In this entry we highlight some of the concerns and and negatives that must be considered when examining a Pre-Issued Annuity.

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

So now let’s consider some of the negatives on a PRE-ISSUED ANNUITY :

•     Limited liquidity selling your payment stream prior to maturity could result in a considerable loss.
•     The court order process should be monitored by an expert attorney that is retained by you.
•     The best PRE-ISSUED ANNUITIES never make it to the internet or retail lists.
•     The industry is controlled by a few power players catering to institutional investors.
•     Contracts require a 10% to 20% escrow to secure your future ownership during the court order process tying up some of your money at low or no interest for up to 90 days.
•     Approximately thirty percent of initiated contracts get rejected by the court and you get your escrow back to start over.
•     The industry is full of highly motivated commission oriented sales people that will promise the world and then fall short on delivery they would prefer for you to not have your own expert attorney.
•     Contracts are often discounted by two to four brokers away from the source diluting your potential yield.
•     Most contracts available on the internet are older inventory that has been picked over already
•     Life contingent contracts can end abruptly with an insurance company paying back your principal and yield early since the annuitant died unexpectedly.
•     Not FDIC insured.

Is a PRE-ISSUED ANNUITY right for you? [Read More…]

Annuity guys Video Transcript:

Eric: We talked about IRAs, and this always my biggest concern with IRA’s because you have RMDs that you’re going to have to eventually get to. Liquidity is of one that concerns because you’re buying that stream, or that lump sum, it’s already predicated. It’s already set out.

Dick: You need to balance that, in terms of your overall IRA, that you’ve got money to draw your RMDs from, or that your income stream will be adequate from the pre-issued annuity to cover your RMD. That is a consideration that you have to look at.

Eric: Liquidity in and of itself.

Dick: Let’s just talk about liquidity. That is probably, in all fairness, folks, that is the biggest negative of a pre-issued annuity. Once you buy it you have to know that you’re in a good position to hold it to maturity. If you’re in a good position, it can be a great strategy, a great financial vehicle, but if you’re not and you buy one, then you’re going to be forced to sell it on the secondary market, go through the court order process so your payments streams. That will be at a considerable loss typically.

Eric: There’s a reason that there’s so many players in this market. They’re able to sell low buy high, or . . .

Dick: Buy low, sell high.

Eric: Unfortunately in this case, the people selling are selling at a low point. We really encourage you to know exactly that you can handle that payment stream as it’s been setup, or that lump sum, those criteria fit your situation.

Dick: Another aspect of this, that folks get a little bit frustrated. You talk to a lot of people out there that are basically a commission sales person, they’re claiming to be an expert, they may have done several of these transactions, but they really don’t have what’s called a fiduciary responsibility to the client. If they are incompetent, if they’ve not done well, they’re on to their next client after they’ve placed you with something that may not have been handled properly. This is where we highly recommend that you work with someone, first of all, that is very experienced, but in addition to that, that would be an attorney, because there is a court order process that these go through and you really want to make certain that it’s properly identified, named, that all the parties involved are properly represented, and your closing documents and everything have been reviewed by an attorney; and that that attorney actually has a certain fiduciary obligation to look out for your best interest. If they don’t, they’re in danger of losing their practice.

Eric: We actually would say, we’d encourage you to actually have a retainer with an attorney signed in order to ensure that client/attorney privilege that they’re obligated to basically act in your best interest. That’s that fiduciary responsibility.

Dick: Let’s be fair, that’s going to cut down on the yield a little bit, but when we’re talking about a substantial yield, way better than what’s available in the market and you have to put out $500 out of your pocket to ensure that’s done correctly, that’s a very small part of that yield. It might be 10 basis points over 10 years or 1/10th%. I’m just throwing out some approximations here. It could be way less than that, it could be slightly more.

Eric: Exactly. Next thing is you’re not just going to run down to the corner drugstore and pick one of these up off the shelf.

Dick: No. There’s really some major players in this, and there’s not that many of the major players, 4 or 5 of them. Of those players some of them sell pretty much exclusively to institutional investors, so that leaves less to pick from. There are some smaller entities that are in this distribution vein, but what you really want, and we always are telling our clients this or the website visitors, is you want someone that’s really connected to the sources. They can have multiple avenues to look at the better pre-issued annuities that come along with better yields and better payment terms in this type of thing that most people that are out on the internet buying from a commissioned salesperson, they’re not going to actually know about these.

Eric: The earlier you are in the process, the better return you’re going to get. Insider’s advantage.

Dick: It really is. There’s nothing illegal or wrong about it. It’s not like insider trading or something, this is just knowing how to get to the item first that’s paying the highest yield. There’s another aspect, Eric, that we need to be aware of. I’m going to look back here at my notes so I can make sure that I don’t just keep rambling on and on here, make sure that we hit all of these points.

Eric: We talked about the escrow.

Dick: Right. That was . . . go ahead.

Eric: Where you were going to go?

Dick: Where I was going on it, yes.

Eric: It’s basically when you start to work with somebody, and especially on the insider aspect where you indicate this is what you’re looking for; typically, you’re going to put an escrow out there in order to initiate the process.

Dick: Right. That is the aspect that we want to be aware of, and that is that about 30% of these that enter the court order process will not go through. They’ll be declared invalid by the court system. About 70% of them are going to go through. Just what you were talking about, you have to escrow, get ahead of the curb to get the better ones, you have to actually be willing to say, “That’s a payment stream I would like to have.” Like you said escrow 10%to 20%, to hold that particular contract, that particular pre-issued annuity while it goes through the court order process, and it takes about 90 days. The worst case scenario is you’ll get your escrow back.

Eric: You’ve lost time, that’s all you’ve lost in a sense. Again, the court is protecting your process so that’s a safety side. The negative side is there are procedures and pieces that have to go through in order for this to come to fruition.

How many people are competing in this world? There’s a whole bunch of motivated commissioned people that are in there, but it’s a very small insiders group.

Dick: Yes. When we start getting into attorney’s that work in this area, that are very proficient in this area, that have some real experience, a lot of those attorney’s are actually working for the companies that are buying the settlements, selling the settlements, and this type of thing. There are some available, you can find them typically on the internet. If you’re somehow connected to the industry, you may know some, and that’s something that we can do for our site visitors, is recommend an attorney that we can refer, that would assist them.

Eric: That’s the key, I think. Our strength in this area is working with insiders. We work with somebody that’s key in the industry, that has an insider advantage, and that’s what’s benefited our clients.

Dick: It really makes the difference. I think, folks, that when you look at this whole strategy and this direction for a higher yield, I think you just need to do a little bit more homework, a little more research, become comfortable with how it works. Once you understand it, it can be a very effective, very high-yield safe type of financial strategy.

Eric: It’s an excellent tool for your toolbox. Especially in this extremely low rate environment, it gives you another option.

Dick: For that portion of your money that you want to see grow with a good yield and you can structure the payment stream to fit your needs, it’s hard to beat.

Eric: Thank you for checking out our pre-issued annuities section.

Dick: Yes. We’ll come back with more on this at a later date, and maybe go into more of the mechanics of it.

Eric: Sounds good. Have a great day.

Dick: Thank you.

The post Is a Pre-Issued Annuity right for you? – Part 2 appeared first on Annuity Guys®.

Is a Pre-Issued Annuity right for you? If you think like most people in this low interest rate environment the answer is a resounding YES!

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

Once you understand the high yielding yet safe nature of these financial vehicles it becomes apparent quickly that most of us have money that would be well suited to this type of strategy. The biggest question most individual investors have is how do I get started  without making a mistake that I will regret. The key is using an expert that specializes in this field having a legal and fiduciary interest towards you as the client. The best advisor for this will have experience in the industry, inside sources for access to the best available contracts, and be a practicing attorney to follow and assure the validity of the court order process.

PRE-ISSUED ANNUITIES have several positive attributes in common that make them currently in high demand:

•     High Yields – typically 4.5 to 8.5 percent.
•     Safety – payment streams are **guaranteed by highly rated insurance companies
•     Safety – Court order process protects both buyer and seller
•     Safety – Issuers – regulated by State Insurance Commissions with **guarantee associations .
•     Fixed and reliable income streams
•     Diversification for portfolios of sophisticated investors
•     Truly a non-market correlated asset
•     IRA or Qualified Account compatibility
•     Estate transfer to heirs
•     Twenty year plus successful transaction history

Is a PRE-ISSUED ANNUITY right for you? [Read More…]

Annuity Guys® Video Transcript:

Eric: Today, we’re going to talk about pre-issued annuities, safety, and high-yield. High yield; we’re chasing numbers right now. In this day and age, everybody calls up and they say, “Where can I get . . .” and of course, it used to be, “Where can I get 5%?” now it’s, “Where can I get 3% or 4%?” Is there a place we can get 5%? Especially when they call us up, and based off the Annuity Guys® website, we get a lot of call that say, “Give me a number. Give me 5%”

Dick: This is probably the most frequent call that we get, folks. A lot of folks that are looking for CD alternatives, because CDs, as you know, Eric, what are we now? About 2% would be the max, 2 or 2½ on a really long-range CD. What we’re seeing more frequently is maybe ½%.

Eric: I was going to they all start with a dot in front of the number, unfortunately; 0.8.

Dick: Then when we come down to the new-issue annuities, new-issue annuities, again, are severely affected by this low-rate environment, which may be with us for quite some time because of our fed.

Eric: Just recently, companies are coming out and making predictions that this is the rate environment; get used to it. We’re going to see this for the next 2 to 3 years.

Dick: I’ve often brought this up, but Japan has seen this for the last 15 to 20 years and they’re the second-largest industrialized nation, their GDP, in the world. Is it possible that this becomes an extended 5 or 10-year cycle, because we’re trying to get out economy booted up and it doesn’t happen? Where can good, honest people go to get a good, fair return? That’s the big question.

Eric: The retail environment has always been, “This is what’s available to the consumer.” The nice thing is we’re breaking down some barriers and we’ve got some things that were just available for institutional buyers, banks, multimillionaires, basically people of means, or institutions of means, they dabbled in these markets before. Now you’ve got access for the consumer market.

Dick: If we go back and just do a little brief history, we’ll do something more in-depth later, but just a little brief history. Pre-issued annuities, which are called structured settlements.

Eric: Secondary market annuities.

Dick: Lottery annuities.

Eric: Life-contingent annuities.

Dick: Pre-owned annuities. There’s so many different terminologies, but pre-issued is a pretty accurate way to describe these annuities. Someone bought this annuity originally and they don’t need it anymore, or they were in an accident, they got some type of a settlement, or they won the lottery. They don’t need the income stream, but they do need some money upfront. Folks, you’ve probably seen Imperial Structured Settlement and some other ones out there that regularly advertise on television. Some of these will come through that type of avenue, or distribution. The whole idea of this is that somebody is willing to sell their payment stream for considerably less than what it’s worth, in terms of those final payments throughout the maturity.

Eric: It’s basically, ‘I have an income stream or an annuity that I’m going to eventually get this much money for. I’m willing to sell you that payment stream, or that lump sum, and you’re going to give me a lump sum now.’

Dick: You might sell $200,000 worth of payments for $100,000, that I’m going to collect over a period of maybe 10 years, which comes out to in the neighborhood of about 7%, maybe even a little more than that. That’s a way that I can get a very substantial yield and you can your lump sum of money that you need, that’s kind of the gist of how it works. Like I said, going back in history, a lot of these companies that you see advertising on television to buy these large settlements, they will actually package these up, securitize them, sell them to institutional investors, pension funds and the like, and investment banks, and they have lots of large buyers standing in the wings. Guys like you and I, Eric, and our clients, we couldn’t have access to these, just maybe 5 years ago.

Eric: The market wasn’t there. We didn’t even know it existed, probably, until the advent of . . . from an individual consumer talking to our clients.

Dick: Folks, what really happened was we went through this financial crisis and all the credit dried up, and now all of a sudden, these institutional advisers, Eric, they just weren’t walking in and buying these bundles of securitized pre-issued annuities, so what were they going to do? They found a new avenue to sell it to.

Eric: Yes. Now we have a lot of brokers, independents, going out there and basically finding these pieces out there that are available for purchase. They’re buying them and remarketing them. You’ve got brokers online that are all over the place.

Dick: There’s some negatives that we probably need to talk about, but maybe, let’s break it down and let’s talk about positives and negatives.

Eric: Let’s highlight just first the positives, Okay? Yields: We’re in a low-rate environment right now, so a new-issue annuity, if just were looking at a [inaudible: 06:11] or CD-style, you’re only going to see a return in that 0 to upward . . . 10 years will get you almost 4%. Here, we’re looking at yields.

Dick: We start at 4, 4.5, and we’re well-connected, we know the source that we can go to. We can do considerably better, and on some of different types of pre-issued annuities, they’ll pay out a little more, like the life-contingents. We can get upwards of 8.5% over a good length of time. It’s a huge difference in yield.

Eric: So the yield is much higher.

Dick: Yes. Then we come down to safety.

Eric: We got multiple levels of safety. Who may buy these, who’s underwriting all these contracts? Where are they coming from?

Dick: The ones that we recommend, or the attorneys that we work with, recommend are really coming from A-rated, A+ rated, A++ rated . . . I guess we can do a little name-dropping here, but maybe Allstate, Prudential . . .

Eric: John Hancock.

Dick: These are really strong quality companies.

Eric: We’re not just picking for our clients, it’s not just taking anything, there is a certain requirement of what we’re looking for, from a safety standpoint. They’re safe from the underwriting of that. Somebody owns these annuities. How do they get transferred into my name, if I want to buy them?

Dick: That’s another layer of protection, another layer of safety, and it’s the court-ordered process. When this whole industry got started, like we talked about, approximately 20 years ago or so, it was a little bit like the Wild West, and it was anything goes. A lot’s changed since then, and there’s been some rulings and things that protect the person that’s actually trying to sell their lump sum. Now, this all has to go through a court-ordered process. It really protects both the buyer and the seller. It’s also very important that you have some type of legal representation as it moves through that process, that it’s done where all the I’s are dotted and the T’s are crossed properly.

Eric: That’s safety from . . . so you got a court agreement that’s been placed, so the contract is basically a court-underwritten piece?

Dick: Exactly, and it really directs the insurance company, the A-rated or A+ rated company, where there payment streams are now going to. By court order, they are to pay those to the new owner of those payment streams, not to the new owner of the annuity. The owner of the annuity remains the initial person that had the annuity issued, and that’s why we call it a pre-issued annuity. It was issued previously, and all this person is doing is selling their payment stream.

Eric: It’s not taking the ownership away; it’s really just taking the ownership of the income stream and passing it off.

Dick: Exactly. Then we have the layer of safety that all of these A-rated companies, I should say highly-rated insurance companies, they are regulated by the states, The State Insurance Commission.

Eric: The State Guarantee Association.

Dick: They each have a State Guarantee Association. I would say, folks, you have to individually look into that, what your state does, but it is another layer of protection. You’ve really got about 3 very serious layers of protection. There’s another 1 or 2 that we could talk about, and I’m not going to get into it, it’s a little bit more complex from the structured settlement side, but there’s another layer of protection, sometimes, that becomes into play.

Eric: Are these like just buying them off the shelf, in the sense of who’s buying them?

Dick: This is the trick. Folks, you can go out and Google ‘pre-issued annuities’, you can look structured settlements and the like, and you will find some companies available out there on the internet that have a retail list of what’s available. Unfortunately, the best pre-issued annuities typically never hit the internet; they’re actually taken right from the source when someone wants to sell their payment stream or their lump sum. Again, this really makes a difference if you can be connected to a good attorney, someone who knows right where the source is and can kind of cut out the middle man, cut out the brokers that are in between, because typically, you’ll have anywhere from 2 to 4 brokers involved in sharing the profits before it actually get to the clients. The more that you can cut out of that, the higher yield you’re likely to have.

Eric: Less hands in the pockets, the more [inaudible: 11:26]. These are sophisticated instruments. How would they fit in a portfolio, in a sense? Is it . . .

Dick: This is still, even though there’s a certain level of sophistication to it, it’s like anything that you do in the investment world. If you look at your prospectus what, how many pages are in an average prospectus, Eric? You’re securities guy?

Eric: The phone book? [inaudible: 11:54] pages.

Dick: 100, 150.  You could say that investments are pretty technical, pretty sophisticated, and that would be true, we’ve just become familiar with them, we understand them; our stocks and our bonds, that type of thing. These, likewise, once you understand them, you realize that they’re very safe. The companies that are backing them, you can actually know your yield. You have a very reliable payout in the income stream. There’s really no volatility in it like there would be in an investment?

Eric: I think the key here is diversification, just like anything out there; it’s a key piece, to diversify your portfolio. You said it; it’s a non-market correlated asset. In today’s market, as we watch it bounce like a Wham-O ball, up and down, it’s taking that volatility out. You know exactly what you’re going to get from either the lump sum aspect or the payment stream aspect, so it becomes a nice piece to smooth out the waves with the rest of your portfolio.

Dick: I think we should also mention that it’s IRA-compatible. You’d have to setup a self-directed IRA, which there’s many different custodians out there that’ll help you with that, and we can recommend one to folks that we work with. It is just nice to know that it’s IRA-compatible. Then if you would end up passing early before you’ve received your lump sums or your payment strings, it can be paid directly to your estate or to your heirs.

Eric: Lots of pieces out there that make it an attractive option, especially for these people that, for me, this is for somebody who’s been in the CD world for a long time. They want safety, security, but they want a larger return, and it’s something that’s just going to be parked there.

Dick: It could be for somebody that’s been in the stock market, that are reaching, that are near-retirement age. They’re wanting something that’s much safer, takes the volatility out of it, but they still want to get the yield. That’s all the good things we’ve talked about.

Eric: There are some limitations. Those are on the con side.

Dick: We have to be fair about it.

Eric: We don’t have to, but it should, it makes the video that much better when we’re balanced.

Dick: Fair and balanced. We don’t want to take this away from Bill O’Reilly.

Eric: That’s right.

The post Is a Pre-Issued Annuity right for you? – Part 1 appeared first on Annuity Guys®.