The Purrrfect Bark Annuity - Coming Soon

I'm pretty tough on the insurance industry, this is no secret. But I've been working behind the scenes with GTTD Life and Annuity to bring a new kind of annuity to the marketplace, a truly unique product never before seen.

I'm super excited about how this one product could dramatically change the lives of my clients and hundreds of thousands of teachers across the nation.

I call it, the Purrrfect Bark Indexed Annuity.

I know what you are thinking, how could I be pushing an indexed annuity? I finally found something I can get behind.

The key to greatness with this product lies in a special backtesting procedure I use called #datamining. It's a sophisticated machine learning program that searches for hidden patterns in data that have yet to be used to create indexes (from which one can create derivative products). As many of you know, backtesting always works as well in the past as it does in the future.

This data is then turned into an algorithm, actually two, which I named Feisty Feline and Careless Canine (for reasons that will soon become evident). The proprietary algorithm focuses on various ownership aspects of American households and the differences between cat owner and dog owner households. We are naming the index created from this data The Purrrfect Bark Index and from this index we create The Purrrfect Bark Indexed Annuity (PBIA).

The PBIA has the following features:

Spreads:     None

Caps:          None

Participation Rate: 500% of the growth of adoptions from shelters each year*

Surrender period: Variable based on the inverse average life expectancy of an index of shelter dogs****

Surrender charge: We want to disclose this, but feel it best not to overwhelm you

Guaranteed Minimum Return: 0% on 100% of premium

Commissions:  None of your god damned business, the company pays us, so there!

Way, it gets better. We are pleased to announce there is NO Barkit Value Adjustment (you may know it as the Market Value Adjustment)!

Purrrfect Riders Available:

That's A Good Boy - an optional benefit that provides for the long-term care of your pet should you pass away unexpectedly

9 Lives - this optional living benefit guarantees that your annuity will grow 9% annually for 9 years as long as you take the benefit as an income stream over 99 years**

We are confident that anyone who purchases this unique product will reap massive returns on investment. Our backtesting shows that there is no hotter index in the market than our Purrrfect Bark index.

Not a dog or a cat person? Doesn't matter, this is about more than dogs and cats, it's about earning gigantic rates of return while taking virtually no risk***. There are a lot of indexes you can use with your annuity, but none can compare to our index. Wall Street and major insurance companies are creating new indexes everyday based on absolutely bizarre ideas, we are grounding ours in something everyone can relate to, dogs and cats.


At this point you are either super excited about this product or you've figured out this is a parody. I have recently received numerous advertisements in my e-mail inbox for indexed annuities based on new and bizarre indexes. Indexes that were created just for the insurance company and for indexes that literally had fees deducted from the return so the insurance company products could appear to pay more upside than they actually do.

The absurdity of these new indexes and the failure of the insurance industry to police itself combined with the utter failure of insurance regulators when it comes to indexed products prompted me to write the above post. Don't believe me, here are a few examples of the shit that hits my inbox.

It's far past time to start regulating insurance companies and the products they market better. We are approaching absurdity. Can the average person even decipher the above two ads? How about the average agent?

The purpose of many indexed annuities today is to obfuscate, to say it's gone to the dogs would be impugning the integrity of every "good boy" out there. There is not a pooper scooper big enough to shovel the shit indexed annuity companies are pushing these days.

Scott Dauenhauer, CFP, MPAS


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*If growth in shelter adoptions is negative, the participation rate is zero.
**Income stream is non-transferrable, even at death. 
***You are taking credit risk and should take into account the rating of the insurance company. 
****We want shelter animals adopted and living long lives, so the more you adopt and keep your pet healthy, the faster your surrender charges go away. 

GTTD Life and Annuity - Gone To The Dogs Life and Annuity is Trademarked (it's not)!

Annuity Compensation Conflicts

Compensation conflicts with annuities abound. Most of the time the conflict is in selling one annuity over another to earn a higher commission or to earn a trip to a tropical paradise. However, there are also conflicts that exist once an agent has settled on a product to sell you - should they take their money now, or over time? I recently came across the following over at www.efmoody.com and found it interesting:

Annuity Investors Revealed by Scott Dauenhauer, CFP, MSFP, AIF on Scribd

What's so extraordinary about this agent advertisement is the different options available to the agent for receiving their commission. They have three options:

Take a big commission up front (6.50%),

A smaller upfront commission and ongoing smaller commissions for a few years, or

Structure their commissions to look like an investment advisor (except that the commissions are not disclosed and there is no fiduciary responsibility)

You'll notice that the third option produces the highest long term compensation to the agent, though it takes patience to collect. One must wonder why you would pay a 2.5% commission to a salesperson plus an ongoing 1% commission when there is nothing to manage. Investment advisors are at least getting paid to manage the money, the agent isn't managing anything and has no fiduciary or planning responsibility. As long as they keep the client in the policy, the insurance agent gets paid. This seems similar to the C-Share problem mutual funds have, in other words, even if the compensation is paid as a commission, if it's structured to look like a fee-based, fiduciary relationship, it should be regulated as one. If it walks and talks like a duck...

I'd like to point out one more thing. In glancing at the 10 year commissions on each option the numbers for the third option (labeled Trail) looked off to me. I setup a simple spreadsheet and sure enough, the 14.31% is incorrect, that's the total commissions paid over 11 years, not 10. They got their own compensation advertisement wrong.

Not only is there a conflict in choosing which annuities to use, there is a conflict once you've decided upon an annuity. The sale of annuities are literally conflicts wrapped within conflicts, wrapped within a conflict. I'm not one of the advisors who says that all annuities are bad, but you can understand why many would simply shake their head at a system that is so adverse to the customers the agents and insurance companies are supposed to be serving.

Scott Dauenhauer, CFP, MPAS, AIF

Are you 403(b) Wise? 403bwise.org is the place on the internet to learn, advocate and build community.

More 403(b) Vendor Shenanigans & Trips...Those Amazing Trips

This past week I've come across several instances of what I consider improper marketing efforts by insurance agents for 403(b) vendors. 

As best I can tell, this week it's LSW and Midland, two of the worst 403(b) vendors in the industry in my opinion. 

I also found where LSW is having their Conference of Champions trip and have posted the details.

LSW Agent Violated District Rules?

The first issue is with an LSW representative, as reported to me:

The email was originally sent out to our principal (name redacted). In the email it states that he (the LSW insurance agent/salesperson) had:

"nominated our school for our 'sports equipment giveaway' program on numerous occasions in the past." 

It goes on to state:

"As you know, we are (an) approved 403(b) advisors with the district as well as the TPA (third party administrator) and we conduct retirement updates at numerous schools functions including staff/professional development meetings." 

The letter goes on to state that:

"we have 2 sets of sports equipment available to be donated in March that are being funded by one of our agents out of his own pockets with no corporate money involved."

So what's the problem? Several.

First, the rep is essentially bribing the school official with sports equipment in order to gain a quid pro quo of access to "staff/professional development meetings." This is unethical in my opinion. If you want to give the school equipment, just give it.

The bigger problem is that in this particular school district agents are prohibited from being on campus for any reason (other than if their child attends, of course). Yet the rep is attempting to gain access even though the rep new it was not allowed. I know the rep knew it wasn't allowed because the rep is listed as an LSW rep on the active agent list that LAUSD collects.

It gets worse. The agent represents that he is an "approved 403(b) advisor(s) with the district as well as the TPA". This is a misleading claim. The district doesn't approve agents and the Third Party Administrator doesn't either. The district simply makes all agents and brokers who sell products complete information so that they can track who is selling in the district and ensure they are following the rules. The list has not been vetted. You can read all the documents that LAUSD requires agents to sign here. LAUSD has not approved this salesperson in any fashion, simply required that they adhere to LAUSDs guideline if they wanted to sell in the district, to indicate otherwise seems quite dishonest to me.

To give you an idea of what the solicitation agreement entails, here are a few of the key points:

SECTION I – RULES AND PROCEDURES

1. Agent must sign the Rules of Solicitation Agreement and file with TSA Consulting Group, Inc., Plan Administrator, prior to working with employees of Los Angeles Unified School District.
   
2. Any Agent working in the district must be listed as an agent with at least one of the companies on the authorized investment provider list.
   
3. Agent is responsible for updating TSA Consulting Group Inc. of any changes in company/companies represented and any change in business contact information such as address, email and phone contact.
   
4. No agent may solicit employees or distribute promotional materials for the purpose of obtaining contracts for tax‐sheltered annuities, 403(b) voluntary retirement savings or similar benefits on District property.
   
5. Agents may not ask employees to utilize District facilities (fax machines/telephones) to arrange appointments or send materials related to 403(b) voluntary retirement accounts.
   
6. Agents are not permitted to meet with employees on District property for any reason related to the soliciting or servicing of an employee 403(b) Tax‐Sheltered Annuity.
   
7. Interference in any way with employees daily period of service will not be tolerated.
   
8. Agents may not for any reason sign‐in to the ART System for, or on behalf of the employee, to process any
   transaction or make changes to Salary Reduction Agreement information. Accessing ART utilizing someone else’s credentials is considered fraudulent activity and is grounds for immediate termination. 

The agent is listed with LAUSD which indicates he signed this agreement (note: I've not independently verified he signed the agreement, this is an assumption based on the process in place to get on the agent provider list). Notice Rules 4 - 7....the above e-mail seems to be looking to violate all of those rules. It's going to be hard to claim ignorance.

The second solicitation issue happened in the same city and same district and the rep involved is also listed several times on the districts agent provider list.

LSW/Midland Appointed Agent Represents As CalSTRS?

In this situation an agent who is appointed with LSW and Midland (and who has won awards apparently with both for selling their products) represents himself as being affiliated with CalSTRS, a common trick of insurance agents selling 403(b) products.

I don't know how the individual received the document below, but you can see that it asks questions related to the California State Teachers' Retirement System (CalSTRS) pension plan. But more importantly, the e-mail address literally starts with "calstrs". I've blocked out any identifying information.

LSW Advisor Resources by Scott Dauenhauer, CFP, MSFP, AIF on Scribd

This is another case of misleading solicitation. Even if the agents didn't mean to mislead, he used the name of CalSTRS in his e-mail address...that's a no-no. The agent brags on his website that "Since 2012 (name of agent) has reached the President’s and Platinum club levels with several nationally recognized Premier Retirement Planning and Insurance Carriers." If you are not aware, this is not a trait a consumer should look for in a trusted advisor - it simply means he sold enough of that company's products to achieve a certain level (which normally leads to trips similar to the ones below).

Bottomline - solicitation by reps of insurance companies that are bad for consumers continue to be a problem. Be careful out there.

Just so you understand what is driving these solicitations, I'm including below the trips that these types of agents might qualify for if they submit enough business to National Life Group/Life of the Southwest:

LSW 2017 by Scott Dauenhauer, CFP, MSFP, AIF on Scribd

LSW 2018 by Scott Dauenhauer, CFP, MSFP, AIF on Scribd

It's time this kind of stuff stopped.

Scott Dauenhauer, CFP, MPAS, AIF

Are you 403(b) Wise? 403bwise.org is the place on the internet to learn, advocate and build community.

Everything Wrong With 403(b) Markets In One Slimy Vimeo Video

I subscribe to Google Alerts and recently I was alerted to a Craigslist ad that was recruiting people to sell commission based index annuities to unsuspecting teachers in Chicago.

I clicked on the link and then found a video.

It's a bit long, but gives you some insight into the thinking and compensation and marketing practices of these sales agents. No mention of doing real financial planning or teaching people to do real financial planning.

It's everything that is wrong with this industry in one video.



2015-12-23 11.22 Webinar Now from Chris Reid on Vimeo. It's time these practices were stopped. These people are not fiduciaries, they do not have educators best interest in mind. Nor are they qualified to provide competent financial planning (as demonstrated by a lack of credentials).

Are you 403(b) Wise? 403bwise.org is the place on the internet to learn, advocate and build community.

Scott

Bermuda, Ireland, Florida or Argentina - Just Sell Enough LSW Annuities

Want to goto Bermuda in 2018? Just become an indexed annuity salesperson who contracts with the National Life Group (also known as Life of the Southwest or LSW) and sell enough of their products and you could be heading there in business class!

Perhaps you want to stay in the United States, Naples, Florida at the Ritz-Carlton was a destination for 2017.

Want to go to Ireland or maybe Argentina? No worries, LSW has options for those as well. Again, you only need to sacrifice your soul and sell their surrender charge laden annuity and insurance products to unsuspecting people, including hard working school employees and you too can board business class.

The 403(b) and 457(b) markets are littered with companies and insurance agents selling indexed annuity products to teachers and other school employees who are not informed enough to know what they are purchasing. These products often come with 10 year or longer surrender periods with surrender charges exceeding 10%.

Don't believe me...see for yourself:

National Life Group Destinations by Scott Dauenhauer, CFP, MSFP, AIF on Scribd

These disgusting incentives should be not be legal. Scott Dauenhauer, CFP, MPAS, AIF

Are you 403(b) Wise? 403bwise.org is the place on the internet to learn, advocate and build community.

Yet Another Hidden Annuity Compensation Conflict

The conflicts in annuity compensation seem endless. This is why I generally tell people to avoid them. I've got another conflict to add to the growing list, deferred compensation.

Insurance companies want loyalty and they design their compensation systems to reward it. I recently came across F and G Annuity and Life's deferred compensation scheme and thought it was a good demonstration of hidden conflicts in the recommendation that might be coming from your annuity agent.

Agents that aren't captive (meaning they can sell any insurance companies products) sometimes end up as independent, but captive. Confused? Let me explain.

Imagine you have two products you can sell. One rewards you with bigger commissions, amazing trips and other perks, but only if you sell enough products from that company during a specific time frame. If the agent anticipates making $2 million a year in premium sales, the perks available to that agent by selecting only one company to distribute can be significant versus if that agent sold products from two (or more) insurance companies. It's possible that the agent could miss qualifying for big perks at both companies even though they sell more in premium than agents who did receive the perks (but kept all their business in one place).

Back to F and G Annuity and Life.

F and G Life has a deferred compensation program for agents who use distribute their products, it's called the Power Producer Program. This program rewards loyalty. It rewards the agents who concentrate their sales with F and G and it presents a significant conflict of interest when the agent is choosing which product to sell to a customer. Should they sell the product that doesn't qualify them for contributions into a deferred compensation program (for the agents retirement) or one that does?

This is a conflict that the NAIC should eliminate (among many, many others). There should not be an incentive to sell one product type over another.

Here is the outline of the Power Producer Program as explained in an F and G brochure:

Each year we set a Power Producer qualification level. Producers earn credits throughout the calendar year and can combine both their annuity and life sales. The 2019 qualification level to earn one credit is 1.75 million points. $1 of FIA premium is equal to 1 point and $1 of life premium, up to target, is equal to 15 points. The Power Producer credit is determined each year, but each credit is typically worth between $3,000-5,000.

The deposit amounts are cumulative and below is an example. By qualifying for just one credit a year, from 2013-2018, F&G would have contributed $80,000 on your behalf to a non-qualified deferred compensation plan.

The current qualification period is January 1 - December 31, 2019. 

Insurance is an important part of your financial plan and insurance regulation in the United States has failed the consumer. While I don't expect you'll receive an honest answer, always ask how your agent will be compensated and if selling the product they want you to buy qualifies them for trips, commissions, other perks and deferred compensation.

Here is an image from the brochure and a link to it.

Are you 403(b) Wise? 403bwise.org is the place on the internet to learn, advocate and build community.

F & G Life Power Producer Program