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Author: Lifeisgr8 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75781  
Subject: AXA Equitable Asset Mgt Investment Date: 6/6/2005 4:56 PM
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A broker is recommending a substantial investment in The AXA Equitable Asset Management Investment product. (ie: $200K of a $500K IRA). This is an Annuity, and he says 6% is guaranteed every year, and if market does better than 6%, that return is credited to your account that year. Any one invested in this? Any guideance? Thanks!
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Author: drippinfool Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46364 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/6/2005 5:02 PM
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Maybe tgtbt?
-drippin

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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46365 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/6/2005 5:03 PM
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Run. Annuities inside an IRA are redundant.

From ClarkHoward.Com

Clark wants to talk again about variable annuities and the damage they can do to seniors' bank accounts. Road shows where variable annuities are sold are popping up all over the country. The target is “nursing home age” people and the hook is a free meal. Once the salespeople have them hooked, they push annuities with a 7 percent guarantee on investment. Sounds impressive right?

Well, what these people aren't told is that annuities have huge commissions that eat up your money. In addition, the penalty to get out of an annuity is 17.5 percent of the money you invested. And the 7 percent is not a guarantee at all. So, in sum, there is never a time when people – older folks especially - should buy a variable annuity.

The groups that are supposed to regulate this industry are doing nothing. So, it's up to you to protect your money and to tell your relatives about it. If your parents tell you they that they have gotten an invitation to a free breakfast, tell them not to go and treat them to a breakfast yourself.

Clark also had this to say:

Clark has been getting tons of calls from listeners who have been ripped off in annuities. First of all, what's an annuity? Under the tax code, annuities are an investment vehicle you buy for retirement savings. And money in an annuity grows tax-sheltered until you take it out after age 59. When you take it out, you pay full tax on the earnings. Tax-deferred annuities may have had a place in someone's portfolio up until the early '90s.

But at that time, changes were made to the tax code. And today, the only reason annuities are sold is so they can be sold again. Because of that, they are the most expensive investments out there and they have huge commissions. A tax-deferred annuity has expenses that are10 times greater than a low-cost mutual fund. So, with all of the massive commissions and yearly fees, you give up two cents on every dollar.

It's like starting backwards every year. Getting out of annuities is also a hassle. You are charged massive “surrender fees” as high as 7 to 10 percent if you want to cancel the account. So, annuities are much easier to get into than to get out of. Granted, there are several different kinds of annuities. Teachers have annuities for retirement and that may be the only thing available through their work.

But tax-deferred annuities are different. So, if you're in an annuity and you want to get out, you can do what's called a “transfer” to either TIAA-CREF - tiaacref.org or vanguard.com. They charge much less than regular companies. And, you only want to transfer if you've gotten out of the “surrender charge” time, which usually last 5 to 7 years. Another annuity is called an “immediate payout annuity,” and these are very technical and esoteric.

The bottom line is that you need to save the maximum you can in your retirement plan at work. That is the first priority. Your second priority is to get out of debt. Opening a Roth IRA is also a good idea. And then start investing for your child's education. But if a salesman starts pitching “tax-advantaged accounts” or annuities, know that it is not in your best interest.

Fuskie
Who wonders if this broker has cold-called you, or is someone with whom you have a trusted relationship...

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Author: DollarS9nz Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46367 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/6/2005 5:20 PM
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Fuskie is right.

Anyone who is recommending for you to purchase an annuity inside of a tax sheltered account IS NOT LOOKING OUT FOR YOUR INTERESTS. The salesperson (your broker in this case) stands to make a sizable comission on this sale - that is his incentive.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46368 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/6/2005 9:07 PM
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Your broker is not telling you the whole story, and is not acting in your best interests.

For instance, he failed to tell you about the following fees:

- You do not get any of the dividends from the market. AXA gets them. So that's a 2%-3% fee each year.
- Your monthly gain is capped but your losses are not. The amount of the gain varies from annuity to annuity. Say your cap is 3%/month. So if the market goes up 30% one month, up 30% the next month, and then down 6% the next month, you're right where you started -- AXA keeps the other 54%.
- If there is major inflation, that 6% guarantee suddenly becomes worthless. If your cap is 3%/month, you can only earn 36%/year tops -- whereas the market should be tracking inflation.

Stay away! Find a different broker!

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Author: investinginstuff Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46369 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/6/2005 9:16 PM
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Put all the lipstick you want on this pig, it's still a FREAKIN' PIG!

He probably failed to tell you that he'll make a nice $12,000 commission off this sale. I would find a different broker.

JLP

http://allthingsfinancial.blogspot.com

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46509 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/15/2005 10:25 PM
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Hold the presses!

Folks, I am a bit surprised (though I guess I should not be) that you are giving blanket statements about a contract you know little about. As an Advisor, I am familiar with this particular contract and I consider it to be one of the best in the industry.

Life, I would recommend this contract to you if you meet the following criteria:

Don't want to risk ever losing your principle
Want guaranteed income (in this case 6%)
Want guaranteed increase in death benefit

I would not recommend this if you are comfortable with market volitility as the expense will be higher in a VA for the same investment.

What makes this contract nice is that you can pull out 6% a year of your ORIGINAL investment, regardless of current account value, and you can increase that 6% to a higher dollar amount in future years if your account does better than 6% (as, for example, the Moderate Allocation acount has done).

If you don't take the 6% (or you take a portion of it due to RMD, for example) the rest of it is applied to the increase in death benefit. So, you could take 4%, apply 2% to the death benefit, regardless of the account performance, up through age 85 (when the 6% is maxed out but the account performance can still take the DB and the income higher).

Also, it is NOT true that you broker necessarily makes more money from an annuity, especially if your broker is a bank broker. I work as a FA for a large national bank and I get 4% to my gros commission for any annuity. I also get 4% for a mutual fund sale. I only make more money on an annuity sale when the contract goes about 50k and only then because on mutual fund sales, the client gets breakpoints starting at 50k (in most situations). Additionally, I make less on an annuity if the client is older (80+). On some annuity sales, I make only 1% to my gross commission.



To recap, if you are uncomfortable with the volitility the market can present and you need a guaranteed income stream, this is a great contract.

NO MUTUAL FUND OR STOCK can give you the same protection. Sure you pay for it in fees (and you get what you pay for) but 6% is still 6%.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46515 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/16/2005 1:36 AM
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Don't want to risk ever losing your principle
Want guaranteed income (in this case 6%)


As I pointed out in my reply, inflation is always eating your principle, so a guarantee that you won't ever lose principle is of little value. Also a guaranteed income is not so great if it doesn't outpace inflation.

Also, it is NOT true that you broker necessarily makes more money from an annuity, especially if your broker is a bank broker.

We were not comparing the annuity to loaded mutual funds; we were comparing it to no-load, no-12-b-1-fee funds.

6% is still 6%.

Not if inflation is 8%....or 18%.

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46520 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/16/2005 11:50 AM
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Still, we know nothing about the risk tolerance (or the investment experience) of the purchaser.

Also, if the client needs income from their investment, then they will not likely have an increase in their value of their principle anyway (so inflation risk is not resolved by simply buying an income mutual fund). And yes, 6% is still 6%...


If you buy a bond fund that yield 6%, you still have to be concerned about inflation risk, and interest rate risk. Two years later, if rates are low and as the bonds mature, your fund could now be yielding only 5%.

In contrast, while you have higher expenses, they are not an issue as it relates to your income stream. You have no interest rate risk and your inflation risk is relatively the same.

Again, a VA is not for everyone, but neither is a go-it-alone mutual fund. I see clients every month that tried it on their own and lost much of their life savings. Telling them they saved money with a no-load fund that had little or no 12b-1 fees is of little comfort to them.

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Author: cliff666 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46522 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/16/2005 12:19 PM
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Again, a VA is not for everyone, but neither is a go-it-alone mutual fund. I see clients every month that tried it on their own and lost much of their life savings. Telling them they saved money with a no-load fund that had little or no 12b-1 fees is of little comfort to them.

I can't tell you how strongly I disagree with you on VA's. I have one, with American Legacy, which has underperformed by almost any measure. I blame the extra 1% fees associated with the annuity. I also have a variety of index funds, but mainly VEXMX and VGSIX which have outperformed. It appears that when you say "Index Fund" you mean an S&P emulator, whuch has underperformed of late. Check back in 20 years and we'll compare notes. I also have a bundle of American Funds, which are front loaded, and they are doing well. The fees are low, and I am satisfied with the performance. One big advantage to me is that they include a substantial non-US investment automatically, so that I don't have to search out good funds and try to maintain a good mix. Having said that, I wouldn't buy them if I were starting out today. The front end load is a big obstacle. But I suppose with more than a million they eliminate the load, so this wouldn't be an issue for many here.

My other Mutual Fund exposure is the Fidelity FLPSX and FCNTX in my 401K. When I retire I may move these out of the 401K (Should I? I would appreciate any advice here. The funds are available at Fidelity, but I believe the Low-Priced Stocks fund is closed to new investors.)

At any rate, when I retire next year, I will draw the annuity down first. It should last three years. Then I'm undecided, but there is no rush. I may take some IRA money out and convert to Roths, as long as the tax bite is not over 15%.

At any rate, the management fees associated with VA's are a huge anchor on performance, and I expect to be needing money for the next 40 years, so a fixed 6% would be dumb in the extreme. imo.

cliff

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46524 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/16/2005 12:36 PM
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Also, if the client needs income from their investment, then they will not likely have an increase in their value of their principle anyway (so inflation risk is not resolved by simply buying an income mutual fund). And yes, 6% is still 6%...

Let me point you in the direction of something called the "safe withdrawal ratio" for a portfolio that's the right mix of a stock index fund and a bond index fund. You can get current income (that grows with inflation) while still growing your portfolio enough to keep up with inflation.

http://www.retireearlyhomepage.com/restud1.html

or more detailed (but it costs money)

http://www.retireearlyhomepage.com/reports1.htm

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46526 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/16/2005 1:22 PM
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<<I can't tell you how strongly I disagree with you on VA's. I have one, with American Legacy, which has underperformed by almost any measure. I blame the extra 1% fees associated with the annuity. I also have a variety of index funds, but mainly VEXMX and VGSIX which have outperformed. It appears that when you say "Index Fund" you mean an S&P emulator, whuch has underperformed of late. Check back in 20 years and we'll compare notes. I also have a bundle of American Funds>>

All VAs vary just like all mutual funds vary. Did you know that there are some excellent VAs with American Funds available? You can also pick Index funds within a VA. I don't recommend a VA unless a client meets specific criteria. I would much rather give someone a direct American Fund investment then put them in a VA but if they have never invested before in their life and they want some guarantees, a VA can do that for them.

As far as moving the funds, I would certainly do so for one significant reason - you control the investment. Even if you roll it over to a Fidelity direct account, you have the control. As long as it is through the company, they can change the funds available to you as well as change the actual company that runs the 401K. If you want to stay in the low-priced stock fund, Fidelity may allow you to do so if you do a direct rollover to them. I would call that 1800 number on the top right hand corner of your green statement.

While 6% may be dumb for you, I know plenty of people that would jump at the chance of geting a fixed 6% with upside potential.

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Author: investinginstuff Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46536 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/16/2005 8:45 PM
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While 6% may be dumb for you, I know plenty of people that would jump at the chance of geting a fixed 6% with upside potential.

Actually, by the time you take off 2+ percent for management fees, your 6% becomes 4%. That's not that great a deal to me.

JLP

http://allthingsfinancial.blogspot.com

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46539 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/16/2005 10:38 PM
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no, this particular annuity does *not* charge explicit management fees. The management fees are hidden (no dividends, capped gains, gains not locked in).

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46717 of 75781
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/29/2005 4:44 PM
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<<While 6% may be dumb for you, I know plenty of people that would jump at the chance of geting a fixed 6% with upside potential.

Actually, by the time you take off 2+ percent for management fees, your 6% becomes 4%. That's not that great a deal to me.

JLP>>

Sorry it has taken me so long to reply - vacation then illness.

For this contract, you get 6% AFTER the fees.

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