Author Topic: A New Start with Everest Wealth Management - Q&A with the management  (Read 33275 times)

MMM

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MOD NOTE:

If you are coming here from a Google Search on Everest Wealth Management or Philip Rousseaux, make sure you read the following thread:
http://forum.mrmoneymustache.com/investor-alley/everest-wealth-management-accused-of-fraud/

/END MOD NOTE, ORIGINAL POST BELOW
--------------------------------------------
A quick background:
I'm not going to whitewash the past: I first heard about Everest when the management asked me if I could remove some allegedly defamatory posts about the company that were reposted here in this forum. Website owners do not react well to this type of situation, and we got all the way to the brink of a lawsuit over it. The action was debated extensively in public here on this forum.

But after some escalation of the battle, I realized the real issue that we are fighting over here: company owners simply want accurate information about themselves to be out there. My goal is to show that peaceful responses providing the real facts, rather than requests to remove anything, are a far more powerful public relations tool.

So as a gesture of peace and to encourage Everest to come here to share their real story, I have archived all the previous discussion and hope to begin anew. I welcome readers to ask questions, our guest wealth managers to answer them, and finally everyone can have a chance to tell their story.

This is an experiment in peaceful communication. Can we prove to the world that open discussion always wins? If we succeed, I hope to use this as an example for other companies to follow.

Note: for people participating in this thread, it is worth noting the rules of discussion here:
http://www.mrmoneymustache.com/forum/forum-information-faqs/forum-rules/
and here:
 http://www.mrmoneymustache.com/forum/forum-information-faqs/this-forum's-policy-on-takedown-requests-and-legal-threats/
« Last Edit: June 28, 2016, 09:12:37 PM by arebelspy »

MMM

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #1 on: March 18, 2014, 07:59:57 AM »
I'll start by throwing in the first question myself:

1) In the past, there has been debate on the Internet on whether or not Everest can really guarantee various return rates. I have not researched the company's services myself, but can you explain exactly what you do, and who is your ideal target customer?
« Last Edit: March 18, 2014, 08:57:52 AM by arebelspy »

iamlindoro

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #2 on: March 18, 2014, 08:18:36 AM »
I hope this isn't considered inflammatory-  I am hoping the management can explain why they would ever consider a legal broadside against the owner of a popular community to be a good idea, or in any way productive.  Why did Everest Wealth Management feel that this was the best course of action, rather than healthily engaging with this community to begin with?  I will refrain from giving my own opinion on why this is because I would rather not fan the flames any more than necessary, but part of being able to "forgive and forget" for me is getting a satisfactory explanation about the reasons behind what I consider antisocial behavior.

arebelspy

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #3 on: March 18, 2014, 08:21:45 AM »
EDIT: Redacted.
« Last Edit: March 18, 2014, 08:45:14 AM by arebelspy »
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

MMM

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #4 on: March 18, 2014, 08:27:20 AM »
Can we start with what the company DOES, first? This is a fresh start, not a rehashing of the old issue.

 Later, we can have some Q&A over effective public relations for a company.

arebelspy

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #5 on: March 18, 2014, 08:33:15 AM »
Can we start with what the company DOES, first? This is a fresh start, not a rehashing of the old issue.

 Later, we can have some Q&A over effective public relations for a company.

I see what you're saying, but it's sort of the elephant in the room.  It happened, and I feel like they need to address it so people can move past it and we can discuss their merits.  It's hard to have a big fight with someone and then awkwardly talk to them without it being addressed so you can properly move on and start rebuilding the relationship.

I tried to stick with only factual statements and questions, no opinions.  Nevertheless, if you think we should skip over that for now, that's fine.

EDIT: Questions pertaining to past lawsuits removed.  /END EDIT
« Last Edit: March 18, 2014, 08:46:17 AM by arebelspy »
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Cromacster

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #6 on: March 18, 2014, 08:44:32 AM »
A good starting point might be.....

2) Who is your target audience?

3) Why should I choose you rather than managing my own investments?
« Last Edit: March 18, 2014, 09:23:40 AM by Cromacster »

KingCoin

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #7 on: March 18, 2014, 08:54:05 AM »
4) How much sales commission is EWM typically paid for selling indexed annuities?

5) How do insurance companies structure and hedge indexed annuities? What is their typical annual profit margin on these products?
« Last Edit: March 18, 2014, 08:58:12 AM by arebelspy »

arebelspy

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #8 on: March 18, 2014, 08:57:38 AM »
MOD NOTE: I'm going to go through and "number" all the questions for easy reference.  Cheers!
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

PeteD01

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #9 on: March 18, 2014, 09:07:16 AM »
http://www.youtube.com/watch?v=luYL2AKjV7s

This is what the fuss is about.

PeteD01

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #10 on: March 18, 2014, 10:00:39 AM »
http://www.youtube.com/watch?v=luYL2AKjV7s

This is what the fuss is about.

For those not familiar with the kind of insurance product they are trying to sell. Here is a short article about how this annuity stuff works and what the 7% really means:

http://blog.annuity123.com/do-i-really-get-a-7-2-return-forever-from-that-guaranteed-lifetime-withdrawal-benefit-glwb/


MDM

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #11 on: March 18, 2014, 10:04:10 AM »
http://www.youtube.com/watch?v=luYL2AKjV7s

This is what the fuss is about.

6) Is a return of "up to" 7% guaranteed by capping the return at 7%?  E.g., in 2013 the S&P 500 index rose >>7%, but investors in annuities capped at 7% would indeed have a return of "up to" 7%.

That is one way ("participation rates", "asset fees", "early withdrawal fees", etc. are others) indexed annuities make their own money while selling subscribers on the "you can't lose money" aspect.  Some people (e.g., my 90 year old mother) are happy to  "do better than leaving it in the bank".

arebelspy

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #12 on: March 18, 2014, 10:18:11 AM »
http://www.youtube.com/watch?v=luYL2AKjV7s

This is what the fuss is about.

For those not familiar with the kind of insurance product they are trying to sell. Here is a short article about how this annuity stuff works and what the 7% really means:

http://blog.annuity123.com/do-i-really-get-a-7-2-return-forever-from-that-guaranteed-lifetime-withdrawal-benefit-glwb/

Related to this article:

7) Is the "up to 7%" guaranteed in the video the rollup rate, or the IRR?
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

EWM

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #13 on: March 18, 2014, 10:20:49 AM »
First and foremost, thank you Pete for the opportunity to explain our services and solutions to the Mustachian community, I am glad we were able to resolve this to set the record straight.  Before we go into what we do, I see the elephant in the room needs addressing, so without further ado lets dive right into some of the questions the users are asking.  First, we did not “shut down” the LTR blog that was a choice made by the owner, not one we made nor asked for.  It was never our intention or a goal of ours.   Secondly, some of the questions and comments I have seen floating around pose questions like, “did you talk to LTR first?  Why not ask for a dialogue first with them?”  We did, we never heard back.  We sent numerous emails and tweets  to which no one ever replied, I would of much rather have worked with the owner(s) of LTR in a similar manner to what we are doing with the MMM community.  I would much rather focus this thread on what we do and addressing the communities’ questions.

Our clients are probably a little bit different from most of the readers of this blog, our average client is someone who is a baby boomer and is looking to secure their retirement and reduce risk.  "Risk" can be many different things to many different people; it can be longevity risk, interest rate risk, inflationary risks, and market risk.  To many of our clients, it’s a mix of all of those.  We use fixed annuities to help address some of these concerns and secure a portion of our client’s retirement income.  Fixed annuities don’t have any fees, sales charges, or upfront loads.  They offer clients protection from the risks mentioned above and do so in a unique way.  If you are interested in learning more about the annuities, I would suggest you visit this link

https://www.youtube.com/watch?v=BS3B2Ins4GI

Keep in mind that for most of the readers of this blog who are younger and trying to cut debt down and accumulate your nest egg, the annuity probably isn’t the best way to go.  These solutions work best for pre retirees and retirees.  There is a great white paper that was put out through a professor at Wharton, which I would encourage your readers to dive into who have an interest in learning more about these.  The fascinating part about this paper is that they (Wharton) back date test the returns of these solutions and come up with some remarkable results.   When you compare the fixed annuity to other "safe" solutions such as government bonds or CDs they typically outperform them, and by a lot.  Even more fascination is during certain periods the annuity even outperformed the Vanguard low cost index fund(s).  I have attached the white paper to this post for those of you interested in this.

Asides from being growth vehicles that offer downside protection, a lot of the fixed annuities now offer riders (at an additional cost typically under 1%) that will provide a steady rise in the value of the income base, as of this post, the rate is 8%.  So what does this mean?  It means that you can accurately forecast what the income base will be when you need income, weather that’s in 3 years or 10, and you are able to confidently withdraw 5% and have that income guaranteed by the insurance company for life.  Now, unlike other annuities with high fees or that require you hand over the asset to the insurance company, the fixed annuity doesn’t.  There is no requirement of annuitization and whatever is there upon death, is passed on probate free to the beneficiaries.  These promises are made by insurance companies, not our firm.

There are many other bells and whistles that the fixed annuity offers, such as increasing income during retirement based on CPI, protected death benefits with some offering bonuses to beneficiaries of up to 25% to offset taxes, and tax deferred growth.  No other investment vehicle in the world can do all of this, period. 

We believe in using the market and obviously aren’t completely risk averse, but for a lot of our clients, they don’t want to have a second 2008 occur and they certainly don’t want to run out of money.  There are only two scenarios that can occur in retirement, you will either out live your money, or your money will outlive you.  The annuity ensures the latter. 

Some of the other questions that readers have asked are how does the insurance company do this?  Well that would be best answered by an actuary of the company, but the simple answer is hedging future contracts of the underlying index that determines the interest rate.  Commissions that are paid vary, depending on the contract, the company, and the client’s age.  I can tell you that many fee based advisors that charge in the 1%-2% fees actually earn more than we do. 






« Last Edit: March 18, 2014, 10:26:08 AM by EWM »

brewer12345

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #14 on: March 18, 2014, 10:26:48 AM »
8. Why on earth would anyone ever buy an equity indexed annuity when anyone with a brokerage account and 15 minutes could replicate the base contract at a fraction of the price and with far better economics (as detailed here http://lifeinvestmentseverything.blogspot.com/2012/01/rolling-your-own.html)?

9. How do you help your investors manage the counterparty risk they take to insurers when buying these products, considering that state guaranty funds are ill-equipped to deal with the failure of a major insurer?
« Last Edit: March 18, 2014, 10:30:28 AM by arebelspy »

KingCoin

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #15 on: March 18, 2014, 10:52:09 AM »
Commissions that are paid vary, depending on the contract, the company, and the client’s age.  I can tell you that many fee based advisors that charge in the 1%-2% fees actually earn more than we do.

10. So, what's average?

This article from Forbes is very cautionary:
"Big commissions for salespeople mean extended surrender charges[iii] for you.  Although most examples aren’t nearly this egregious, I’ve seen Equity Indexed Annuities that pay a 15% commission to the selling agent but have a 20 year surrender charge for the investor!  I don’t want you to be held ransom by your investments."
http://www.forbes.com/sites/timmaurer/2012/05/17/annuities-are-not-bought-theyre-sold/

It's worth noting that followers of this blog generally advocate for a do-it-yourself investment approach featuring low-fee index funds. The prevailing view is that commissions, loads, management fees, and various flavors of middle men all subtract (often substantially) from long term investment performance. Most would rather manage risk around long-term statistical analysis (in a manner of an actuary) than sacrifice performance for the fees associated with "principal protected" structured products.  This might explain the general adversarial tone toward annuity type products and the sellers thereof (legal maneuvers aside).
« Last Edit: March 18, 2014, 10:57:25 AM by arebelspy »

MMM

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #16 on: March 18, 2014, 11:07:33 AM »
Excellent stuff so far, and thanks EWM for joining in.

As a correction to your perception about the readers of the blog - I find it spans the age ranges pretty well. I seem to get emails from teenagers through to 80+ year-olds every week, and we have featured some of their stories over the years. A couple of interesting ones:

http://www.mrmoneymustache.com/2013/05/11/the-quitting-lawyer-and-the-despondent-millionaire/
http://www.mrmoneymustache.com/2013/01/29/pension-schmension-retire-on-your-own-terms/

The demographic of the blog in general leans toward professionals in this older one-off survey:
http://www.mrmoneymustache.com/2013/09/17/a-one-question-survey-who-are-the-mustachians/

And this forum represents about 1% of blog readers, probably even more skewed towards the high-tech and high-education than the main blog. They seem to be much wealthier than average, with very few people battling major debt problems when compared to a random population sampling.

Although this is not meant to understate the importance of the people who are just starting out here!


PeteD01

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #17 on: March 18, 2014, 11:39:26 AM »
Before we go into what we do, I see the elephant in the room needs addressing, so without further ado lets dive right into some of the questions the users are asking.  First, we did not “shut down” the LTR blog that was a choice made by the owner, not one we made nor asked for.  It was never our intention or a goal of ours.   Secondly, some of the questions and comments I have seen floating around pose questions like, “did you talk to LTR first?  Why not ask for a dialogue first with them?”  We did, we never heard back.  We sent numerous emails and tweets  to which no one ever replied, I would of much rather have worked with the owner(s) of LTR in a similar manner to what we are doing with the MMM community.  I would much rather focus this thread on what we do and addressing the communities’ questions.


I'm going to take this at face value and I think I am satisfied with your explanation.

I am actually in favor of partial annuitization but definitely prefer to roll my own with a combination of a SPIA ladder and immediate variable annuities. This strategy is not one aiming for maximum returns but solves for contingencies the FIA is also supposed to solve. I have access to TIAA-CREF which makes that approach even more attractive.
Theoretically, I can see how FIA's are supposed to solve for all contingencies but in practice, the devil is again in the details.
I think that FIA are directed at retirees who are uncomfortable with the complexities of rolling your own but unfortunately FIA's just transfer the complexity into the contract.

Here is a link to Fidelity which mentions many of the contractual issues which a retiree has to carefully address before buying the product. I have a hard time to visualize a retiree who can do that but cannot roll her own.

https://www.fidelity.com/viewpoints/retirement/considering-indexed-annuities

At the end of the day, the hapless retiree will just have to decide to trust the salesperson or not  and for some it may be the right product but for others it won't be. In other words, FIA's are complex products for people in need of simplicity - and I do not have a good answer to the problem.

Peter


brewer12345

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #18 on: March 18, 2014, 12:21:14 PM »
I think that FIA are directed at retirees who are uncomfortable with the complexities of rolling your own but unfortunately FIA's just transfer the complexity into the contract.

Here is a link to Fidelity which mentions many of the contractual issues which a retiree has to carefully address before buying the product. I have a hard time to visualize a retiree who can do that but cannot roll her own.

Peter

This problem could be solved if the retiree were dealing with an advisor who accepted a fiduciary role in advising them.  I think this begs an additional question for Everest:

11. Are you fiduciaries for your clients?  Or do you only have to meet the suitability standard?
« Last Edit: March 18, 2014, 12:27:26 PM by arebelspy »

EWM

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #19 on: March 18, 2014, 01:15:42 PM »
So a few more questions have popped up, naturally.  I will try to address them; yes the insurance company guarantees are crucial to the process, so working with an independent professional who has the ability to do their due diligence is paramount.  One of the concerns we have within our industry is that a few “private equity” deals went down in 2013, and those transactions sometimes are meant to benefit the shareholders, not policy owners.  It is paramount that reitrees work with a company that will be there 10,20, and 30 years from now to make due on the promises made.   Many states have Guarantee and Life Associations which cover insolvencies, for a list of your state limits and coverage’s, visit http://www.nolhga.com/policyholderinfo/main.cfm.

As for the comment on the terms and commissions, we don’t use 15 or 20 year annuities.  The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization has some out with regulations that most insurance companies follow (not all since they are still state regulated) which would prevent an annuity  from having  contract longer than 10 years or greater than 10% in the form of surrender charge.  Most of these contracts will pay trail commissions of 1% for life, but again, it’s important to point out that the money doesn’t come from performance or the client; it’s built into the product.

One of the users claimed you could do this on your own, I would respectfully disagree.  You have to remember a few things.  One, most people who use a fixed  annuity are risk averse, therefor by building a portfolio and using futures  and bonds you are now entering risk.  Second, will the client be able to get the same pricing as some of these insurance companies do, one of the companies we work with is the largest trader of S&P500 future contracts, therefor they are sure to get better fills and executions and pricing.  Third, what happens if a 2008 like fear sets in, will the client adhere to the investment policy?  These are valid reasons on why not to do it yourself.   Also, lets address longevity risk, you certainly aren’t transferring the risk the of outliving your money to a third party if doing it yourself. 

Now, is there a “price” for all of this, absolutely?  Some of you have said hey we “mustachians” are do it yourselfers, who needs an annuity?  Maybe, maybe not?  Obviously, the lower  your portfolio withdraw rate, the more you may not.  I will leave that debate up to the scholars, but there are many prominent studies out there that show portfolio failure rates of anywhere from 10% all the way as high as 50% for a 5% withdraw rate.  http://wpfau.blogspot.com/2012/01/safe-withdrawal-rates-have-i-been.html

It all comes down to what are your goals and what type of income do you require in retirement?  How comfortable are you with doing it on your own? 



brewer12345

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #20 on: March 18, 2014, 01:20:51 PM »
I think I am done asking questions since it is clear the kind of answers we will be getting.  But I will reiterate: are you fiduciaries for your clients?  If not, why?

KingCoin

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #21 on: March 18, 2014, 02:06:02 PM »
Most of these contracts will pay trail commissions of 1% for life, but again, it’s important to point out that the money doesn’t come from performance or the client; it’s built into the product.

Thanks for clarifying. Though, to say the 1% is "built into the product" is a sanguine way of saying inferior performance is built into the product. Obviously, that money isn't coming from thin air. It's coming from the client one way or another - even if the product performs as advertised.

MMM

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #22 on: March 18, 2014, 02:35:34 PM »
Everest captured the distinction pretty well: Mustachians (especially the subcategory who use this forum) are extremely DIY in the finance area. I got blasted roundly, for example when I even suggested that firms like Personal Capital offer reasonable services for those who are DIY-adverse:
http://www.mrmoneymustache.com/2013/10/11/personal-capital-the-investors-version-of-mint/

They charge a ~0.9% fee for wealth under management. Could you beat their net returns if you were a well-versed index investor? I would say the odds are in your favor.

But MOST people tend to be a bit lazy with their money - they just want it to be enough, and not worry about it. I'd even put myself into this category, even though I manage my own investments.

So while everyone is free to criticize any financial product, I wouldn't consider the existence of options other than index funds to be immoral. As long as the distinction is made, "Hey, this is how we do things, this it what it costs you, and you can also do just fine buying index funds if that is what you're into."

I know this will cost me some status among Mustachians - so I will admit it up front: there are many areas of life in which MMM is not very impressive or badass. But luckily, you don't need to be great at everything in order to thrive.
« Last Edit: March 18, 2014, 02:37:37 PM by MMM »

EWM

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #23 on: March 18, 2014, 02:39:47 PM »
I think I am done asking questions since it is clear the kind of answers we will be getting.  But I will reiterate: are you fiduciaries for your clients?  If not, why?

Brewer, we are.

iamlindoro

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #24 on: March 18, 2014, 02:54:44 PM »
They charge a ~0.9% fee for wealth under management. Could you beat their net returns if you were a well-versed index investor? I would say the odds are in your favor.

.9% is a MASSIVE expense ratio relative to the .05% of VTSAX.  EWM, given the all-time average return of the total stock market of 8-11%, what value does your product bring that justifies:

a) An apparent cap on yearly returns at 7%
b) an expense ratio 18x larger than a product (a total market index) with no caps, all-time history of outperforming 7%, and equivalent (non-)guarantees?
« Last Edit: March 18, 2014, 03:04:47 PM by iamlindoro »

Insanity

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #25 on: March 18, 2014, 02:58:03 PM »
They charge a ~0.9% fee for wealth under management. Could you beat their net returns if you were a well-versed index investor? I would say the odds are in your favor.

But MOST people tend to be a bit lazy with their money - they just want it to be enough, and not worry about it. I'd even put myself into this category, even though I manage my own investments.

I've always wondered about this. 

I am of the belief that at some point, I will have someone manage my money.  Not because I am lazy, but because it is a valuable service for someone to provide and a job they can make money at while helping me.  The point where this occurs is where the ~1.0% or whatever the fee is becomes inconsequential to the overall spending rate over the course of the year compared to what I am getting in the investment.

I turned down having a money manager this year because I am no where near that number yet :)

matchewed

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #26 on: March 18, 2014, 03:11:30 PM »
Let's not get confused here. The "they" MMM is referencing is Personal Capital, not EWM. Let's not jump on a .9% ER comment and bag EWM w/ it.

MDM

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #27 on: March 18, 2014, 03:32:13 PM »
Some people sell cars that cost $80K new and don't do any better at getting you from point A to point B than a used $4K car.  As long as the buyer is fully aware of the trade-offs, all is well.

What I don't like about indexed annuity products is well stated by PeteD01: they "are complex products for people in need of simplicity".  The EWM-supplied video glosses over these complexities.

Within the past year my mom, age 90, let me look at her investments.  She had 7 indexed annuities, 4 with 15 year surrender schedules and 3 with 10 year.  Some had asset fees of 1.5% and participation rates of 30%-40%.  Those weren't the first year values (1st year: 0.5 % fee and 100% participation), but they were within the contractually allowed range chosen by the company annually. 

When I asked her agent about the situation, his reply was "The problem with these accounts is [name of company] due to 2008 losses wound up dropping participation rates below what they projected."  Gee, thanks a bunch - and oh-by-the-way my mom had no idea what was going on (refer back to PeteD01 quote).

And yet, even after explaining this to her, my self-described child-of-the-Depression mom said, "well, I just didn't want to lose any money so that's ok."  As the saying goes, any alternative when compared to something sufficiently bad, can be made to look good.

There was one thing, however, that caused her to say "get out" of the annuities.  She knew that any interest credited was "tax free" to her.  But she thought that any amount I and her grandchildren would inherit would be tax free to us also.  When I explained that no, unlike an appreciated stock, annuity interest is taxable upon withdrawal even to inheritors she said "I don't want that!"

Anyway, it seems clear that no self-respecting Mustachian is likely to invest in indexed annuities.  What you advise your family and friends to do is of course up to you.  If they ignore you, buy a Porsche and invest in indexed annuities, well....

marty998

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #28 on: March 18, 2014, 03:34:21 PM »
Ahh % fees. Whether it is EWM or every other player in the industry, % fees are the hidden nasty.

Question to EWM: Having built a 1% fee into the product. Do you actually tell your clients the dollar value of the fees they pay to you each year?

For full disclosure I work for a Company in the finance industry that does charge % fees. However we do disclose the actual dollar charges that are deducted from client investments.

If I sat on the consumer side of the fence my question would be why should 2 clients, provided with the same service, placed into the same products, be charged different amounts, because 1 has $1m to invest and the other has $500k. But that is not a fair question to be putting to EWM alone.

KingCoin

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #29 on: March 18, 2014, 04:06:37 PM »
Question to EWM: Having built a 1% fee into the product. Do you actually tell your clients the dollar value of the fees they pay to you each year?

To add insult to injury, the 1% fee that EWM is taking is only the middle-man fee. The insurance company managing these products is also making money off the annuity buyers too. How much? Who knows. But given the level of commission they pay annuity sellers, it must be a goodly amount.

« Last Edit: March 18, 2014, 05:46:05 PM by KingCoin »

brewer12345

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #30 on: March 18, 2014, 04:35:34 PM »
How much? Who knows. But given the level of commission they pay annuity sellers, it must be a goodly amount.

Plus all the other stuff the sucker unsuspecting buyer of EIAs/FIAs helps pay for: executive compensation, state guaranty association levies, private jets, gigantic buildings with the insurance company's name on them, premium taxes, stadium naming rights, rating agency fees, and Dog knows what else.  Meanwhile they could have replicated this idiotic strategy for pennies on the dollar and chosen whatever tax treatment they like (taxable account, traditional or roth IRA).  But since the annuity salesman is very good at selling you the sizzle rather than the steak and will probably send you a birthday card every year (so they can nail you for another commission when you get out of the early surrender charge period), the beleaguered buyers of these things seem to be easy meat on the hoof.

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #31 on: March 18, 2014, 05:03:48 PM »
Brewer, I was just going to make fun of you for turning a bland thing like financial service choices in to this huge moral battle where the world is full of idiots and demons...

Until I remembered that I write EXACTLY the same way about transportation choices, people who drive cars through drive-thru windows, and all forms of environmental waste in general :-)

So, good on ya, and to each his own.

Just remember the goal of this particular thread is to demonstrate to other CEOs that collaborative discussions work better than takedown notices. Many of them will come here to see if they should follow EWM's model.

I hope they can learn to write off the passionate objections of people like Brewer, just as Cadillac probably sees my frequent mocking of the Escalade and says, "Sigh. Well, you can't win 'em all."

And heck, they did start making an electric car this year as well. It's a start.

Market demand, rather than complaints, will determine what products and services are offered in this great free-market economy of ours.

brewer12345

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #32 on: March 18, 2014, 05:18:45 PM »
Just remember the goal of this particular thread is to demonstrate to other CEOs that collaborative discussions work better than takedown notices. Many of them will come here to see if they should follow EWM's model.

EWM are free to sell as much of this stuff as they can legally get away with.  I certainly have no interest in or ability to stop them.  But I am done posing questions which IMO either are not seriously answered or which are answered with marketing schpiel that glosses over the very real problems with the product and the sales approach.  Since I am trying to play nice in the sandbox, I have shown anyone interested in this silly product how to roll their own, expressed my opinion of the (lack of) merits of the product, and am happy to leave each to their own judgment/folly.  I don't understand why a rational person would pay 10+ times for the same product (and accept worse taxation of any gains over long term cap gains taxes) what they could get on their own, but so be it.  The insurance industry has a far bigger marketing budget than I do, and there are new suckers cresting the retirement horizon every day.
« Last Edit: March 18, 2014, 07:16:35 PM by brewer12345 »

PeteD01

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #33 on: March 18, 2014, 05:30:46 PM »
How much? Who knows. But given the level of commission they pay annuity sellers, it must be a goodly amount.

Plus all the other stuff the sucker unsuspecting buyer of EIAs/FIAs helps pay for: executive compensation, state guaranty association levies, private jets, gigantic buildings with the insurance company's name on them, premium taxes, stadium naming rights, rating agency fees, and Dog knows what else.  Meanwhile they could have replicated this idiotic strategy for pennies on the dollar and chosen whatever tax treatment they like (taxable account, traditional or roth IRA).  But since the annuity salesman is very good at selling you the sizzle rather than the steak and will probably send you a birthday card every year (so they can nail you for another commission when you get out of the early surrender charge period), the beleaguered buyers of these things seem to be easy meat on the hoof.

I actually do not have a problem with that at all. I probably own a good share of the business myself.
I draw the line where the free flow of information is obstructed by business interest. In the case of LTR, I'm satisfied that the outcome was not the one desired by EWM - I take their word for it.

On another note, I think it is problematic to pitch investing against insuring. Insuring against risk is a very important part of financial planning and I would really like to see a product doing both, investing and insuring, at the same time for every stage an individual can be in.
A reasonably priced FIA could be the right thing for quite a number of people, but then the package gets aggressively sold on the open market... Well, life has risks and buying the wrong product for the wrong reason is one of them.
In other words, it pays to be educated and put some effort into planning investments and insurance. If one doesn't do that then one is likely not going to end up with an optimal outcome - but owning a reasonably priced FIA is certainly not the worst possible outcome.

Peter
« Last Edit: March 18, 2014, 05:40:22 PM by PeteD01 »

brewer12345

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #34 on: March 18, 2014, 05:40:30 PM »
a reasonably priced FIA

I have never seen one.  Owning a purple unicorn would be pretty cool, too.

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #35 on: March 18, 2014, 06:10:10 PM »
a reasonably priced FIA

I have never seen one.  Owning a purple unicorn would be pretty cool, too.

Figure in the possibilities of dementia, financially incompetent dependents and unexpected death of the financial maven, Medicaid eligibility issues, legal risks, and so on.
Don't compare it to self directed investing. It is apples to oranges.
The problem is that FIAs are touted as investments but they aren't.

Peter

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #36 on: March 18, 2014, 07:06:40 PM »
a reasonably priced FIA

I have never seen one.  Owning a purple unicorn would be pretty cool, too.

Figure in the possibilities of dementia, financially incompetent dependents and unexpected death of the financial maven, Medicaid eligibility issues, legal risks, and so on.
Don't compare it to self directed investing. It is apples to oranges.
The problem is that FIAs are touted as investments but they aren't.

Peter

If you are worried about dementia, et al you should be lining up a fee-only advisor who is your fiduciary and who is not addicted to selling a particular product for a giant commission.  When all you have is a hammer, every problem looks like a nail.

The EIA/FIA is or is not an investment issue is why the SEC was threatening to require them to be registered products a few years ago.  They ultimately crawfished under the pressure of the state insurance regulators and the general lack of backbone that the SEC has exhibited since the end of the Arthur Levitt days, but they should have done so.

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #37 on: March 18, 2014, 07:10:07 PM »
Brewer, I was just going to make fun of you for turning a bland thing like financial service choices in to this huge moral battle where the world is full of idiots and demons...

Until I remembered that I write EXACTLY the same way about transportation choices, people who drive cars through drive-thru windows, and all forms of environmental waste in general :-)

So, good on ya, and to each his own.

Just remember the goal of this particular thread is to demonstrate to other CEOs that collaborative discussions work better than takedown notices. Many of them will come here to see if they should follow EWM's model.

I hope they can learn to write off the passionate objections of people like Brewer, just as Cadillac probably sees my frequent mocking of the Escalade and says, "Sigh. Well, you can't win 'em all."

And heck, they did start making an electric car this year as well. It's a start.

Market demand, rather than complaints, will determine what products and services are offered in this great free-market economy of ours.
Pete, we can discuss Brewer's background & credentials offline, or you can go a few miles down the road and meet him for lunch yourself, but he has decades of experience with the industries that he's flagellating.  His objections are not just passionate but informed.

This is not a collaborative discussion, at least not from EWM's side.  EWM dismissed Brewer's "roll your own" EIA post using a simplistic "risk = bad" analogy without exploring the thought that EWM could offer exactly the same product to their customers on a two-page contract.

Whether EWM meets the fiduciary standard or not, they charge extremely high fees for investor ignorance... because that's exactly what the market demand allows them to do. 

I have a lot more faith in guys like Brewer and Kitces and you than I do in companies which charge high fees for holding investor's hands and telling them that everything's gonna be all right.

iamlindoro

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #38 on: March 18, 2014, 07:15:52 PM »
I left this thread alone today because I wanted to allow it to take its natural course, and not turn it into a flamefest.  I have given the whole issue some further thought, and I want to try to constructively share with the guest from EWM why I feel like this thread has not turned out as useful as it might have.

EWM, on some level, I am hoping that you recognize that immediately going on the offensive with this blog when you saw something you considered disparaging may not have been the best idea for your business.  I also hope that you see that it wasn't the best idea in terms of normal civil discourse, either.  My feelings on the matter are, based on the now-hidden thread (which Google helpfully continues to cache), you invoked some vague legalese and a threat to "refer the matter to counsel" for one reason-- it would work 99% of the time and at no cost to you. 

You are now speaking to an audience that, if not hostile, is not likely to consider you a trustworthy business partner.  I expect that you know that, and that this token effort at damage control is the best way out of a bad situation.

With all of that said, let me tell you what *would* make a difference to me.  If you were to say something along the lines of "look, I'm a small businessperson trying to provide a quality product.  I recognize that it's not for everyone.  I further realize that I reacted poorly and I am making a commitment never to invoke legal action when someone expresses their opinion again.  It was a bad call, and I learned from it."

Until something like that is forthcoming, I personally will share the story of this incident, and EWM's part in it, with people as an example of the law of unintended consequences (and of the litigious nature of some people).

I am sorry to make this about "the incident" rather than about a product or service.  I just don't see how we can move to civil discourse in the absence of a frank discussion of the reason we're all here.
« Last Edit: March 18, 2014, 07:17:26 PM by iamlindoro »

brewer12345

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #39 on: March 18, 2014, 07:37:58 PM »
I think I am done asking questions since it is clear the kind of answers we will be getting.  But I will reiterate: are you fiduciaries for your clients?  If not, why?

Brewer, we are.

For the record, I think this is a really good thing.  I wish anyone selling financial products to retail were held to the fiduciary standard.

Of course, one might wonder how an EIA/FIA cures every financial ill when held to a fiduciary standard, but "a nod's as good as a wink to a blind man."  Since I don't know what EWM sells to whom, I have no way of knowing if they engage in such practices.  Hopefully they have a full product suite to offer to their clients as appropriate.
« Last Edit: March 18, 2014, 07:39:50 PM by brewer12345 »

EscapeVelocity2020

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #40 on: March 18, 2014, 08:13:42 PM »
I'm just posting to follow this thread, and to add that the civil tone on both sides is appreciated by the casual observer, which many Mustachians (younger, simple index-fund, independent types) are when it comes to what is being talked about in this thread (fiduciary, EIA, FIA, SEC registered products?).  I'm actually finding lots of things to educate myself on, as opposed to cutting the whole industry off at the knees (not picking on you Sol).  And I think EWM will be very careful to tell the truth here, which is refreshing.  Maybe not the whole truth, but we Mustachians are smart enough to parse what is written and who wrote it. 

Thanks MMM for starting this thread, I think it is a step forward. 

By the way, why is everyone editing their posts?  I thought that was only something I did :)

PeteD01

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #41 on: March 18, 2014, 08:20:18 PM »
a reasonably priced FIA

I have never seen one.  Owning a purple unicorn would be pretty cool, too.

Figure in the possibilities of dementia, financially incompetent dependents and unexpected death of the financial maven, Medicaid eligibility issues, legal risks, and so on.
Don't compare it to self directed investing. It is apples to oranges.
The problem is that FIAs are touted as investments but they aren't.

Peter

If you are worried about dementia, et al you should be lining up a fee-only advisor who is your fiduciary and who is not addicted to selling a particular product for a giant commission.  When all you have is a hammer, every problem looks like a nail.

The EIA/FIA is or is not an investment issue is why the SEC was threatening to require them to be registered products a few years ago.  They ultimately crawfished under the pressure of the state insurance regulators and the general lack of backbone that the SEC has exhibited since the end of the Arthur Levitt days, but they should have done so.

I admit that I didn't know this history. But just looking at them reveals that they are really piss poor investment issues if one even cares to look at them that way. In that sense, the SEC made the correct decision by not recognizing them as that.
None of that is really pertinent to the issue of EWM or any other seller of the product is trying to obstruct the free flow of information.
With the issue of FIAs being investments dismissed, the attention has to turn on their merits as an insurance product. I can see very little beyond what simpler annuity products can provide at lower cost and it may well be that the theoretical benefit of the product doesn't work out in practice becaus of the cost.
I hear your advice getting a fiduciary, but sometimes it just feels better to have a contract with a big company... But that's just the paranoid me - I wouldn't trust anyone between me and the contract.
None of this should detract from the fact that these insurance products are marketed aggressively and sold to people who do not have a need for them. Thinking of that, maybe that is the problem with the concept - insuring for everything and charging everybody for it and selling it to everybody, knowing that hardly anyone needs all the features but charging them nonetheless and pay for the jet from difference... Again, I don't care as long as the shareholders get their share, free flow of information is not impeded, or regulators put an end to it.

Peter

Khan

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #42 on: March 19, 2014, 05:33:24 AM »
I think some people on this forum need to stop taking this so personally. Not only are most people financially incompetent, but they are lazy.

Do financial managers, wealth managers, and the like take their cut? Absolutely. Can "we" outperform them? Absolutely.

However, nothing in this world is free. Investing in "Just" the S&P 500 tracking index, like VFINX ignores a lot of things, It is diversification, but not across countries/currencies/investment strategies. And diversification itself is not a sop to cure all investing ills, as over-diversification has it's own issues.

Of course EWM isn't targetting Mustachians. They're goals of existing as a corporation antithetical to our DIY and knowledgeable attitude about the black box that is financial literacy. EWM also won't speak to knowledge(thus the message about 5% SWR, definitely doesn't know how we Mustachians play things).

But there most certainly is a place for financial products. For annuities. Maybe EWM is a garbage company compared to other annuity providers, I have no idea as I'm 30 years too early to research these things, and research I most certainly will my options, but cool the rhetoric.

EWM and their financial products aren't for us. It's really that simple. That doesn't mean what they do is an affront to your dignity, or that they don't provide value to somebody. Banks are shitty customers, and I'm very happy that I don't have to deal with them(NFCU member), but that doesn't mean they don't have value to provide to some people.

I'd also point you towards a couple investing firms that you should look into if you think Vanguard is the only answer. Ever.
DFA
Blackrock, especially ishares

KingCoin

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #43 on: March 19, 2014, 08:36:16 AM »
I think some people on this forum need to stop taking this so personally. Not only are most people financially incompetent, but they are lazy.

Do financial managers, wealth managers, and the like take their cut? Absolutely. Can "we" outperform them? Absolutely.

This is of course true. It's better for the lazy, intimidated, and all around confused to pay a professional manager to responsibly invest their money than to sit on a pile of depreciating cash. That said,  you have to draw a line between someone charging a reasonable fee for a valuable service rendered and someone who charges an enormous (and often hidden) fee selling opaque products while adding little to no value for their clients.

Khanjar, do you think there's any level of hidden fees that are predatory and abusive? Or is it all fair when it comes to fleecing grandma? Where do you draw your line?

(N.B. None of these comments are directed at EWM in particular, but rather retail focused advisors theoretically and generally.)

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #44 on: March 19, 2014, 09:02:34 AM »
I am a little disappointed in this thread so far. I think EWW took a big risk in coming on here and trying to explain themselves despite what happened in the past. I understand that many people on here are very passionate about things, but I was hoping to see a much more friendlier welcome. I don't think EWW has the onus to prove that their product is the best choice for people, or how they exactly how they achieve their results. I thought this was supposed to be a simple way for this situation to get taken care of and put behind us as well as an example of cooperation for others to follow.

Again, I understand that many people are very passionate about this and why they may be, but I also thought of this forum as a pretty friendly place and was expecting us to treat our guests a little nicer, no matter the reason why they are here.


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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #45 on: March 19, 2014, 09:07:22 AM »
I am a little disappointed in this thread so far. I think EWW took a big risk in coming on here and trying to explain themselves despite what happened in the past. I understand that many people on here are very passionate about things, but I was hoping to see a much more friendlier welcome. I don't think EWW has the onus to prove that their product is the best choice for people, or how they exactly how they achieve their results. I thought this was supposed to be a simple way for this situation to get taken care of and put behind us as well as an example of cooperation for others to follow.

Again, I understand that many people are very passionate about this and why they may be, but I also thought of this forum as a pretty friendly place and was expecting us to treat our guests a little nicer, no matter the reason why they are here.

Huh, I was disappointed in the thread for the opposite reason.  I was hoping EWM would actually engage with direct answers to questions, rather than marketing boilerplate.

I think people have been remarkably restrained in their criticisms.

/shrug

Just a different perspective.
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KingCoin

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #46 on: March 19, 2014, 09:13:09 AM »
I am a little disappointed in this thread so far. I think EWW took a big risk in coming on here and trying to explain themselves despite what happened in the past. I understand that many people on here are very passionate about things, but I was hoping to see a much more friendlier welcome. I don't think EWW has the onus to prove that their product is the best choice for people, or how they exactly how they achieve their results. I thought this was supposed to be a simple way for this situation to get taken care of and put behind us as well as an example of cooperation for others to follow.

Again, I understand that many people are very passionate about this and why they may be, but I also thought of this forum as a pretty friendly place and was expecting us to treat our guests a little nicer, no matter the reason why they are here.

I get where you're coming from, but this is a little like Loius Vuitton dropping in to explain their $2,000 handbags. The best possible outcome is that they say their piece, everyone ignores it, and the thread dies a quiet death. There's little chance that mustachians are going to start buying annuities or that EWM is going to change their business model based on criticisms voiced here. I think we all understand that this was a laudable effort by MMM to make nice and bury a hatchet, and it's sort of pointless for everyone to go for the jugular.

arebelspy

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #47 on: March 19, 2014, 09:26:01 AM »
I am a little disappointed in this thread so far. I think EWW took a big risk in coming on here and trying to explain themselves despite what happened in the past. I understand that many people on here are very passionate about things, but I was hoping to see a much more friendlier welcome. I don't think EWW has the onus to prove that their product is the best choice for people, or how they exactly how they achieve their results. I thought this was supposed to be a simple way for this situation to get taken care of and put behind us as well as an example of cooperation for others to follow.

Again, I understand that many people are very passionate about this and why they may be, but I also thought of this forum as a pretty friendly place and was expecting us to treat our guests a little nicer, no matter the reason why they are here.

I get where you're coming from, but this is a little like Loius Vuitton dropping in to explain their $2,000 handbags. The best possible outcome is that they say their piece, everyone ignores it, and the thread dies a quiet death. There's little chance that mustachians are going to start buying annuities or that EWM is going to change their business model based on criticisms voiced here. I think we all understand that this was a laudable effort by MMM to make nice and bury a hatchet, and it's sort of pointless for everyone to go for the jugular.

It's not pointless though though.  It's only pointless for Mustachians who are participating in the thread and understand EWM's business model.

But wait until this thread is the top page on Google for "Everest Wealth Management."  The other threads were removed.  There's no history of the criticism of them from LTR, and no history of their lawsuit threats.  This will be it.

So we have this one thread people looking for info on Everest Wealth Management will see on Google, and go read.  Then we have some questions, mostly ignored, and boilerplate answers.

The person doesn't get how the harm that Everest Wealth Management is doing to their portfolio because, as you say, the thread dies a quiet death.  And they go ahead and invest, not knowing any better in their ignorance.  That is the best possible scenario... for Everest Wealth Management.

I'm concerned about those people googling them for information though, and the best possible scenario for them would be to get the tough questions answered, or, barring that, have Mustachians point out why investing in Everest Wealth Management is not in their best interest.
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KingCoin

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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #48 on: March 19, 2014, 09:38:24 AM »
I'm concerned about those people googling them for information though, and the best possible scenario for them would be to get the tough questions answered, or, barring that, have Mustachians point out why investing in Everest Wealth Management is not in their best interest.

Makes sense. In the public service vein, here's another one from Forbes with questions to ask:
http://www.forbes.com/sites/deborahljacobs/2012/02/15/the-abcs-of-annuities-8-questions-to-ask-before-you-buy/

"In addition to asking about the educational and professional qualifications of financial professionals selling annuity contracts, ask about how the financial professional is getting paid. Some annuities contracts are no-load, meaning no commission of any form is paid to the financial professional making an annuity recommendation to a consumer.

Other annuity contracts are sold on commission, which is paid from the insurance company issuing the contract directly to a licensed insurance agent. Commissions often incur scrutiny since the process of insurance agent compensation is historically less transparent than relationships where consumers pay fees directly to financial advisers.

As a potential buyer of an annuity product, demand transparency. Ask exactly how much the agent selling the contract will be paid in the current year for the sale and on an ongoing basis. If the agent balks, or cannot provide you with an exact dollar amount, walk away from the deal."

Bigote

  • Bristles
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Re: A New Start with Everest Wealth Management - Q&A with the management
« Reply #49 on: March 19, 2014, 09:47:43 AM »
Wow, this is lame.  I'm with Arebelspy.    Can we go back to the lawsuit?