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Guest Sierra

Joel: I am not thin skinned, I am discrete; which means that, while I am willing and able to discuss most things, my personal investments choices are not for public display or consumption. Put another way, I am not here for you to analyze or dissect. I dont do that to others, and I expect, repeat expect, the same courtesy. Lets be clear on that. If we can accommodate each other, then we continue to chat, if not, then, not. Thank you.

 

Herbert Hussey

 

 

Herb: I am quite clear that you are simply evading a reasonal question. Did you not volunteer the information that you buy the fixed annuity and not the variable annuity. Did you not say: "Sierra: M&E charges for VA and fixed annuity are structurally different. The fixed annuity M&E is built into the cost of the product, and can't easily be broken out. On the other hand, the M&E for VA's are a separate fee that is charged to the client's account."

 

You go on to volunteer that you are concerned with the ME fee associated with the variable annuity product so you only buy the fixed annuity product where the ME fee "can't easily be broken out".

 

Then I ask you to explain to us what is the fixed annuity's attraction to you, recognizing the fact that the ME fee is a drain on the declared interest rate and you tell us that I am asking you to divulge your "personal investment choices" when I have done nothing of the kind.

 

As a securities broker you have told the whole world that you have a fixed annuity in your pre-tax account but refuse to tell us your rationale for such an investment notwitstanding the fact that the guranteed return of premiums as a death benefit associated with the ME fee of a variable annuity has no application to the fixed annuity.

 

Could it be that you have bought a fixed annuity for your pre-tax account to impress your prospects to do the same recognizing that the commissions generated from such sales will make your fixed annuity investment in your pre-tax account the best investment of your life?

 

Joel L. Frank

Edited by Sierra

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Guest Sierra

Sierra,

And I guess pigs can fly? That's my point. Just because you say it isn't advice doesn't make it so.

=====================================================================

"Advice" is not present if their is no recourse. If I act on the advice given in a newsletter and the investment sours I have no recourse because the newsletter is not in the business of furnishing investment advice. Do you agree?

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"Advice" is not present if their is no recourse. If I act on the advice given in a newsletter and the investment sours I have no recourse because the newsletter is not in the business of furnishing investment advice. Do you agree?

 

 

I would agree with that. And I would add that the problem lies not with the financial newsletters, but with the rules governing them. It seems to me that there is a clear double-standard at work here. My stockbroker can call me, recommend that I buy shares in GM, and I have recourse to sue him when GM eventually goes bankrupt. By the same token, I can subscribe to "Gabby Huckster's Underpriced Stock Digest," read an article where Gabby jumps out of his skin screaming about what a bargain GM is at these prices (an article CLEARLY written for the sole purpose of touting GM stock), and have no recourse to that because after the enormous headline urging me to BUY GM NOW!!! and the 4-page article talking about how great GM is, there's two lines of teeny tiny print at the bottom reminding me that Gabby is not giving advice here.

 

It seems to me that, in a perfect world, an individual who gives financial advice should be held accountable for that advice, whether he gives it in the form of a phone call or a newsletter, and whether he is making his money from the commission from the sale or the subscription price of the newsletter. Do you agree?

 

[Note: all the advice given in THIS forum, of course, is worth exactly what the reader is paying for it. No liability should EVER be assigned for free advice, unless it comes in the form of these spam postings about penny stocks, which is of course criminal activity.]

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Speaking of "teeny tiny print"..if we got rid of that there might be clear and better understood products available. Most new teacher consumers, unfortunately, skip the fine print and depend on trust. By the way, what are the sources of income/commission for salespeople, i.e., I wouldn't think from the funds "expenses" because that presumably is for the fund's "home office" (analysts, paperwork, big bosses) but I don't know..from 12b fees, from front loads and back loads?...just where? Thanks, Dan

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"By the way, what are the sources of income/commission for salespeople, i.e., I wouldn't think from the funds "expenses" because that presumably is for the fund's "home office" (analysts, paperwork, big bosses) but I don't know..from 12b fees, from front loads and back loads?...just where? Thanks, Dan"

 

Your right Dan, the source of commission is from the loads, 12b-1 fees. They are not from the annual expenses some of which go to the portfolio manager and some to administer the company that the sales representative either works directly for, or is authorized to sell through his sales organization. So if a sales advisor sells a product to you, he would get some of the money paid by the investor, the sales organization would get some to pay their costs and make profit, and the insurance company or other load company would get some to pay their costs and make a profit.

 

Many also charge an additional fee on the statements of say about $20, which many naive investors think is the total cost. I'm not sure who gets that money.

 

Another costs , that is the paybacks to unions and others to have their products endorsed, and consider that there is a good chance that there are cost to gov. officials and others to include school district decision makers to insure an the environment in which business can be done. I'm not sure where these expenses come from. It might be from the 12b-1 or directly reducing company profits.

Edited by ira

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Guest Sierra

 

"Advice" is not present if their is no recourse. If I act on the advice given in a newsletter and the investment sours I have no recourse because the newsletter is not in the business of furnishing investment advice. Do you agree?

 

 

I would agree with that. And I would add that the problem lies not with the financial newsletters, but with the rules governing them. It seems to me that there is a clear double-standard at work here. My stockbroker can call me, recommend that I buy shares in GM, and I have recourse to sue him when GM eventually goes bankrupt. By the same token, I can subscribe to "Gabby Huckster's Underpriced Stock Digest," read an article where Gabby jumps out of his skin screaming about what a bargain GM is at these prices (an article CLEARLY written for the sole purpose of touting GM stock), and have no recourse to that because after the enormous headline urging me to BUY GM NOW!!! and the 4-page article talking about how great GM is, there's two lines of teeny tiny print at the bottom reminding me that Gabby is not giving advice here.

 

It seems to me that, in a perfect world, an individual who gives financial advice should be held accountable for that advice, whether he gives it in the form of a phone call or a newsletter, and whether he is making his money from the commission from the sale or the subscription price of the newsletter. Do you agree?

 

[Note: all the advice given in THIS forum, of course, is worth exactly what the reader is paying for it. No liability should EVER be assigned for free advice, unless it comes in the form of these spam postings about penny stocks, which is of course criminal activity.]

 

 

There is no double standard because a newsletter has thousands of subscribers. A financial profile of each subscriber is not on file with the newsletter as it is with your securities agent. The newsletter has absolutely no knowledge as to whether or not a purchase of GM stock is suitable to any ONE or ALL of its subscribers. The investor is on his own! The individual has no recourse because there is no fiduciary relationship with the newsletter and its subscribers.

 

But when your stock broker recommends GM stock to a client/prospect it better be "suitable" to the investor---if it is and GM tanks the broker is not culpable---but if it is not suitable and it tanks the broker is culpable. The devil is in the detail.

Edited by Sierra

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Welcome back FrenchTeacher!

 

I too was very shocked when I first read that the "NEA received $49.6 million from Security Benefit Life Insurance, the provider of Valuebuilder." But the sentence goes on to read: and other endorsed companies in 2004." It's my understanding the deal is more along the lines of $2 million from Security Benefit. I am no fan of this product in its current form but I think it is important to point that out.

 

Dan Otter

 

 

I think that I misunderstood that sentence, as well. My communication with NEA MB indicated that the amount was, indeed, $2 million. This still does not change my view of the propriety of the payment.

 

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Hi,

On the question of liability, here is what Rick Ferri had to say in a conversation on M*:

 

24. Adrian

rickferri| 05-12-06 | 09:35 PM

.

Yes, but newsletter writing is attractive because a good writer can make a lot of money with no liability. That is because the information in a newsletter is take-it-or-leave-it "journalistic content" according to a 1980s Supreme Court decision. Investors are not obligated to take the advice, so there is no fiduciary standard applied to newsletters, magazines, newspapers, or the stuff you read on bathroom walls. There is no regulation covering newsletters. That is why any writer can claim exorbitant returns and does not have to back them up. Just look at Wade Crook, uh, I mean Wade Cook. He fleeced people for years with his phony newsletters, books, tapes, and seminars. The Feds finally got him.for tax evasion!

 

Newsletter writing is a very different than the business I am in. As an investment manager with full discretion over real accounts, we are fiduciaries. By law we are responsible for our recommendations and our actions. Any performance data used in advertisements must be substantiated by facts. If we mess something up, I pay-up or go to jail.

 

I am not complaining, mind you. I'm just pointing out that investment management business and the newsletter writing business are two completely different occupations with completely different standards of accountability.

 

Rick Ferri

 

Do any of the salepeople disagree with Mr. Ferri? Best Wishes,

 

Joe

 

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