"Fixed index annuity"

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Wild Willie
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"Fixed index annuity"

Post by Wild Willie » Fri Jan 27, 2012 8:21 pm

Hey guys, I'm trying to help my 56 year old sister who is legally blind. She has sent me documents that outline her and her husband's total portfolio and has asked me for advice as to how to be invested when her hubby retires in two years. I can come up with my Boglehead recommendations for most of it, but one of their investments has me somewhat discombobulated. She and hubby rolled over part of their 401k's into a "fixed index annuity", which to me, is a red flag in itself because it was already tax deferred. It is only a five figure amount so it's not that threatening to their retirement, but I have some concerns about the annuity. I, through her, am trying to have her agent/salesman answer a series of questions regarding the annuity. She forwarded her booklet/prospectus to me, but as I expected, most of it is very difficult to understand. Bottom line, she and he turned over five figures of $$ to him which were invested in this annuity. From what I can ascertain, it is invested in some kind of strategy which is associated with the S&P and has a minimum "guaranteed return" of 6% with six options for withdrawals ranging from a straight annual withdrawal to a lesser withdrawal amount with a death amount. From the paperwork she has received annually, it appears that she has earned 6% for the four years she has been invested in it, but I'm afraid the actual expenses are being hidden until the 10 year commitment is up. All I see for sure is the penalty fees (surrender fees) if she decides to withdraw anything before the 10 years. I forwarded her a list of 10 questions to ask her agent/salesman, but he responded with a request to meet her in person to discuss. I am recommending that she get his answers in writing via email. Any suggested questions would be appreciated.

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Re: "Fixed index annuity"

Post by FeedUrPiggy » Fri Jan 27, 2012 10:02 pm

You've answered it yourself. If you have the disclosure, then it should tell you everything you need to know. What is the companty if you don't mind me asking? What you should look into maybe is the company rating. What state does your sister live in?

The fixed index annuities are nothing to question. They're the "slow", "less fun" products, but they're SAFE. I'm an independent producer and that's we focus on and write business with is "fixed" products. Variable products are DANGEROUS! Evidently our economy is not thriving like it was back when the market was up, back when 401ks were growing significantly, employers were matching and contributing, back when variable annuiies were on the rise, and banks were a popular likable place! We're not in that day. They are making up for old times, AND trying to keep up with THEIR comfortable level of income, so THEY're charging fees!

The guarantee of 6% you are referring to is probably a policy RIDER. There are many annuity comp anies that are now offering lifetime income riders. Surprisingly I still find many producers and financial advisors who still haven't heard of them, or just simply stopped to learn of them themselves. I always tell people to see an INDEPENDENT advisor. Rather than a Merrill Lynch advisor who is a direct producer for that company. An independent producer will will be less likely to sell for a quota, or for an incentive. There's less room for conflict of interest.

Anyway, what you have is probably a rider. On her annual statement, in addition to any optional or free withdrawals she deducts, her statement should show some kind of rider fee I'm assuming. It's probably not much but if you're ever wondering how a FIXED indexed annuity "lost" money, many times it's becuase of a rider that a policyowner forgets they have opted for. Trust me, some of those lifetime income riders are the best bet. Of course it's all based on age, and how long they have the money, but I have clients who have already activated their income riders. 6% is the standard rate right now. They were recently as high as 8, but rate changes have been occurring quite often this year alone.

And what you have is probably not a perspectus per se, but there should be a disclosure outlining the details of the product, the annuity length, surrender amts, allocation info, etc.,. The S&P 500 is one the index allocations for the annuity probably. See, rather than individual mutual funds, with endless prospectuses and fees, or stocks, the index annuities follow an index. What makes it fixed is that it has a minimum interest amount, but always the potential for gain. So basically, if the index goes up, you gain. If the index goes down, you stay the same. You escape the volatility of the market. THATs the answer these days.

If you have any more questions/comments let me know. But I could never understand how people could questions fixed index products, especially having been exposed to some of these other products, which to me seem so convuluted and filled with counter productive elements.

Hope this helped some..!

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Mel Lindauer
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Re: "Fixed index annuity"

Post by Mel Lindauer » Fri Jan 27, 2012 11:39 pm

Sometimes those guarantees only apply if one annuitizes the policy. And the insurance company can often change the rules and rate structure. Equity Indexed Annuities are not a simple "CD-like" product. In fact, they're so complex many insurance agents who sell them don't even understand what they're selling.

Here's a Forbes column I did on these things:

http://www.forbes.com/2010/08/10/truth- ... dauer.html
Best Regards - Mel | | Semper Fi

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Dick Purcell
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Re: "Fixed index annuity"

Post by Dick Purcell » Sat Jan 28, 2012 12:40 am

Mel, that’s a great writeup. I love your concluding advice:
Because of all of these negatives, we suggest you just say "No" when someone tries to sell you an Equity-Indexed Annuity. Then turn around and run, don't walk away.
The design purpose of those EIAs is to make them too complex and freakish to assess mathematically, so there is no way to judge them other than the glowing words –- “up with the stock market, no downs” – so the financial industry can extract big amounts and people will still think it’s good.

A few years ago I figured out a way to put simulation of one kind of these things into our software. They were promoted as “up with the S&P” or the Russell 2000, but had caps and fractions that made them offer prospects of growth only equivalent to conservative bonds with exorbitant fees extracted – i.e., not good. And full of lock-ins.

Wild Willie, it appears your sister is already in that one. I suspect the only course is to try to figure out the alternatives for that particular product.

Dick Purcell

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Re: "Fixed index annuity"

Post by Dale_G » Sat Jan 28, 2012 12:52 am

FeedUrPiggy wrote: An independent producer will will be less likely to sell for a quota, or for an incentive. There's less room for conflict of interest.
I liked that part, "... less room for conflict of interest". Sort of like, "our bottled water is less contaminated than the other guy's".

I also like the user name FeedUrPiggy. Does it mean feed your own piggybank - or does it mean something else.

To the OP, good luck. These things are complex - on purpose.

Dale
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Topic Author
Wild Willie
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Re: "Fixed index annuity"

Post by Wild Willie » Sat Jan 28, 2012 12:10 pm

Thanks to all. Seems like it's pretty much what I thought, now I've got to see what advice I can give her to limit the damages. One of the questions I had her ask is if she can just "cash out" after the 10 years are over with and will she receive the 6% gain per year on her original investment if she does so? I fear the answer is going to be "no", at least not without paying some fees. The table contained in the info states that the withdrawal penalites (well, actually they disguise that by calling it a "withdrawal charge rate") decline to nothing after 10 years (which will be in six more years).

Mel, thanks for your info, especially the link to your Forbes article. Very enlightening. I wish I had known four years ago when she was looking into this, I would have discouraged it. As usual, she was sold this at a "free lunch" meeting/seminar, the kind that I get an invitation a month to attend.

Feedurpiggy, I don't think it would be a good idea to ID the company who sold her this. Probably violates the forum rules anyway.

dhodson
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Re: "Fixed index annuity"

Post by dhodson » Sat Jan 28, 2012 12:35 pm

Not a violation at all.

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Wild Willie
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Re: "Fixed index annuity"

Post by Wild Willie » Sat Jan 28, 2012 1:22 pm

If Mel and/or Larry can confirm that to release the company name would not be a violation of the forum rules, I will do so.

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Re: "Fixed index annuity"

Post by Brody » Sat Jan 28, 2012 4:19 pm

One of the questions I had her ask is if she can just "cash out" after the 10 years are over with and will she receive the 6% gain per year on her original investment if she does so?
The answer is "no". It is a rider and will need some sort of withdrawal plan.

Are these products frequently sold inappropriately? Yes.
Do people often not understand what they bought? Yes.
Are they some terrible horrendous product that should never be bought or sold? No.

They are a fixed product. If one is looking for a fixed product (no investment risk), this type of product should be considered. Sometimes it makes sense. More often, it doesn't.
I am the poster formerly known as Oneanddone.

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Mel Lindauer
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Re: "Fixed index annuity"

Post by Mel Lindauer » Sat Jan 28, 2012 4:54 pm

Wild Willie wrote:If Mel and/or Larry can confirm that to release the company name would not be a violation of the forum rules, I will do so.
It's OK to name the company and the full name of the annuity product so that others may be able to provide more specific information.
Best Regards - Mel | | Semper Fi

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mlebuf
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Re: "Fixed index annuity"

Post by mlebuf » Sat Jan 28, 2012 5:05 pm

Before becoming a Boglehead I made the mistake of buying one of these. I was locked-in for six years and after six years my total return was 7.1 percent for the entire six-year period - far less than the rate of inflation. It was less than I would have received in a CD and far less than a low-cost, short-term bond fund would have returned.

Mel is right on target about the complexity of these products. I find investing to be most worthwhile when I follow Jane Bryant Quinn's advice: Don't buy anything you don't understand or can't explain to a ten-year-old.

My advice to anyone considering these products: DON'T GO THERE!
Best wishes, | Michael | | Invest your time actively and your money passively.

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Wild Willie
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Re: "Fixed index annuity"

Post by Wild Willie » Sat Jan 28, 2012 5:17 pm

The name of the company is American Investors Life Insurance Company now called AVIVA. The product is "Flexible Premium Indexed Deferred Annuity". Within that product, they have chosen two "strategies", half in the 1-year Monthly Cap Index Strategy and half in the 1-year Average Multiple Index Strategy. (She did not realize this). Other info: The "contract form" is the "Income Select Plus" with a rider of "Income Edge". She has asked the agent to explain these terms and where in the booklet, that she has forwarded to me, she can find the definition of these terms. So far, he has responded with examples of how the "annuity can be annuitized" and referred her to the booklet to explain the strategies (which I could not decipher). Still waiting for him to explain the contract form and rider definitions that could not be found in the booklet.

Following this, I have given her another ten questions for her agent and asked for specific answers or a reference, by page number, to the appropriate page in the booklet. I keep calling it a booklet, I suppose it should be called the contract since that is what they call it, and you would think it would be self-explanatory, but it is not. His response to that was for her to bring in her policy and he would explain it to her. Her response back to him was that she is legally blind and that she needs to communicate via email because her computer allows her to enlarge lettering so that she can read it.

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Taylor Larimore
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Beware.

Post by Taylor Larimore » Sat Jan 28, 2012 5:38 pm

HI Willie:
Following this, I have given her another ten questions for her agent and asked for specific answers or a reference, by page number, to the appropriate page in the booklet. I keep calling it a booklet, I suppose it should be called the contract since that is what they call it, and you would think it would be self-explanatory, but it is not. His response to that was for her to bring in her policy and he would explain it to her. Her response back to him was that she is legally blind and that she needs to communicate via email because her computer allows her to enlarge lettering so that she can read it.
The agent has refused to answer questions in writing. Instead, he wants her to "bring in her policy and he would explain it to her." My guess is that the agent wants to sell her another annuity policy. Beware. . .

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: "Fixed index annuity"

Post by dhodson » Sat Jan 28, 2012 5:45 pm

That actually isnt the reason. The reason is that the agent does not want any physical evidence of what transpires if they say something wrong or misleading. I recommend you record the conversation. What the agent will likely do is attempt to convince you this is a great deal and any negatives you were fully aware of and that you chose this instead of them pushing it on you. They will then document it as such for their company. Thus if you file any sort of complaint, they will say their doucmentation shows you were fully informed. Any statement that you feel is inaccurate that the person says, right it down and have them sign their name next to it. If they refuse then document that they refused to do so. Put the time and date and do it right in front of them. Id even pull out my iphone and take a picture of the agent.

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Re: "Fixed index annuity"

Post by Don Robins » Sat Jan 28, 2012 6:14 pm

Fixed indexed annuities are among the very worst products invented by the insurance industry to scam consumers. Are they ever good? Yes, they are always good for the agent and the company. Be wary, there is at least one sales agent on this forum who says these products can be O.K. Again, it is O.K. only for the selling agent.

To the OP. Your sister made a bad decision and got screwed. Probably best bet now is to wait out the remainder of the ten year period, then surrender the product. This should avoid surrender charges and only result in income taxes on the gain and the 10% penalty if she is under the age of 59 1/2.

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Wild Willie
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Re: "Fixed index annuity"

Post by Wild Willie » Sat Jan 28, 2012 8:00 pm

Spoke to my sister and her husband tonight and asked them a question that I had not asked before (and should have)....."what was your understanding of the product you were buying"? Their answer was "we thought we were buying something that we could cash out after 10 years with no less than a 6% annual return". Obviously, that is not what they got, but as the old saying goes "Caveat emptor" or something like that which supposedly means "let the buyer beware" (I think).

Question is, do they have any recourse, especially since she is legally blind and decided on the purchase after hearing about it during a seminar/lunch where she could not have been able to actually see the powerpoint/slide presentation? They told me that after the seminar, they visited the offices of the agent where they signed up for the product. Full disclosure, they said that each year, they attend a meeting for them and other investors in which they are always asked "Anyone need any money?" They have always said "no" because they know they would have to pay the withdrawal rate aka penalty fees. Another comment they made, in her recent conversation with the agent, he stated that while she is supposedly earning 6% a year, it is actually decreased to 5.7% because of the "fees". And yet, in his email, he emphatically states "there are no fees because it is not a variable annuity".

Thanks to all who have chimed in with your comments. This is a great forum as I have learned many times before.

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Barry Barnitz
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Re: "Fixed index annuity"

Post by Barry Barnitz » Sat Jan 28, 2012 8:42 pm

Hi:

While this is likely to be a different product version of the fixed index annuity in question, it is offered by AVIVA. Here is the glossy brochure offered to clients: Aviva Progressive Index Annuity.

Here is what is offered to the salesman: Aviva Progressive Index Annuity.

regards,
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Re: "Fixed index annuity"

Post by Mel Lindauer » Sat Jan 28, 2012 9:36 pm

Barry Barnitz wrote:Hi:

While this is likely to be a different product version of the fixed index annuity in question, it is offered by AVIVA. Here is the glossy brochure offered to clients: Aviva Progressive Index Annuity.

Here is what is offered to the salesman: Aviva Progressive Index Annuity.

regards,
Wow, the very first line in the salesman's brochure reads:
Look at this EIA Commission - 8.5%!!!
Best Regards - Mel | | Semper Fi

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Re: "Fixed index annuity"

Post by trico » Sat Jan 28, 2012 9:56 pm

Babe Ruth bought annuities with is hi income before the 1931 stock marker crash. He was one of a few that didn't go broke in that period in history. Annuities are great for certain peoples risk tolerance. Don't let anyone talk them down. However most annuities are sold and not bought. So do your research and get all the information. Remember you have 30 days to review and cancel your contract to get a full refund. American Equity Life Insurance also has some EIA to look at with a 8% GLIB rider avalible. So check around before you buy. Also you can purchase a $100.00 research report from [link removed by admin LadyGeek]. These people will help you see if you should buy one in your situation. They are not in the business of selling annuities but the person that developed this used to sell annuities and has a ton of information on them both good and bad.

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Re: "Fixed index annuity"

Post by nisiprius » Sat Jan 28, 2012 10:11 pm

trico wrote:Babe Ruth bought annuities with his income before the 1931 stock marker crash. He was one of a few that didn't go broke in that period in history. Annuities are great for certain peoples risk tolerance. Don't let anyone talk them down.
What kind of "annuity" did Babe Ruth buy? I'll bet it wasn't an equity indexed annuity. I'll bet it wasn't a variable annuity.

I'll bet it was what is now variously called an "income annuity," "fixed immediate annuity," or "single premium immediate annuity."
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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Mel Lindauer
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Re: "Fixed index annuity"

Post by Mel Lindauer » Sat Jan 28, 2012 10:14 pm

nisiprius wrote:
trico wrote:Babe Ruth bought annuities with his income before the 1931 stock marker crash. He was one of a few that didn't go broke in that period in history. Annuities are great for certain peoples risk tolerance. Don't let anyone talk them down.
What kind of "annuity" did Babe Ruth buy? I'll bet it wasn't an equity indexed annuity. I'll bet it wasn't a variable annuity.

I'll bet it was what is now variously called an "income annuity," "fixed immediate annuity," or "single premium immediate annuity."
My money's on you, Ni. I'm betting that you're correct.
Best Regards - Mel | | Semper Fi

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Re: "Fixed index annuity"

Post by Toons » Sat Jan 28, 2012 10:18 pm

nisiprius wrote:
trico wrote:Babe Ruth bought annuities with his income before the 1931 stock marker crash. He was one of a few that didn't go broke in that period in history. Annuities are great for certain peoples risk tolerance. Don't let anyone talk them down.
What kind of "annuity" did Babe Ruth buy? I'll bet it wasn't an equity indexed annuity. I'll bet it wasn't a variable annuity.

I'll bet it was what is now variously called an "income annuity," "fixed immediate annuity," or "single premium immediate annuity."
"Protecting his money from capital loss"
"Upon the termination of the said trust during the lifetime of my wife, CLARA MAE RUTH, I direct the Trustee thereof to purchase from an insurance company authorized to do business in the State of New York, a refund annuity which will pay to my wife, CLARA MAE RUTH, during her lifetime, in equal monthly installments the annual amount of Six Thousand ($6,000.) Dollars"

http://www.preservemycapital.com/The%20 ... t%20Us.htm :D
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Mel Lindauer
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Re: "Fixed index annuity"

Post by Mel Lindauer » Sat Jan 28, 2012 10:20 pm

It appears Babe Ruth had a deferred fixed annuity that he planned to annuitize at some point after he retired from baseball.

We're discussing Equity Indexed Annuities here, so discussing Babe Ruth's policy sounds like an insurance salesmen's diversionary tactic.
Best Regards - Mel | | Semper Fi

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Re: "Fixed index annuity"

Post by trico » Sat Jan 28, 2012 10:46 pm

Obviously they didn't have equity index annuities in Babe Ruths time. But also make sure if you do buy one of these equity index annuities, that the insurance company will pay you your full contract value if you should become ill and are admitted to a nursing home, or are diagnosed with a terminal illness. And there should be not surrender fee either for these situations.

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Re: "Fixed index annuity"

Post by stratton » Sat Jan 28, 2012 11:56 pm

The client brochure linked above is actually pretty good at explaining how it works with examples for various index returns and penalties. No mention of the 8.5% load though. :annoyed

Paul
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Re: "Fixed index annuity"

Post by mephistophles » Sun Jan 29, 2012 12:41 am

Mel Lindauer wrote:It appears Babe Ruth had a deferred fixed annuity that he planned to annuitize at some point after he retired from baseball.

We're discussing Equity Indexed Annuities here, so discussing Babe Ruth's policy sounds like an insurance salesmen's diversionary tactic.
This would be an SPIA a guarantee that the purchase amount would be guaranteed if the annuitant died before it was paid out. Often called Immediate Income Annuity with Installment Refund. A very wise and conservative choice in this case.

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Re: "Fixed index annuity"

Post by Oicuryy » Sun Jan 29, 2012 12:57 am

Here is a pdf with formulas for the interest crediting methods of equity indexed annuities.
http://www.gofigurenow.com/SamplePDF/Cr ... ethods.pdf

What AVIVA calls 1-year Monthly Cap Index Strategy is probably the Monthly Point to Point method with a one-year reset period. The 1-year Average Multiple Index Strategy would be the Monthly Average Multiple Index method.

For the brochure in Barry's link, the Annual Breakthrough Indexed Account looks to be the Point to Point method with a one-year reset period, two participation rates and no cap. The Annual Cap Indexed Account is the Point to Point method with a one-year reset period, 100% participation rate and a cap.

6% is not the interest rate of the Income Select Plus annuity. It is the roll-up rate of the optional Income Edge GLWB rider as described in this brochure.
http://www.ailincome.com/docs/55041.pdf

Ron
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Barry Barnitz
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Re: "Fixed index annuity"

Post by Barry Barnitz » Sun Jan 29, 2012 4:24 am

HI:

Although not verifiable (as the substantiating links are broken) this thread regarding Babe Ruth and his purchase of annuities, sold to him by his fellow baseball superstar Harry Heilmann (who worked during the offseason for an insurance company) should prove of interest. Keep in mind, that since variable annuities were first created by CREF circa 1954, these annuities would have been a form of fixed annuity. Also keep in mind that if the Babe had placed his money in a bank, he would almost surely have lost it during the massive bank failures during the depression. As a further nugget for speculative thought, think how the depression and post depression generation would have viewed institutions following the depression-- collapsed banks and toxic stock market-- while insurer's remained solvent and you may have an insight as to why this generation selected the insurance industry to fund so much of the nascent education industry contributory pension market (what would become the 403-b market).

Link: Google Answers: Insurance company that Harry Heilmann worked for in Detroit, MI, in 1924-1930.

regards,
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Re: "Fixed index annuity"

Post by dhodson » Sun Jan 29, 2012 6:57 am

tons of insurance companies go under all the time

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Dick Purcell
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Re: "Fixed index annuity"

Post by Dick Purcell » Sun Jan 29, 2012 9:29 am

Wild Willie –

Based on some comments in this thread, it’s possible that our software’s “EIA Probabilizer” can simulate your sister’s EIA, for consideration of the possibility that since she has it maybe she would want to just keep it long term –- especially if there are disadvantages in escaping from it.

For this simulation to be feasible, the following would have to be true for your sister’s EIA:

1. It is linked to the price index of the S&P 500 or the Russell 2000.

2. It is “annual reset.”

3. For each year, its return rate is that of the index with only the following annual adjustments:

a. Participation %.

b. Cap (upper limit on return rate of index or EIA – specify which)

c. Min return rate

d. Annual deductions as % of EIA value

If the EIA’s annual return rates happen to be determined by these things, post its specs for these items. I can then determine a return-rate arithmetic mean (aka “return”) and standard deviation (aka “risk”) for it that you could use to consider its potential role in your sister’s long-term plan. The specs I would provide would NOT be valid for individual years or short-term investment, but thanks to the Central Limit Theorem would be approximately valid for long-term holding.

Dick Purcell

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Re: "Fixed index annuity"

Post by Oicuryy » Sun Jan 29, 2012 12:16 pm

I finally found a document that gives more information about the interest crediting methods of the Income Select Plus annuity.
http://www.custominsurancemarketing.com ... cation.pdf

The 1-Year Monthly Cap Index Strategy has an upper limit (cap) on each month's percentage change. The interest rate for a year is the sum of the twelve capped monthly percentage changes. A 1% monthly cap means that if the index goes up, say, 5% in one month only 1% will be included in the sum. But there is no lower limit. A −11% drop in one month would make the yearly interest rate 0 no matter how much the index went up in other months.

I also found this document about a class action settlement against AVIVA.
http://www.multichoiceannuity.com/AvivaMemo082509.pdf

Is Wild Willie's sister a member of the class? Did she get any of the benefits of the settlement? Does the settlement prevent her from suing on her own?

Ron
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Re: "Fixed index annuity"

Post by Brody » Sun Jan 29, 2012 1:13 pm

dhodson wrote:tons of insurance companies go under all the time
The issue isn't about companies going under. It is about what people lose or don't lose when the company goes under.
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Re: "Fixed index annuity"

Post by Brody » Sun Jan 29, 2012 1:22 pm

It is important to point out again that Fixed Indexed Annuities are not some different kind of annuity.

Fixed indexed annuities are simply a type of fixed deferred annuities.

The major difference is that a FIA/EIA has interest credited by a formula. Tradiational fixed annuities have interest that is stated up front for a number of years and then is determined by the insurance company. Both have minimum guarantees.

In general, when one sees a very large commission with an EIA product, people like to assume that the large commission is due to it being an EIA. The reality is that commissions are more closely tied to surrender periods than traditional fixed vs. indexed product. An EIA with a short surrender schedule won't have a giant commission. Traditional fixed annuity products rarely have giant commissions simply because they rarely have giant surrender schedules.

It is easy to take the view that the insurance company simply wants to rip off its customers. This sure seems counterproductive to operating (for some of these companies)100+ year companies.
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Wild Willie
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Re: "Fixed index annuity"

Post by Wild Willie » Sun Jan 29, 2012 2:26 pm

Oicurrvyy,

thanks for the link to the class action settlement. At first, I thought this might be a way out of this for them, but it appears the settlement only gives them some type of bonus % depending on which type of product they have. I have asked them if they ever received a notice of this settlement and I am awaiting their response. From what I could see, they have until mid 2012 to respond if I read the info correctly. In any event, I guess we know why the agent did not want to respond in writing to the last set of questions.

Dick Purcell, if I can figure out how to find the answers to your questions, I'll respond. I am waiting for additional documents she mailed to me last week.

To all, thanks again for all the comments and information. It has been most helpful.

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Re: Beware.

Post by Brody » Sun Jan 29, 2012 3:36 pm

Taylor Larimore wrote:HI Willie:
Following this, I have given her another ten questions for her agent and asked for specific answers or a reference, by page number, to the appropriate page in the booklet. I keep calling it a booklet, I suppose it should be called the contract since that is what they call it, and you would think it would be self-explanatory, but it is not. His response to that was for her to bring in her policy and he would explain it to her. Her response back to him was that she is legally blind and that she needs to communicate via email because her computer allows her to enlarge lettering so that she can read it.
The agent has refused to answer questions in writing. Instead, he wants her to "bring in her policy and he would explain it to her." My guess is that the agent wants to sell her another annuity policy. Beware. . .

Best wishes.
Taylor
The key here with the exchange between the agent and your sister is how the agent reacted when she said that she needs communication via e-mail. If I'm not mistaken, you have not told us what he did at that time.

On this board, there always seems to be the predisposition to assume that the agent is less than honest. I think that I get into arguments here often simply because I don't start with this same assumption.

Let me tell you how an honest agent might like to handle a situation in which a client was asking questions and didn't seem to completely understand their product:

1) The agent would want a face to face meeting. This is the best way to make sure that everybody is on the same page. Following the meeting, the agent would send either an e-mail or letter detailing all aspects of the conversation.

2) If a client was asking for an e-mail meeting because they were legally blind, but they could read bigger print, it doesn't change anything. The agent would make sure that she had the information in bigger print and still would want to meet with her in person.

3)If the client really was against an in-person meeting, it would take place over e-mail/ phone.

Personally, it is just a business decision on my part, if someone is confused, especially if they are older, I have a strong preference to meet them in person. I am still willing to put everything in writing.

When one should be concerned is when an agent won't put things in writing.
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Wild Willie
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Re: "Fixed index annuity"

Post by Wild Willie » Sun Jan 29, 2012 3:50 pm

Brody, you are correct in that he has not refused to put it into email, he just requested an in person meeting with her and hubby. Point taken, but now that she has requested everything via email, I would assume he would honor that request and we should know that by next week. Keep in mind, she cannot drive and her husband would have to take off work to drive her there.

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Re: "Fixed index annuity"

Post by Taylor Larimore » Sun Jan 29, 2012 4:05 pm

Wild Willie wrote:Brody, you are correct in that he has not refused to put it into email, he just requested an in person meeting with her and hubby. Point taken, but now that she has requested everything via email, I would assume he would honor that request and we should know that by next week. Keep in mind, she cannot drive and her husband would have to take off work to drive her there.
Willie:

I was an insurance agent for five years.

In my opinion, a good insurance agent, when asked to put something in writing about a policy holder's insurance contract, would do it immediately. Asking for an appointment is not responsive to the request. It is an evasion--or worse.

Best wishes
Taylor
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Re: "Fixed index annuity"

Post by Brody » Sun Jan 29, 2012 4:31 pm

Taylor Larimore wrote:
Wild Willie wrote:Brody, you are correct in that he has not refused to put it into email, he just requested an in person meeting with her and hubby. Point taken, but now that she has requested everything via email, I would assume he would honor that request and we should know that by next week. Keep in mind, she cannot drive and her husband would have to take off work to drive her there.
Willie:

I was an insurance agent for five years.

In my opinion, a good insurance agent, when asked to put something in writing about a policy holder's insurance contract, would do it immediately. Asking for an appointment is not responsive to the request. It is an evasion--or worse.

Best wishes
Taylor
Yes, he should certainly honor the request. Taylor, keep in mind that based upon what Willie has written, we have no indication of any evasion. He asked for a meeting. She asked for e-mail. That's all that we know so far. He did not respond to an e-mail request with a request for an in-person meeting.

That being said, it is very difficult for an agent to put specific things contained in the contract in writing. There is a reason why contracts (any kind of contract) are written the way that they are. An agent has to be very careful about explaining contractual language. He can't just put things in his own words. It is the words of the contract that matter. If the lady can't read the contract, the first thing that the agent should be doing is getting a contract that she can read. He can then go over it with her to make sure that she understands it.
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Re: "Fixed index annuity"

Post by Dale_G » Sun Jan 29, 2012 4:35 pm

IMHO, by far the best EIA thread yet.

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Re: "Fixed index annuity"

Post by mephistophles » Sun Jan 29, 2012 6:05 pm

I do not sell equity indexed annuities. I would not buy one. Same goes for Variable annuities except for Vanguard and TIAA/CREF. Kinda like reaching into a barrell of really rotten apples looking for a good one.

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Re: "Fixed index annuity"

Post by Mel Lindauer » Sun Jan 29, 2012 7:35 pm

Brody wrote:That being said, it is very difficult for an agent to put specific things contained in the contract in writing. There is a reason why contracts (any kind of contract) are written the way that they are. An agent has to be very careful about explaining contractual language. He can't just put things in his own words.
Isn't it kind of odd that insurance agents can sure explain the hell out of the policies when they're selling them, but now he's got lockjaw and can't? Gimme a break; he's just trying to CHA because he senses trouble and, as a fellow insurance salesman, you're trying to explain his actions away.
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Re: "Fixed index annuity"

Post by Wild Willie » Sun Jan 29, 2012 9:52 pm

Don't want to mislead anyone, he did answer the initial three questions in writing via email, but that only raised more questions because the answers were incomplete IMHO. I will withhold judgement to see if he answers the 10 follow up questions via email this week or insists on an in person meeting.

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Re: "Fixed index annuity"

Post by Brody » Sun Jan 29, 2012 9:56 pm

Mel Lindauer wrote:
Brody wrote:That being said, it is very difficult for an agent to put specific things contained in the contract in writing. There is a reason why contracts (any kind of contract) are written the way that they are. An agent has to be very careful about explaining contractual language. He can't just put things in his own words.
Isn't it kind of odd that insurance agents can sure explain the hell out of the policies when they're selling them, but now he's got lockjaw and can't? Gimme a break; he's just trying to CHA because he senses trouble and, as a fellow insurance salesman, you're trying to explain his actions away.
Mel, that simply isn't a fair accusation. The only thing that we can go by is what a third part told us and from what we have been told, the only thing that we know is that the sister doesn't understand the product and the agent suggested that they get together to talk about it. We have absolutely nothing indicating that the agent has lockjaw or that he's trying to cover up his actions. He has agreed to meet. What else could/would/should he do? Keep in mind that we don't have a report back following the sister's request to meet via e-mail.

Let me explain my point about putting things in writing, but being hesitant to the extent that they pertain to the actual contract. It is the contract that counts. Therefore, it is important to go over the actual contract and not some e-mail summary. When I talk to a client, I talk, and put into writing why they should do this or that. However, when it comes to the actual contract, I can't put the contractual terms in my own words. I need to take the actual contract and go over it with the client.

The best analogy that I can come up with for this is a mutual fund prospectus. When I was selling funds, I couldn't legally even write in a prospectus. One can't circle anything or touch it in anyway.
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Taylor Larimore
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2 annuity questions

Post by Taylor Larimore » Sun Jan 29, 2012 9:59 pm

Willie:

How many pages are in the policy contract? Also, what is the exact title of the contract on the first page?

Thank you.
Taylor
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Re: "Fixed index annuity"

Post by Brody » Sun Jan 29, 2012 10:04 pm

Wild Willie wrote:Don't want to mislead anyone, he did answer the initial three questions in writing via email, but that only raised more questions because the answers were incomplete IMHO. I will withhold judgement to see if he answers the 10 follow up questions via email this week or insists on an in person meeting.
Wild Willie, I'm usually the one defending the products and the salesmen in these threads. Don't take that to mean that I think that this is an appropriate product for the situation. I don't have a clue. I just know that everyone is best served by seeing multiple sides of the issue.

If I was in his shoes, I would probably want an in-person meeting. It wouldn't be a refusal to do it over e-mail. It's more that experience has taught me that when questions start leading to more questions, it is time to start from the very beginning and make sure that the client has a complete understanding.

Unfortunately, at this point, questions leading to more questions points to a rushed sales process from the beginning. The sale was made before the client understood what they were actually purchasing. Sometimes, this is because the client keeps saying that they understand when they don't. This often happens when it is a sale made by trust. (The client trusts the salesman and is going to probably do whatever is recommended.) It also happens when the salesman is simply pushy and the client isn't capable of saying no. It can also be a case of the salesman being a dishonest scumbag who took advantage of the fact that the legalese is very difficult to understand.
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Re: "Fixed index annuity"

Post by dhodson » Sun Jan 29, 2012 10:20 pm

Brody wrote:
Mel Lindauer wrote:
Brody wrote:That being said, it is very difficult for an agent to put specific things contained in the contract in writing. There is a reason why contracts (any kind of contract) are written the way that they are. An agent has to be very careful about explaining contractual language. He can't just put things in his own words.
Isn't it kind of odd that insurance agents can sure explain the hell out of the policies when they're selling them, but now he's got lockjaw and can't? Gimme a break; he's just trying to CHA because he senses trouble and, as a fellow insurance salesman, you're trying to explain his actions away.
Mel, that simply isn't a fair accusation. The only thing that we can go by is what a third part told us and from what we have been told, the only thing that we know is that the sister doesn't understand the product and the agent suggested that they get together to talk about it. We have absolutely nothing indicating that the agent has lockjaw or that he's trying to cover up his actions. He has agreed to meet. What else could/would/should he do? Keep in mind that we don't have a report back following the sister's request to meet via e-mail.

Let me explain my point about putting things in writing, but being hesitant to the extent that they pertain to the actual contract. It is the contract that counts. Therefore, it is important to go over the actual contract and not some e-mail summary. When I talk to a client, I talk, and put into writing why they should do this or that. However, when it comes to the actual contract, I can't put the contractual terms in my own words. I need to take the actual contract and go over it with the client.

The best analogy that I can come up with for this is a mutual fund prospectus. When I was selling funds, I couldn't legally even write in a prospectus. One can't circle anything or touch it in anyway.
yep but when you are a younger and less experienced agent, what you do is have a senior guy right next to you. He has a stack of these things and when you write on it, he rips them up and gives the client a new one. That happened to me. Unfortunately i didnt immediately realize that the agent was clueless and would pretend putting whole life within a qualified plan was in my best interest.

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Re: "Fixed index annuity"

Post by Brody » Sun Jan 29, 2012 10:26 pm

yep but when you are a younger and less experienced agent, what you do is have a senior guy right next to you. He has a stack of these things and when you write on it, he rips them up and gives the client a new one. That happened to me. Unfortunately i didnt immediately realize that the agent was clueless and would pretend putting whole life within a qualified plan was in my best interest.
I hear this type of thing sometimes, and it really sucks.

I realize and am quite thankful that the "upbringing" that I received as an insurance agent matched the upbringing that I received as a child at home. In short, my general agent and manager when I started were both very honest and believed in doing what was best for the client. I was fortunate to learn from them. Otherwise, I am convinced that my career would have lasted about 90 days.

I do hear way too many horror stories. I don't care about someone's profession, doctor, insurance agent, janitor, it doesn't matter. How can anyone regardless of profession/job be unethical? Life is too short to have to dislike the man in the mirror.
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Wild Willie
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Re: "Fixed index annuity"

Post by Wild Willie » Mon Jan 30, 2012 9:51 am

Willie:

How many pages are in the policy contract? Also, what is the exact title of the contract on the first page?

Thank you.
Taylor

NOTE: posted a reply, but it didn't come out on the blog for some reason, so I will post again. Pls excuse the possible duplication.

Taylor, the title is "Flexible Premium Indexed Deferred Annuity Contract" and it has about 100 pages. I say "about" because it has many sections, all of which have individual numbering schemes. If it's necessary, I can hand count the pages if you think it vital.

Wild Willie

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Dick Purcell
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Re: "Fixed index annuity"

Post by Dick Purcell » Mon Jan 30, 2012 10:44 am

A hundred pages!

The worst villains in the EIA world are the people who determine and control what these products are -– the math types who design them, the lawyers who write their hundred-page contracts, and the executives who oversee the creation and marketing of them. These people don't face the victims -- they send others out to do that.

Back a few years ago when these things were roaring into the market and I looked at them, there were hundreds, new ones appearing all the time. Each one a little different in mix of curveballs, sliders, sinkers, knuckleballs, and beanballs.The common features were (a) too complex for assessment and comparison with any standard financial-analysis tools, or for real understanding by investors or salesmen, and (b) suited for word descriptions that make them sound much better than they are –- “up with market rises, no drops.”

There are a few financial planners who understand these things well enough to fit them to people’s needs and desires –- I know one –- but so very few. For almost everyone out in the field, investors and advisors/salesmen, the people back at headquarters have provided a swamp of slickly packaged incomprehensibility for generation of high fees.

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Taylor Larimore
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Complexity or Simplicity ?

Post by Taylor Larimore » Mon Jan 30, 2012 12:01 pm

Hi Dick:
The people back at headquarters have provided a swamp of slickly packaged incomprehensibility for generation of high fees.
I have a Equitable Variable Deferred Annuity contract on my desk that is 176 pages in length written in small-print legalize that I cannot understand (and I was in the business). It is inconceivable that a blind old lady will ever comprehend the contract she purchased. She was totally at the mercy of the salesman who had a conflict-of interest between feeding his family or feeding his prospect in retirement.

This thread is a good reminder for all of us:
"You shouldn't buy anything too complex to explain to the average 12-year old." -- Jane Bryant Quinn
We own 2 Single Premium Immediate Annuities. Our AVIVA contract is 4 pages; Our Genworth contract is 8 pages. A 12-year old can understand both.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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