienced and knowledgeable.  Westland has been supporting the financial planning community for almost four decades with CFP quality advice and service.  We are more than a Quote Service.  We are the associates you wish you had in the office next door to assist you with each client.  Call or email us with your next insurance, annuity or long-term care situation and see what real insurance-based financial strategies look like. Check out our refreshed web site at www.westlandinc.com and read on to get a flavor for the in-depth information Westland client-advisor get when they ask about annuities.

 

Thought for the week:

There is no doubt that annuities in the retirement portfolio can substantially and predictably enhance the financial results and the emotional satisfaction for the benefit of the client.  Now with products that offer ongoing asset-based compensation to the advisors, they are becoming even more prevalent and acceptable in the financial planning community.

There is more to choosing an annuity than simply receiving a quote of the latest and greatest from your favorite brokerage guy or your BD’s internal insurance/annuity sales desk.  You need to understand the products and how they will work in your client’s unique situation.  Recently I have received more compliments than usual about our Annuity Guru, Josh VerHoeve.  More and more folks are impressed by the level of assistance and understanding he is able to impart and realize that it makes you and your clients so much more comfortable with how the strategies being considered will enhance the value and effectiveness of the clients’ retirement portfolio.  I thought I would share with you a taste of Josh’s expertise and guidance.  Notice the history, the insights and the product knowledge he brings to the subject.

This makes this issue of PEARLS a little longer than usual; but at the end I think you will understand what a knowledgeable annuity expert with years of experience can bring to your planning process.

Notice that Josh doesn’t mince words.  He knows the product and the carrier’s history and has a frame of reference to help him decide on the appropriate recommendation for your client.

Last week an advisor requested Josh’s opinion of a statement from an annuity wholesaler that his well – known product was the best performing Index Annuity since 2006.

It is possible but it would depend on exactly when you bought it and the rates and terms on which you purchased it and your renewal rates. This product was one of the only annuities at the time that had an “un-capped” strategy. The product was proprietary through several marketing companies initially but really took off in sales from 2006-07.

Their best product would allow you to allocate up to 70% of your account to the S&P and 30% to a fixed account and would charge you a spread/fee. The 30% in the fixed account would earn a fixed rate and you would have 100% participation rate on the other 70% and no cap on that money in the S&P but you would have a spread/fee instead. Spreads have varied up to as high as 5%. The most sold product was a 12 year because to get the best blend you would need to buy/sell the 12 year. The original version of the product did not lock in any gains until four years. So you had to wait four years to see what you would earn, but you would get 70% of the S&P less a spread which could work out well.

Assuming a 01/1/2006 issue date and then the first four years from 1/1/06 through 01/1/2010 you would have gotten a big fat zero from the index account and then from 01/2010 through 1/1/2014 you would have done pretty awesome. I have not had any calls or seen any statements raving about the performance however. Even with that assumption I am not sure someone would have kicked that much butt? The S&P was up 60% the 2nd four years so you would have earned 0% the first four years, then 70% of 60%(approximately) the next four years less the spread. So maybe your $100k deposit is $140k or so after eight years? I do know they created adifferent reset version too. So if you had that one I guess you may have done better.

Then there was the request for opinion of a contract that had come to their attention that seemed almost too good:

Thanks for sending this over. They are a B++ carrier (AM Best) that does quite a bit of business in FIAs. There may have been a quarter or two several years back where they even beat Allianz in sales. We generally try to stay away from B rated carriers.

They were also very successful in sales not just because of this product (although it is very good for income) but because of another product still being sold that gives the client ”100% of the S&P” over a period of time. I believe they are banking on the S&P not having a return over a period of time. They also have the ability to drop the rate on the product, which I believe they will do depending on what the S&P does.

Some of the best actuaries out there have told me “off the record” they believe these products are a gamble. They are gambling on the S&P and these policies in general and even this very product you sent me. You and I know that insurance companies are not in the business of gambling but rather in the business of guarantees. They usually do not care what the market does orwhat your client does or what the advisor does or what anyone does. They get a return on EVERY possible outcome because that is how a good actuary prices a product and how successful insurance companies operate. How do you think an insurance company can last for 100-150 yearsthrough depressions, recessions, bull markets, bear markets etc.? It is because they win on every outcome.

Check out the attached vital signs report compared to four of our top carriers we work with, does anything seem to stick out? Comdex in the 40s!