Does WFG's IUL Return 9.35%?
- Thread starter sonseeker
- Start date
- 11,453
There are so many issues with that statement, it's actually hard to know where to start.
1) Average returns are not the same as realizing that return every year.
2) IULs have not been AROUND for 25 years.
3) IULs are a concept sale. Based on participation rates and cap rates, you can participate in the upside of the underlying index, but not the downside.
Therefore, the common disclosure that applies to investments also applies to indexed insurance products: past performance is NOT an indication of future performance.
In my opinion, based on only the statement you made... I wouldn't DARE work with an agent with such imprecise wording in how they describe their product and product performance.
1) Average returns are not the same as realizing that return every year.
2) IULs have not been AROUND for 25 years.
3) IULs are a concept sale. Based on participation rates and cap rates, you can participate in the upside of the underlying index, but not the downside.
Therefore, the common disclosure that applies to investments also applies to indexed insurance products: past performance is NOT an indication of future performance.
In my opinion, based on only the statement you made... I wouldn't DARE work with an agent with such imprecise wording in how they describe their product and product performance.
- Thread starter
- #3
An IUl will never produce over 9% unless you over fund like crazy to water down the effect of the cost of insurance.
If you extrapolate the S&P since inception average returns you will get a number around 11.5%... but if you cap the product out for an index cap rate and forego any losses and any gains over said cap rate you receive a pure gain average of around 7.8% with the S&P 500. Now you have to calculate in a few factors that diminish that rate...
A 1% management fee or .9 with pac life.
Now your best case rate is 6.8% roughly speaking and that is before you deal with cost of insurance.
So I usually illustrate around 6% if they are healthy and young.
IUL's are still young and untested for the most part. That's why department of insurance regulators set a cap rate for illustrations at around 7% for IULs.
If you don't believe me just go find the return figures for the SP500 and do the math on an excel sheet like I did.
If you extrapolate the S&P since inception average returns you will get a number around 11.5%... but if you cap the product out for an index cap rate and forego any losses and any gains over said cap rate you receive a pure gain average of around 7.8% with the S&P 500. Now you have to calculate in a few factors that diminish that rate...
A 1% management fee or .9 with pac life.
Now your best case rate is 6.8% roughly speaking and that is before you deal with cost of insurance.
So I usually illustrate around 6% if they are healthy and young.
IUL's are still young and untested for the most part. That's why department of insurance regulators set a cap rate for illustrations at around 7% for IULs.
If you don't believe me just go find the return figures for the SP500 and do the math on an excel sheet like I did.
- Thread starter
- #5
Keep in mind that IULs index accounts don't get dividend participation. If you are looking at historical returns of the s&p make sure yet don't include dividends. Most do.
Also, where do you come up with management fee?
- 318
Transamerica IUL is available to sell without being part of WFG. The WFG might have indexes not available to the rest of us, which would allow them to claim it's "exclusive". It might not. I don't know.
What I do know - or at least I think I know - is that while the TA IUL is the hottest seller, it doesn't have the highest cap rate, nor the lowest expenses, so the returns won't be as high as many other IULs out there.
9.35%? They may have done some backtesting to arrive at that figure, as in, IF it was available back in 1991, it would have generated a return of 9.35%. Or maybe they were saying the underlying index returned 9.35% over the past 25 years.
Whatever they did, I don't recommend the TA IUL. There are better options out there.
What I do know - or at least I think I know - is that while the TA IUL is the hottest seller, it doesn't have the highest cap rate, nor the lowest expenses, so the returns won't be as high as many other IULs out there.
9.35%? They may have done some backtesting to arrive at that figure, as in, IF it was available back in 1991, it would have generated a return of 9.35%. Or maybe they were saying the underlying index returned 9.35% over the past 25 years.
Whatever they did, I don't recommend the TA IUL. There are better options out there.
Paclife has a .9% management fee and all IUL's charge a management fee... sometimes they are just better at hiding it.
PacLife's new IUL lineup has a management fee of .8%. But most major players in the IUL marketplace do not have management fees.
PacLife has a higher cap with a management fee vs most carriers have a slightly lower cap with no management fee.
Mox Nox in Rem
New Member
There are so many carriers who do much better than Transamerica IUL.
Allianz, Voya, Columbus Life, North America, maybe Nationwide depending on your clients situation. There are much more better options than Transamerica. I dont even think Transmamerica has a participation loan available.
Allianz, Voya, Columbus Life, North America, maybe Nationwide depending on your clients situation. There are much more better options than Transamerica. I dont even think Transmamerica has a participation loan available.
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