Just sat through a wealth-management sales pitch.

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Lazareth
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Location: New England

Just sat through a wealth-management sales pitch.

Post by Lazareth » Thu Jul 18, 2019 10:50 am

I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota. I provided my financial information in her initial call last week (age 65 retired with p/t income, wife 63 working, $1.3 MM mostly in tax-deferred accounts... not much else) and I agreed to the second call, this morning's pitch with her mentor, with the caveat that I was 'all set' and would not be signing on. But they still came at me sincerely as expected and I'm afraid I've not seen the last of them. Thought I'd share the bottom line with the forum:
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.

Vanguard Fan 1367
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Re: Just sat through a wealth-management sales pitch.

Post by Vanguard Fan 1367 » Thu Jul 18, 2019 11:02 am

Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota. I provided my financial information in her initial call last week (age 65 retired with p/t income, wife 63 working, $1.3 MM mostly in tax-deferred accounts... not much else) and I agreed to the second call, this morning's pitch with her mentor, with the caveat that I was 'all set' and would not be signing on. But they still came at me sincerely as expected and I'm afraid I've not seen the last of them. Thought I'd share the bottom line with the forum:
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.
I also appreciate the Boglehead help. When I was young and impressionable someone said that when you had significant assets that you should get a professional advisor. Now I agree with John Bogle that "you get what you don't pay for" with asset management. 1 percent of 1.3 million or 13 thousand bucks doesn't excite me these days for an annual fee. I am not excited about the annuity or the life insurance either.

Godot
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Location: Little Beirut

Re: Just sat through a wealth-management sales pitch.

Post by Godot » Thu Jul 18, 2019 11:17 am

Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota. I provided my financial information in her initial call last week (age 65 retired with p/t income, wife 63 working, $1.3 MM mostly in tax-deferred accounts... not much else) and I agreed to the second call, this morning's pitch with her mentor, with the caveat that I was 'all set' and would not be signing on. But they still came at me sincerely as expected and I'm afraid I've not seen the last of them. Thought I'd share the bottom line with the forum:
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.
I'm fairly ignorant about annuities, but how can one be both variable AND guaranteed? Doesn't variable mean that the payout will be contingent on how the market does?
“There is man in his entirety, blaming his shoe when his foot is guilty.” ― Samuel Beckett, Waiting for Godot

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Stinky
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Re: Just sat through a wealth-management sales pitch.

Post by Stinky » Thu Jul 18, 2019 11:18 am

Congratulations on helping out your family friend and resisting the urge to buy anything.

Sounds liked you avoided spending $13k per year in fees, plus VA costs, plus term insurance premium. Maybe $20k in total.

Those kinds of numbers take my breath away ......
It's a GREAT day to be alive - Travis Tritt

Shallowpockets
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Re: Just sat through a wealth-management sales pitch.

Post by Shallowpockets » Thu Jul 18, 2019 11:18 am

"family friend whose daughter..."

You did a favor. I am sure she had the pitch down. She is learning. Learning the wrong things, which is to part people from their money with a narrow focused approach to money. Selling cars. Not user friendly. Biased for money purposes. Fake friend. This is what she is getting into.
Family friend is probably happy she is getting a nice office job. This is how it starts and is perpetrated. Most likely the daughter has no idea of finance. If she did would she go over to the darker side? Is the "job" the main focus. Yes, it is.
Daughter is fresh out of college. No real world finance experience. Is this who we want selling finance products? Would you listen to anyone else in any profession on such an important matter who was fresh from college and had no experience in the subject matter?
This is an ignoble profession. Snake oil and timeshares.

But, hey, its a job.

Glockenspiel
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Re: Just sat through a wealth-management sales pitch.

Post by Glockenspiel » Thu Jul 18, 2019 11:22 am

I appreciate you helping a fresh out of college kid develop some skills and bring her some knowledge. Developing presentation skills and learning how to appropriately respond to a prospective client's questions is important in a professional-type of career.

HEDGEFUNDIE
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Re: Just sat through a wealth-management sales pitch.

Post by HEDGEFUNDIE » Thu Jul 18, 2019 11:24 am

Godot wrote:
Thu Jul 18, 2019 11:17 am
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota. I provided my financial information in her initial call last week (age 65 retired with p/t income, wife 63 working, $1.3 MM mostly in tax-deferred accounts... not much else) and I agreed to the second call, this morning's pitch with her mentor, with the caveat that I was 'all set' and would not be signing on. But they still came at me sincerely as expected and I'm afraid I've not seen the last of them. Thought I'd share the bottom line with the forum:
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.
I'm fairly ignorant about annuities, but how can one be both variable AND guaranteed? Doesn't variable mean that the payout will be contingent on how the market does?
They’re guaranteed on the downside, variable on the upside.

NotWhoYouThink
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Re: Just sat through a wealth-management sales pitch.

Post by NotWhoYouThink » Thu Jul 18, 2019 11:39 am

An annuity in your IRA? Term life insurance for a 65 year old retiree? Holy smokes those are terrible recommendations. Any chance you can suggest to your friend that the daughter seek other employment?

When you talk to them again you might question those suggestions. Part of sales is overcoming the objections of your prospective customer. There is a lot to object to with this, might as well give them some practice. Or maybe teach them something.

bsteiner
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Re: Just sat through a wealth-management sales pitch.

Post by bsteiner » Thu Jul 18, 2019 11:51 am

Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. ...

Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed ... Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively. ...
If you buy both life insurance and an annuity, isn't that like betting on both teams in the same game?

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willthrill81
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Re: Just sat through a wealth-management sales pitch.

Post by willthrill81 » Thu Jul 18, 2019 12:06 pm

1% AUM fee, variable annuity, unneeded life insurance for financially independent retirees...

That seems par for the course for these organizations. Frankly, I think that I would straight up tell them that you do not wish to speak with them any more. What's sad is that your friend's daughter is now involved with this organization and probably being persuaded to believe that what they and she are doing is in their clients' best interest.

:oops:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Jack FFR1846
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Re: Just sat through a wealth-management sales pitch.

Post by Jack FFR1846 » Thu Jul 18, 2019 12:14 pm

I don't think I would have your patience. I'd start out with a question:

"I've got $2.5M that I pay $486.36 a year all in for fees. You're proposing 1% plus ERs. Let's say 0.1% ER average. So for the $27,500.....or more than I plan to pay for a new car....what do you think you can do to make up that fee and then do better than my 3 fund?". And next, "If you really think you can do something, are you willing to enter into a contract where you will personally guaranty that you will beat what I've got now? If you're not, then good day".
Bogle: Smart Beta is stupid

delamer
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Re: Just sat through a wealth-management sales pitch.

Post by delamer » Thu Jul 18, 2019 12:19 pm

I am interested that you were willing to provide a friend’s daughter with details of your finances, especially given that you had no serious interest in the service.

Dottie57
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Re: Just sat through a wealth-management sales pitch.

Post by Dottie57 » Thu Jul 18, 2019 12:29 pm

HEDGEFUNDIE wrote:
Thu Jul 18, 2019 11:24 am
Godot wrote:
Thu Jul 18, 2019 11:17 am
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota. I provided my financial information in her initial call last week (age 65 retired with p/t income, wife 63 working, $1.3 MM mostly in tax-deferred accounts... not much else) and I agreed to the second call, this morning's pitch with her mentor, with the caveat that I was 'all set' and would not be signing on. But they still came at me sincerely as expected and I'm afraid I've not seen the last of them. Thought I'd share the bottom line with the forum:
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.
I'm fairly ignorant about annuities, but how can one be both variable AND guaranteed? Doesn't variable mean that the payout will be contingent on how the market does?
They’re guaranteed on the downside, variable on the upside.
Many times they are guarteed up to a given percent loss, like 10%. If the market goes down 25%, you bear 15% loss. Not my kind of guarantee.

Also, I think the 8% guarantee may be on the market going up. The annuity owner may have growth capped at 8 %.

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Doom&Gloom
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Re: Just sat through a wealth-management sales pitch.

Post by Doom&Gloom » Thu Jul 18, 2019 12:45 pm

Grats for helping the family of a friend!

People go in all different directions. She could have found worse. Maybe she will get re-directed in due time. I don't get all the hate here. Nearly all jobs are designed to separate people from their money--some simply provide more value to the consumer than others.

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HomerJ
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Re: Just sat through a wealth-management sales pitch.

Post by HomerJ » Thu Jul 18, 2019 12:50 pm

HEDGEFUNDIE wrote:
Thu Jul 18, 2019 11:24 am
Godot wrote:
Thu Jul 18, 2019 11:17 am
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota. I provided my financial information in her initial call last week (age 65 retired with p/t income, wife 63 working, $1.3 MM mostly in tax-deferred accounts... not much else) and I agreed to the second call, this morning's pitch with her mentor, with the caveat that I was 'all set' and would not be signing on. But they still came at me sincerely as expected and I'm afraid I've not seen the last of them. Thought I'd share the bottom line with the forum:
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.
I'm fairly ignorant about annuities, but how can one be both variable AND guaranteed? Doesn't variable mean that the payout will be contingent on how the market does?
They’re guaranteed on the downside, variable on the upside.
Technically this is correct, but in actual life in terms of real money, it's a complete scam.

They "guarantee" 8% returns on your money. But that's not cash-value.

You don't get to cash out your money 20 years later with guaranteed 8%+ growth.

There are two numbers... The "income-value" of your money grows at 8% minumum, but that number is ONLY used if you annuitize the product later, i.e. change it to an annual payment each year from then on.

And that second number will be super low compared to market rates, and that's where they get you.

For instance, say at age 65, I "invest" $100,000 for 10 years, get my 8% "guarantee", and get a nice pretty statement every year showing my money growing quickly. The 10th year, my statement might read $215,000...

That's pretty good!! But I can't cash out $215,000.

I can, however, start an annual payment from my account. They might pay me 5% a year for life. Or $10,750 a year for life..

However, I'd be 75 at that point, and market rates for annuities for 75 year olds are 9% today.

To generate $10,750 a year for life at 75, I'd really only need $120,000.

So my money really only grew to the equivalent for $120,000. That's all the insurance company is using to generate the $10,750 payment for life.

So instead of my "guaranteed" 8%, I really only got 2% a year.

It's a total scam and should be illegal. They should not be allowed to use the word "guaranteed".
The J stands for Jay

DarkHelmetII
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Re: Just sat through a wealth-management sales pitch.

Post by DarkHelmetII » Thu Jul 18, 2019 12:59 pm

"Withdrawals from a VA are tax deferred so there would never be a reason to place one in a tax-favored account like an IRA."

Image

Image

othermike27
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Re: Just sat through a wealth-management sales pitch.

Post by othermike27 » Thu Jul 18, 2019 1:08 pm

Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota.
I respectfully disagree with this premise.

Many years ago our then high-school-aged daughter's music tutor concluded that giving music lessons was never going to support him (good decision), and that he would branch out into selling whole life insurance as well (not such a good decision). Wife and I were asked to sit through a presentation so that this eager young man could "practice" his sales presentation. Just for practice? Yes indeed, he and his mentor said, just for practice, no obligation to buy, etc., etc. Despite misgivings, we agreed and sat through 30-45 minutes of mind-numbing hocus-pocus about whole life policies. And at the end ... they actually asked us to buy this stuff! We had to say no several times, and escort them out the door.

So I disagree. I was not really a "practice" run for the music man, and OP you were not just helping to meet a first month pitch quota. We were each set up as the mark for a particularly disingenuous and cynical variation of affinity selling. But we can't be the only two people who have been hit up this way. It's probably a well-established and common tactic to break in a newbie sales person by having them start with relatives, friends and acquaintances as what are hoped to be easy marks.

Note to self: next time this happens, grab your Bogle bobblehead and wag it fiercely at the offender. Then slam the door/phone/other device. :twisted:

just1question
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Re: Just sat through a wealth-management sales pitch.

Post by just1question » Thu Jul 18, 2019 1:10 pm

I was going to chime in by piling on how bad the FA's advice is and expensive variable annuities (with a rider) are, but you seem to already know that. You've done your good deed (or mitzvah!). You don't owe anybody a second call. If you aren't going to use the FA, which it seems you are not, he probably doesn't want to waste his time talking with you. But expect a call back from him in a couple of years asking how you are doing and if you have reconsidered.

Good luck.

Godot
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Re: Just sat through a wealth-management sales pitch.

Post by Godot » Thu Jul 18, 2019 1:15 pm

HomerJ wrote:
Thu Jul 18, 2019 12:50 pm
HEDGEFUNDIE wrote:
Thu Jul 18, 2019 11:24 am
Godot wrote:
Thu Jul 18, 2019 11:17 am
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I'm fairly ignorant about annuities, but how can one be both variable AND guaranteed? Doesn't variable mean that the payout will be contingent on how the market does?
They’re guaranteed on the downside, variable on the upside.
Technically this is correct, but in actual life in terms of real money, it's a complete scam.

They "guarantee" 8% returns on your money. But that's not cash-value.

You don't get to cash out your money 20 years later with guaranteed 8%+ growth.

There are two numbers... The "income-value" of your money grows at 8% minumum, but that number is ONLY used if you annuitize the product later, i.e. change it to an annual payment each year from then on.

And that second number will be super low compared to market rates, and that's where they get you.

For instance, say at age 65, I "invest" $100,000 for 10 years, get my 8% "guarantee", and get a nice pretty statement every year showing my money growing quickly. The 10th year, my statement might read $215,000...

That's pretty good!! But I can't cash out $215,000.

I can, however, start an annual payment from my account. They might pay me 5% a year for life. Or $10,750 a year for life..

However, I'd be 75 at that point, and market rates for annuities for 75 year olds are 9% today.

To generate $10,750 a year for life at 75, I'd really only need $120,000.

So my money really only grew to the equivalent for $120,000. That's all the insurance company is using to generate the $10,750 payment for life.

So instead of my "guaranteed" 8%, I really only got 2% a year.

It's a total scam and should be illegal. They should not be allowed to use the word "guaranteed".
Thank you for the detailed explanation. Seemed like it was too good to be true!
“There is man in his entirety, blaming his shoe when his foot is guilty.” ― Samuel Beckett, Waiting for Godot

JediMisty
Posts: 258
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Location: Central NJ

Re: Just sat through a wealth-management sales pitch.

Post by JediMisty » Thu Jul 18, 2019 1:27 pm

othermike27 wrote:
Thu Jul 18, 2019 1:08 pm
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota.
I respectfully disagree with this premise.

Many years ago our then high-school-aged daughter's music tutor concluded that giving music lessons was never going to support him (good decision), and that he would branch out into selling whole life insurance as well (not such a good decision). Wife and I were asked to sit through a presentation so that this eager young man could "practice" his sales presentation. Just for practice? Yes indeed, he and his mentor said, just for practice, no obligation to buy, etc., etc. Despite misgivings, we agreed and sat through 30-45 minutes of mind-numbing hocus-pocus about whole life policies. And at the end ... they actually asked us to buy this stuff! We had to say no several times, and escort them out the door.

So I disagree. I was not really a "practice" run for the music man, and OP you were not just helping to meet a first month pitch quota. We were each set up as the mark for a particularly disingenuous and cynical variation of affinity selling. But we can't be the only two people who have been hit up this way. It's probably a well-established and common tactic to break in a newbie sales person by having them start with relatives, friends and acquaintances as what are hoped to be easy marks.

Note to self: next time this happens, grab your Bogle bobblehead and wag it fiercely at the offender. Then slam the door/phone/other device. :twisted:
+1 I was asked for a friends teenager's summer job to come over so he could "practice" his sales pitch of over priced knives. I reluctantly agreed after it was stressed repeatedly that I wasn't going to be asked to buy... "Not really". The exercise was to express misgivings so he could "practice". It got ugly when I politely declined several times to spend 1 or 2k (can't remember now) on knives I didn't want in the first place. She threw a tantrum and accussed me of being "selfish" because I could afford it and they were so broke. It's not the only reason we're no longer friends, but a good example...

HEDGEFUNDIE
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Joined: Sun Oct 22, 2017 2:06 pm

Re: Just sat through a wealth-management sales pitch.

Post by HEDGEFUNDIE » Thu Jul 18, 2019 1:28 pm

Godot wrote:
Thu Jul 18, 2019 1:15 pm
HomerJ wrote:
Thu Jul 18, 2019 12:50 pm
HEDGEFUNDIE wrote:
Thu Jul 18, 2019 11:24 am
Godot wrote:
Thu Jul 18, 2019 11:17 am
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I'm fairly ignorant about annuities, but how can one be both variable AND guaranteed? Doesn't variable mean that the payout will be contingent on how the market does?
They’re guaranteed on the downside, variable on the upside.
Technically this is correct, but in actual life in terms of real money, it's a complete scam.

They "guarantee" 8% returns on your money. But that's not cash-value.

You don't get to cash out your money 20 years later with guaranteed 8%+ growth.

There are two numbers... The "income-value" of your money grows at 8% minumum, but that number is ONLY used if you annuitize the product later, i.e. change it to an annual payment each year from then on.

And that second number will be super low compared to market rates, and that's where they get you.

For instance, say at age 65, I "invest" $100,000 for 10 years, get my 8% "guarantee", and get a nice pretty statement every year showing my money growing quickly. The 10th year, my statement might read $215,000...

That's pretty good!! But I can't cash out $215,000.

I can, however, start an annual payment from my account. They might pay me 5% a year for life. Or $10,750 a year for life..

However, I'd be 75 at that point, and market rates for annuities for 75 year olds are 9% today.

To generate $10,750 a year for life at 75, I'd really only need $120,000.

So my money really only grew to the equivalent for $120,000. That's all the insurance company is using to generate the $10,750 payment for life.

So instead of my "guaranteed" 8%, I really only got 2% a year.

It's a total scam and should be illegal. They should not be allowed to use the word "guaranteed".
Thank you for the detailed explanation. Seemed like it was too good to be true!
A 2% guarantee is still a guarantee. What is a 10-year Treasury paying these days? And the Treasury doesn't have the upside of the annuity, if the market returns more than 8% CAGR (long term returns on the S&P are more like 10%).

dcdowden
Posts: 163
Joined: Sun Sep 28, 2014 11:42 am

Re: Just sat through a wealth-management sales pitch.

Post by dcdowden » Thu Jul 18, 2019 1:37 pm

My sister went through the training and passed the tests to become certified to sell various financial products working for an investment firm several years ago. Her first project was to 'help' her in'laws with their finances. When she came up with a plan and reviewed it with her boss, he told her that what she had selected was no good because it did not generate enough fees for the investment firm. She decided to quit that line of work.

Point
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Re: Just sat through a wealth-management sales pitch.

Post by Point » Thu Jul 18, 2019 1:43 pm

Perfect!

"I've got $2.5M that I pay $486.36 a year all in for fees. You're proposing 1% plus ERs. Let's say 0.1% ER average. So for the $27,500.....or more than I plan to pay for a new car....what do you think you can do to make up that fee and then do better than my 3 fund?". And next, "If you really think you can do something, are you willing to enter into a contract where you will personally guaranty that you will beat what I've got now? If you're not, then good day".

Broken Man 1999
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Re: Just sat through a wealth-management sales pitch.

Post by Broken Man 1999 » Thu Jul 18, 2019 1:47 pm

JediMisty wrote:
Thu Jul 18, 2019 1:27 pm
othermike27 wrote:
Thu Jul 18, 2019 1:08 pm
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota.
I respectfully disagree with this premise.

Many years ago our then high-school-aged daughter's music tutor concluded that giving music lessons was never going to support him (good decision), and that he would branch out into selling whole life insurance as well (not such a good decision). Wife and I were asked to sit through a presentation so that this eager young man could "practice" his sales presentation. Just for practice? Yes indeed, he and his mentor said, just for practice, no obligation to buy, etc., etc. Despite misgivings, we agreed and sat through 30-45 minutes of mind-numbing hocus-pocus about whole life policies. And at the end ... they actually asked us to buy this stuff! We had to say no several times, and escort them out the door.

So I disagree. I was not really a "practice" run for the music man, and OP you were not just helping to meet a first month pitch quota. We were each set up as the mark for a particularly disingenuous and cynical variation of affinity selling. But we can't be the only two people who have been hit up this way. It's probably a well-established and common tactic to break in a newbie sales person by having them start with relatives, friends and acquaintances as what are hoped to be easy marks.

Note to self: next time this happens, grab your Bogle bobblehead and wag it fiercely at the offender. Then slam the door/phone/other device. :twisted:
+1 I was asked for a friends teenager's summer job to come over so he could "practice" his sales pitch of over priced knives. I reluctantly agreed after it was stressed repeatedly that I wasn't going to be asked to buy... "Not really". The exercise was to express misgivings so he could "practice". It got ugly when I politely declined several times to spend 1 or 2k (can't remember now) on knives I didn't want in the first place. She threw a tantrum and accussed me of being "selfish" because I could afford it and they were so broke. It's not the only reason we're no longer friends, but a good example...
Cutco, no doubt!

I know them well!

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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Doom&Gloom
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Re: Just sat through a wealth-management sales pitch.

Post by Doom&Gloom » Thu Jul 18, 2019 1:49 pm

dcdowden wrote:
Thu Jul 18, 2019 1:37 pm
My sister went through the training and passed the tests to become certified to sell various financial products working for an investment firm several years ago. Her first project was to 'help' her in'laws with their finances. When she came up with a plan and reviewed it with her boss, he told her that what she had selected was no good because it did not generate enough fees for the investment firm. She decided to quit that line of work.
Good for her!
:beer

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HomerJ
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Re: Just sat through a wealth-management sales pitch.

Post by HomerJ » Thu Jul 18, 2019 1:51 pm

HEDGEFUNDIE wrote:
Thu Jul 18, 2019 1:28 pm
A 2% guarantee is still a guarantee. What is a 10-year Treasury paying these days? And the Treasury doesn't have the upside of the annuity, if the market returns more than 8% CAGR (long term returns on the S&P are more like 10%).
Why are you defending this? Serious question.

(1) The written "guarantee" is for 8% (and that's PRECISELY how they sell it to gullible customers). If they actually get the equivalent of 2% returns, how in the world do you think it's okay to say "Hey 2% is still a guarantee"

(2) The upside has fine print too. Usually they have some crazy limit like a 1% or 1.5% a month max... So, if the market goes up 3% in January, 0% in February, 4% in March, you may only be credited for 2% or 3% of that 7% rise.
The J stands for Jay

megabad
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Re: Just sat through a wealth-management sales pitch.

Post by megabad » Thu Jul 18, 2019 1:59 pm

Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
I suppose it is no surprise that clearly there is not (and will never be with these types of firms) a bullet point that lists "fiduciary"...

senex
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Re: Just sat through a wealth-management sales pitch.

Post by senex » Thu Jul 18, 2019 2:23 pm

Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm.
Thanks for sharing your story. Exposure helps create antibodies. Knowing their tactics helps us know how to talk friends/relatives out of these things.
HomerJ wrote:
Thu Jul 18, 2019 12:50 pm
There are two numbers... The "income-value" of your money grows at 8% minumum, but that number is ONLY used if you annuitize the product later, i.e. change it to an annual payment each year from then on.
Thanks to HomerJ, too. This is useful info. Complexity really is an enemy of understanding.

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Abe
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Re: Just sat through a wealth-management sales pitch.

Post by Abe » Thu Jul 18, 2019 2:42 pm

JediMisty wrote:
Thu Jul 18, 2019 1:27 pm

+1 I was asked for a friends teenager's summer job to come over so he could "practice" his sales pitch of over priced knives. I reluctantly agreed after it was stressed repeatedly that I wasn't going to be asked to buy... "Not really". The exercise was to express misgivings so he could "practice". It got ugly when I politely declined several times to spend 1 or 2k (can't remember now) on knives I didn't want in the first place. She threw a tantrum and accussed me of being "selfish" because I could afford it and they were so broke. It's not the only reason we're no longer friends, but a good example...

I've been through this 2 times with the knives, one was a friend of family and the other was my step-grandson. Same thing happened, it was supposed to be just for practice, but they came on strong with the high pressure. They came to our home so we were a captured audience. They have a demonstration which last about an hour or more. They ask us for one of our kitchen knives and then they demonstrate how much sharper their knives are than ours. Then they asked us to buy their most expensive knife set. When we refused to buy it, they asked us to buy a little cheaper set, then on down the line until they finally asked us to buy only one knife which was way overpriced. I have to say they were very well trained. Every time when we rejected their offer to buy, they would ask why, and whatever we said, they had an answer for it. When they finally gave up, they asked us for the names of any friends or family they could call on. Very awkward.
Slow and steady wins the race.

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willthrill81
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Re: Just sat through a wealth-management sales pitch.

Post by willthrill81 » Thu Jul 18, 2019 2:50 pm

HomerJ wrote:
Thu Jul 18, 2019 12:50 pm
HEDGEFUNDIE wrote:
Thu Jul 18, 2019 11:24 am
Godot wrote:
Thu Jul 18, 2019 11:17 am
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota. I provided my financial information in her initial call last week (age 65 retired with p/t income, wife 63 working, $1.3 MM mostly in tax-deferred accounts... not much else) and I agreed to the second call, this morning's pitch with her mentor, with the caveat that I was 'all set' and would not be signing on. But they still came at me sincerely as expected and I'm afraid I've not seen the last of them. Thought I'd share the bottom line with the forum:
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.
I'm fairly ignorant about annuities, but how can one be both variable AND guaranteed? Doesn't variable mean that the payout will be contingent on how the market does?
They’re guaranteed on the downside, variable on the upside.
Technically this is correct, but in actual life in terms of real money, it's a complete scam.

They "guarantee" 8% returns on your money. But that's not cash-value.

You don't get to cash out your money 20 years later with guaranteed 8%+ growth.

There are two numbers... The "income-value" of your money grows at 8% minumum, but that number is ONLY used if you annuitize the product later, i.e. change it to an annual payment each year from then on.

And that second number will be super low compared to market rates, and that's where they get you.

For instance, say at age 65, I "invest" $100,000 for 10 years, get my 8% "guarantee", and get a nice pretty statement every year showing my money growing quickly. The 10th year, my statement might read $215,000...

That's pretty good!! But I can't cash out $215,000.

I can, however, start an annual payment from my account. They might pay me 5% a year for life. Or $10,750 a year for life..

However, I'd be 75 at that point, and market rates for annuities for 75 year olds are 9% today.

To generate $10,750 a year for life at 75, I'd really only need $120,000.

So my money really only grew to the equivalent for $120,000. That's all the insurance company is using to generate the $10,750 payment for life.

So instead of my "guaranteed" 8%, I really only got 2% a year.

It's a total scam and should be illegal. They should not be allowed to use the word "guaranteed".
They're basically treating mortality credits as a return. That should be illegal, and I'm surprised that the SEC or whichever body that governs them allows it.

Sadly, I've seen even experienced people make this same mistake. On a recent episode of the Stacking Benjamins podcast, the hosts repeatedly referred to the 8% annual increase in SS benefits by deferring between FRA and age 70 as a return, which it most definitely is not.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

HEDGEFUNDIE
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Re: Just sat through a wealth-management sales pitch.

Post by HEDGEFUNDIE » Thu Jul 18, 2019 3:08 pm

HomerJ wrote:
Thu Jul 18, 2019 1:51 pm
HEDGEFUNDIE wrote:
Thu Jul 18, 2019 1:28 pm
A 2% guarantee is still a guarantee. What is a 10-year Treasury paying these days? And the Treasury doesn't have the upside of the annuity, if the market returns more than 8% CAGR (long term returns on the S&P are more like 10%).
Why are you defending this? Serious question.

(1) The written "guarantee" is for 8% (and that's PRECISELY how they sell it to gullible customers). If they actually get the equivalent of 2% returns, how in the world do you think it's okay to say "Hey 2% is still a guarantee"

(2) The upside has fine print too. Usually they have some crazy limit like a 1% or 1.5% a month max... So, if the market goes up 3% in January, 0% in February, 4% in March, you may only be credited for 2% or 3% of that 7% rise.
Tell me another product that has the downside protection of a Treasury return and 70-80% upside capture of the equity markets.

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willthrill81
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Re: Just sat through a wealth-management sales pitch.

Post by willthrill81 » Thu Jul 18, 2019 3:14 pm

HEDGEFUNDIE wrote:
Thu Jul 18, 2019 3:08 pm
HomerJ wrote:
Thu Jul 18, 2019 1:51 pm
HEDGEFUNDIE wrote:
Thu Jul 18, 2019 1:28 pm
A 2% guarantee is still a guarantee. What is a 10-year Treasury paying these days? And the Treasury doesn't have the upside of the annuity, if the market returns more than 8% CAGR (long term returns on the S&P are more like 10%).
Why are you defending this? Serious question.

(1) The written "guarantee" is for 8% (and that's PRECISELY how they sell it to gullible customers). If they actually get the equivalent of 2% returns, how in the world do you think it's okay to say "Hey 2% is still a guarantee"

(2) The upside has fine print too. Usually they have some crazy limit like a 1% or 1.5% a month max... So, if the market goes up 3% in January, 0% in February, 4% in March, you may only be credited for 2% or 3% of that 7% rise.
Tell me another product that has the downside protection of a Treasury return and 70-80% upside capture of the equity markets.
I think the question is whether there truly is 70% or more of the upside potential of stocks. If there was and there were limited fees, then it seems that something like this would be a slam dunk for virtually of your portfolio, especially for a retiree since it would remove most of the sequence of returns risk. My understanding is that the upside potential is significantly less than that and that the fees are onerous.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

samsdad
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Re: Just sat through a wealth-management sales pitch.

Post by samsdad » Thu Jul 18, 2019 3:22 pm

I came here looking for a description of the steak dinner you are supposed to get for listening to a sales pitch like this.

Disappointed to say the least.

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FGal
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Re: Just sat through a wealth-management sales pitch.

Post by FGal » Thu Jul 18, 2019 3:24 pm

Can I ask why you did this favor instead of telling your friend that you are not at all supportive of the career path/company their daughter is in and as it would be compromising your ethics to help in this manner due to the ways firms like this train their employees to take advantage of those that aren't financially intelligent? You didn't even have to go into that much detail, I'd likely think a polite "no thanks, I value your friendship and I never mix money and friends."

But if you're close, "I'm sure she'll find leads with her company without dipping into her friend/family pool, and hey, friend, you do realize that this could become a real problem if you mix friendship and business/money?"

You're doing no one any favors by encouraging her. In fact, you just helped someone who will go on to practice predatory behavior on others that likely will not be as savvy as you.

And I agree with the poster(s) that say this wasn't "practice" this was an out and out fishing expedition meant to take advantage of your relationship with the goal to reel you in. That they didn't this time means they will likely keep trying, and will likely strain this friendship going forward.

It feels so slimy to me that they'd encourage this, but I know it's common. But how pathetic that it smacks of the whole multi-level-marketing garbage where they target the low skilled/bored to sell products to ALL THEIR FRIENDS and you only hear from that old buddy in high school on facebook when they suddenly want to tell you about this great new product they've started selling...
FIREd as of March 2015!

HomeStretch
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Re: Just sat through a wealth-management sales pitch.

Post by HomeStretch » Thu Jul 18, 2019 3:32 pm

JediMisty wrote:
Thu Jul 18, 2019 1:27 pm
othermike27 wrote:
Thu Jul 18, 2019 1:08 pm
I was not really a "practice" run for the music man, and OP you were not just helping to meet a first month pitch quota. We were each set up as the mark for a particularly disingenuous and cynical variation of affinity selling. But we can't be the only two people who have been hit up this way.
+1 I was asked for a friends teenager's summer job to come over so he could "practice" his sales pitch of over priced knives.
+2 spouse and I were asked by a friend to let son “practice” his sales pitch for over priced knives too. Really awkward when we realized the “set up”.

OP - hopefully your refusal to “buy” doesn’t impact your friendship.

BogleMelon
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Re: Just sat through a wealth-management sales pitch.

Post by BogleMelon » Thu Jul 18, 2019 3:35 pm

Godot wrote:
Thu Jul 18, 2019 11:17 am
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota. I provided my financial information in her initial call last week (age 65 retired with p/t income, wife 63 working, $1.3 MM mostly in tax-deferred accounts... not much else) and I agreed to the second call, this morning's pitch with her mentor, with the caveat that I was 'all set' and would not be signing on. But they still came at me sincerely as expected and I'm afraid I've not seen the last of them. Thought I'd share the bottom line with the forum:
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.
I'm fairly ignorant about annuities, but how can one be both variable AND guaranteed? Doesn't variable mean that the payout will be contingent on how the market does?
+1
That was my thought as well
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

BogleMelon
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Re: Just sat through a wealth-management sales pitch.

Post by BogleMelon » Thu Jul 18, 2019 3:38 pm

HEDGEFUNDIE wrote:
Thu Jul 18, 2019 11:24 am
Godot wrote:
Thu Jul 18, 2019 11:17 am
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota. I provided my financial information in her initial call last week (age 65 retired with p/t income, wife 63 working, $1.3 MM mostly in tax-deferred accounts... not much else) and I agreed to the second call, this morning's pitch with her mentor, with the caveat that I was 'all set' and would not be signing on. But they still came at me sincerely as expected and I'm afraid I've not seen the last of them. Thought I'd share the bottom line with the forum:
  • 1% fee, Fidelity is custodian, 20 to 23 low cost ETF’s mostly Fidelity some Vanguard
  • Access to their proprietary all-in-one portal and their CFP's
  • Use my IRA assets to fund a minimum $150K Penn Life Deferred Variable Annuity 8% guaranteed
  • Purchase ten-year term life policy either $500K or $1MM, annual premiums $3,200 and $6,200 respectively.
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.
I'm fairly ignorant about annuities, but how can one be both variable AND guaranteed? Doesn't variable mean that the payout will be contingent on how the market does?
They’re guaranteed on the downside, variable on the upside.
Too good to be true! It is like the insurance company promising you that they will lose money so you can make money. Always. In good time and bad time!
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather


Dottie57
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Re: Just sat through a wealth-management sales pitch.

Post by Dottie57 » Thu Jul 18, 2019 4:00 pm

othermike27 wrote:
Thu Jul 18, 2019 1:08 pm
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota.
I respectfully disagree with this premise.

Many years ago our then high-school-aged daughter's music tutor concluded that giving music lessons was never going to support him (good decision), and that he would branch out into selling whole life insurance as well (not such a good decision). Wife and I were asked to sit through a presentation so that this eager young man could "practice" his sales presentation. Just for practice? Yes indeed, he and his mentor said, just for practice, no obligation to buy, etc., etc. Despite misgivings, we agreed and sat through 30-45 minutes of mind-numbing hocus-pocus about whole life policies. And at the end ... they actually asked us to buy this stuff! We had to say no several times, and escort them out the door.

So I disagree. I was not really a "practice" run for the music man, and OP you were not just helping to meet a first month pitch quota. We were each set up as the mark for a particularly disingenuous and cynical variation of affinity selling. But we can't be the only two people who have been hit up this way. It's probably a well-established and common tactic to break in a newbie sales person by having them start with relatives, friends and acquaintances as what are hoped to be easy marks.

Note to self: next time this happens, grab your Bogle bobblehead and wag it fiercely at the offender. Then slam the door/phone/other device. :twisted:
I had a similar experince. The sales guy got mad and said I was selfish to not want to have insurance to help my parent if I died early.

StealthRabbit
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Re: Just sat through a wealth-management sales pitch.

Post by StealthRabbit » Thu Jul 18, 2019 4:09 pm

Jack FFR1846 wrote:
Thu Jul 18, 2019 12:14 pm
I don't think I would have your patience. I'd start out with a question:

"I've got $2.5M that I pay $486.36 a year all in for fees. You're proposing 1% plus ERs. Let's say 0.1% ER average. So for the $27,500.....or more than I plan to pay for a new car....what do you think you can do to make up that fee and then do better than my 3 fund?". And next, "If you really think you can do something, are you willing to enter into a contract where you will personally guaranty that you will beat what I've got now? If you're not, then good day".
:oops: wow... $27,500 one yr fee is 785 cars for me or 235m miles worth.
As a boglehead (investment centric stance), I drive a $35 car (cost of last replacement) that has delivered a very faithful 50 mpg on free fuel since 1976.

1% adds up.

I too hope the OP's friend's daughter finds a better career path. Use each opportunity to learn and leave!

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dratkinson
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Re: Just sat through a wealth-management sales pitch.

Post by dratkinson » Thu Jul 18, 2019 5:06 pm

Lazareth wrote:
Thu Jul 18, 2019 10:50 am
...family friend whose daughter...
If you like them, send these books to the friend to give to the daughter.
--The Only Investment Guide You’ll Every Need, Andrew Tobias. Cover personal finance topics.
--The Bogleheads’ Guide to Investing. A structured overview of wise retirement investing.
--Date… or Soul Mate, Warren. Priceless if it helps avoid bad marriage/divorce.


Thanks for the information on "practice" sales tactics. "To be forewarned is to be forearmed."



I was offered the opportunity to visit my local MetLife office for a free review of my insurance policies*. Long story short, it quickly turned into a sales pitch for a variable annuity, which I could partially fund by surrendering my current policies. (Two birds, one stone: Fees already earned on insurance policies, so MetLife was looking to earn new fees on VA + plus turn off death benefits on insurance policies.)


But having read on the BH forum for a while, I turned to the prospectus "fees" page and reviewed every fee.
--There were multiple fees listed.
--And the fees could be increased at any time.
--And new fees could be added at any time.

So I asked where was the prospectus written guarantee that my return would be higher than the market return, after subtracting all MetLife fees? Why? If it's not guaranteed to over perform, then it IS guaranteed to under perform. (Crickets.)


I also noted the surrender fees information.
--And calculated the first year 9% surrender fee on a $500K VA meant the salesman expected to make $45K.

So asked how was an unneeded, high-priced VA, that is guaranteed to under perform the market, good for anyone other than the salesman/MetLife? (Crickets.)



Thanks BHs.



* A family friend sold two whole-life policies to my parents "...because you love your child."

I reimbursed parents for policy fees after I was out on my own and took over policies. Didn't know any better.

Since the damage was done (MetLife got it fees), today it seems that I have these options.
--I can surrender policies for ~$8K, and pay taxes on that income (according to MetLife rep).
--or I can keep them and let heirs use growing ~$30K tax-free death benefit to settle estate.

Since total annual premiums are <$200, and additional annual paid up insurance (death benefit) is ~2x that, I have decided to let MetLife pay as much as possible to my heirs for their service to my parents.
Last edited by dratkinson on Thu Jul 18, 2019 5:39 pm, edited 1 time in total.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

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ChowYunPhat
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Re: Just sat through a wealth-management sales pitch.

Post by ChowYunPhat » Thu Jul 18, 2019 5:31 pm

Lazareth wrote:
Thu Jul 18, 2019 10:50 am
While I have no interest in these I enjoyed the back-n-forth mostly with the mentor/CFP who did the talking...he was polite and talked too fast. I endeavored to ask challenging but not snarky questions to help the young trainee hone her presentation skills. Being a BH I probably showed off a little but I was certainly comforted in the knowledge that my assets are simply invested across the markets at a fraction of the cost, are tax-efficiently allocated, and my risk is adjusted by an equity exposure that lets me sleep soundly... and for this I say thank you to the many BH's here who continue to help me.
Couldn't agree more Lazareth. I'm also appreciative of the assistance provided by the forum and thanks for sharing the story. You were kind to grant the meeting. There may be a future moment where she asks follow-up questions of you in private which would be a great opportunity to share what you've learned here.

It's hard starting out as a young professional, and you don't know what you don't know.
A wise man and his money are friends forever...

sport
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Re: Just sat through a wealth-management sales pitch.

Post by sport » Thu Jul 18, 2019 6:15 pm

Abe wrote:
Thu Jul 18, 2019 2:42 pm
JediMisty wrote:
Thu Jul 18, 2019 1:27 pm

+1 I was asked for a friends teenager's summer job to come over so he could "practice" his sales pitch of over priced knives. I reluctantly agreed after it was stressed repeatedly that I wasn't going to be asked to buy... "Not really". The exercise was to express misgivings so he could "practice". It got ugly when I politely declined several times to spend 1 or 2k (can't remember now) on knives I didn't want in the first place. She threw a tantrum and accussed me of being "selfish" because I could afford it and they were so broke. It's not the only reason we're no longer friends, but a good example...

I've been through this 2 times with the knives, one was a friend of family and the other was my step-grandson. Same thing happened, it was supposed to be just for practice, but they came on strong with the high pressure. They came to our home so we were a captured audience. They have a demonstration which last about an hour or more. They ask us for one of our kitchen knives and then they demonstrate how much sharper their knives are than ours. Then they asked us to buy their most expensive knife set. When we refused to buy it, they asked us to buy a little cheaper set, then on down the line until they finally asked us to buy only one knife which was way overpriced. I have to say they were very well trained. Every time when we rejected their offer to buy, they would ask why, and whatever we said, they had an answer for it. When they finally gave up, they asked us for the names of any friends or family they could call on. Very awkward.
I ran into a different twist on this 60 years ago. I was looking for a summer job and answered an ad in the newspaper. The job was selling these overpriced knives. However, before I could get the job, I had to buy a set of "samples". The pitch was convincing to a teenager. My wise parents said "no".

psteinx
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Re: Just sat through a wealth-management sales pitch.

Post by psteinx » Thu Jul 18, 2019 6:45 pm

Heh, I remember my parent(s) sitting through a pricey knife sales session at our house ca. 35 years ago. Friend of my brother's friend I think - needed to make his quota of sales pitches. FWIW, IIRC, I don't think the pitch pressure was too high, and lasted maybe 30-45 minutes.

Maybe a bit of a rite of passage for some 18-24 year old kids and the parents of their friends? (and friends' friends)? As long as you don't actually buy it...

My kids haven't really entered THAT stage yet, but there is the occasional pressure to buy other overpriced junk at younger ages. Girl Scout cookies are ok in my book, if a bit overpriced. The rest - meh...

(Oh, and the robotics team for one of my girls has been a big recepient of Girl Scout support, so I suppose I shouldn't complain about the price...)

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Raymond
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Re: Just sat through a wealth-management sales pitch.

Post by Raymond » Thu Jul 18, 2019 7:01 pm

OP, thanks for your post, very interesting.

Reminds me to tell an acquaintance of mine that my wife and I will have "other plans" that night/week/month/year/century if he floats the idea of inviting us to his wife's SaladMaster "presentation" again :P
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Re: Just sat through a wealth-management sales pitch.

Post by Tdubs » Thu Jul 18, 2019 7:05 pm

othermike27 wrote:
Thu Jul 18, 2019 1:08 pm
Lazareth wrote:
Thu Jul 18, 2019 10:50 am
I just sat through 1-hour wealth-management sales presentation phone-call with a well-established 1% manager firm. It was a favor to a family friend whose daughter just started with that firm fresh out of college, and needed to meet a first month pitch quota.
I respectfully disagree with this premise.

Many years ago our then high-school-aged daughter's music tutor concluded that giving music lessons was never going to support him (good decision), and that he would branch out into selling whole life insurance as well (not such a good decision). Wife and I were asked to sit through a presentation so that this eager young man could "practice" his sales presentation. Just for practice? Yes indeed, he and his mentor said, just for practice, no obligation to buy, etc., etc. Despite misgivings, we agreed and sat through 30-45 minutes of mind-numbing hocus-pocus about whole life policies. And at the end ... they actually asked us to buy this stuff! We had to say no several times, and escort them out the door.

So I disagree. I was not really a "practice" run for the music man, and OP you were not just helping to meet a first month pitch quota. We were each set up as the mark for a particularly disingenuous and cynical variation of affinity selling. But we can't be the only two people who have been hit up this way. It's probably a well-established and common tactic to break in a newbie sales person by having them start with relatives, friends and acquaintances as what are hoped to be easy marks.

Note to self: next time this happens, grab your Bogle bobblehead and wag it fiercely at the offender. Then slam the door/phone/other device. :twisted:
This is the same script my neighbor followed in trying to sell me stainless cookware for something close to $10k. The apprentice does the intake and the veteran comes in to close the deal and sweeten the pot when it looks like it might help. It could be a set of deluxe screwdrivers, the sales script does not change.

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Re: Just sat through a wealth-management sales pitch.

Post by tibbitts » Thu Jul 18, 2019 7:13 pm

We often disparage variable annuities here but seldom with specifics. I think it would be helpful to post the detailed terms of the '*8%" annuity so we can analyze it. The most often criticized point of annuities is "fees!", but nobody really cares how high the fees are, because what matters is the payout. While in theory fees detract from payout, the net return to you is important, not how much someone else makes off the transaction.

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Re: Just sat through a wealth-management sales pitch.

Post by JediMisty » Thu Jul 18, 2019 7:49 pm

Abe wrote:
Thu Jul 18, 2019 2:42 pm
JediMisty wrote:
Thu Jul 18, 2019 1:27 pm

+1 I was asked for a friends teenager's summer job to come over so he could "practice" his sales pitch of over priced knives. I reluctantly agreed after it was stressed repeatedly that I wasn't going to be asked to buy... "Not really". The exercise was to express misgivings so he could "practice". It got ugly when I politely declined several times to spend 1 or 2k (can't remember now) on knives I didn't want in the first place. She threw a tantrum and accussed me of being "selfish" because I could afford it and they were so broke. It's not the only reason we're no longer friends, but a good example...

I've been through this 2 times with the knives, one was a friend of family and the other was my step-grandson. Same thing happened, it was supposed to be just for practice, but they came on strong with the high pressure. They came to our home so we were a captured audience. They have a demonstration which last about an hour or more. They ask us for one of our kitchen knives and then they demonstrate how much sharper their knives are than ours. Then they asked us to buy their most expensive knife set. When we refused to buy it, they asked us to buy a little cheaper set, then on down the line until they finally asked us to buy only one knife which was way overpriced. I have to say they were very well trained. Every time when we rejected their offer to buy, they would ask why, and whatever we said, they had an answer for it. When they finally gave up, they asked us for the names of any friends or family they could call on. Very awkward.
Uggggh. I will definitely strongly decline anny invitation of this type. Sounds worse than a timeshare presentation. OTOH I do buy girl scout cookies. Yummy 😋

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nedsaid
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Re: Just sat through a wealth-management sales pitch.

Post by nedsaid » Thu Jul 18, 2019 8:02 pm

tibbitts wrote:
Thu Jul 18, 2019 7:13 pm
We often disparage variable annuities here but seldom with specifics. I think it would be helpful to post the detailed terms of the '*8%" annuity so we can analyze it. The most often criticized point of annuities is "fees!", but nobody really cares how high the fees are, because what matters is the payout. While in theory fees detract from payout, the net return to you is important, not how much someone else makes off the transaction.
Mel Lindauer is probably the foremost authority here on Variable Annuities. The now deceased Ole Meph posted a lot about insurance products, he worked in the industry and his posts were very good. Not sure how much he commented on Variable Annuities. I have analyzed a few of these annuities for people here, pretty much I break the annuity into its component parts and analyze it piece by piece. I felt the fees were high and the benefits marginal. People buy these mainly for their principal and/or income guarantees, the so-called living benefits. Moshe Milevsky is probably the best known academic authority on these products. In general, I would advise people not to buy them.

My suspicion is that the 8% guarantee is on the growth of the number (income base) on which guaranteed withdrawals are calculated on rather than on the underlying portfolio. Guaranteed withdrawals are normally 5%-6% of the income base, where the guarantee kicks in is when your guaranteed withdrawals exhaust the underlying portfolio balance. The illustrations that I have seen regarding these assume you leave the money in the annuity for 10 years before you start taking the guaranteed withdrawals. You keep taking the withdrawals for a lifetime even after the portfolio balance is exhausted. The annual fees you pay for the guarantee can be 4% a year. There are variations on this, I have seen "step up" guarantees on principal and on future income as the value of the underlying portfolio grows. But all these living benefit riders cost money.
A fool and his money are good for business.

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Re: Just sat through a wealth-management sales pitch.

Post by Stinky » Thu Jul 18, 2019 8:12 pm

tibbitts wrote:
Thu Jul 18, 2019 7:13 pm
We often disparage variable annuities here but seldom with specifics. I think it would be helpful to post the detailed terms of the '*8%" annuity so we can analyze it. The most often criticized point of annuities is "fees!", but nobody really cares how high the fees are, because what matters is the payout. While in theory fees detract from payout, the net return to you is important, not how much someone else makes off the transaction.
Only OP can give us the details of the variable annuity.

But, HomerJ's excellent analysis earlier in this thread (quoted below) show that the quoted 8% rate is a total scam. It applies to the annuitization option only, not the accumulation of account value.

One of the Boglehead tenets is to "minimize fees". A variable annuity like this, larded up with mortality and expense charges, rider charges for annuitization roll-ups, and high internal fees on mutual funds, can easily have total internal annual charges of 3% or more. I don't see how a variable annuity can possibly be competitive with an index fund.

I, for one, care about how high fees are. That's why I would never buy a variable annuity.

HomerJ wrote:
Thu Jul 18, 2019 12:50 pm

They "guarantee" 8% returns on your money. But that's not cash-value.

You don't get to cash out your money 20 years later with guaranteed 8%+ growth.

There are two numbers... The "income-value" of your money grows at 8% minumum, but that number is ONLY used if you annuitize the product later, i.e. change it to an annual payment each year from then on.

And that second number will be super low compared to market rates, and that's where they get you.

For instance, say at age 65, I "invest" $100,000 for 10 years, get my 8% "guarantee", and get a nice pretty statement every year showing my money growing quickly. The 10th year, my statement might read $215,000...

That's pretty good!! But I can't cash out $215,000.

I can, however, start an annual payment from my account. They might pay me 5% a year for life. Or $10,750 a year for life..

However, I'd be 75 at that point, and market rates for annuities for 75 year olds are 9% today.

To generate $10,750 a year for life at 75, I'd really only need $120,000.

So my money really only grew to the equivalent for $120,000. That's all the insurance company is using to generate the $10,750 payment for life.

So instead of my "guaranteed" 8%, I really only got 2% a year.

It's a total scam and should be illegal. They should not be allowed to use the word "guaranteed".
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