Any Feedback On The Nationwide Insurance IUL?

[PrivClientSG]

I know he guaranteed column shows minimum interest and mac charges.. But can you show current interest rates with max charges?

I am so drawing a mental block here, but I do think I've seen current interest and max mortality.

@jtow11 I own a couple dozen IULs. They have averaged 5% - 7% growth since purchase. sjm

Thank you Sheryl! If you don't mind -- how old is the oldest policy and how old is the newest? Thank you very much for your insight and perspective!

 

[PrivClientSG]

While I agree with nearly everything that @PrivClientSG suggests, I would not judge a product by whether/not it is approved in the state of New York. That state is essentially an "island" of regulation, and so much more strict than any other state. Their regulations result in relatively-less competitive products, and many companies choose not to do business there at all, as a result. Their compensation requirements alone, make it challenging for insurance companies to offer competitive product there. It is my personal opinion, as someone who aids the NAIC, that New York caters to mutual insurers that sell par whole life, and are patently opposed to indexed life. No product is "bad." Products are merely tools. sjm

Glad to see you around Sheryl!

He can correct me, but I dont think he was suggesting other agents do the same.

Being in NJ, he likely has a lot of NY based clients. Most NJ agents do. So his personal product lineup probably needs to have mostly NY carriers in it.

Just a guess though.

Yes, you are both right, at least to some extent...Listen, it was none other than Francis Albert, Ol' Blue Eyes, who said, "If I can make it there...I'll make it anywhere..." LOL. Just kidding. Seriously, like I said, it's a personal nuance, idiosyncrasy, weird thing. I simply just look. No, I would not judge a product solely on whether it was approved in NY. That would be not only myopic, but foolish. I know that the NY State DFS is the most stringent, and difficult, in the country. But in some respects, that's a good thing. Yes, in others it's not. No argument necessary. We can say this squashes competitive products, but it we can also say it protects the consumer from dangerous ones. That's outside the scope of this discussion.

Hey, I'm a NY'er, LOL. Thanks for the insight and perspective!

 

[scagnt83]

I know he guaranteed column shows minimum interest and mac charges.. But can you show current interest rates with max charges?

Most Ive seen do not. I think Axa allowed this at one point, perhaps Allianz as well. Its been a few years since Ive run illustrations on either of those though.

An issue I have is they also do not show the max charges on the expense report. So there is literally no way of knowing what they are without seeing the contract. You have to find a specimen contract on the front end to know the ratio of how high they can raise the expenses within the policy.

Max charges are certainly an issue to look at when analyzing IUL.

Some carriers can only increase expenses by 50%.... others can increase expenses by 200%...

 

[scagnt83]

What's more- I am frustrated that many of the indexes have annual fees, which are deducted from the performance of the index, and have the effect of drag on the product, but agents rarely know this.

A newer one on the market has a 5% fee and a 7% fee. Unbelievable that agents actually sell that crap.

Ive heard the SEC & FINRA have taken notice of these new "Fee Based" Index Options within IUL.

Terrible for the future of IUL and keeping it classified as a fixed product. jmo

 

[PrivClientSG]

Most Ive seen do not. I think Axa allowed this at one point, perhaps Allianz as well. Its been a few years since Ive run illustrations on either of those though.

An issue I have is they also do not show the max charges on the expense report. So there is literally no way of knowing what they are without seeing the contract. You have to find a specimen contract on the front end to know the ratio.

Max charges are certainly an issue to look at when analyzing IUL.

Some carriers can only increase expenses by 50%.... others can increase expenses by 200%...

I always, always, always, not sure if I said always -- ask for a specimen policy. Period. I have the same gripe as you do. Yes, I think Allianz did do this, and I am not sure if they still do. I want -- I demand -- to know what the current mortality charges are AND WHAT THE GUARANTEED MAXIMUM CHARGES ARE! Period. I've asked and had home office or brokerage people say to me, "Why would you want to know, it's never happened in the history of the world" or some foolish comment like that. Thanks again!

 

[scagnt83]

I've asked and had home office or brokerage people say to me, "Why would you want to know, it's never happened in the history of the world" or some foolish comment like that. Thanks again!

Ive heard the same. Some of the largest IMOs in the country have said similar comments to me when trying to pitch fee heavy (commission heavy) IUL products. Even the executives of those IMOs have said those comments to me.

I tell them they should learn the history of the product they sell.

And if I remember correctly, NA/Midland has increased expenses on a few product lines sold over the past decade. Not at the max, but increased prior to the 10y mark, not a positive sign.

Back in the 70s/80s they didnt just suddenly max out the expenses in ULs... it was gradual. Same with lowering rates, they didnt go from 11% to 3% overnight.

 

[ATM]

Understanding how they work is exactly why I am not comfortable with them.

They have been around the FIA space for a decade now. Marketed as a "game changer" for client returns. Well.... that never happened... a few did better than the S&P, most didnt. Plenty of FIA agents/clients were not happy with real world results.... and these are hybrid indexes that backtested amazing, Im talking 11%-15% returns on the backtesting.... some showed a rolling 20year low of 4% or 5%.... and somehow they never broke 5% over the actual 10 years they existed!

Its easy to take historical factors, put them into an algorithm, and it would have killed it during that given time period. Traders/Firms have been doing that for 100 years now. But they almost never match that historical performance, because the factors moving the market are constantly changing. What caused it to go up and down 20 years ago is not the same as what causes it to go up and down today... and in 5 years it will be a different set of factors... and again in another 5 years.

Trying to "pick" the winners and losers is a dangerous game in the market. Hybrid indexes are just attempting to picking the winning and losing "factors" that move the market. Just look at the change in whats moved the market over just the past 4 years... its literally changed yearly. No historical based algorithm can cover that.

if you understand how they work, then you will understand that no index is a magic bullet to higher returns because the company has to hedge and has to use it's general account return to do the rest.

IMO, all the options available in an IUL are going to return roughly the same amount over a long time period. If you think about it it has to make sense because if one index selectin does better, the options are going to cost more and the company will not be able to buy more option on an index that has higher growth potential. Those simply cost more.

The only way, IMO, to game that system is to correctly time when each index should be used and when they shouldn't. I'm not a good predictor and neither is anyone else. The options markets prices out any potential advantages of one over another. So IMO, it just doesn't matter.

 

[PrivClientSG]

A newer one on the market has a 5% fee and a 7% fee. Unbelievable that agents actually sell that crap.

Ive heard the SEC & FINRA have taken notice of these new "Fee Based" Index Options within IUL.

Terrible for the future of IUL and keeping it classified as a fixed product. jmo

How hard is it to find these fees within the illustration? Thanks.

 

[ATM]

I have an IUL I bought in Oct 2011. Thru 10/2022 average annual return in 5.83%, and that's in a policy with no front or back end load.

I think that's a very reasonable return for the time period for a fixed product. Better when you figure it's potentially tax free and the owner may be in a high tax bracket.

 

[ATM]

How hard is it to find these fees within the illustration? Thanks.

Very easy if the carrier has an illustration of annual costs addendum the agent can print with the illustration.