Financial Planner meeting

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Moneybags1
Posts: 119
Joined: Sat Jun 06, 2009 7:09 am
Location: Citrus Co Florida

Financial Planner meeting

Post by Moneybags1 » Mon Jul 09, 2018 3:42 pm

I'd like to run something by you guys and gals.. I had a visit to a local financial planner to pick up a prize and meet the father and son team who do a radio show on Saturdays and they do a name that tune kind of thing. The man has had his own proprietorship for 26 years, been in the business for 38 years I believe. They wanted to draw me a financial plan, I am 56 and not really interested in doing one loaded with insurance and annuities at this time. In fact I asked just how does a guaranteed annuity work in a severe financial crash, the son said that the companies they use have talented people that use options and some other stuff I had a hard time grasping. I thought derivatives, just great. I told them I have been an asset allocator in the Boglehead tradition until the past few years where I feel lucky to be where I have gotten and been in mainly short term fixed income. What I find disturbing is when I said that the VG annuity I have is mine in the event of an insurance company bankruptcy and Fixed Annuities go down with the ship, he told me it was the other way around and not to worry because insurance companies rarely go down and the gov't would have an orderly merger of companies in so many words..I stated that in my knowledge of Fixed Annuities, when you die any money left goes back into the pot to keep the annuity going, he said that is not true, it goes to my beneficiary .. I have always feared insurance products and feel they always create new creations so people never catch on. We are in Florida and he told me I was wrong in assuming that annuities, IRA's, pensions etc were off limits to lawsuits. Now when I got my VG Variable annuity the VG rep told me most of the inquiries for these products are from doctors and lawyers from Florida and Texas to shield assets from lawsuits. They want me to bring them detailed statements of my assets etc to build a life long plan. What do you all think of this? I have a hard time grasping these products which I feel do more for the insurance companies than than me. In my mind if there is such a thing as market upside and no downside packaged into an investment, why doesn't everyone have them? I am also too pessimistic to think that their are any safe investments except what I basically have now and yes I know they are not so safe if preservation of purchasing power is part of the mix...My assignment is to read "Stress Free Retirement" by Patrick Kelly.. What am I missing here??
The business has an A+ BBB rating

Thanks,
Mike

delamer
Posts: 5778
Joined: Tue Feb 08, 2011 6:13 pm

Re: Financial Planner meeting

Post by delamer » Mon Jul 09, 2018 4:27 pm

I don’t think you are missing anything.

They want to sell you high commission products that make them money. So they convince themselves and you that those products are somehow to your advantage.

Stay away.

If you have concerns about whether your assets are protected from lawsuits, then talk to a lawyer not a financial sales guy.

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Pajamas
Posts: 6015
Joined: Sun Jun 03, 2012 6:32 pm

Re: Financial Planner meeting

Post by Pajamas » Mon Jul 09, 2018 4:29 pm

What was the prize?

I don't think you are missing anything. Sounds like a trap and the prize was the bait.

alex_686
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Joined: Mon Feb 09, 2015 2:39 pm

Re: Financial Planner meeting

Post by alex_686 » Mon Jul 09, 2018 4:40 pm

Having worked with insurance and annuity accounting, let me try to shed some light on the issue.

First, before a annuity can be offered the plan has to be submitted to the state insurance agency. The plan is tested using the state's return and life expectancy assumptions, which tend to be conservative. Here are 2 key takeaways. First, the core of the products tend to be cookie cutter. Everybody has to work off the same profit / loss expectations. Second, one of the reasons why annuities tend to be so expensive is not because of the broker's commission (which does not help) but by the conservative nature of the state insurance's assumptions. Risk and return and linked and the state insurance commission is very risk adverse.

Second, annuities are held in a segregated account. All of your money goes into a special segregated account for just that plan, all of the monies are paid out of that account. If the insurance company goes bankruptcy, creditors can't touch the segregated accounts. In theory, these accounts should be self substantiating, without helps from the parent company. Insurance companies would only step in if something seriously broke the specific plan. I can think of cases where early polices of long term care were seriously under-priced where this happened. I can't imagine that happening with the plain vanilla whole life polices out there.

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Sandtrap
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Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Financial Planner meeting

Post by Sandtrap » Mon Jul 09, 2018 4:43 pm

If you feel like you're in a room with a table and everyone around you is salivating and has a plastic bib with a lobster on it. . . . you're the lobster. :shock:
Just kidding. . :D

Seriously.
Try doing this before you do anything.
Post a brief portfolio review for the forum experts and see what they come up with as far as comprehensive suggestions. It's possible you don't need to pay anyone to manage or setup things.
You have nothing to lose:

Here's the format.
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

Perhaps annuities in the form of SPIA's have a place in your portfolio. Perhaps not.

j :D

mortfree
Posts: 1207
Joined: Mon Sep 12, 2016 7:06 pm

Re: Financial Planner meeting

Post by mortfree » Mon Jul 09, 2018 4:45 pm

Sounds like a classic FUD case. I am sensing Fear, uncertainty and doubt in your post.

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Sandtrap
Posts: 5204
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Financial Planner meeting

Post by Sandtrap » Mon Jul 09, 2018 4:55 pm

mortfree wrote:
Mon Jul 09, 2018 4:45 pm
Sounds like a classic FUD case. I am sensing Fear, uncertainty and doubt in your post.
New one.
Good one.
FUD

Fear, Uncertainty, Doubt.
All natural warning signals to be heeded.
j

bsteiner
Posts: 3427
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Financial Planner meeting

Post by bsteiner » Mon Jul 09, 2018 5:16 pm

There are a few states where annuities are exempt from creditors. Whether it's worth paying 2% to 3% a year (less at Vanguard) for an annuity, and turning your qualified dividends and capital gains into ordinary income, for this protection (if you're in a state where annuities are protected from creditors) is up to the prospective buyer to decide.

Dottie57
Posts: 4240
Joined: Thu May 19, 2016 5:43 pm

Re: Financial Planner meeting

Post by Dottie57 » Mon Jul 09, 2018 5:17 pm

Moneybags1 wrote:
Mon Jul 09, 2018 3:42 pm
I'd like to run something by you guys and gals.. I had a visit to a local financial planner to pick up a prize and meet the father and son team who do a radio show on Saturdays and they do a name that tune kind of thing. The man has had his own proprietorship for 26 years, been in the business for 38 years I believe. They wanted to draw me a financial plan, I am 56 and not really interested in doing one loaded with insurance and annuities at this time. In fact I asked just how does a guaranteed annuity work in a severe financial crash, the son said that the companies they use have talented people that use options and some other stuff I had a hard time grasping. I thought derivatives, just great. I told them I have been an asset allocator in the Boglehead tradition until the past few years where I feel lucky to be where I have gotten and been in mainly short term fixed income. What I find disturbing is when I said that the VG annuity I have is mine in the event of an insurance company bankruptcy and Fixed Annuities go down with the ship, he told me it was the other way around and not to worry because insurance companies rarely go down and the gov't would have an orderly merger of companies in so many words..I stated that in my knowledge of Fixed Annuities, when you die any money left goes back into the pot to keep the annuity going, he said that is not true, it goes to my beneficiary .. I have always feared insurance products and feel they always create new creations so people never catch on. We are in Florida and he told me I was wrong in assuming that annuities, IRA's, pensions etc were off limits to lawsuits. Now when I got my VG Variable annuity the VG rep told me most of the inquiries for these products are from doctors and lawyers from Florida and Texas to shield assets from lawsuits. They want me to bring them detailed statements of my assets etc to build a life long plan. What do you all think of this? I have a hard time grasping these products which I feel do more for the insurance companies than than me. In my mind if there is such a thing as market upside and no downside packaged into an investment, why doesn't everyone have them? I am also too pessimistic to think that their are any safe investments except what I basically have now and yes I know they are not so safe if preservation of purchasing power is part of the mix...My assignment is to read "Stress Free Retirement" by Patrick Kelly.. What am I missing here??
The business has an A+ BBB rating

Thanks,
Mike
If you don’t fully understand the financial product, don’t buy it.

What is certain is that the FP will get a large commission if you buy it. There may be many totals or values that get thrown around like ”income base” which is not the same as the cash value. It may sound great, but you won’t be told about all fees included.

Don’t do it. Don’t even meet. If you want an annuity, SPIA OR SPDA are good tools.

Jack FFR1846
Posts: 7613
Joined: Tue Dec 31, 2013 7:05 am

Re: Financial Planner meeting

Post by Jack FFR1846 » Mon Jul 09, 2018 5:59 pm

The garbage roofer who I filed a claim with BBB and I hired an attorney has an A+ rating with no complaints. Do you know why? Because BBB is business focused and to remove a complaint (mine), the roofer simply called BBB and said the complaint was resolved. I guess the letter from my attorney meant to him that the matter was resolved.

I'm sure these snake oil salesmen are quite familiar with BBB and the easy A+ rating.
Bogle: Smart Beta is stupid

megabad
Posts: 507
Joined: Fri Jun 01, 2018 4:00 pm

Re: Financial Planner meeting

Post by megabad » Mon Jul 09, 2018 6:17 pm

I have 3 basic tests for a financial advisor/planner:
1) Are you a fiduciary? (correct answer yes)
2) How are you paid? (correct answer fee only or flat fee)
3) How many products are in a typical managed portfolio? (I prefer less than 10)

I find that about 75% of planners fail these. The other 25% are generally pretty decent to folks in my experience. But not everyone needs a financial planner/advisor and I would certainly ask yourself that question before even giving these guys the light of day.

Moneybags1
Posts: 119
Joined: Sat Jun 06, 2009 7:09 am
Location: Citrus Co Florida

Re: Financial Planner meeting

Post by Moneybags1 » Wed Jul 11, 2018 5:23 am

I would like to profusely thank everyone for the responses, as usual on this forum I come away a little more knowledgeable.

Delamer, I will take your advice and stay away, there is a reason they do a radio show, that must cost a bundle for an hour a week. I did tell the guy that I plan on going back into stock allocations at a future date fully knowing you need the returns of stocks to carry you through inflation over the years, he said, stocks are for amassing money his product was to preserve the money with market returns. I did say that if I did any of his products, I want to know every fee and expense ratio.

Pajamas, The prize was a Foreigner CD, actually I won a CD previously from them and they mailed it along with a small book "Stress Free Retirement", I didn't want the prize, I just took them up on the offer to stop in to say hello as they are located 2 minutes from me. I was curious to meet the people I have listened to on and off for 8+ years, i have told them in the past I am not into annuities..

Alex, thanks for shedding some light on how these products are priced and funded.

Sandtrap, Thank you for the link.. I felt like the lobster without the butter.. I should know better, but I am glad I consulted you folks..

Mortfree, Yes I have/had FUD, I don't feel trepidation any more, Thanks..

BSteiner, I rechecked and Florida does offer protection from creditors for annuities, IRA,s pensions SEPs. I did learn that HSA's aren't included and supposedly the state is working on the issue..

Dottie57, Thank you, income base, cash value, I get it now.. The guy who claims he had his own money in this said they all got 17% last year, I wonder thinking what you said, 17% of what, 50% of the investment.. You got me really thinking... What you said got me think about a book I read about life insurance in the 1980's written by a former broker explaining the newly created Universal life with all the different moving parts that confuse and obfuscate the reason you are really buying the product in the first place- Term Life being what you want and need.

Jack, so the BBB is not what it seems..

Megabad, Thanks- Fee only, its funny I worked for a guy who sold these products in retirement and I asked how can they give you market returns with out suffering market losses.. What he said went over my head, I don't think he knew.. A couple years later he totally retired at age age 80 and asked me, his house cleaner where he should invest his nest egg, he had no fear or stocks, I recommended a local Fee only asset allocator who dealt with DFA funds, he was torn between them and another outfit that would invest as they seen fit, he ultimately went with the DFA firm. What made me really take pause, was this guy obviously didn't trust the products he sold. Something I didn't think about sitting in the FP's chair this past Monday..

Again, many thanks to all, this conversation invoked many buried thoughts about the topic at hand.. I did tell the FP about the Bogleheads, he said he heard of them, maybe he really didn't, obviously he don't know what the hell goes on in this forum, LOL

Mike

Grt2bOutdoors
Posts: 19052
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Financial Planner meeting

Post by Grt2bOutdoors » Wed Jul 11, 2018 5:51 am

You did not win a prize - YOU are the prize. Remember this - there is no free anything in life, you pay one way or the other. It’s like the black widow spider who says “step into my parlor”, you were just stopping by to “pick up your Foreigner cd”. Years ago banks would offer “free coffee and cookies, free toasters and clock radios” to get low cost funding and sell you products, today some of them still do and lollipops too!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Moneybags1
Posts: 119
Joined: Sat Jun 06, 2009 7:09 am
Location: Citrus Co Florida

Re: Financial Planner meeting

Post by Moneybags1 » Wed Jul 11, 2018 8:19 pm

Amen to that@grt2boutdoors

mhalley
Posts: 6006
Joined: Tue Nov 20, 2007 6:02 am

Re: Financial Planner meeting

Post by mhalley » Wed Jul 11, 2018 8:36 pm

The only annuities bogleheads can agree on is an SPIA. (Single fixed income annuity). In general, your state will have a fund that will pay out in the event that the insurance company you do business with for the annuity defaults. You can click on your state here to see the limit for yours.
http://www.findyourannuity.com/Annuitie ... uity-Guide
and the wiki on fixed income annuities
https://www.bogleheads.org/wiki/Immediate_fixed_annuity

GuyInFL
Posts: 100
Joined: Thu Aug 04, 2016 7:17 pm

Re: Financial Planner meeting

Post by GuyInFL » Wed Jul 11, 2018 9:38 pm

Great line delamer
If you have concerns about whether your assets are protected from lawsuits, then talk to a lawyer not a financial sales guy.

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nedsaid
Posts: 10199
Joined: Fri Nov 23, 2012 12:33 pm

Re: Financial Planner meeting

Post by nedsaid » Thu Jul 12, 2018 12:47 pm

Moneybags1 wrote:
Mon Jul 09, 2018 3:42 pm
I had a visit to a local financial planner to pick up a prize. . .
This is what Nisiprius calls stealing bait from a trap. Problem is you are up against people who are very good at sales, the very best salesmen are a force of nature in themselves, even those of us with higher sales resistance are vulnerable. Better to avoid the "free" prizes. I think of the people who get "free" vacations only to be captive to a very persuasive time share presentation. Some of these folks come home the proud owners of a timeshare.
A fool and his money are good for business.

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meowcat
Posts: 386
Joined: Wed May 09, 2012 5:46 am

Re: Financial Planner meeting

Post by meowcat » Thu Jul 12, 2018 1:09 pm

megabad wrote:
Mon Jul 09, 2018 6:17 pm
I have 3 basic tests for a financial advisor/planner:
1) Are you a fiduciary, and are you acting as a fiduciary on my behalf? (correct answer yes)
2) How are you paid? (correct answer fee only or flat fee)
3) How many products are in a typical managed portfolio? (I prefer less than 10)

I find that about 75% of planners fail these. The other 25% are generally pretty decent to folks in my experience. But not everyone needs a financial planner/advisor and I would certainly ask yourself that question before even giving these guys the light of day.
Fixed that for ya.
More people should learn to tell their dollars where to go instead of asking them where they went. | -Roger Babson

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