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Life Health > Annuities > Variable Annuities

On the Case

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Thank you, thank you, thank you for your great cover story, “Power of Attorney” (July 2004), about a law firm that also provides tax, financial planning, and estate planning services. I have struggled with this type of practice for three years. I began as an investment advisor/CFP in the early ’80s, and then added the law practice in 2000. We struggle with similar issues in Utah, and it is very encouraging to see a successful firm practicing like this while maintaining the integrity of the legal practice. I am struggling with compensation, ownership, and licensing issues between disciplines, especially since not all of our partners are attorneys, registered reps, or RIAs.

I think we will see many more practices like this emerge, especially on a smaller boutique scale, and I am glad to see that your magazine is on the case. Thanks again for a very informative article.

Troy T. Wilson

Reliance Financial Advisors

Salt Lake City, Utah

Gone Fishin’

In “The Right Way to Optimize” (Gluck Report, June 2004), Ibbotson and PlanScan representatives criticized current optimization techniques while praising new techniques that, coincidentally, they happened to be selling. I skip over articles when they smell as fishy as this one did. Please stick to unbiased reporting so that I can read your whole magazine.

David (Trey) Biz?

Oklahoma City, Oklahoma

Variable Opinions

I must take exception with your July article about variable annuities (“Bird in Hand,” July 2004), and remind you of some of the other distinct disadvantages of VAs that you failed to mention.

1. VAs are estate-planning nightmares. You have taken gains that would normally be taxed at capital gains rates and made them taxable at income tax rates. Secondly, should the client die, the heirs are paying income taxes on the gains. Gains on stocks or mutual funds would receive a step-up in basis. The gains would be wiped out and no taxes paid.

2. Variable annuity ownership cannot be changed without triggering a taxable event, which makes VAs hard to gift.

3. Expenses and charges within the contracts are unreasonably high and affect returns dramatically over the long haul.

4. The only suitable client for an annuity is someone who is debt-free, has contributed the maximum annual amount to his qualified plan and IRA, and still has money he wishes to allocate strictly to retirement. Clients should also be counseled that annuity money should be spent while they are alive.

I think we all know that if annuities, like mutual funds, were subject to breakpoints, their sales would drop significantly and there would be far fewer abuses.

Chris Foster, CFP

Back Me Up on This One

I read your July Gluck Report article entitled “Serve Yourself” and appreciate the benefits of Mirra’s system regarding file sharing and remote access features. I also agree that data backup is not addressed very well with their system. The protection from catastrophe or employee sabotage is not handled in Mirra’s system, and as you mention in the article, mirroring and backup are completely different things.

We have found that the Tenet Data Backup service is very easy to use, reliable, and very affordable. I look at it as a service that really protects my business and my clients.

Patrick K. Tucker

Meridian Capital Management, Inc.

Omaha, Nebraska


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