Come on folks, let's stick to the topic, there's plenty here to discuss. If someone's idea doesn'...
t hold water better to show why than try to discredit the poster....

-Tad

Who pays for GMWB  (partial, in sup...
port of Bob Veres s )?

 

Note that even if the insurance assets  underlying the variable annuity subaccounts have a zero return or even small positive returns, the floor guarantee can still be triggered. This is b/c benefit payments decline whenever subaccount performance is lower than the assumed investment rate (AIR), for example, 5%. To that extant the insurer raises its mortality and expense (M&E) risk charge to cover this floor guarantee. That actually makes a triggering of the floor guarantee more likely b/c the underlying funds must perform even better just to offset the additional charge.  

Risks associated with offering such a floor guarantee can be partially transferred to the annuitant, depending on product construction. For example, future benefit payments could be reduced to extant necessary (but never lower than the floor) to cover any shortfall that had previously arisen due to poor fund performance. Effectively, this has the annuitant   borrowing from hims/ her self, in the sense that he /she is really receiving an advance against future benefit payments to make up the shortfall. 

However, the insurer must make up the current period shortfall from its own assets but it has reduced liability-the present value of future annuity benefits exclusive of the floor benefit guarantee-by a like amount. The cost of such product construction to the insurer is less than one where the insurer alone funds 100% of any shortfall b/c once benefit payments again equal or exceed the floor level, the insurer is paying a lower number of annuity units par payment than the original number. B/c any advance serves as a negative premium that reduces the number of annuity units the value of which is payable per benefit period, it may take longer for the benefit level to climb back up to the floor.  

300 BP/yr is a reasonably accurate figure for the total annual cost of
a fully-commission...
able VA with a GLWB, including subaccount expenses. 
Some advisors will sell that contract and opt to get paid in one lump
sum up front.  Others (including Yours Truly) will opt for a "C share
type" payout, with a trail commission of 100 bps/yr.

There is, in
EITHER scenario, no need to tack on an advisor fee.  The cost of advice
is included in that figure, just as it is in the figure for the mutual
fund portfolio side (where a 100 bps/yr AUM fee was assumed).

John,
This
is interesting...is it fair to say that you're an exceptional case,
rather than a typical one? Meaning, with respect to ongoing services
and choice of trail over lump-sum.

I'd be interested to see what
the typical "service mix received" is for a VA purchaser, over the life
of the product...and how it compares when the agent opts for lump sum
rather than trail. Then a comparison to some other approaches, whether
it's RR/mutual funds, RIA/mutual funds, etc. So few VAs are annuitized,
and so much VA activity is contract replacement, that the sample might
not be very big -- but they're out there.

To generalize it -- I
think a consumer sees a very wide range of service levels across
service providers. I believe that's
true both within each pay/licensing model, and among them. But my
belief is that the VA+lump is likely to be a "turnkey" product with
much less ongoing advice associated with it (perhaps none other than contract-related). That's certainly been the
case with inbound clients, but then again, perhaps that's the reason
they left the firm that sold them the VA.

So to me
it's a bit of a throw-away for a study to say "well they incur the cost
of the VA but they won't need to pay any advisory fees." It says to me they might have a narrow view of the expected service levels for this type of client. A lot
is going to come up that will require new advice and new costs for that
advice because the original agent is unwilling (or unable, because of licensing) to provide it.
Seven years from now the client has a grandchild, wants to factor her
into the overall mix somehow...is that agent who took the lump going to
do that work, without the client incurring an additional cost not
accounted for in the study? Or - last year the IRA-to-Charity
opportunity was there for MRDs, if that was well into
annuitization did the lump-pay agent who sold it in 1998 call and solicit that idea (even
though it wouldn't lead to a dime of compensation)? These are
completely routine questions to address in the context of a long-term
advisory relationship for a retiree. I'm highly skeptical the typical lump-pay agent
is doing that stuff -- if in fact they're even around anymore...

-Tad

Tad,

You write "Especially when the investment mix seems to leave a lot of room for improv...
ement ($3.8 to $2.2 in three years with only 5% withdrawals??)."

The decrease in value was not the result of partial withdrawals, so much as of a massive bear market.  The GLB would have permitted the contract owner to continue taking 5% of the larger figure for life, even after the actual account balance fell 43%.

And you write "Tack on that 300 basis point cost assumption (which still needs an advisor-fee of some type tacked on top of it, to provide all the other money-related advice that comes up that a rep handling that annuity typically wouldn't do) and...well I don't want to click that link to look at the paper, I have actual work to do. It would waste time, and Ibbotson would just get reinforcement about its "sponsored research" by having another download to count."

300 BP/yr is a reasonably accurate figure for the total annual cost of a fully-commissionable VA with a GLWB, including subaccount expenses.  Some advisors will sell that contract and opt to get paid in one lump sum up front.  Others (including Yours Truly) will opt for a "C share type" payout, with a trail commission of 100 bps/yr.
There is, in EITHER scenario, no need to tack on an advisor fee.  The cost of advice is included in that figure, just as it is in the figure for the mutual fund portfolio side (where a 100 bps/yr AUM fee was assumed).

I don't like "heaped commissions" on VAs one bit.  They encourage churning.  They don't match compensation with work performed.

John Olsen

[Sorry for the messy formatting, that was second post via copy-paste.]

Bob Veres' title, "Cheerleaders in Lab Coats," does raise a good question...when I see Ibbotson (...
an almost - though not entirely - "academic" brand pre-Morningstar) doing sponsored studies it's hard not to invoke thoughts of other industry sponsored (read: bogus) "research." An egregious example would be . Another advisor actually called me awhile ago about some other study, the basic point being -- doesn't Ibbotson seem a little different now? So just a comment regarding Ibbotson, I wonder if they've weighed the value of that brand against doing industry-sponsored research...a phrase that some of us consider to be almost oxymoronic. There are plenty of trade associations to handle that stuff -- NAVA, etc. -- that's what they're there for. You read that, you read the ICI stuff, and you read "studies" directly from product companies, and you know the potential biases.

[Though if anyone wants to start sponsoring leather-bound annual copies of the SBBI Yearbook I think that would be a wonderful idea, send one to my address immediately and I'll shut up! =) ]

But that leads to the second point...there aren't enough hours in a day to read all the industry-sponsored research, especially about beaten to death topics in financial planning. I skim the assumptions and decide accordingly. And I'm sorry but Peng Chen's statement above implicitly seems to invalidate the case used to prove the thesis, no?:

Peng Chen writes...
"Not for everyone:  Throughout the white paper, we state many times that VAs with lifetime GMWB are not appropriate for every investor (e.g., investors with...a great deal of wealth)"

BV's column cites from the case...
"The GWMB really kicks in after the down market of 2000, when the account value drops from a 1999 high of $3.8 million...to $2.2 million at the end of 2002... the contract keeps paying what it paid in 1999: $191,578."

Say WHAT?

This isn't "a great deal of wealth?" It is to anyone who's looked at, say, the SCF data (except perhaps the speech writers for Democratic primary debates - with those $200k/year "middle class" families).

Look:
there are plenty of $3.8 retirees out there, but longevity risk isn't much of an issue for that group - think about what the term means. Talk about "longevity risk" for the early retiree with $40,000 in CDs and the concept makes some sense. And come up with the completely market-paranoid individual who just can't get past the concept of short-term volatility...to the point where they're willing to guarantee and lock in substantially larger costs during investment and, god forbid, early/unexpected liquidation, to deal with that potential volatility - and these products are a way to manage that risk. I haven't met that individual yet, but I can accept arguendo that they're out there and that this approach is at least a turnkey solution to the problem.

But build a case around $191,578 in "required" annual income and a $3.8 million portfolio, while footnoting that the approach isn't right for those "with a great deal of wealth," and you kind of lose those of us who are advisers on planet earth.

Especially when the investment mix seems to leave a lot of room for improvement ($3.8 to $2.2 in three years with only 5% withdrawals??).

Tack on that 300 basis point cost assumption (which still needs an advisor-fee of some type tacked on top of it, to provide all the other money-related advice that comes up that a rep handling that annuity typically wouldn't do) and...well I don't want to click that link to look at the paper, I have actual work to do. It would waste time, and Ibbotson would just get reinforcement about its "sponsored research" by having another download to count.

-Tad

"Vig has repeatedly demonstrated a palpable animus against commissionable products and those who ...
sell them."


John:

Let us not forget that famous line from Vig...  The one about how advisory based advisors are "Ripping off" their clients.  At least Vig is equal handed in his contempe for practising advisors.

Amber

Vig Goren writes "The problem is with those unscrupulous salesmen pushing unsuitable annuity p...
roducts such as deferred VAs, upon naïve buyers".

Actually, the problem is with self-appointed critics who make foolish and unsubstantiated summary judgments such as the one above.

Vig has repeatedly demonstrated a palpable animus against commissionable products and those who sell them; he's also demonstrated, repeatedly, that he knows little or nothing about the things he condemns.

The "low-cost" VAs that Vig touts -

(a) do not compensate the seller, which means that either the buyer gets no advice or he must pay extra for it.  That doesn't make these contracts bad.  It just means that they cannot be compared, head-to-head, with contracts that do compensate the seller for his or her financial advice.

(b) offer limited, IF ANY, "guaranteed living benefits".  If one doesn't NEED those features, it's certainly arguable that one shouldn't pay for them, which might suggest a low-fee VA that doesn't offer them.    To my mind, a better course might be to avoid buying any VA, if the purchase money is non-qualified.  I believe that the benefit of tax-deferral offered by a variable annuity is not worth the cost (All Ordinary Income treatment).   But when GLBs are added, the paradigm changes.

Commissionable VAs that include GLBs can offer RISK MANAGEMENT benefits that are arguably unobtainable elsewhere for most buyers.  Whether those RM benefits are worth the price charged is certainly arguable, and Peng Chen addressed that issue in his paper.  (So did Bob Veres in his response, but Bob made some bad assumptions and presumptions.  That said, I have a LOT of respect for Bob Veres; I simply believe he let his bias overwhelm his admirable good sense when he wrote that response).  Both Chen and Veres tried to inform us by applying original thought to the issue.

It's an approach I recommend to Vig Goren.

- John Olsen

I usually agree with most of Peng Chenâ??s repor...
ts. IMO, Peng Chen, Moshe Milevsky, Roger Ibbotson,  Rick Carey, Jeffrey Dellinger, and others, are extremely valuable sources of reliable info for the benefits of annuities to investors. The problem is with those unscrupulous salesmen pushing unsuitable annuity products such as deferred VAs, upon naïve buyers.

I also agree with Bill Reichenstein and Larry Swedroe who wrote the following report on VAs in the NOV 2007 issue of AAII Journal, titled: 

 Investment Products: If It Has to Be Sold, Don t Buy It!  

A few excerpts:

But financial firms cannot add value merely by buying securities and combining them into a portfolio. Mutual funds can charge a convenience fee for combining securities into a portfolio and for reinvesting the distributions, but these conveniences can be attained for 0.20% or less. Thus, there is, at best, a very small value added merely from combining securities into a portfolio.

Many investors have not thought about this concept or its investment implications. But it explains why investors should avoid investments and investment products with commissions. This extra charge is only going to a sales person, and that sales person is not providing a serviceâ??or adding valueâ??to the individual investor.

For example, a no-load mutual fund buys securities, puts them together, and sells pro-rata shares of the portfolio s that is, mutual fund share s for cost. The no-load fund does not sell the mutual fund shares for more than the cost; in finance, the value of the whole portfolio does not exceed the sum of the parts.

There are two ways that open-end mutual funds are distributed, that is, two ways that they acquire cash. Some open-end mutual funds are sold by a sales force including brokers, as at AG Edwards and those in a bankâ??s lobby and commission-based financial planners.

Their compensation is based on a one-time upfront sales fee (i.e., front-end load) and sometimes a smaller annual trailing fee, which is part of the 12b-1 fee. Sometimes these fees are as low as 0.35% per year, but they can be considerably higher.

The other distribution method is by direct purchase from the fund or direct marketing. These mutual funds may be purchased via mail, 800 numbers, or directly through supermarkets such as at Charles Schwab.

Because brokers do not receive compensation for selling these direct purchase funds, there is no incentive for them to recommend them.

From an investor s viewpoint, if an investor can select a mutual fund, there is no reason to pay a middlemanâ??s fee. Simply put, the front-end sales commission comes directly from the investor s pocket. The 12b-1 fee is part of the annual expense ratio, so it, too, comes directly from the investorâ??s pocket.

When VAs  Make Sense

Investing in a non-qualified variable annuity makes sense only if these three conditions are met:

·                       1)          The investor has contributed all funds allowed to tax-deferred retirement accounts such as 401(k)s, 403(b)s, and Keoghs and tax-exempt retirement accounts such as Roth IRAs and Roth 401(k)s.

·                       2)       The investor wants an underlying investment in bonds, REITs, commodities, or some other tax-inefficient investment. As discussed earlier, if an investor wants an underlying investment in stocks, they should invest in a tax-efficient stock fund instead of even a low-cost variable annuity.

·                   3)              Finally, the annuity should be one of the few low-cost ones such as those offered by TIAA-CREF and Vanguard. Since they avoid salesmen and use low-cost funds, their annual expense ratios are below 1% and they have no surrender fees.

 

Summary

Unlike manufacturing firms, financial firms cannot add much value by combining parts into a whole. The value of the whole portfolio cannot exceed the value of the sum of the individual securities.

Mutual funds can charge a convenience fee for combining securities into a portfolio and for reinvesting the distributions, but these conveniences can be attained for 0.20% or less. Consequently, investors should not pay much more for a portfolio than the value of the individual securities.

It follows that investors should avoid investments and investment products with commissions, because the extra charge is only going to a sales person providing a service to the financial firm, and not to the individual investor.

These include:

·                                 Loaded mutual funds,

·                                 Variable annuities, and

·                                 Equity-indexed annuities. (Although not mentioned in this article, it also includes structured investment products, which often share many characteristics of equity-indexed annuities.)

PRETAX MONTHLY INCOME FUNDED BY A $500,000
INITIAL INVESTMENT FOR A FEMALE,  AGE 65

 

Mutual Fund vs [IVA-Life Annuity]

 

Probability of......................Initial

Outliving Income................Income

 

1%.[0%]....................$2,050......[$3,275]

5.....[0]..........................2,157.........[ditto]

10...[0]..........................2,237.........[ditto]

25..[0]...........................2,417.........[ditto]

50..[0]...........................2,739.........[ditto]

71..[0]...........................3,275.........[ditto]

 

Assumptions:

 

ð     Annuity 2000 Basic Mortality Table

ð     8% investment performance

ð     4% AIR

ð     Monthly annuity-due IVA benefits are projected, then mutual fund distributions are set equal to a percentage of IVA benefits so that the mutual fund balance is exhausted when 99%, 95%, 90%, 75%, 50%, and 29% of females originally age 65 have died.

 

********************************************

 

 

 

I mean, Vig, are you serious?

Can you name three things the federal government has success...
fully managed?  I'll name three they haven't.

Their own budget?  Uh, no.

Social Security?  Uh, no.

Medicare?  Uh, heck no.

Now we have candidates who want the federal government to take over health care insurance AND now this guy (and you) apparently believe taking over LTCi would be a good idea as well.

Unbelievable.  Nothing bothers me more than a government taking over other aspects of healtcare when it's already proven that the parts of other healtcare areas they now attempt to run successfully aren't and are, in fact, failing as evidenced by them becoming ever-closer to insolvency.

Yeah, let's let Uncle Sam take over LTCi and health insurance.  Real good idea.

look up Ken Zahn on the web.....greatest review course....take, study and study..you will pass.&n...
bsp;

Vig Goren writes "John Olsen,

Please read this and realize that the LTC issue, on the nati...
onal scale, can't be solved by financial advisors. Sooner or later it must be taken over by the US Government and the money that your clients spent on it (including commissions),  would be forfeited. Unless the LTCs are for short term and at low costs. "

Oh, good GRIEF! 

Yeah, let the Federal government take over Long Term Care. that'll fix the problem.

Thanks for the laugh, Vig.

- John Olsen

Bob Veres still seems to be missing some pivotal points in Dr. Chen's article.  For example,...
he writes -

" I did have a problem with the paper making this assumption, and then putting a higher weighting to stocks in the VA contract vs. a mutual fund portfolio. Maybe I'm the only one who thinks that looks like rigging the comparison in favor of the VA contract. No advisor I've ever talked with says that you should abandon prudent asset allocation principles inside a VA contract or outside; the research cited in this rebuttal is primarily from consumers, not advisor-tended portfolios, and I suspect there would be difference between the two. "

The whole point of "putting a higher weighting to stocks in the VA contract vs. a mutual fund portfolio" is that, in the VA contract, the presence of a GLB permits such additional weighting without the downside risk that would result in the absence of the GLB.

Bob asks "why compare VAs to mutual funds at all? The only people I have ever seen make that comparison are annuity salespeople."

Aw, come ON, Bob!  I don't know how many such comparisons I've seen, (dozens, certainly) but at least half, if not more, were produced by financial journalists.  Are Suzy Orman and Jane Bryant Quinn "annuity salespeople"?

As to Bob's discussion of fees, he seems not to be aware of the various commission payout arrangements available to sellers of VAs.  For example, he writes  -

"But to say that this the M&E covers the advisory fee for the duration of the relationship is, well, an interesting assumption. Assume the advisor gets paid 4% up-front for recommending the annuity.  At most, that pays for four years of the advisor's efforts on behalf of the client. But the insurance company doesn't lower that 125 basis point M&E charge after four years, and the contract life is expected, in this white paper, to be 30 years or more. Who pays for the advisor's advice for the other 26 years? The Good Fairy? But to say that this the M&E covers the advisory fee for the duration of the relationship is, well, an interesting assumption. Assume the advisor gets paid 4% up-front for recommending the annuity.  At most, that pays for four years of the advisor's efforts on behalf of the client. But the insurance company doesn't lower that 125 basis point M&E charge after four years, and the contract life is expected, in this white paper, to be 30 years or more. Who pays for the advisor's advice for the other 26 years? The Good Fairy? "

Let's look at that argument a bit closely:

Bob's statement that if the advisor is paid an up-front commission for recommending the annuity, that amount (which Bob assumes is 4%; it's often more) "pays for four years of the advisor's efforts on behalf of the client". 

No, it doesn't.  Nearly every commissionable VA pays "trail" commissions, similar to those paid by mutual fund "A" shares.

More to the point, most VA contracts offer the selling advisor an option as to commission payout.  It's true that many advisors take the "heaped up front" option, so they're compensated as if they'd sold "A" mutual fund shares.  (Who pays for those latter advisors' advice for the remainder of the advisor/client relationship, Bob - the Good Fairy?).  But many will opt for levelized payouts - where the "trail" commission is about 1%.

And that ongoing commission is paid for, not by the Good Fairy, but by the ongoing M&E charge that Bob wondered about. 

What about when the advisor elects to take his money all up front, with little or no trail?  How is that advisor being compensated for the later years of the advisory relationship?  The answer is simple:  HE GOT HIS MONEY UP FRONT!  That's what he CHOSE.

Personally, I think that's a LOUSY way to compensated an advisor for a long-term advisor/client relationship, but it's hardly unique to variable annuities.  It's how mutual funds have worked for decades.

Bob also observes "But I'm a little surprised to see him recommending VA contracts inside IRA or pension funds. Only the most aggressive salespeople are pounding that particular drum."

Well, I must be an "aggressive salesperson" then, because I frequently recommend a VA inside an IRA.  But it's NEVER a tax-related recommendation, because THERE ARE NO ADVANTAGES OR DISADVANTAGES TO USING A VA INSIDE AN IRA.  Any advantages or disadvantages have to do with suitability as an investment vehicle OR AS A RISK MANAGEMENT TOOL within that IRA account.

Not incidentally, while I have no quibble with using a VA inside an IRA or QP account - if the investment and/or risk management features make it suitable - I am not a fan of using VAs in NON-qualified accounts, unless they contain Guaranteed Living Benefits.  Why?  Because, in my opinion, the advantage of tax-deferral that variable annuities enjoy is not worth the cost for that deferral - namely: All Ordinary Income treatment of ALL distributions, plus the 72(q) penalty for early distributions. 

That is NOT the case with NON-VARIABLE annuities, because, while they get All Ordinary Income treatment too, so do those investment vehicles with which fixed annuities may be properly compared (CDs, Bonds, Bond Funds).

Why do I make an exception for VAs in NQ accounts when they contain Guaranteed Living Benefits?  Because it may well be that the risk management features outweigh the tax disadvantages.  That is quite possible where the risk tolerance of the purchaser is such that he or she would not consider a heavily equity-weighted allocation in the absence of those GLBs.

Annuities in general (with some exceptions, such as so-called "CD annuities") are not (in my view, at least) primarily investments.  They're primarily risk management tools.  This is certainly true when the annuity in question is a variable contract containing a Guaranteed Living Benefit (or, perhaps, a Guaranteed Death Benefit).

- John L. Olsen, CLU, ChFC, AEP

MsoNormal>Why was this report reviewed at the home page of  this website with a  negative bias (twist)? 

High Net Worth Survey: More Pessimism, Fewer Advisors 

By Colleen O'Connor-Grant

May 7, 2008

Link: 

=

This report, in its source,  ends with the following paragraph. Why is it not a pleasing sound to advisors- ears?

So what about advice? With their ability to offer insightful advice and a full-service approach that provides assistance beyond just investment advice, advisors may still be in the best positions to help America s wealthy keep that bounce in their step.


See it here at the source and get another (positive) view:

Excerpt

News Release

Phoenix Wealth Survey Finds Optimism Returns to High Net Worth With Feelings of Financial Security Back to 7-Year High

High Net Worth Strategy for Retirement: Don't. Six out of 10 plan to continue working to maintain lifestyle, pay for healthcare
HARTFORD, Conn.--(BUSINESS WIRE)--May 16, 2007--America's millionaires have regained their feelings of financial well-being and optimism, but have growing concerns about their future retirement, according to the eighth annual Phoenix Wealth Survey conducted by The Phoenix Companies, Inc. (NYSE:PNX), a leading provider of life insurance, annuities and investments.


Wealthy Americans appear to have a new bounce in their step, thanks largely to the recent bull market. Eighty-one percent of those surveyed say they feel wealthier than they did last year, and more high-net-worth consumers consider their long-term wealth "extremely secure." The survey also reveals that high-net-worth individuals are taking a more aggressive approach to investing. For the first time in six years, their appetite for return on assets equals the desire for preservation of wealth.


They may need that aggressive approach to investing because long-term retirement security is their primary financial concern. In fact, a growing number of the high net worth believe they may never fully retire, in part because of their concerns about future healthcare or long-term care expenses.


"The 2007 Phoenix Wealth Survey reveals the high net worth's positive attitudes about their financial well-being as well as widespread changes in their attitudes towards retirement," said Walter H. Zultowski, Ph.D., senior vice president, research and concept development at Phoenix. "During the bull market of the 1990s, high-net-worth individuals wanted to retire early and completely. This year, despite feeling more secure in their wealth, a larger percentage of respondents expect to keep working at least part-time."


In addition, this year's survey found a significant discrepancy among the generations that comprise the high-net-worth market. The youngest of the high net worth - who have the greatest number of years to amass a retirement nest egg - are the most bearish about the future. Although they have more money at a younger age than their predecessors, Gen-X millionaires expressed the greatest uncertainty about their future finances as they face retirement without traditional pension plans, with Social Security benefits in doubt and healthcare costs skyrocketing.


Survey Highlights


Phoenix conducted the study of more than 1,800 high-net-worth households - those with net worth of $1 million of more, excluding their primary home - to stay in synch with the highly complex personal financial and business planning needs of this segment. The survey also revealed that:

• More high-net-worth individuals want to match or exceed their current income in order to enjoy a "comfortable retirement," and fewer expect ever to fully retire from work.
  
  
  
• Despite being upbeat about their personal financial situation, the high-net-worth individual's optimism toward the economy remains low with fewer than one-third saying they are "very" or "fairly optimistic" about the economy. This represents a significant drop from the 53 percent who said they were optimistic about the economic outlook five years ago.
  
  
  
• Younger and older millionaires alike are still searching for the right kind of financial advice. The overwhelming majority lack a written financial plan and one-third do not have a primary financial advisor.
  
  
  
• Banks may have an opportunity to gain new clients among younger high-net-worth individuals. Gen-X millionaires, the fastest growing affluent demographic, are the most likely to test the financial services offered by banks. In fact, from college funding to asset allocation advice, estate planning to purchasing mutual funds, these respondents indicate that they are more ready than ever to consider a bank for their financial needs.

Retirement and Advice


Wealthy Americans indicate they are putting off retirement because they enjoy working, but the delay is also driven by concerns surrounding healthcare and long-term living expenses, as well as the desire to maintain their current standard of living. In general, experts recommend most retirees will need approximately 80 percent of their peak working income in retirement. However, a full 47 percent of those surveyed expect to rely on 100 percent or more of their current income in retirement.


Despite these high expectations, fewer than 15 percent of the respondents own annuity products that can help generate supplemental retirement income or products, such as long-term care insurance, designed to reign in healthcare-related expenditures.


One of the most surprising findings from the survey is the lack of advice millionaires receive about retirement and other financial planning.


"More than a third of the respondents don't have a primary financial advisor, and the number of the wealthiest consumers who have a full-service broker dropped to 25 percent - the lowest in the survey's history," said Zultowski. "At the same time, a growing number - 14 percent, twice as high as just four years ago - admit they know 'little' or 'next to nothing' about investments and other financial matters, so there are significant opportunities for advisors to help the high net worth achieve their financial goals."
-------------------------------------------------------------
To read the full report in PDF enter in Google:

2007 Phoenix Wealth Survey Executive Summary

 

I have been an employee Financial Consultant for my entire career working for two of the most adv...
ertised firms on TV. I have my CFP and have experience with financial planning.  I approached a local RIA about joining their group and they and I are both very interested.  The firm is super ethical and have been around for 20 plus years.  I like the partners a lot and feel that I would be a great fit.  My goal is to own my own clients and they are offering a turnkey platform, office space, compliance etc.  I asked them what would be my cost to join the firm. The response was that it would not be a matter of cost but how I would want the relationship to look. 
a) run the client thru as turnkey
b)become a partner as an equity owner or employee or some combination of both.

My concern is that I am great at listening to clients advising them and sales but I do not know much about joining a firm in this capacity. What my payout should be, etc.
Can you folks please help me think this thru?

Thank you,

Sam

I got this from Ed Slotts website: as I couldn't find anything on the irs pub 590 that refer...
enced it.    This is what I initially thought as well -from what I understand the rmd is based on if the original owner was already taking his/her rmds.  If they were, you need to take the rmd based on their age.  If they weren't, you take the rmds based on the beneficiary's age.   
Good luck.  Deborah





mhassett



Joined: 01 Jan 1970
Posts: 9











Heres the 2 part question. DAD who passed leaves IRA for daughter. We dont know if daughter titles the non spousal inherited IRA properly. But if she did and in this case she passed, can the husband inherit the non spousal inherited IRA from deceased wife and if so how does he title the new inherited IRA?

Any help would certainly be appredciated....Michael

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alan-oniras



Joined: 01 Jan 1970
Posts: 1252
Location: Prescott, AZ










If daughter names her husband as her successor beneficiary on the non spouse inherited IRA, he cannot make the IRA his own upon her passing, but can continue to take RMDs based on the non recalculated schedule his wife was using, and add his name as successor beneficiary. He also should name his own successor beneficiary.

He would title as follows:
John Smith, as beneficiary of Susan Smith, beneficiary of Donald Jones, deceased xx/xx/xxxx.

There is not a rigid format requirement, so it may be necessary to adjust the above somewhat to comply with the IRA custodian's support system requirements. The original account owner must continue to be identified, however.