Thoughts on Gainbridge OneUp Annuity?

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frcabot
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Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

Can’t find reviews of this anywhere. The base strategy is basically SP500 Total Return + 1% per year. I’m not really sure how this product will be backed financially (ie you’re not holding the sp500 directly, you’re holding an insurance contract), and the taxation will be really inefficient due to gains being taxed at ordinary income rates when withdrawn rather than capital gains rates or qualified dividends. Not really sure what the use case scenario is, maybe someone whose estate is over $12M for estate planning purposes?
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by exodusNH »

frcabot wrote: Fri Aug 18, 2023 12:43 am Can’t find reviews of this anywhere. The base strategy is basically SP500 Total Return + 1% per year. I’m not really sure how this product will be backed financially (ie you’re not holding the sp500 directly, you’re holding an insurance contract), and the taxation will be really inefficient due to gains being taxed at ordinary income rates when withdrawn rather than capital gains rates or qualified dividends. Not really sure what the use case scenario is, maybe someone whose estate is over $12M for estate planning purposes?
The prospectus is 135 pages. Do you think it's that long for the benefit on the consumer?
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by Stinky »

frcabot wrote: Fri Aug 18, 2023 12:43 am Can’t find reviews of this anywhere. The base strategy is basically SP500 Total Return + 1% per year. I’m not really sure how this product will be backed financially (ie you’re not holding the sp500 directly, you’re holding an insurance contract), and the taxation will be really inefficient due to gains being taxed at ordinary income rates when withdrawn rather than capital gains rates or qualified dividends. Not really sure what the use case scenario is, maybe someone whose estate is over $12M for estate planning purposes?
It's a RILA (registered indexed linked annuity). See link here. https://www.gainbridge.io/oneup.html

Kind of like a fixed indexed annuity, except A LOT MORE COMPLICATED.

Most Bogleheads don't like FIAs. I expect that most Bogleheads won't like RILAs either.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nisiprius »

Prospectus here.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nisiprius »

I believe the "catch" is illiquidity and the complexity involved in getting your money out. There are pages of explanations and illustrations in that prospectus explaining how that works. There is a penalty for taking money out within the first seven years.

Here's what you definitely CANNOT do with this product. You definitely cannot hand them $10,000 and come back in a year and say "Hey, the S&P 500 returned 4%, so please give me $10,000 + 4% + 1%." Because... if you are even allowed to do that, I didn't look down that rabbit hole... they would say "There's a 5% withdrawal change, here's your $10,000 + 4% + 1% - 5%."

Notice that the "coupon indexed strategy," which is the S&P500 + 1% strategy, does not put any floor under losses.

As for the "use case," there has been a flurry of new products coming out in a few years that use options to reshape the payouts in various ways. I don't know what caused this flurry, I suspect some new regulation that allows things that might not previously have been allowed. I think the "use case" is simply that they are easy to sell because they sound vaguely as if they are Just Plain Better in some magical way than a plain stock market investment, b) the actual behavior is really hard to understand. In this case everyone is going to be dazzled by "S&P total return + 1%."

The boldfacing is theirs:
The Contract has two phases: (i) an Accumulation Phase, during which you allocate payments (and any earnings) (“Contract Value”) to investment options (“Strategies”) to which we credit interest (“Interest”), positive or negative, based on the relevant Strategy’s fixed interest or market index-linked return at the end of specified investment periods; and (ii) an annuity phase, during which we will apply the value of your Contract to make either periodic payments or a single lump sum payment, depending on the option you choose.

Strategies. The Contract offers two general Strategy types, as follows:

The Fixed Interest Strategy... [and] three Indexed Strategies: the Buffer Indexed Strategy, the Coupon Indexed Strategy, and the Floor Indexed Strategy....

What is the Coupon Indexed Strategy?

The Coupon Indexed Strategy provides a Coupon Credit that both reduces potential losses and increases potential gains, regardless of whether the performance of the Reference Index over the Indexed Strategy Term has been positive or negative. This means that the Coupon Credit will always increase any gains when the performance of the Reference Index is positive over the Indexed Strategy Term and also at the end of the Indexed Strategy Term and will always reduce any losses when the performance of the Reference Index is negative over the Indexed Strategy Term and also at the end of the Indexed Strategy Term. The Coupon Credit is calculated as a percentage (“Coupon Rate”) of the amount you allocated to the Coupon Indexed Strategy, adjusted to reflect any Deductions from the Coupon Indexed Strategy over the applicable Indexed Strategy Term (“Coupon Credit Base”). The Coupon Credit only applies on the last day of the Indexed Strategy Term. This means you are only protected from potential losses at the end of the Indexed Strategy Term. It also means you are not eligible for any increased gains before the end of the Indexed Strategy Term.

The Coupon Credit Base is a measuring value and is not available for withdrawal, surrender, as a Death Benefit, or for application to any Settlement Option.
That last bolded sentence is interesting.
Last edited by nisiprius on Fri Aug 18, 2023 7:37 am, edited 3 times in total.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nisiprius »

This seems odd, but maybe I'm misunderstanding something. Really? You can buy this online and the broker has no requirement to verify suitability?
The OneUp™ RILA is distributed through an unaffiliated broker-dealer, J. Alden Associates, Inc. ("Alden Associates") (FINRA/SIPC), 37 West Avenue, Suite 301,Wayne , PA 19087. Alden Associates is not subject to state or federal suitability requirements or best interest obligations in connection with the purchase of the OneUp™ RILA. This means that a financial professional will not conduct a suitability review of the purchase of the OneUp™ to determine if its features, benefits, risks, and fees are appropriate for purchasers based on their financial situation and objectives. The OneUp™ RILA is a complex insurance and investment vehicle designed for long-term investment purposes, and it is not suitable for all investors. It is not intended for someone who needs ready access to cash or who is seeking complete protection from downside risk. You should consider consulting with a third-party financial professional before you purchase the OneUp™ RILA.
Last edited by nisiprius on Fri Aug 18, 2023 7:38 am, edited 1 time in total.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nisiprius »

The complex terms of this product don't translate into a simple "forced holding period," but everything about, particularly withdrawal fees and the structure of the accumulation and withdrawal phases, mean that you certainly can't just hand them $10,000 and come back exactly twelve months later (it has to be an exact multiple of twelve months or all bets are off) and say "The S&P gained 4%, please give me my $10,000 + 4% + 1%" The first thing they would do is say "there's a 5% withdrawal charges, so here's your $10,000 + 4% + 1% - 5%." If the rules even let you do that.

So the intellectual question is: the withdrawal charge ends at seven years. IF they were literally guaranteed that every investor would hold the product for at least 7 years, could they credibly promise S&P 500 total return + 1% at the end of that time? I think the answer could well be "yes." I'm not sure of the details how you would do the financial engineering to get the extra 1%, but I think it's possible. It ought to be possible to engineer an extra premium for a big sacrifice in liquidity.

Now, the structure of the product certainly encourages long holding periods and compensates the insurer if the policy holder doesn't do so. It is probably close enough.

There are also some weird details about the holding period needing to be an exact multiple of 3 months or you don't get S&P 500 total return + 1%. And don't forget that it's an annuity, and there's a nonzero possibility of dying within seven years, and there's another big long chunk of prospectus explaining how the "death benefit" works.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

Most bogles I think don’t like RILAs because of the fees. But the fees here are minimal assuming the holding period is satisfied. As far as risk of death, the annuity does pass to heirs although without a step up in basis. The real problem with holding the SP500 in a NQ annuity is the taxation on the back end and the lack of step up in basis at death. I could potentially see someone holding this in a Roth IRA for an extra 1%.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by TomatoTomahto »

frcabot wrote: Fri Aug 18, 2023 11:42 am Most bogles I think don’t like RILAs because of the fees. But the fees here are minimal assuming the holding period is satisfied.
Regardless of the fees, most BHs don’t like investments they don’t understand. I can almost guarantee that I’m not going to understand a 135 page prospectus, and for certain won’t read one.
I get the FI part but not the RE part of FIRE.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

This is the other issue:

“All guarantees under the Contracts are backed by the Company’s general account, which consists of all assets of the Company other than those allocated to an insulated separate account of the Company and is subject to the claims of creditors. Guarantees supported by the Company’s general account are subject to the claims-paying ability of the Company.

We hold certain assets in a Separate Account we established to help support our guarantees under the Contracts. Like our general account, all of the assets of the Separate Account are subject to the liabilities arising from any of our other Contract owners, credits and other business, in addition to being chargeable with the claims under this Contract. Owners of the Contract do not participate in the performance of the assets held in the Separate Account and do not have any direct claim on them. We guarantee all benefits relating to your value in the Contract, regardless of whether assets supporting it are held in the Separate Account or our general account. You should look to the financial strength of the Company for its claims-paying ability.”

Who knows if Gainbridge Life Insurance Company (ratings? This is not the same company that underwrites the fixed annuity) is going to be around 7+ years from now? I don’t think the (substantial?) added risk + tax issues are worth the extra 1%.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

Actually, it looks like Guggenheim changed its name to Clear Springs and then to Gainbridge, so maybe it is the same company that is underwriting the MYGAs. https://interactive.web.insurance.ca.go ... eid=110636

Am best rating is A-
https://ratings.ambest.com/DisclosurePD ... BNum=61888
Last edited by frcabot on Fri Aug 18, 2023 12:05 pm, edited 1 time in total.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by Stinky »

As always, nisiprius has some extremely insightful thoughts posted above. There's more "warning signs" noted in his posts than I can shake a stick at.
nisiprius wrote: Fri Aug 18, 2023 6:31 am As for the "use case," there has been a flurry of new products coming out in a few years that use options to reshape the payouts in various ways. I don't know what caused this flurry.....
Indexed annuities have been a leading seller in the annuity space for many years now.

However, more recently, the extremely low level of interest rates led to low cap and participation rates on indexed annuities. This may have led to the development of the RILA product, which gives a higher potential upside in exchange for not flooring the policy return at zero.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nisiprius »

frcabot wrote: Fri Aug 18, 2023 11:53 am This is the other issue:

“All guarantees under the Contracts are backed by the Company’s general account, which consists of all assets of the Company other than those allocated to an insulated separate account of the Company and is subject to the claims of creditors. Guarantees supported by the Company’s general account are subject to the claims-paying ability of the Company.

We hold certain assets in a Separate Account we established to help support our guarantees under the Contracts. Like our general account, all of the assets of the Separate Account are subject to the liabilities arising from any of our other Contract owners, credits and other business, in addition to being chargeable with the claims under this Contract. Owners of the Contract do not participate in the performance of the assets held in the Separate Account and do not have any direct claim on them. We guarantee all benefits relating to your value in the Contract, regardless of whether assets supporting it are held in the Separate Account or our general account. You should look to the financial strength of the Company for its claims-paying ability.”

Who knows if Gainbridge Life Insurance Company (ratings? This is not the same company that underwrites the fixed annuity) is going to be around 7+ years from now? I don’t think the (substantial?) added risk + tax issues are worth the extra 1%.
I looked them up directly with A. M. Best confirming, as they say themselves, that A. M. Best's financial strength rating is A-. Didn't take the time to check if they are rated by Fitch, Moody's, or S&P. As to what that means, that's always an imponderable. Something like 3/4ths of all insurance companies are rated in the A's, which can be interpreted either as "grade inflation" or "well, really, most insurance companies ARE sound."
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nisiprius »

Stinky wrote: Fri Aug 18, 2023 12:04 pm As always, nisiprius has some extremely insightful thoughts posted above. There's more "warning signs" noted in his posts than I can shake a stick at.
nisiprius wrote: Fri Aug 18, 2023 6:31 am As for the "use case," there has been a flurry of new products coming out in a few years that use options to reshape the payouts in various ways. I don't know what caused this flurry.....
Indexed annuities have been a leading seller in the annuity space for many years now.

However, more recently, the extremely low level of interest rates led to low cap and participation rates on indexed annuities. This may have led to the development of the RILA product, which gives a higher potential upside in exchange for not flooring the policy return at zero.
I wasn't thinking so much of indexed annuities as of products like the Innovator "Power Buffer" ETFs.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by ResearchMed »

nisiprius wrote: Fri Aug 18, 2023 5:57 am Prospectus here.

This section of the Prospectus is, er, "interesting":

"Self-Directed Purchase Risk
The Contracts are offered solely to self-directed investors through the Gainbridge website at www.gainbridge.io. Purchases of the Contract are made without a recommendation by the Company, Gainbridge Insurance Agency, Alden Associates, or any other third-party sales organization and, therefore, these entities are not subject to state and federal suitability requirements and best interest obligations in connection with your purchase of the Contract. Alden Associates is not subject to state or federal suitability requirements or best interest obligations in connection with your purchase of the Contract. This means that a financial professional will not conduct a suitability review of your purchase of the Contract to determine if the Contract’s features, benefits, risks, and fees are appropriate for you based on your financial situation and objectives. The Contract is a complex insurance and investment vehicle designed for long-term investment purposes, and it is not suitable for all investors. You should consult with a third- party financial professional. It is not intended for someone who needs ready access to cash or who is seeking complete protection from downside risk. The Contract may not be a good fit for your individual circumstances."
[emphasis added]

What was the quote from Maya Angelou?
"When someone shows you who they are, believe them the first time."
They are definitely "telling you".
And they are telling you twice.

RM
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by Stinky »

frcabot wrote: Fri Aug 18, 2023 12:00 pm Actually, it looks like Guggenheim changed its name to Clear Springs and then to Gainbridge, so maybe it is the same company that is underwriting the MYGAs. https://interactive.web.insurance.ca.go ... eid=110636
The MYGAs issued through the Gainbridge agency are on the paper of Clear Spring Life, previously known as Guggenheim Life.

It appears that the RILAs issued through the Gainbridge agency are on the paper of a different company called Gainbridge Life.

All very confusing!
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by Stinky »

frcabot wrote: Fri Aug 18, 2023 11:42 am Most bogles I think don’t like RILAs because of the fees. But the fees here are minimal assuming the holding period is satisfied. As far as risk of death, the annuity does pass to heirs although without a step up in basis. The real problem with holding the SP500 in a NQ annuity is the taxation on the back end and the lack of step up in basis at death. I could potentially see someone holding this in a Roth IRA for an extra 1%.
You don't see the fees that are "buried" in the inner workings of the product.

Just like indexed annuities, RILAs have internal fees of somewhere in the area of 2% per year. Roughly 1% goes to commission, marketing, and other issue expense. And the other 1% goes policy administration, taxes, overhead, capital charges, and profits.

You don't see those fees. But they're there. Trust me.

(Also, I don't believe that the product gives you the dividends on the relevant underlying index. That's a roughly 1.5%-2% per year item missing from the product returns.)
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by petulant »

The explosion in options-based products like FIAs and IULs has to do with licensing. Agents without securities licenses can sell these products because there is no risk of "investment loss," which means they can only lose money because of surrender charges and company fees, not the stock market crashing.

The products are also popular because investors are misled. They hear returns tied to the stock market, which is a wrong impression. The returns are still driven by bonds, which make up 96% of the assets backing these products and the returns of which set the options budget setting the participation and cap rates. These will not earn fundamentally different amounts than bond portfolios.

I think the marketing success of FIAs and IULs has encouraged insurers to develop RILAs, which introduce some investment risk to support higher participation and cap rates. But note they are required to be sold by agents with securities licenses (hence the broker-dealer issue).

Ultimately the annuities are expensive products. I suspect the low risk is showing there is a market for conservative investments. I suspect FIAs and IULs will have some staying power because of that. But the next time there is a harsh enough drop to trigger losses on RILAs, I bet they will go nearly extinct.
Last edited by petulant on Fri Aug 18, 2023 12:23 pm, edited 2 times in total.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by petulant »

Stinky wrote: Fri Aug 18, 2023 12:16 pm (Also, I don't believe that the product gives you the dividends on the relevant underlying index. That's a roughly 1.5%-2% per year item missing from the product returns.)
We have got to drop the missing dividend myth from the BH repertoire on these products. FIAs and so on buy call options that are ultimately hedged through another entity holding the underlying asset. The price of the call option is set based on the expected dividends to be received by the hedger. So, the product is getting the benefit of the dividends through the options being cheaper and the option budget stretching further. For example, thanks to the dividends, maybe a generic FIA benchmarked against the S&P 500 price index has a 70% participation rate instead of 65%, or an 8% cap instead of a 7% cap, etc.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nisiprius »

petulant wrote: Fri Aug 18, 2023 12:20 pm
Stinky wrote: Fri Aug 18, 2023 12:16 pm (Also, I don't believe that the product gives you the dividends on the relevant underlying index. That's a roughly 1.5%-2% per year item missing from the product returns.)
We have got to drop the missing dividend myth from the BH repertoire on these products. FIAs and so on buy call options that are ultimately hedged through another entity holding the underlying asset. The price of the call option is set based on the expected dividends to be received by the hedger. So, the product is getting the benefit of the dividends through the options being cheaper and the option budget stretching further. For example, thanks to the dividends, maybe a generic FIA benchmarked against the S&P 500 price index has a 70% participation rate instead of 65%, or an 8% cap instead of a 7% cap, etc.
This particular product says explicitly that it is based on total return, so, yes, for this product, and stinky's criticism, above, is probably wrong for this particular product.

Many FIAs are based on the S&P 500 price return, so, no, it's a fair criticism of the other products.

I don't think many buyers actually understand the difference between the S&P 500 price return and the S&P 500 total return, and I seriously doubt that advisors make a point of explaining this, so it is valid to alert people to pay attention to which they are getting.

Arguing that you get the benefit of the dividend through a higher participation rate is a hypothetical. It seems to me like many arguments that consumers will get some benefit through lower costs which will be passed through in the form of lower prices. Do you actually have evidence that the higher participation rate is more than a "maybe?"
Last edited by nisiprius on Fri Aug 18, 2023 12:37 pm, edited 1 time in total.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nedsaid »

My general advice would be to avoid the more complex annuities that are sold. It bugs me when you need to be a lawyer to understand the prospectus and an actuary to properly evaluate the product. It also might require an understanding of the laws and regulations that cover these types of annuities. I am not a never say never person, there might be a person with a unique circumstance who might benefit from something like these, just keep in mind these more complex annuity products are sold and not bought. Another thing to consider are the fees that the complex annuity products charge.

My general advice is that the best annuities to consider are the Single Premium Immediate Annuities (SPIAs) and the Multi-Year Guaranteed Annuities (MYGAs). If you own an expensive Variable Annuity, you might consider a rollover to a cheaper one, such as what Fidelity offers. As another part of general advice, we prefer Term Life over Whole Life. So in 3-4 sentences is a good summary of Boglehead advice regarding Annuities and Life insurance.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by Stinky »

Oops!

I was off base on whether the annuitant received the benefit of dividends on the Gainbridge product.

Sorry. :oops:
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by petulant »

nisiprius wrote: Fri Aug 18, 2023 12:34 pm
petulant wrote: Fri Aug 18, 2023 12:20 pm
Stinky wrote: Fri Aug 18, 2023 12:16 pm (Also, I don't believe that the product gives you the dividends on the relevant underlying index. That's a roughly 1.5%-2% per year item missing from the product returns.)
We have got to drop the missing dividend myth from the BH repertoire on these products. FIAs and so on buy call options that are ultimately hedged through another entity holding the underlying asset. The price of the call option is set based on the expected dividends to be received by the hedger. So, the product is getting the benefit of the dividends through the options being cheaper and the option budget stretching further. For example, thanks to the dividends, maybe a generic FIA benchmarked against the S&P 500 price index has a 70% participation rate instead of 65%, or an 8% cap instead of a 7% cap, etc.
This particular product says explicitly that it is based on total return, so, yes, for this product, and stinky's criticism, above, is probably wrong for this particular product.

Many FIAs are based on the S&P 500 price return, so, no, it's a fair criticism of the other products.

I don't think many buyers actually understand the difference between the S&P 500 price return and the S&P 500 total return, and I seriously doubt that advisors make a point of explaining this, so it is valid to alert people to pay attention to which they are getting.

Arguing that you get the benefit of the dividend through a higher participation rate is a hypothetical. It seems to me like many arguments that consumers will get some benefit through lower costs which will be passed through in the form of lower prices. Do you actually have evidence that the higher participation rate is more than a "maybe?"
I have reviewed options quotes on SPY and a handful of other stocks several times a year for years, particularly with an eye on synthetic long positions and synthetic bonds. The prices for call options always reflect a dividend expectation in some way. For example, we can make a synthetic 1-yr bond out of a long S&P 500 fund and adjust the % of payoff coming from dividends and the amount from contracts by adjusting the strike prices etc. But at the end of the day, all the synthetic bonds we can make will still be in the mid-5s, with slight variation.

https://www.investopedia.com/articles/a ... prices.asp

Nobody at the insurance company is sitting around figuring out the price of call options without dividends so that they can pretend to spend more on options.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nedsaid »

nisiprius wrote: Fri Aug 18, 2023 12:34 pm
petulant wrote: Fri Aug 18, 2023 12:20 pm
Stinky wrote: Fri Aug 18, 2023 12:16 pm (Also, I don't believe that the product gives you the dividends on the relevant underlying index. That's a roughly 1.5%-2% per year item missing from the product returns.)
We have got to drop the missing dividend myth from the BH repertoire on these products. FIAs and so on buy call options that are ultimately hedged through another entity holding the underlying asset. The price of the call option is set based on the expected dividends to be received by the hedger. So, the product is getting the benefit of the dividends through the options being cheaper and the option budget stretching further. For example, thanks to the dividends, maybe a generic FIA benchmarked against the S&P 500 price index has a 70% participation rate instead of 65%, or an 8% cap instead of a 7% cap, etc.
This particular product says explicitly that it is based on total return, so, yes, for this product, and stinky's criticism, above, is probably wrong for this particular product.

Many FIAs are based on the S&P 500 price return, so, no, it's a fair criticism of the other products.

I don't think many buyers actually understand the difference between the S&P 500 price return and the S&P 500 total return, and I seriously doubt that advisors make a point of explaining this, so it is valid to alert people to pay attention to which they are getting.

Arguing that you get the benefit of the dividend through a higher participation rate is a hypothetical. It seems to me like many arguments that consumers will get some benefit through lower costs which will be passed through in the form of lower prices. Do you actually have evidence that the higher participation rate is more than a "maybe?"
Don't know about this particular product but I know that with other such indexed products that participation rates are at the discretion of the insurance company. Sort of like Calvin playing Calvinball with his toy Tiger, Hobbes. Calvinball had ever changing rules according to Calvin, the
main character in the strip. Do you really want to play Calvinball with your annuity? You want to understand the participation rate with this
annuity and make sure that you have what you think you have. In other words, is the participation rate subject to change?

These discussions remind me of the Groucho Marx joke about the fine print in insurance policies. Groucho said, "The fine print in the policy says that you are only covered if you are run over by a herd of wild elephants at 3:00 in the morning." It is all in the fine print.

I think there are three great American Philosophers: Yogi Berra, Groucho Marx, and the elusive T-Shirt philosopher. Oh, you might count Will Rogers and perhaps Mark Twain as well. So I guess maybe there are five. Erma Bombeck at number six? Anyhow, I think Grouch has it right here.
A fool and his money are good for business.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by patrick »

The suitability language does not bother me for a couple of reasons. First, there is generally not a suitability review for many other things such as buying individual stocks. More importantly, even when suitability reviews are done they do not necessarily stop the sale of bad insurance products.

But I would still be wary of this. It seems implausible that they could make a profit by guaranteeing to pay 1% above S&P 500 total return to anyone who signs up. I presume they make up for it somewhere, but I haven't studied it in enough detail to find out where.
CletusCaddy
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by CletusCaddy »

Sounds like a “Why Not 100% Gainbridge OneUp Annuity?” thread is in order!
petulant
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by petulant »

Yes, the insurers can change the participation rates and caps, which is a genuine problem. But it's a red herring for the dividend question. The dividend question is, even if the insurer had to keep the participation rates and caps at a fair level in line with a dedicated bond interest stream, would the lack of dividends on the price return benchmark result in a loss of 1.5% per year in value in some way? The answer is no, because the options market prices in dividend expectations. If you could magically invent an S&P 500 total return swap with the features needed to support these products, it would cost more than the price return options and result in no material difference in outcome.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by exodusNH »

patrick wrote: Fri Aug 18, 2023 12:57 pm The suitability language does not bother me for a couple of reasons. First, there is generally not a suitability review for many other things such as buying individual stocks. More importantly, even when suitability reviews are done they do not necessarily stop the sale of bad insurance products.

But I would still be wary of this. It seems implausible that they could make a profit by guaranteeing to pay 1% above S&P 500 total return to anyone who signs up. I presume they make up for it somewhere, but I haven't studied it in enough detail to find out where.
It seems like they measure the return point to point. If the ending point happens to be a 2% down day, you'd get that much less of a credit, even if it recovered two days later.

It seems like would be similar to the returns (presumably with a floor of $0) you'd get buying into the market Jan 1, selling on March 31, then buying in again on April 1.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by exodusNH »

TomatoTomahto wrote: Fri Aug 18, 2023 11:51 am
frcabot wrote: Fri Aug 18, 2023 11:42 am Most bogles I think don’t like RILAs because of the fees. But the fees here are minimal assuming the holding period is satisfied.
Regardless of the fees, most BHs don’t like investments they don’t understand. I can almost guarantee that I’m not going to understand a 135 page prospectus, and for certain won’t read one.
That was my point above. A 135 page contract is not for the consumer's benefit.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

exodusNH wrote: Fri Aug 18, 2023 1:05 pm
TomatoTomahto wrote: Fri Aug 18, 2023 11:51 am
frcabot wrote: Fri Aug 18, 2023 11:42 am Most bogles I think don’t like RILAs because of the fees. But the fees here are minimal assuming the holding period is satisfied.
Regardless of the fees, most BHs don’t like investments they don’t understand. I can almost guarantee that I’m not going to understand a 135 page prospectus, and for certain won’t read one.
That was my point above. A 135 page contract is not for the consumer's benefit.
Even a vanguard ETF has a 35+ page summary prospectus and 70+ page SAI. I don’t know if that in itself means the product is bad/unsuitable/scam etc.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

nedsaid wrote: Fri Aug 18, 2023 12:48 pm
nisiprius wrote: Fri Aug 18, 2023 12:34 pm
petulant wrote: Fri Aug 18, 2023 12:20 pm
Stinky wrote: Fri Aug 18, 2023 12:16 pm (Also, I don't believe that the product gives you the dividends on the relevant underlying index. That's a roughly 1.5%-2% per year item missing from the product returns.)
We have got to drop the missing dividend myth from the BH repertoire on these products. FIAs and so on buy call options that are ultimately hedged through another entity holding the underlying asset. The price of the call option is set based on the expected dividends to be received by the hedger. So, the product is getting the benefit of the dividends through the options being cheaper and the option budget stretching further. For example, thanks to the dividends, maybe a generic FIA benchmarked against the S&P 500 price index has a 70% participation rate instead of 65%, or an 8% cap instead of a 7% cap, etc.
This particular product says explicitly that it is based on total return, so, yes, for this product, and stinky's criticism, above, is probably wrong for this particular product.

Many FIAs are based on the S&P 500 price return, so, no, it's a fair criticism of the other products.

I don't think many buyers actually understand the difference between the S&P 500 price return and the S&P 500 total return, and I seriously doubt that advisors make a point of explaining this, so it is valid to alert people to pay attention to which they are getting.

Arguing that you get the benefit of the dividend through a higher participation rate is a hypothetical. It seems to me like many arguments that consumers will get some benefit through lower costs which will be passed through in the form of lower prices. Do you actually have evidence that the higher participation rate is more than a "maybe?"
Don't know about this particular product but I know that with other such indexed products that participation rates are at the discretion of the insurance company. Sort of like Calvin playing Calvinball with his toy Tiger, Hobbes. Calvinball had ever changing rules according to Calvin, the
main character in the strip. Do you really want to play Calvinball with your annuity? You want to understand the participation rate with this
annuity and make sure that you have what you think you have. In other words, is the participation rate subject to change?

These discussions remind me of the Groucho Marx joke about the fine print in insurance policies. Groucho said, "The fine print in the policy says that you are only covered if you are run over by a herd of wild elephants at 3:00 in the morning." It is all in the fine print.

I think there are three great American Philosophers: Yogi Berra, Groucho Marx, and the elusive T-Shirt philosopher. Oh, you might count Will Rogers and perhaps Mark Twain as well. So I guess maybe there are five. Erma Bombeck at number six? Anyhow, I think Grouch has it right here.
On this product there is no participation rate. You get the full return of the SP500 Total Return index plus 1% (0.25% every quarter). There are other strategies they offer with floors and buffers and those use the price return index rather than the total return index (ie you lose the value of the dividends). However even then I believe there is a full participation rate. Presumably the insurance company is paying for those strategies by keeping the dividends for itself as well as the other fees charged (primarily surrender fees etc.). Over a long enough period the insurance company would have the upper hand as it would (presumably) eventually recoup any losses caused by the floor/buffer. What’s more curious is how they’re juicing the returns by 1% on top of the Total Return index. Theoretically surrender fees and other charges might pay for that bonus, but I fail to see what’s in it for Gainbridge (or, for that matter, why someone would choose to hold the SP500 in a tax-inefficient NQ annuity rather than directly in a taxable investment account).
Last edited by frcabot on Fri Aug 18, 2023 1:18 pm, edited 2 times in total.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

exodusNH wrote: Fri Aug 18, 2023 1:04 pm
patrick wrote: Fri Aug 18, 2023 12:57 pm The suitability language does not bother me for a couple of reasons. First, there is generally not a suitability review for many other things such as buying individual stocks. More importantly, even when suitability reviews are done they do not necessarily stop the sale of bad insurance products.

But I would still be wary of this. It seems implausible that they could make a profit by guaranteeing to pay 1% above S&P 500 total return to anyone who signs up. I presume they make up for it somewhere, but I haven't studied it in enough detail to find out where.
It seems like they measure the return point to point. If the ending point happens to be a 2% down day, you'd get that much less of a credit, even if it recovered two days later.

It seems like would be similar to the returns (presumably with a floor of $0) you'd get buying into the market Jan 1, selling on March 31, then buying in again on April 1.
They add 0.25% to the reference index change every 3 months, for a total of 1% a year. Since they use the DJ SP500 TR index, you get the full 1% (assuming you hold a full year) including the benefit of any dividends. If you sell before the 0.25% is credited (once at the end of every quarter) then you don’t get the benefit of the increase. It seems relatively straightforward but I still wouldn’t bite due to the taxation issues (unless held in a Roth IRA/401k or existing traditional 401K/IRA) and the added risk from not holding the investments directly (ie insurer risk) not being worth the 1% increase.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

I also suppose the 1% bonus could be coming from those who elect the fixed (currently 3%) option and the spread between that return and Gainbridge’s own investment portfolio. Still, I agree that without a clear explanation of how Gainbridge can afford to juice the Total Return index by 1%, there must be risk somewhere.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by petulant »

I truly don't believe it. Look, the coupon strategy is really the S&P 500 total return plus 1%. Even Fidelity and Transamerica charge 40 bps to get into a vanilla variable annuity with S&P 500 total return. So if an insurer says they can do S&P 500 plus 100 bps, we should assume there are at least 140 bps and probably more like 200-250 bps in fees hidden somewhere.

The prospectus does not list any specific fees outside possible premium taxes and the surrender charges. However, I still have to believe they are there. For example, the explanation of contract value with the "coupon index" strategy shows that deductions can reduce value, but it doesn't include any deductions in the example. So they have the right to include deductions.

Also, the offering insurer is an affiliate of other Gainbridge companies. The fees are probably buried in transactions with the other insurers.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

petulant wrote: Fri Aug 18, 2023 1:35 pm I truly don't believe it. Look, the coupon strategy is really the S&P 500 total return plus 1%. Even Fidelity and Transamerica charge 40 bps to get into a vanilla variable annuity with S&P 500 total return. So if an insurer says they can do S&P 500 plus 100 bps, we should assume there are at least 140 bps and probably more like 200-250 bps in fees hidden somewhere.

The prospectus does not list any specific fees outside possible premium taxes and the surrender charges. However, I still have to believe they are there. For example, the explanation of contract value with the "coupon index" strategy shows that deductions can reduce value, but it doesn't include any deductions in the example. So they have the right to include deductions.

Also, the offering insurer is an affiliate of other Gainbridge companies. The fees are probably buried in transactions with the other insurers.
I think the only fees disclosed / deductions imposed by Gainbridge are surrender fees. I agree it’s sus.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by exodusNH »

frcabot wrote: Fri Aug 18, 2023 1:07 pm
exodusNH wrote: Fri Aug 18, 2023 1:05 pm
TomatoTomahto wrote: Fri Aug 18, 2023 11:51 am
frcabot wrote: Fri Aug 18, 2023 11:42 am Most bogles I think don’t like RILAs because of the fees. But the fees here are minimal assuming the holding period is satisfied.
Regardless of the fees, most BHs don’t like investments they don’t understand. I can almost guarantee that I’m not going to understand a 135 page prospectus, and for certain won’t read one.
That was my point above. A 135 page contract is not for the consumer's benefit.
Even a vanguard ETF has a 35+ page summary prospectus and 70+ page SAI. I don’t know if that in itself means the product is bad/unsuitable/scam etc.
Those documents a) contain multiple funds in the same document (e.g. VTI, VOO, and others) and b) much of it is going to be boilerplate documentation required by the SEC.

The annuity prospectus is for that one product.

It seems as though you have made up your mind, even with the likes of Stinky -- who worked as an executive at the insurance companies that sold these products -- pointing out that they're not a good deal. (Not to mention Rex66 and petulant, but of whom have a lot of knowledge on the product.)

Best of luck. I hope it works out.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by CWhea1775 »

I am not as smart as most of those posting on this thread, but it you can get the SP500 return through any number of cheap indexing products through many reputable companies with transparent cost and return information.

You can add the potential of an additional 1% with this product, but to do that you need to lock up your money for years and trust that this company has not hidden a bunch of expenses in an encyclopedic prospectus that even experts may have difficulty parsing out.

Seems like a pretty bad risk/reward situation to me.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by Nate79 »

Who wouldn't want a product that gives the S&P500 total return + 1% per year with no fees. Back up the truck! Why would anyone buy the index fund itself if you could get such a product?

Now you need to find what you are missing because this is complete BS.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

exodusNH wrote: Fri Aug 18, 2023 1:52 pm
frcabot wrote: Fri Aug 18, 2023 1:07 pm
exodusNH wrote: Fri Aug 18, 2023 1:05 pm
TomatoTomahto wrote: Fri Aug 18, 2023 11:51 am
frcabot wrote: Fri Aug 18, 2023 11:42 am Most bogles I think don’t like RILAs because of the fees. But the fees here are minimal assuming the holding period is satisfied.
Regardless of the fees, most BHs don’t like investments they don’t understand. I can almost guarantee that I’m not going to understand a 135 page prospectus, and for certain won’t read one.
That was my point above. A 135 page contract is not for the consumer's benefit.
Even a vanguard ETF has a 35+ page summary prospectus and 70+ page SAI. I don’t know if that in itself means the product is bad/unsuitable/scam etc.
Those documents a) contain multiple funds in the same document (e.g. VTI, VOO, and others) and b) much of it is going to be boilerplate documentation required by the SEC.

The annuity prospectus is for that one product.

It seems as though you have made up your mind, even with the likes of Stinky -- who worked as an executive at the insurance companies that sold these products -- pointing out that they're not a good deal. (Not to mention Rex66 and petulant, but of whom have a lot of knowledge on the product.)

Best of luck. I hope it works out.
You need to read better. I repeatedly said I don’t think this product makes sense, if for no other reasons than the taxation issues and the risk that the insurance company goes under rendering the annuity illusory. That said, I would still like to know how a company can promise 1% over the total return of the SP500 in the absence of apparent fees (other than surrender charges), participation caps, price return instead of total return, or other gimmicks.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

Nate79 wrote: Fri Aug 18, 2023 2:47 pm Who wouldn't want a product that gives the S&P500 total return + 1% per year with no fees. Back up the truck! Why would anyone buy the index fund itself if you could get such a product?

Now you need to find what you are missing because this is complete BS.
Right, so what are we missing?
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

Ok, I think I know. It’s likely Gainbridge hopes to make up any loss on the back end through the annuitization options in the drawdown phase. I wouldn’t be surprised if the annuity payments amortization (ie the payments) are less than they’d be at eg Fidelity. See page 44 of the prospectus.

Of course, it’s possible to withdraw from the annuity without surrender charges after the 7 year holding period WITHOUT annuitizing the contract, or even rolling over the annuity through a 1035, but it’s possible that enough people will annuitize that Gainbridge can make money that way. This is still a best guess as the annuitization tables are not provided, and therefore there’s no way to compare the annuitization payments offered by Gainbridge versus eg Fidelity for a single life annuity or their other options.

So, assuming one is OK with the insurer risk (A-) rating, and the tax consequences (eg purchase with Qualified Assets), theoretically one could take advantage of the 1%, keep it locked up for at least 7 years, and come out ahead of the SP500 without electing the annuitization options. Lots of caveats here, however.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by CletusCaddy »

I honestly might throw a few $k at this just to see what the catch is.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by TomatoTomahto »

CletusCaddy wrote: Fri Aug 18, 2023 3:04 pm I honestly might throw a few $k at this just to see what the catch is.
How much time do you have? The catch might not appear for 7 years.
I get the FI part but not the RE part of FIRE.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by CletusCaddy »

TomatoTomahto wrote: Fri Aug 18, 2023 3:08 pm
CletusCaddy wrote: Fri Aug 18, 2023 3:04 pm I honestly might throw a few $k at this just to see what the catch is.
How much time do you have? The catch might not appear for 7 years.
Are you saying the balance at the end of the 7 years would not equal the S&P 500 + 1% annnually?

I would expect that it would, and then I could roll it into a MYGA or something plain vanilla like that.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

CletusCaddy wrote: Fri Aug 18, 2023 3:09 pm
TomatoTomahto wrote: Fri Aug 18, 2023 3:08 pm
CletusCaddy wrote: Fri Aug 18, 2023 3:04 pm I honestly might throw a few $k at this just to see what the catch is.
How much time do you have? The catch might not appear for 7 years.
Are you saying the balance at the end of the 7 years would not equal the S&P 500 + 1% annnually?

I would expect that it would, and then I could roll it into a MYGA or something plain vanilla like that.
Im certain it would (assuming Gainbridge doesn’t fold). I think Gainbridge is hoping most people eventually annuitize the contract and they can make money that way, ie hoping most people do not roll over / 1035 the contract.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by TomatoTomahto »

CletusCaddy wrote: Fri Aug 18, 2023 3:09 pm
TomatoTomahto wrote: Fri Aug 18, 2023 3:08 pm
CletusCaddy wrote: Fri Aug 18, 2023 3:04 pm I honestly might throw a few $k at this just to see what the catch is.
How much time do you have? The catch might not appear for 7 years.
Are you saying the balance at the end of the 7 years would not equal the S&P 500 + 1% annnually?

I would expect that it would, and then I could roll it into a MYGA or something plain vanilla like that.
I have just followed this thread in a cursory way, but my understanding was that the funds are held for a minimum of 7 years. So, my thought is that the catch, if there is one, won’t reveal itself until 7 years or you read and understand all 135 pages of the prospectus, whichever comes first.
I get the FI part but not the RE part of FIRE.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

TomatoTomahto wrote: Fri Aug 18, 2023 3:12 pm
CletusCaddy wrote: Fri Aug 18, 2023 3:09 pm
TomatoTomahto wrote: Fri Aug 18, 2023 3:08 pm
CletusCaddy wrote: Fri Aug 18, 2023 3:04 pm I honestly might throw a few $k at this just to see what the catch is.
How much time do you have? The catch might not appear for 7 years.
Are you saying the balance at the end of the 7 years would not equal the S&P 500 + 1% annnually?

I would expect that it would, and then I could roll it into a MYGA or something plain vanilla like that.
I have just followed this thread in a cursory way, but my understanding was that the funds are held for a minimum of 7 years. So, my thought is that the catch, if there is one, won’t reveal itself until 7 years or you read and understand all 135 pages of the prospectus, whichever comes first.
You can withdraw prior to 7 years but there are surrender charges. An owner is, however, permitted to withdraw 10% per year before 7 years for free. Gainbridge also has a very detailed FAQ.

FYI I’m a lawyer here including with securities litigation experience and I’ve actually read (and understood) the prospectus. Actually, although long, the prospectus is fairly straightforward and well organized with questions and answers. Still, just based on the risk of the insurer going under, I would deem this product too risky personally for the bulk of one’s assets (just my own opinion, not legal or investment advice). https://www.gainbridge.io/faq.html

I might throw a little bit in a Roth IRA (like a couple percent of my portfolio) where the taxation issues wouldn’t be a factor, for example replacing part of my VTI or VOO holdings.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nisiprius »

petulant wrote: Fri Aug 18, 2023 12:20 pm ...We have got to drop the missing dividend myth from the BH repertoire on these products. FIAs and so on buy call options that are ultimately hedged through another entity holding the underlying asset. The price of the call option is set based on the expected dividends to be received by the hedger. So, the product is getting the benefit of the dividends through the options being cheaper and the option budget stretching further. For example, thanks to the dividends, maybe a generic FIA benchmarked against the S&P 500 price index has a 70% participation rate instead of 65%, or an 8% cap instead of a 7% cap, etc.
Let me rephrase my gripe, then.

It gets indefinite because we have no real way of knowing how these products are sold to customers and how customers understand or misunderstand what they are getting.

In the case of a typical FIA, not the Gainsbridge product that is the thread topic, I believe that many customers think that they are getting "the S&P 500" without the downside. There are many layers of complexity and phonus-balonus. But two important ones are this. Let's use your hypothetical percentages.

a) The fact that there is only partial participation is a hidden problem with the product. Defenders will say, of course, that it isn't "hidden" at all, but we would need to interview customers and find out how many of them can state correctly what the participation percentage is, and how many of them just are dazed by dozens of details that were rattled off quickly and didn't sink in.

b) In this framing, the use of a price index instead of a total return index serves to further hide things by making the participation percentage look larger than it is. That is, they might see a 70% participation rate on the price index, and believe that they are getting 70% of what they would be getting in an index fund, when it is really only 65%.

It is important for customers to know whether they are buying the total return index or the price index, and therefore when someone asks about a product, it is appropriate to point out whenever a price index is used, because I believe many people do not understand this.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by frcabot »

nisiprius wrote: Fri Aug 18, 2023 3:22 pm
petulant wrote: Fri Aug 18, 2023 12:20 pm ...We have got to drop the missing dividend myth from the BH repertoire on these products. FIAs and so on buy call options that are ultimately hedged through another entity holding the underlying asset. The price of the call option is set based on the expected dividends to be received by the hedger. So, the product is getting the benefit of the dividends through the options being cheaper and the option budget stretching further. For example, thanks to the dividends, maybe a generic FIA benchmarked against the S&P 500 price index has a 70% participation rate instead of 65%, or an 8% cap instead of a 7% cap, etc.
Let me rephrase my gripe, then.

It gets indefinite because we have no real way of knowing how these products are sold to customers and how customers understand or misunderstand what they are getting.

In the case of a typical FIA, not the Gainsbridge product that is the thread topic, I believe that many customers think that they are getting "the S&P 500" without the downside. There are many layers of complexity and phonus-balonus. But two important ones are this. Let's use your hypothetical percentages.

a) The fact that there is only partial participation is a hidden problem with the product. Defenders will say, of course, that it isn't "hidden" at all, but we would need to interview customers and find out how many of them can state correctly what the participation percentage is, and how many of them just are dazed by dozens of details that were rattled off quickly and didn't sink in.

b) In this framing, the use of a price index instead of a total return index serves to further hide things by making the participation percentage look larger than it is. That is, they might see a 70% participation rate on the price index, and believe that they are getting 70% of what they would be getting in an index fund, when it is really only 65%.

It is important for customers to know whether they are buying the total return index or the price index, and therefore when someone asks about a product, it is appropriate to point out whenever a price index is used, because I believe many people do not understand this.
Correct, the vast majority of RILAs use both the Price Return Index of the SP500 where that is an option, and/or impose participation caps, in exchange for offering some downside protection. The problem is that over the long term, no one comes out ahead with downside protection, and the insurance company ensures that these RILAs are held for a sufficiently long period through lockup fees and withdrawal charges, such that the insurer will always come out ahead. This Gainbridge product—at least the base coupon strategy—is far more straightforward, however. Even the two other strategies that offer downside protection offer 100% participation, but in the price return index rather than the total return index. So the only cost for the downside protection with the RILA offered by Gainbridge appears to be the loss of dividends—far far better than any other RILA I’ve ever seen.
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Re: Thoughts on Gainbridge OneUp Annuity?

Post by nisiprius »

frcabot wrote: Fri Aug 18, 2023 3:17 pm ...FYI I’m a lawyer here including with securities litigation experience and I’ve actually read (and understood) the prospectus. Actually, although long, the prospectus is fairly straightforward and well organized with questions and answers...
Yes and no. The language doesn't seem obfuscated. However, it doesn't help that they are describing four different products at the same time, possibly because you are apparently allowed to mix and match different combinations of the four within the same account. There is a fixed interest strategy and three indexed strategies, two based on price return, one on total return, two with 72-month terms, one with a three-month return.

And the description of how the payoff is calculated on pp. 30 to 38, and thirteen different tables, may not be any more complicated than necessary, but that's pretty complicated.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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