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Dear Medical Executive-Post,

I purchased a fixed contract annuity for $50,000 in 2004.

This was a guaranteed principle annuity with MetLife. I used money from a CD. This was not an IRA. I withdrew interest monthly and withdrew the allowed 10% per year.

In January 2007, the interest was so low (2%), that I decided to withdraw all funds. I was charged a 6% early withdrawal penalty (approx. $2,300).

• How is this treated for taxes?
• Early withdrawal penalty on Line 33?
• Loss on investment?
  

This does not show on the 1099, but it is on the remittance advice.

Thank you.
Linda

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Dear Medical Executive-Post

This is an excellent communications forum and blog; I tell all my friends about it. So, here is my dilemma. 

The Problem?

My financial planner charges me a percentage of assets-under-management. He explained that in this way we are both on the “same side of the economic table”, with aligned interests. It all sounded good at first; but now I am wondering after doing some research and readings?  

For example: 

1. Doesn’t this produce an “equity bias”, as he earns more income with equities than cash or bonds? This seems especially problematic with automated DRIP programs that don’t produce cash for purchases during market price downturns, but seem to constantly buy-up; at least 2/3 of the time according to my readings.
2. Why can’t I pay a percentage of the assets he “grows” for me, rather than on the assets I have already amassed myself – without his help, or brought in from elsewhere?  And, why pay if he looses money?
3. Is it true that my account is just bundled and outsourced with many other similar accounts, and is not really specific for me at all? Of course, this probably does reduce his risk by remaining within the “standard of care” for his industry. But, common industry practice doesn’t mean it’s good for me. And, why do I have to sign a brokerage arbitration agreement? Why is he not a fiduciary like my CPA and attorney?
4. What is the deal with all these meetings and client engagements that don’t seem to add any value? And, he doesn’t seem interested in financial planning at all, despite being a “financial planner.” My other concerns are glossed-over, and then he just recommends I see an “expert”, when pressed.

Assessment

Is it time for me to “do-it-myself”; and go to a passive investment management style, use index funds or ETFs, and be done with it all? This strategy sure seems a lot cheaper. Of course, I fear my “doubts” will affect our relationship.

Conclusion

Am I wrong, or right? The more I investigate and learn about all these industry practices, the more concerned I have become. Any thoughts are appreciated?  Yet, maybe I don’t really have a problem at all! 

Nevertheless, where does a doctor (or anyone else for that matter) go for “honest advice”?  

PS: Your books are excellent sources, but I still need some help with execution.

Thank you. 

Dr. Mark-Me Anonymous

[Washington, DC]   

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Filed under: "Ask-an-Advisor" | Tagged: Ask a Consultant | 6 Comments »

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