Leaving Advisor Annuity Help

[redwine]

Still working on helping a close friend leave her advisor for Fidelity. Classic advisor tactic, he has intentionally made her low 7 figure portfolio into a complex gobbly gook mess. Now to the actionable:

Two annuities in traditional IRA: Allianz Fixed Annuity and Jackson Variable Annuity. What are her options? 1.Keep the annuities and paper work at home (why does the advisor even handle this and do advisors take AUM from annuity?), sell later after evaluating surrender charges, etc. 2. Transfer to Fidelity IRA utilizing a 1035 exchange?

Two annuities in a brokerage account: Lincoln Variable Annuity and Allianze Indexed Annuity. I would she just needs to evaluate these individually and sell when best to minimize surrender fees and optimize the ordinary taxable gains she will have to pay. And does an advisor typically take an AUM for "sold" annuities?

We meet with the advisor on Friday so I'm trying to go in as informed as possible. She already has contacted Fido and has accounts set up. Yes, I know the issues around helping a friend with finances, so no need for the reminder. Just finished the audiobook of Bernstein's Four Pillars and I am grateful that Bill doesn't minimize what the "finance" professionals are taking from their clients. And the "Fiduciary" status that this advisor touts is worthless. Thanks in advance.

[Rex66]

1035 does not apply to products within an Ira

All these annuities are commission based

You need to evaluate each one and any riders like income riders

If you want guaranteed income then possibly sticking out what was already purchased might be best but you need to compare that to like a spia would purchase with this money.

Likely they all have surrender fees

They should be able to tell you when surrender charges disappear or go down and guaranteed income values at various ages.

[steadyosmosis]

Still working on helping a close friend leave her advisor for Fidelity. Classic advisor tactic, he has intentionally made her low 7 figure portfolio into a complex gobbly gook mess. Now to the actionable:

Two annuities in traditional IRA: Allianz Fixed Annuity and Jackson Variable Annuity. What are her options? 1.Keep the annuities and paper work at home (why does the advisor even handle this (BIG FAT commission for each annuity the financial advisor salesman sells) and do advisors take AUM from annuity?), sell later after evaluating surrender charges, etc. 2. Transfer to Fidelity IRA utilizing a 1035 exchange?

Two annuities in a brokerage account: Lincoln Variable Annuity and Allianze Indexed Annuity. I would she just needs to evaluate these individually and sell when best to minimize surrender fees and optimize the ordinary taxable gains she will have to pay. And does an advisor typically take an AUM for "sold" annuities?

We meet with the advisor on Friday so I'm trying to go in as informed as possible. She already has contacted Fido and has accounts set up. Yes, I know the issues around helping a friend with finances, so no need for the reminder. Just finished the audiobook of Bernstein's Four Pillars and I am grateful that Bill doesn't minimize what the "finance" professionals are taking from their clients. And the "Fiduciary" status that this advisor touts is worthless. Thanks in advance.

One answer in blue above.

And if I were leaving the 'advisor', I surely would NOT meet with him/her again.
I would not give him/her another chance to take more of my money.
They are so skilled at it.
Very persuasive.

[Harmanic]

Don't do anything until you evaluate the riders (if any) and surrender charges. In rare cases, income riders can be valuable, and you lose them in a transfer.

[Stinky]

As others have said, you need to gather information for EACH annuity as to (a) riders, especially guaranteed income/withdrawal or guaranteed death (if the policies have riders), and (b) surrender charges.

Absent “in the money” riders, it’s likely that the variable annuities could/should be terminated. How to do that precisely depends on what your friend wants to do.

The answer may be the same for the indexed annuities. But it all depends on the numbers.

[bsteiner]

Don't worry about the surrender fees. You've already incurred them. The surrender fees are to compensate the agent (salesperson) and the insurance company for the loss of their annual fees if you surrender the annuity in the early years. But if you surrender the annuity in the early years you won't incur the future annual fees.

There's often no good choice for an investment type annuity. If you keep it, you continue to incur the expenses, and you turn the future income and growth into ordinary income, and you give up the basis step-up at death. If it's in an IRA, you continue to incur the expenses but you don't get to turn the future income and growth into ordinary income.

[redwine]

Big Thanks for all the replies, very helpful.

[Stinky]

Big Thanks for all the replies, very helpful.

Please do post back if you have questions.

Kudos to you for helping your friend leave an advisor who is clearly putting his/her best interests ahead of those of your friend.

[Tdubs]

As others have said, you need to gather information for EACH annuity as to (a) riders, especially guaranteed income/withdrawal or guaranteed death (if the policies have riders), and (b) surrender charges.

Absent “in the money” riders, it’s likely that the variable annuities could/should be terminated. How to do that precisely depends on what your friend wants to do.

The answer may be the same for the indexed annuities. But it all depends on the numbers.

Given the surrender charges, wouldn't the cake already be baked at this point on most indexed annuities? There wouldn't be a lot to gain by terminating them?

[Rex66]

Depends

Sometimes it looks like you will easily make up the surrender charges over a few years

Just depends if you value the rider if any and all the internal costs of the annuity

[Tdubs]

Duplicate

[Stinky]

As others have said, you need to gather information for EACH annuity as to (a) riders, especially guaranteed income/withdrawal or guaranteed death (if the policies have riders), and (b) surrender charges.

Absent “in the money” riders, it’s likely that the variable annuities could/should be terminated. How to do that precisely depends on what your friend wants to do.

The answer may be the same for the indexed annuities. But it all depends on the numbers.

Given the surrender charges, wouldn't the cake already be baked at this point on most indexed annuities? There wouldn't be a lot to gain by terminating them?

In my view, whether to terminate an annuity while there are still surrender charges on the policy can be a complex question.

On the one hand, the fees and excess investment expenses on most variable annuities are high enough that it often makes sense to just terminate the annuity. The benefit of the burn off of the surrender charge is more than offset by the cost of the excess fee drag.

On the other hand, many indexed annuities have both surrender charges and punitive market value adjustments for full termination before the end of the surrender charge period. In many cases, the benefit of the burn off of surrender charges and MVAs makes up for the crappy interest crediting on the indexed annuity.

As I also said in my original response, riders must also be examined to see if they are “in the money”. If they are, it could influence the termination decision.