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Financial Planning > Behavioral Finance

Praise for "The Puzzler"

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Good article on “Do VAs Ever Make Sense?” (The Puzzler, January 2005)

I wish you would look into some popular riders that I find very, very attractive, including guaranteed income and death benefits that compound annually.

I invested a substantial amount of client assets into Scudder Destinations, which the company then cut off. I did another few million with US Allianz Life, which then cut theirs. The list goes on.

If annuities are such a rip-off, how come these insurers have ended these programs?

My prediction is that Equitable and MetLife will end theirs next.

Jack Oujo, CPA/CFP

Wall, New Jersey

The Puzzler (Ben Warwick) responds:

1. The length of “The Puzzler” did not allow me to explore the myriad of guaranteed equity-linked products that are now offered by annuity companies. Perhaps a more in-depth article could be possible in the future.

2. I never said that annuities are a “rip-off.” On the contrary, they may make sense for some investors. In the case of Scudder Destinations, the embedded options may have been unintentionally underpriced, which would cause Scudder to discontinue the products.

Mark Twain on FPA

Mark Twain must have been referring to the FPA when he said: “Nothin’ needs reformin’ like other people’s habits.”

FPA wants to reform the brokerage industry by adding to its regulatory burden. The hypothesis is that investors will change from brokerage firm advisors to financial planners if brokers disclose more information. Some planners argue that investors need “more regulatory protection” but fail to answer the question: “Protection from what?”

Brokerage firm representatives already are subject to more regulation than financial planners. Reps take as many as 15 regulatory examinations in addition to optional internal examinations over advanced topics, or the CFP examinations for reps who choose to excel.

The important protection for investors is protection from loss, a practical impossibility that also is contrary to a capitalistic system in which all investors assume risk. However, a client of a large brokerage firm has more protection than the client of a small financial planning firm. The reason is that large firms pay arbitration settlements, but small financial planning firms rarely have the financial resources to pay such awards.

Financial planners should leave brokers alone. Let the SEC and consumer groups formulate the appropriate regulatory environment. Instead, FPA should use its limited resources to study and to improve our practices, as has the CFP Board in creating practice standards. We need to evaluate and to improve ourselves before we accuse others of inappropriate behavior.

John Guy, CFP

Wealth Planning & Management

Indianapolis, Indiana


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