This wholesaler prefers not to talk product

As a wholesaler, I found your Jan. 29 article “Wholesalers fall short, say advisers” very interesting and very…

As a wholesaler, I found your Jan. 29 article “Wholesalers fall short, say advisers” very interesting and very accurate. I also agree with [adviser] Matt [Blecker] and his comment about many wholesalers’ having scripts to run on.
Personally, I am not good at memorizing, so the use of a script is out. Many of the products that are out there focus on wealth accumulation, and as a result, that is what the wholesalers talk about.
There are not a lot of products that are geared toward retirement income or wealth distribution, and so wholesalers talk about the products that they have to offer.
Personally, I hate talking about products. I love to talk with the advisers about asset allocation.
In particular, I talk with them about dividing the client’s money into a couple of big buckets. One bucket contains the money that the client wants to keep forever or spend it before they die; they do not want to risk losing that money. The second bucket contains the money that the client is willing to risk and lose in an effort to make the contents of that bucket grow.
Sadly, you cannot have growth without some risk.
Steve Rovito
Regional vice president/Ohio
InSource Inc.
Indianapolis

‘Lifetime income’ pitches ignore effect of inflation
While I agree with the comment from [Robert] Hanten [“Lawmaker changes horses on income stream comments,” Feb. 5] that if advisers don’t alert clients to the likelihood of running out of money before death at a given withdrawal rate and portfolio design, they cannot possibly make a recommendation that puts the client’s needs first, I don’t agree that annuities are the best answer — particularly if there is a surviving spouse or a retiree wants to leave a financial legacy.
Remember, a key point of the annuity is that (unless it is a joint annuity) a lifetime amortized annuity “dies” when the owner dies — even if it’s the next day or week.
I believe a better and more flexible solution involves helping clients do the pertinent calculations related to retirement funding.
I find that although “lifetime income” sounds great, most clients really want “lifetime lifestyle” instead. They want income that will not only last as long as they live but keep up with the cost of living.
I find most clients don’t just want $20,000 a year, they want income equal to the inflation-adjusted equivalent of that current $20,000 10, 15, 20 — or whatever — years in the future.
I have no problem with an adviser’s promoting annuities, as long as they are required to show, in writing — and have the client sign — a chart showing what income they would need each year of retirement to counteract the effects of inflation. Want to bet that someone who needs $20,000 today wouldn’t consider $20,000 in 20 years true “lifetime income”?
Suppose we have a client who wants the current equivalent of $20,000 a year for 30 years and assumes investments will earn 6%.
To generate $20,000 a year with no annual increase, an investment of $291,814 is needed.
To generate $20,000 a year with 2%-a-year increase, an investment of $362,850 is needed.
To generate $20,000 a year with 4%-a-year increase, an investment of $461,409 is needed.
A client who wanted to withdraw 4% more each year would really have the current equivalent of only $12,649 a year with an investment of $291,814.
Ultimately, retirement funding is a function of years, inflation rate, investment rates, other sources, etc. To take the simplistic approach of an annuitized annuity could cause painful financial hardship when a client can least afford to deal with it.
Ilene Davis, CFP
Cocoa, Fla.

Gadfly in the ointment: A doctor in the house?
Your Jan. 22 article “VA critic’s new take on pricing called just as wrong as his first” will certainly ingratiate you with the insurance industry and its agents — something that appears to be a secondary purpose of the article.
You describe Moshe Milevsky as an “academic gadfly” in the opening paragraph and then proceed to refer to him throughout the article as Mr. Milevsky, avoiding the honorific “Dr.” (eight times). You could have evened things out a little two ways. One, you could have dropped the “gadfly” slight and used “Dr.” as appropriate, or two, you could have slighted the other industry interviewees as well, calling them “industry apologists,” “industry tools” or other, possibly more inventive creations. Maybe you could have included the appellations of the industry respondents as, “B.S. in marketing, NYU,” etc.
Try not to let your industry slant on the business leak so obviously into your articles. The industry observers in the article did just fine without the help.
Craig R. Hoogstra, CFP
Accredited investment fiduciary
CRH Services LLC
Washington

Editor’s note: It is InvestmentNews style to eschew the honorific “Dr.” in second reference for academics and even medical doctors mentioned in a non-medical context — running a health science fund, for instance. And the word “gadfly” is not necessarily a pejorative; it denotes one who rouses others from complacency.