Variable Annunity ??

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Gmaloof
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Variable Annunity ??

Post by Gmaloof » Wed Feb 18, 2015 4:39 pm

A co-worker of mine recently transfered her 401K acccount to Ameriprise Financial. The first thing the broker did was buy the RiverSource RAVA 5 Advantage variable annuity. The principal amount was $200,000.00. Is anyone familiar with this product and how it works? I'm just trying to figure out if there is anyway to get her out of this annunity without incuring a large surrender charge? Unfortunately the 10 day grace period has already past. She wanted to know if she is stuck or should she still get out despite the surrender charges? Any and all feedback will be appreciated.

TIA ...GMaloof

The Wizard
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Re: Variable Annunity ??

Post by The Wizard » Wed Feb 18, 2015 5:03 pm

Oh my, shark attack, sorry to hear that.
You'd have to see what the paperwork says.
Unless she can make a case for being coerced or being sold into this without permission.
Did she sign anything??
Attempted new signature...

The Wizard
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Re: Variable Annunity ??

Post by The Wizard » Wed Feb 18, 2015 5:11 pm

...and page 81 of the 139 page prospectus for that product mentions a 7.5% commission for selling that VA.
Wowza.
New Lexus soon come...
Attempted new signature...

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powermega
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Re: Variable Annunity ??

Post by powermega » Wed Feb 18, 2015 5:30 pm

Posts like this make me sick to my stomach. A variable annuity within a qualified account is a sure sign of getting ripped off.

She could try to make a point of getting her money back, but I suspect that it's a lost cause. I'm sure the surrender charge rates are horrible in the first few years. Even if she took the surrender charge hit and transferred her account to a new traditional IRA at a real custodian, there would be a break-even point in a few years. Determine what the total ER of the annuity is (likely over 1.5%), then divide that by the surrender charge rate, and that is a very rough measure of the break even duration. This assumes you are transferring the money into a traditional IRA with low ER investments, like a TSM/TBM combination. Assuming 1.5% ER and a 7.5% surrender charge rate, the break even point is about 5 years.

She could also raise a stink with FINRA and claim that she was mislead into all of this. Again, a variable annuity within a qualified account reeks of mismanagement, bordering on outright fraud.
Even a stopped clock is right twice a day.

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Gmaloof
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Re: Variable Annunity ??

Post by Gmaloof » Wed Feb 18, 2015 5:58 pm

powermega wrote:Posts like this make me sick to my stomach. A variable annuity within a qualified account is a sure sign of getting ripped off.

She could try to make a point of getting her money back, but I suspect that it's a lost cause. I'm sure the surrender charge rates are horrible in the first few years. Even if she took the surrender charge hit and transferred her account to a new traditional IRA at a real custodian, there would be a break-even point in a few years. Determine what the total ER of the annuity is (likely over 1.5%), then divide that by the surrender charge rate, and that is a very rough measure of the break even duration. This assumes you are transferring the money into a traditional IRA with low ER investments, like a TSM/TBM combination. Assuming 1.5% ER and a 7.5% surrender charge rate, the break even point is about 5 years.

She could also raise a stink with FINRA and claim that she was mislead into all of this. Again, a variable annuity within a qualified account reeks of mismanagement, bordering on outright fraud.
The real shame is that the 401k was with the TSP. The broker had her do a rollover to Ameriprise and as soon as the cash hit the account he purchsed the VA and pocketed the 7.5% commission,that The Wizard mentioned above.
Last edited by Gmaloof on Tue Feb 24, 2015 3:17 pm, edited 1 time in total.

retire14
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Re: Variable Annunity ??

Post by retire14 » Wed Feb 18, 2015 6:07 pm

How could Sales folks like this sleep at night?

dhodson
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Re: Variable Annunity ??

Post by dhodson » Wed Feb 18, 2015 6:10 pm

Easily the commission pays for their new bed.

She should file a complaint but it isn't going to be successful. Might warn others.

They will claim the rider makes it okay that this was purchased with qualified funds.

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PaddyMac
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Re: Variable Annunity ??

Post by PaddyMac » Wed Feb 18, 2015 6:54 pm

Disgraceful. I don't think she should shrug and lose money. She should fight back. The 10 day period is for someone who was properly informed and agreed to it, then changed their mind. It doesn't sound like that was the case here.

Document every date & time of every transaction.
Document every email, every phone call, and what was said by whom and when.
Then ASAP file a written complaint to the broker and Ameriphase to get it all on the record that the complaint was made at the first possible opportunity.
Then start researching how to take it further, but get that on record first.

This would be a PERFECT case to bring to the Consumer Financial Protection Bureau http://www.consumerfinance.gov, as they are looking to push Fiduciary Duty for financial advisors and are getting push back from the industry. Your friend would be a perfect case - she could be sitting in the gallery at the next State of the Union as an example of someone who was harmed by a bad apple looking for a commission...
http://www.consumerfinance.gov/askcfpb/ ... ciary.html

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arcticpineapplecorp.
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Re: Variable Annunity ??

Post by arcticpineapplecorp. » Wed Feb 18, 2015 7:06 pm

Gmaloof wrote:A co-worker of mine recently transfered her 401K acccount to Ameriprise Financial. The first thing the broker did was buy the RiverSource RAVA 5 Advantage variable annuity. The principal amount was $200,000.00. Is anyone familiar with this product and how it works? I'm just trying to figure out if there is anyway to get her out of this annunity without incuring a large surrender charge? Unfortunately the 10 day grace period has already past. She wanted to know if she is stuck or should she still get out despite the surrender charges? Any and all feedback will be appreciated.

TIA ...GMaloof
Brokers make you broke(r). In her case, she could be out $15,000 (7.5% of $200,000). But that won't buy the agent a lexus as was suggested. Maybe a Corolla.
"How could Sales folks like this sleep at night?" I'm sure he sleeps very well. $15,000 can buy some nice french linens I'm sure.

I had a friend do the same thing with her bank. Unfortunately, she emailed me before going to the appointment and I sent her articles on the dangers of variable annuities, talked to her about buying a SPIA and/or going through Vanguard, etc. After all that, she still bought the variable annuity from the bank. Some people just can't/won't be helped. This may not be your friend's situation, but I sure hope she learned a valuable lesson from this experience (regardless of whether this can be fixed or not).

She should learn to always read the prospectus before buying any financial product,
If she doesn't understand it or how the person selling it gets paid, she shouldn't buy it
Can't take the salesperson's word for it. They love to say "the company pays me" which is a lie.

Good luck. Good advice from others. Let us know how it goes.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Barry Barnitz
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Re: Variable Annunity ??

Post by Barry Barnitz » Wed Feb 18, 2015 7:12 pm

Hi:

Here is the link to the annuity webpage, which provides some information regarding this product, as well as a link to the prospectus; Riversource RAVA 5 Advantage VA.

regards,
Additional administrative tasks: Financial Page affiliate blog; finiki the Canadian wiki; The Bogle Center for Financial Literacy site; Wiki Bogleheads® España.

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Mel Lindauer
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Re: Variable Annunity ??

Post by Mel Lindauer » Wed Feb 18, 2015 7:43 pm

powermega wrote:Posts like this make me sick to my stomach. A variable annuity within a qualified account is a sure sign of getting ripped off.

She could try to make a point of getting her money back, but I suspect that it's a lost cause. I'm sure the surrender charge rates are horrible in the first few years. Even if she took the surrender charge hit and transferred her account to a new traditional IRA at a real custodian, there would be a break-even point in a few years. Determine what the total ER of the annuity is (likely over 1.5%), then divide that by the surrender charge rate, and that is a very rough measure of the break even duration. This assumes you are transferring the money into a traditional IRA with low ER investments, like a TSM/TBM combination. Assuming 1.5% ER and a 7.5% surrender charge rate, the break even point is about 5 years.

She could also raise a stink with FINRA and claim that she was mislead into all of this. Again, a variable annuity within a qualified account reeks of mismanagement, bordering on outright fraud.
Well said. Couldn't agree more. What a ripoff.
Best Regards - Mel | | Semper Fi

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Mel Lindauer
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Re: Variable Annunity ??

Post by Mel Lindauer » Wed Feb 18, 2015 7:44 pm

Here's a Forbes column I did on this ripoff practice.

http://www.forbes.com/2010/07/02/variab ... dauer.html
Best Regards - Mel | | Semper Fi

Jpg
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Re: Variable Annunity ??

Post by Jpg » Wed Feb 18, 2015 8:14 pm

This victim should file an arbitration claim against the firm with FINRA.She could file a pro se(without a lawyer).Go to the FINRA website.More people need to stand up and fight these sharks .

Topic Author
Gmaloof
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Re: Variable Annunity ??

Post by Gmaloof » Mon Feb 23, 2015 6:17 pm

Thanks for all of your replies. I will pass along the excellent recommendations.

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BL
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Re: Variable Annunity ??

Post by BL » Mon Feb 23, 2015 6:59 pm

My sympathies.
The real shame is that the 401k was with the TSP. The broker had her do a rollover to Ameriprise and as soon as the cash hit the account he purchsed the VA and pocketed the 7.5% commission,that The Wizard mentioned above. I only wish she would have told me about this before she decided to go forward.
First, was it a 401k or a TSP? Did she just get out of government employment or military? It is important to get the facts and terms straight if you file a complaint.
I would immediately get everything (else) out from A; they don't deserve to make any more profit from her and are not to be trusted with her money!

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Gmaloof
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Re: Variable Annunity ??

Post by Gmaloof » Tue Feb 24, 2015 3:08 pm

BL,

Has not left federal service. She did an in-service partial rollover to ameriprise. The account was held in the federal TSP program which is considered a 401K program or close to it for federal employees. The TSP account is still open and she is still contributing on a bi-weekly basis..

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BL
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Re: Variable Annunity ??

Post by BL » Tue Feb 24, 2015 3:39 pm

Gmaloof wrote:BL,

Has not left federal service. She did an in-service partial rollover to ameriprise. The account was held in the federal TSP program which is considered a 401K program or close to it for federal employees. The TSP account is still open and she is still contributing on a bi-weekly basis..
Interesting! In that case, I would be tempted to "get" them as she left the best deal around for this! It certainly was not in her best interest, but I guess it doesn't have to be, just be "suitable" which covers a lot of bad choices.

acejacksingh
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Re: Variable Annunity ??

Post by acejacksingh » Tue Feb 24, 2015 3:40 pm

arcticpineapplecorp. wrote:
Brokers make you broke(r). In her case, she could be out $15,000 (7.5% of $200,000). But that won't buy the agent a lexus as was suggested. Maybe a Corolla.
"How could Sales folks like this sleep at night?" I'm sure he sleeps very well. $15,000 can buy some nice french linens I'm sure.
well....$15,000 * 10 people = $150,000 for the year. which should cover the Lexus. And he prolly just sleeps in the Lexus.

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powermega
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Re: Variable Annunity ??

Post by powermega » Tue Feb 24, 2015 5:07 pm

What makes me sick is that $15k is about one entire year's worth of contributions. That's an entire year of contributions she'll never get back. This is not even considering what that $15k will eventually grow to.

:twisted:
Even a stopped clock is right twice a day.

bluemarlin08
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Re: Variable Annunity ??

Post by bluemarlin08 » Tue Feb 24, 2015 5:59 pm

Certainly file a grievance, these types of cases can be reversed. The insurance company does not want this type of press and a big charge back to the agent might get his attention.

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nedsaid
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Re: Variable Annunity ??

Post by nedsaid » Tue Feb 24, 2015 8:12 pm

Gmaloof wrote:A co-worker of mine recently transfered her 401K acccount to Ameriprise Financial. The first thing the broker did was buy the RiverSource RAVA 5 Advantage variable annuity. The principal amount was $200,000.00. Is anyone familiar with this product and how it works? I'm just trying to figure out if there is anyway to get her out of this annunity without incuring a large surrender charge? Unfortunately the 10 day grace period has already past. She wanted to know if she is stuck or should she still get out despite the surrender charges? Any and all feedback will be appreciated.

TIA ...GMaloof
Advisors who do this should be just taken out and shot. I am not sure they should even get their final cigarette.

The only exception would be if the investor really wanted the "living benefit" guarantees that some variable annuities provide. Some of these provided guarantees that would protect the principal and allow for guaranteed "step ups" in principal guarantees. There were actually attractive guarantees that a few of these annuities provided but insurance companies have scaled these back. The trouble is that these are very complex instruments and it is difficult for a layman to determine if he got a good deal on the guarantees or not.

In most cases these annuities are real turkeys. Mostly they are fee traps. The reason advisors sell these are the high commissions. 7.5% commission is higher than a 5.75% load on stock mutual funds and a 3.75% to 4.25% commission on bond funds. Disgraceful.
A fool and his money are good for business.

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