Question about these investment types

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DCBogler
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Question about these investment types

Post by DCBogler »

Hi, I am starting to work with a new investment advisor and she has suggested these investment types that I am not familiar with. All my money is in IRAs, 401ks, or cash.

Can you explain if these are good investments for someone about 10 years from retirement?

Prudential Flexguard Annuity
Variable life investment policy

Thanks!
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KlingKlang
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Re: Question about these investment types

Post by KlingKlang »

These are excellent investment types, for your advisor, as she will receive large commissions for selling them to you.

Money in IRAs and 401(k) is already tax sheltered, it's a waste of money to put it into a tax sheltered annuity or life insurance policy.
annu
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Re: Question about these investment types

Post by annu »

Is this recommendation for cash maybe? Even that as already mentioned is borderline unethical. But if this also includes 401k/roth, you should report the adviser, they do not have to be fudiciary, but cannot defraud clients either
exodusNH
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Re: Question about these investment types

Post by exodusNH »

DCBogler wrote: Fri May 20, 2022 10:37 am Hi, I am starting to work with a new investment advisor and she has suggested these investment types that I am not familiar with. All my money is in IRAs, 401ks, or cash.

Can you explain if these are good investments for someone about 10 years from retirement?

Prudential Flexguard Annuity
Variable life investment policy

Thanks!
They are terrible ideas for you. Great ideas for the salesperson you're working with because of the big commissions they'll get.

I would recommend not working with this person. They don't have your best interests at heart, even if they claim to be a fiduciary.

This video goes into detail what a terrible product universal life is. https://youtu.be/HYhfX1g6uYw The indexed annuity has similar characteristics except for the insurance component, which you probably don't need anyway.
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retiredjg
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Re: Question about these investment types

Post by retiredjg »

DCBogler wrote: Fri May 20, 2022 10:37 am Hi, I am starting to work with a new investment advisor and she has suggested these investment types that I am not familiar with. All my money is in IRAs, 401ks, or cash.

Can you explain if these are good investments for someone about 10 years from retirement?

Prudential Flexguard Annuity
Variable life investment policy

Thanks!
Welcome to the forum. :happy

These types of investments are frequently good for the advisor (commissions) and high cost for the investor....meaning less profit.

Suggest you say no. And maybe do some reading here before getting too involved with the salesperson.

https://www.bogleheads.org/wiki/Getting_started. Be sure to watch the videos.
Topic Author
DCBogler
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Re: Question about these investment types

Post by DCBogler »

annu wrote: Fri May 20, 2022 10:58 am Is this recommendation for cash maybe? Even that as already mentioned is borderline unethical. But if this also includes 401k/roth, you should report the adviser, they do not have to be fudiciary, but cannot defraud clients either
Could you explain more about why it is unethical?

Her suggestion was to put money each month into the variable life insurance plan. The other suggestion was to move money out of an underperforming lifecycle mutual fund into the annuity.
exodusNH
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Re: Question about these investment types

Post by exodusNH »

DCBogler wrote: Fri May 20, 2022 11:03 am
annu wrote: Fri May 20, 2022 10:58 am Is this recommendation for cash maybe? Even that as already mentioned is borderline unethical. But if this also includes 401k/roth, you should report the adviser, they do not have to be fudiciary, but cannot defraud clients either
Could you explain more about why it is unethical?

Her suggestion was to put money each month into the variable life insurance plan. The other suggestion was to move money out of an underperforming lifecycle mutual fund into the annuity.
They are terrible products. Please watch the video I linked.
livesoft
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Re: Question about these investment types

Post by livesoft »

Welcome to the forum. I am curious what drew you to the Bogleheads.org forum in the first place. Bogleheads.org is famous for low-/no-cost low-expense-ratio passively-managed index fund investing and what the salesperson proposed to you was pretty much exactly the opposite. They may call themselves a financial advisor, but that doesn't mean they are working for your benefit. They may even sincerely believe they are working for your benefit, but from what you have presented, they have not given you good advice at all.

I suggest you step back and commit some more time to learning about how you can avoid people like the salesperson you have selling stuff to you. Perhaps they are even a friend or relative of yours, but that does not make their advice good.
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Topic Author
DCBogler
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Re: Question about these investment types

Post by DCBogler »

livesoft wrote: Fri May 20, 2022 11:19 am Welcome to the forum. I am curious what drew you to the Bogleheads.org forum in the first place. Bogleheads.org is famous for low-/no-cost low-expense-ratio passively-managed index fund investing and what the salesperson proposed to you was pretty much exactly the opposite. They may call themselves a financial advisor, but that doesn't mean they are working for your benefit. They may even sincerely believe they are working for your benefit, but from what you have presented, they have not given you good advice at all.

I suggest you step back and commit some more time to learning about how you can avoid people like the salesperson you have selling stuff to you. Perhaps they are even a friend or relative of yours, but that does not make their advice good.
It is a relative. I’ve never used a financial professional before, and am trying to figure out how to handle this.
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Stinky
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Re: Question about these investment types

Post by Stinky »

DCBogler wrote: Fri May 20, 2022 10:37 am Hi, I am starting to work with a new investment advisor and she has suggested these investment types that I am not familiar with. All my money is in IRAs, 401ks, or cash.

Can you explain if these are good investments for someone about 10 years from retirement?

Prudential Flexguard Annuity
Variable life investment policy

Thanks!
Welcome to the Forum! I’m so glad that you posted your question about your advisors PERFECTLY AWFUL recommendations.

First, on the Prudential product, here’s a link to a long thread about the product. As you’ll see, the product is not a good consumer value.
viewtopic.php?t=328364

Second, the advisor wants you to buy a variable life insurance policy? Really? Do you need life insurance at all? If you’re just 10 years from retirement, it’s not likely that you need much (if any) life insurance protection.

And even if you do need life insurance, term life is a much better choice than a permanent life insurance product like variable life. It’s much cheaper, and provides pure death benefit protection.

Variable life is not only bad as an insurance choice, it is also very sub optimal as an investment choice. Fees and costs are high. You’re likely to have a surrender charge for a decade or more, impeding your access to your account value. Any gains on the account value are taxed at ordinary income rates if you surrender the policy.

Your advisor is an insurance salesman, pure and simple. If you buy the Prudential product, he/she will make an upfront commission of likely 6-8% of your premium. If you buy variable life, he/she will likely make 75-100% of your first year premium.

Not only should you not follow the recommendations of this “advisor” - you need a new advisor who isn’t trying to sell you such junk products. Or, using the Boglehead principles, maybe you could manage your investments yourself.

Post back with questions.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
livesoft
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Re: Question about these investment types

Post by livesoft »

It is a relative. I’ve never used a financial professional before, and am trying to figure out how to handle this.
Well, that's a red flag warning. I suggest you do not mix relatives with your portfolio. A simple, "I don't want to mix family with my investment portfolio" is all you need to tell them. I would not even tell them "Thank you, but ..." because you should NOT be thanking them. Instead, they should be thanking you for not becoming a client.

But how did you come to this forum then?
Last edited by livesoft on Fri May 20, 2022 11:40 am, edited 2 times in total.
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KlingKlang
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Re: Question about these investment types

Post by KlingKlang »

DCBogler wrote: Fri May 20, 2022 11:03 am Her suggestion was to put money each month into the variable life insurance plan. The other suggestion was to move money out of an underperforming lifecycle mutual fund into the annuity.
If you tell us which lifecycle mutual fund it is we can give you as evaluation. Don't assume that it is underperforming because it has lost value this year, almost everything is down.
Topic Author
DCBogler
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Re: Question about these investment types

Post by DCBogler »

KlingKlang wrote: Fri May 20, 2022 11:32 am
DCBogler wrote: Fri May 20, 2022 11:03 am Her suggestion was to put money each month into the variable life insurance plan. The other suggestion was to move money out of an underperforming lifecycle mutual fund into the annuity.
If you tell us which lifecycle mutual fund it is we can give you as evaluation. Don't assume that it is underperforming because it has lost value this year, almost everything is down.
It’s the Vanguard Target Retirement 2035 fund, although I just changed it to that a few years ago. It’s a 401k that started at 20k around 2003 and has doubled at least six times.
CedarWaxWing
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Re: Question about these investment types

Post by CedarWaxWing »

Stay with your VG target dated fund, which is a good product.

Educate yourself for a year... starting with viewing the videos you were referred to, checking the wiki book lists, search out Jack Bogle online videos and speeches.

https://www.amazon.com/If-You-Can-Mille ... B00JCC5JKI

Download the above written mini book by Bernstein to your kindle/phone... and read it at least 3 times.
Read it every time you find yourself waiting in a long line, or getting your car oil change, or .... you name it.
You can get it free, but the 1.00 will be one more incentive to read it, and will make it easy to have on hand always until you understand why what it says is very true.

If you also read the books he recommends and take his advice you will be well served.
IF you do the readings... and frequently peruse Bogleheads.org you should by a year be knowledgeable enough to know how to make good investment decisions...

Hint: Good investment decisions usually involve low cost indexed mutual funds. Keep it simple applies. Do the reading.

Insurance products are almost always a bad investment... and including the ones you mentioned.
It is a pretty sure bet that your relative has no sophisticated investing knowledge, and does not likely understand the harm you would be
suffering if you bought either of those products. She has been "educated" (actually deceived into believing) to think those are good products when they are terribly bad investing products, and are also not good insurances.
exodusNH
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Re: Question about these investment types

Post by exodusNH »

DCBogler wrote: Fri May 20, 2022 11:36 am
KlingKlang wrote: Fri May 20, 2022 11:32 am
DCBogler wrote: Fri May 20, 2022 11:03 am Her suggestion was to put money each month into the variable life insurance plan. The other suggestion was to move money out of an underperforming lifecycle mutual fund into the annuity.
If you tell us which lifecycle mutual fund it is we can give you as evaluation. Don't assume that it is underperforming because it has lost value this year, almost everything is down.
It’s the Vanguard Target Retirement 2035 fund, although I just changed it to that a few years ago. It’s a 401k that started at 20k around 2003 and has doubled at least six times.
That's a perfectly fine fund! It's doing bad because EVERYTHING is doing bad.

Please tell your relative that you don't mix family and money. They may genuinely believe they're selling you good products. But they're not. The company has filled their head with talking points and enough answers to deflect the common questions.

Those products probably have 50+ contracts. Contracts that long are never to protect the client.
Topic Author
DCBogler
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Re: Question about these investment types

Post by DCBogler »

Thanks to all of you for your thoughts. Most of my money is invested the Bogle way, but I wanted to ask about these products because times do change and I wasn’t sure what they were. This is delicate since the person is a relative, but her firm may well not have anything good to offer.
Tavistock1
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Re: Question about these investment types

Post by Tavistock1 »

Stinky wrote: Fri May 20, 2022 11:30 am
DCBogler wrote: Fri May 20, 2022 10:37 am Hi, I am starting to work with a new investment advisor and she has suggested these investment types that I am not familiar with. All my money is in IRAs, 401ks, or cash.

Can you explain if these are good investments for someone about 10 years from retirement?

Prudential Flexguard Annuity
Variable life investment policy

Thanks!
Welcome to the Forum! I’m so glad that you posted your question about your advisors PERFECTLY AWFUL recommendations.

First, on the Prudential product, here’s a link to a long thread about the product. As you’ll see, the product is not a good consumer value.
viewtopic.php?t=328364

Second, the advisor wants you to buy a variable life insurance policy? Really? Do you need life insurance at all? If you’re just 10 years from retirement, it’s not likely that you need much (if any) life insurance protection.

And even if you do need life insurance, term life is a much better choice than a permanent life insurance product like variable life. It’s much cheaper, and provides pure death benefit protection.

Variable life is not only bad as an insurance choice, it is also very sub optimal as an investment choice. Fees and costs are high. You’re likely to have a surrender charge for a decade or more, impeding your access to your account value. Any gains on the account value are taxed at ordinary income rates if you surrender the policy.

Your advisor is an insurance salesman, pure and simple. If you buy the Prudential product, he/she will make an upfront commission of likely 6-8% of your premium. If you buy variable life, he/she will likely make 75-100% of your first year premium.

Not only should you not follow the recommendations of this “advisor” - you need a new advisor who isn’t trying to sell you such junk products. Or, using the Boglehead principles, maybe you could manage your investments yourself.

Post back with questions.


+1000

To the op- please note sticky’s signature line at the bottom of his reply- he comes from the industry
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ruralavalon
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Re: Question about these investment types

Post by ruralavalon »

Welcome to the forum :) .

DCBogler wrote: Fri May 20, 2022 10:37 am Hi, I am starting to work with a new investment advisor and she has suggested these investment types that I am not familiar with. All my money is in IRAs, 401ks, or cash.

Can you explain if these are good investments for someone about 10 years from retirement?

Prudential Flexguard Annuity
Variable life investment policy

Thanks!
Don't seek investment advice from an insurance salesperson.

If you don't understand an investment, don't buy it. If you need an explanation that means you shouldn't buy it.

Don't buy any type of annuity, other than a simple low cost Single Premium Immediate Annuity (SPIA).

Wiki article Immediate fixed annuity. https://www.immediateannuities.com

You are "about 10 years from retirement". Do you need any life insurance at all? Why? Do you have dependents? If you need any life insurance buy low-cost term insurance.

It is a relative. I’ve never used a financial professional before, and am trying to figure out how to handle this.
Politely say that you are not interested. You don't owe them an explanation.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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