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.