I evaluate financial risk for a living, so was very curious to see how the tone of blogs would change from 2005 to the economic environment of today. Those 2005-2007 supporters of MF seemed to love the idea of leveraging their home equity to invest in real estate. Focus on the upside, and ignore the downside. Probably has been has been a painful lesson in the concept of leverage.

Missed Fortune concepts do have their place, but as many have alluded to, know what you are getting yourself in for.

And…

Any gains from this annuity are treated as ordinary income by the IRS. That is the highest tax rate. However, if you simply bought the Vanguard S&P 500 index fund, the gains and dividends are taxed at a lower capital gains and dividend rate. So, with an FIA, you covert low tax capital gain and dividend income income into high tax ordinary income. Doesn’t sound like a good deal.

No, the links you gave a are a sales pitch. There is no background information on how the product actually works, no concrete numbers, no investment strategies, no nothing, just generalities. There are no fees, commissions, or risks listed.

“Also, if you think that a 60-80 year old should be in stocks, then you should bet a security license and start selling, you’d fit right in.”

As I said before, I don’t think so. My point was the 30 year window at 12% annual return vs. 7% annual return. Your FIAs invest in what? Index funds? You compared to S&P 500, so S&P 500 returns 12%, and your clients get up to 7% only in up years? That is 5%+ that the FIA is making and not paying out to its customers. Am I wrong? If so, explain why.

“Some FIAs haver guarnateed returns (7% on an accumulation value and a lifetime income stream). yes, there are fees in these as well, but it’s clear you know more about this subject matter than me so I probably don’t need to explain how that product works either”

Why are you getting abrasive? I’m only asking the questions that should be asked. If you offered solid answers I’ll stand corrected. You didn’t even answer any of the questions I listed in the previous comment, you never explained why or how I’m wrong. I’m only asking for the facts, and if the facts are not stated, for everyone here to see (not by calling you or reading yoru book), then that puts up huge red flags.

I offered to educate you on the products and if you want to learn about them drop me and e-mail and we can talk about it. the links i gave you are lay explanations of how products works so clients can determine if finding and advisor who knows them well and can speak with them about the products makes sense.

I figured since you clearly didn’t understand the products some basic education might be helpful to you.

Also, if you think that a 60-80 year old should be in stocks, then you should bet a security license and start selling, you’d fit right in.

Bonds are ok, but so too are FIAs as an asset allocation model.

that’s what asset allocation is about. putting some money in stocks, mutual funds and buckets that will never go backwards (FIA).

Some FIAs haver guarnateed returns (7% on an accumulation value and a lifetime income stream). yes, there are fees in these as well, but it’s clear you know more about this subject matter than me so I probably don’t need to explain how that product works either.

roccy

They explain a lot of the what… barely any of the how.

What is funny about these FIAs is that the S&P you compared to returned 12%, yet the FIAs only returned whatever the cap value is. Regardless of the ups and downs, the investor is losing out on the difference over the course of those 30 years. The average worker retires between 55 – 65, they are living until 95, which gives them 30+ years, even if they invested in equity assests they would still get the averaged return of 12%.

So, while your investors are enjoying comfortable returns, FIAs are enjoying the difference even more, plus fees, commissions, etc.

If this is not how it works, then please explain in detail how.

anyone talking about FIAs and hidden fees clearly does not understand the product. please forward me anything recent that scott has written so I can e-mail him and tell him where he is wrong.

There are no “fees” in most FIAs. what they have are “caps” that limit investment return. Some FIAs have spreads through participation rates, but they are open and obvious.

again, i’ll state that if you want to be educated on these products, you can contact me directly. you seem like a bright guy and I can explain them to you in about 5 minutes.

Also, anyone comparing long term growth in stocks and mutual funds to FIA are missing the point. FIAs are not meant to obtain the returns stocks are over the long term. they are simply a secure bucket that never goes backwards and should go fowards between 4-6% maybe close to 7% if there is a bull run long term.

this is why with an asset allocation model FIA make more sense the older you get.

Advisors make no money off of sales of stocks/bonds/mutual funds.

“One last thought on asset allocation, using a 30 year historical rate of return of the S&P 500 is not helpful to a 65-80 year old who is in retirement and because some idiot stock jockey had him/her in a balanced portfolio of stock and mutual funds (that are down 40% over the last 18 months) the client has to go back to work or can’t live the lifestyle he/she wants to in retirement.”

Amen, that retiree should have been investing in bonds well before retirement so that when they retired they would be almost solely in bonds. We are in agreement over the idiot stock jockeys who have no idea what a proper asset allocation should be.

most stock brokers do not understand FIAs or EIUL. What they know is that their BDs don’t allow them to sell the products and if they do sell them it takes away from assets under management which is frowned upon.

It’s all about asset allocation. Stock jockey’s put everythig in mutual funds and stocks. hard core life agents tell everyone to put it into life or fixed annuities.

quality advisors will preach diversified asset allocation. but again, this is someome commical becuase stock jockey’s do not understand fixed life or annuity products and life agents don’t understand socks and mutual funds.

This is why most of the american public gets bad advice.

One last thought on asset allocation, using a 30 year historical rate of return of the S&P 500 is not helpful to a 65-80 year old who is in retirement and because some idiot stock jockey had him/her in a balanced portfolio of stock and mutual funds (that are down 40% over the last 18 months) the client has to go back to work or can’t live the lifestyle he/she wants to in retirement.

It’s not the products that are bad or evil. It’s the advisors giving the advice and that would include whoever is telling you that FIAs and or EIUL do not have a place in many client’s asset classes.

“It’s laughable to have FINRA try to regulate products that by design will never go backwards due to stock market risk when the advisors it regulates have done such a terrible job diversifying and protecting clients in the stock market (where most client are down 40% or more in the last 18 months as of the date of this post).”

Yes the market is down 40% this year, can you tell me what the total return for the S&P 500 was for the last 30 years?

12.7% annually. What type of annual return is Douglas Andrews saying you can get in his books? 8.5% after fees. So even if you factor in the tax free loans, you still come out ahead investing in the market.

“John is referring to the additional cost of mutual funds in addition to the typical 1.5% mutual fund expense.”

Which mutual funds? Vanguard mutual funds? His own company?