Welcome to the real world, Mr. Dimon. They finally found a blemish on Wall Street’s golden boy. The banker who could do no wrong just lost $2 billion due to his rogue trading department. And, yes, he’s the same guy who went to Washington on several occasions whining that proposed regulations (Volcker rule) will change Wall Street forever and make his bank uncompetitive in the global financial environment.

I hate regulation as much as the next bird, but for the price of some occasional public scorn, the big banks, in return, continue to abuse and deceive the public and, guess what, America is still at their mercy. Remember “too big too fail”? Well, they’re still too big to fail, and there’s not a damn thing we Americans can do about it. I loathe big banks and it got me thinking, what good are these big banks now? Continue Reading

For the last two years we’ve heard the PIIGS (Portugal, Italy, Ireland, Greece, Spain) must cut social programs and fire government workers to cut their debt levels and get their financial houses in order. Germany has been playing hardball with these fiscally porcine countries by threatening to push them out of the European Union if they don’t enact austerity programs. Here’s the catch: what happens when voters in the PIIGS, as well as in the Netherlands and France, choose growth over austerity? Will the Germans play a game of chicken with the euro zone? I don’t think they will. Continue Reading

The dreaded topic of renewal rates—a thorn in my side since my egg hatched—may be the most important aspect of fixed-index annuities, but it’s an enigma to just about every annuity purchaser. And most agents probably don’t understand the inner workings of renewal rates either.

Let’s start with the definition of renewal rates: When you purchase a fixed or fixed-index annuity, you are given a guarantee for a certain duration. It may be for one, three or five years, or any period of time that a company offers. Renewal rates commence after your initial guarantee has ended. In the old days, insurers commonly offered new buyers a one-year guarantee that had seven years of surrender penalties. After the first year, the company declared what they’d offer you on your annuity contract. You were, in essence, at the insurer’s mercy for the remaining six years, or you could opt to surrender your contract and face a surrender penalty. Keep in mind, you had a minimum guarantee, usually 3%, but the company determined what they would pay to annuity policyholders. Insurance companies referred to this company declared rate as the renewal rate. Continue Reading

After checking an insurer’s ratings, the next step in search of the (nearly) perfect annuity is finding a suitable surrender charge duration.

An annuity’s surrender charge duration is the number of years you’ll be hit with a penalty if you surrender or liquidate a contract. Most penalties last from seven to 10 years, but some last as long as 20 years or as short as three years. Currently, 10 years seems to be the surrender period of choice for the popular fixed index annuities. Continue Reading

How do retirement-conscious Americans get unbiased, third-party annuity product information? Well, they can’t, because it doesn’t exist. If Americans find opinions about annuities on the Web or in their community, they likely come from an annuity agent who’s trying to peddle his products.

So, how would you create a fixed annuity rating system that would help consumers purchase the best annuity products? Continue Reading

I’ll come out and say it: it’s almost impossible for an annuity company to make money building and selling annuity products. In fact, I think I’d rather own airline stock than try to make money with life insurance company shares.

Insurance companies create new products, build these products off actuarial projections, spend millions in set-up and marketing, then wait for the business to roll in. The insurer usually becomes too aggressive with the new products or they take the too-conservative road.

If the annuity is priced aggressively, business can and will come in quickly. Management gets giddy, and they high-five each other for weeks. The company hires new back office staff to process all the new business. The company tries hard, but customer service still falls apart. The cycle continues for six months or so, usually until someone in accounting or a new consultant asks how the hell they are going to make money paying these rates. When the facts emerge, the company runs to the exit door. It turns into an expensive lesson learned. Continue Reading