Michael Salley is one of those ever-growing group of advisors who have become independent and taken their Wall Street knowledge to Main Street, bringing along his New York working-class neighborhood ethics. Leaving a long career as a wirehouse rep at Merrill Lynch and Prudential Securities, he left New York to start Salley Wealth Advisors Group, LLC, in Summerville, South Carolina, near where his parents' and wife's family has roots.
As a broker for three decades, Salley remains a fan of annuities and insurance company products, despite naysayers on financial cable networks who say the costs are too high, he says. Americans are living longer and longer, and for Salley, "the question is not the return on investment, but how do I manage my clients' assets to make sure that I don't outlive them."
Thus, Salley likes to use a group annuity when it comes to a 401(k) plan. "I use the variable annuity quite extensively with retirement plan assets because it is the only thing I can show my clients that has a guarantee against market risk," he says. Even though the annuity is seen as a tax deferral vehicle, Salley doesn't see any problem using a product with a tax deferral within a tax-deferred program. Baby boomers with very large IRA and 401(k) balances get Salley's explanation that they have their boat insured, they have their house insured, so why not insure their 401(k) plan with an annuity? An annuity within the 401(k) makes sure there is a guaranteed income stream despite what the market does.
Salley goes so far as to state, "In my mind, a variable annuity is perhaps the smartest way for one to own mutual funds today." He also says the new guaranteed living benefits are a tremendous tool for the investing public, "especially during these extremely volatile times," and he likes that they can be extended to the spouse as well.
With continued globalization, a large percentage of stock market opportunities are outside the U.S. and there is a lot of uncertainty, so using an annuity in a qualified plan because of the safety and the benefits means the results for clients are actually guaranteed, he says.
An insurance company's key concern is to stay invested--the assets are preserved for the family and the annuity owner, Salley claims. The annuity buyer, he says, is perhaps a little bit more disciplined than the average investor, so he won't make a worried call every time the market turns, Salley notes.
"These are some people who are very happy," he says of his annuity owners. "I have never had someone say to me, 'Mike, I want to take all my money out of my annuity contract.' They can take something out and still leave money for their spouse and their children and grandchildren," he adds.
Major insurance companies now use a multi-manager investment platform that gives access to some of the brightest portfolio managers on Wall Street. Many contracts offer over 50 options to choose from in addition to a menu of asset allocation portfolios, Salley says.
Salley started recommending annuities 20 years ago. Now annuities are available with 18 different mutual fund companies on the investment platform so there is a wide choice of investments, he notes.
"My clients don't switch in and out of investments every time the wind changes direction," he says. "I don't want to get in the habit of buying and selling investments."
If someone did like a stock three years ago and didn't like it now, "there would have to be a very good reason for that," he says. "The market going down is not a reason. My business is predicated on staying in the market for a long time."
Salley knows about the long haul. He was raised on 147th Street in New York, and then his father moved to Brooklyn with his eight children after Salley's mother died when he was but nine. He grew up in an economically disadvantaged neighborhood but always maintained the hard-working, deeply spiritual, honest and patriotic values his parents had instilled in him, went to college on a scholarship, and got news he had passed his Series 7 exam in time to notify his father on his deathbed.
"I market myself as the financial advisor who sits on the same side of the table as his clients. I understand that the way in which I build my practice puts me in alignment with clients. I am not going to do well unless my clients do well."
Elizabeth D. Festa is a freelance business writer based in Washington, D.C. She can be reached by e-mail at email@example.com.