Ed Zollars, CPA
November 5th 03, 05:06 PM
Tad Borek wrote:
>> He told me that normal mutual funds I would be
>> paying a commission of 4% right away, plus I would be taxed every year
>> for any gains, and then taxed again when I realized those gains.
>
>
> Thousands of mutual funds are available at no load (zero commission) but
> you don't get "help" from an advisor with them. Of course if the advisor
> tells you mutual fund gains are taxed twice it's not worth the 4%.
I agree--with advice like that I suspect the best thing is
to move on to another adviser <grin>.
Seriously, either you are making leaps from what he said to
conclusions that aren't warranted (which may or may not have
been his intention) *OR* he has given you totally erroneous
information.
You do pay tax annually on dividends (not all gains) and
then pay tax on the gain when you sell--but no *double* tax
since, to the extent the dividends are reinvested, they add
to basis and *reduce* the gain on eventual sale. So every
dollar of increased value gets taxed only once and,
potentially, never if you hold the shares until you die. As
well, a large portion of that income may be taxed at
favorable rates under the new law.
If you have made the statement you made above in his
presence and he didn't correct you, it's time to find a new
adviser. Whether or not a VUL makes sense for you is a
different question--but whether you should use this adviser
to help you make that decision wouldn't appear to be open to
question if he won't correct the impression you have above.
Because I would have to conclude that either he was
grossly incompetent (if he believes the statements) *OR* he
is not terribly honest (if he allows you to continue to
believe something he knows is in error, but which might help
him close the sale).
As well, ask him what changes in your situation would make
him change his advice away from the VUL to the mutual funds.
If he can't think of any, then I would again leave
him--because while VULs are fine devices in the right
circumstances, not all circumstances are the right ones.
Finally, if he passes those tests, ask some of his long term
(preferably five years or more) customers about what he had
done for them after the sale. Most important (and don't
clue him on this question before he asks customers to talk
with you), ask about how often he has reviewed the policy's
performance with the customers since the sale. A VUL needs
careful "care and feeding" after the sale to assure it is
still meeting the goals--if this agent has tended to make
the sale and then disappear, it doesn't suggest he'd be the
best person to work with in your case.
--
Ed Zollars, CPA
Phoenix, Arizona
>> He told me that normal mutual funds I would be
>> paying a commission of 4% right away, plus I would be taxed every year
>> for any gains, and then taxed again when I realized those gains.
>
>
> Thousands of mutual funds are available at no load (zero commission) but
> you don't get "help" from an advisor with them. Of course if the advisor
> tells you mutual fund gains are taxed twice it's not worth the 4%.
I agree--with advice like that I suspect the best thing is
to move on to another adviser <grin>.
Seriously, either you are making leaps from what he said to
conclusions that aren't warranted (which may or may not have
been his intention) *OR* he has given you totally erroneous
information.
You do pay tax annually on dividends (not all gains) and
then pay tax on the gain when you sell--but no *double* tax
since, to the extent the dividends are reinvested, they add
to basis and *reduce* the gain on eventual sale. So every
dollar of increased value gets taxed only once and,
potentially, never if you hold the shares until you die. As
well, a large portion of that income may be taxed at
favorable rates under the new law.
If you have made the statement you made above in his
presence and he didn't correct you, it's time to find a new
adviser. Whether or not a VUL makes sense for you is a
different question--but whether you should use this adviser
to help you make that decision wouldn't appear to be open to
question if he won't correct the impression you have above.
Because I would have to conclude that either he was
grossly incompetent (if he believes the statements) *OR* he
is not terribly honest (if he allows you to continue to
believe something he knows is in error, but which might help
him close the sale).
As well, ask him what changes in your situation would make
him change his advice away from the VUL to the mutual funds.
If he can't think of any, then I would again leave
him--because while VULs are fine devices in the right
circumstances, not all circumstances are the right ones.
Finally, if he passes those tests, ask some of his long term
(preferably five years or more) customers about what he had
done for them after the sale. Most important (and don't
clue him on this question before he asks customers to talk
with you), ask about how often he has reviewed the policy's
performance with the customers since the sale. A VUL needs
careful "care and feeding" after the sale to assure it is
still meeting the goals--if this agent has tended to make
the sale and then disappear, it doesn't suggest he'd be the
best person to work with in your case.
--
Ed Zollars, CPA
Phoenix, Arizona