Equity Management (missed fortune and IBC)

[indaville]

You like the LI over securities because of safety? Let me ask you this, would you consider this philosophy to be a long term process? If so, what makes you think the returns on an EIUL will outperform the returns of a well allocated equity protfolio?

What 17 years in this business has taught me is that even the best laid plans fall apart. Clients get tired of putting those dollars into a life insurance policy. They refinance their houses. They move to new houses. They buy new cars. They send their kids to college. Oh yeah, and let's not forget what has happened to the rates on those Option ARM loans over the last two years. Now the monthly savings they were to set aside for the EIUL has reduced. It's just a recipe for disaster.

This type of program is not for the mass population. It MAY work for a select few. And I do mean a select few. Any agent who "convinces" a person to refinance their house and take that equity and put it into an EIUL along with the monthly savings is not, in my opinion, looking out for the best interest of the client. They are only looking at padding their wallets.

I don't use EIUL, I use an over-funded WL. I agree the strategy is not for everyone, but when it does work it can be a huge benefit for the client.

 

[johncm]

It is best to use insurance and stay away from securities with this strategy. The Missed Fortune guys seem to think this will work for everyone, my experience says that for about 1 in 3 this could be a good idea.

O.K., you've repeated yourself and not answered the question.

I don't know what is going on with my posts?

I like the LI over securities b/c of the safety. Using LI over bonds provides multiple benefits for the client.

You like the LI over securities because of safety? Let me ask you this, would you consider this philosophy to be a long term process? If so, what makes you think the returns on an EIUL will outperform the returns of a well allocated equity protfolio?

What 17 years in this business has taught me is that even the best laid plans fall apart. Clients get tired of putting those dollars into a life insurance policy. They refinance their houses. They move to new houses. They buy new cars. They send their kids to college. Oh yeah, and let's not forget what has happened to the rates on those Option ARM loans over the last two years. Now the monthly savings they were to set aside for the EIUL has reduced. It's just a recipe for disaster.

This type of program is not for the mass population. It MAY work for a select few. And I do mean a select few. Any agent who "convinces" a person to refinance their house and take that equity and put it into an EIUL along with the monthly savings is not, in my opinion, looking out for the best interest of the client. They are only looking at padding their wallets.

This is not for the mass population. It works if you can get around this. If you get tired of putting money into anything, it will fall apart. SOME people jsut do not want the risk of securities and WANT safety. What's wrong with that. With 17 years, you've got me beet by a bunch. But, I still wonder if you are not just set in your own way and can not see any different. Not saying it's bad, but until you do a little more than just read the book, why bash it.

It is only a few companies that this works with and no it's not because of what's in the book. I don't think he mentions any names in the book. It is only a few only because when yuo do a side by side only a few come out on top with the rest not even close behind.

WL is good but I still believe that EIUL will still beat WL hands down. I know I am going to take a beating on this, but that is how I see it. WL was yesterday EIUL is today. Lets face, things improve in time. Ealy UL gave people a bad taste and we have learned.

On bonds, Safe yes, but do little in the arbitrage arena

 

[indaville]

WL was yesterday EIUL is today.

The thing with WL is it always survives. UL was going to replace it, then variable, now EIUL. If you are using LI for cash accumulation I have not seen a UL or EIUL that looks good when you start taking cash out.

 

[johncm]

WL was yesterday EIUL is today.

The thing with WL is it always survives. UL was going to replace it, then variable, now EIUL. If you are using LI for cash accumulation I have not seen a UL or EIUL that looks good when you start taking cash out.

Have you actually taken a look at a EIUL designed to take cash out at some point.
Take a look at F&G, Indy Life and LSW. These 3 are way ahead of the other EIUL products. And although WL looks good. These look alot better. With much better chance of higher gains than WL could get.

 

[sman]

This is not for the mass population.

Is there an echo in here?

It works if you can get around this.

This is the exception and not the norm and based on faulty assumptions if you ask me.

If you get tired of putting money into anything, it will fall apart.

Yes, but at least with equities you still have access to those monies you've saved. With the EIUL, you've suffered from a drag due to the load fees and COI. In addition, you've got lengthy surrender charges.

SOME people jsut do not want the risk of securities and WANT safety. What's wrong with that.

There is absolutely nothing wrong with that. However, those are generally the people who would rather have a home paid for and not mortgaged to the hilt in "HOPES" that what the agent showed them will work.

But, I still wonder if you are not just set in your own way and can not see any different.

Nope. I have to study everything that comes out on the market. You either study it and use it or study it and refute it. You use it if it's a good deal for the client. You refute it if you believe it will do more harm than good. After studying it, I choose the latter.

Not saying it's bad, but until you do a little more than just read the book, why bash it.

It's faulty for you to assume I've done little more than read a book.

It is only a few companies that this works with and no it's not because of what's in the book. I don't think he mentions any names in the book. It is only a few only because when yuo do a side by side only a few come out on top with the rest not even close behind.

Ah yes, it works when the numbers used in the illustration are obtained. When there is no increase in COI. When there is no reduction in premium due to the Option ARM loan having rising interest rates. It amazes me how agents will accept the "historic" returns when offering this product, and turn around and bash equities (most that do this aren't even licensed to sell equities) and use the "past results don't guarantee future returns" argument. How is it that you think and index product can outperform the index itself when it doesn't even include the dividends of that index? And don't give me the whole "it doesn't participate in the downturns of the market".

I know that the two most used carriers for this approach are F&G and Indianapolis Life. With F&G's MasterChoice, you've got a 7.5% load up to target (then 5% of excess) plus $10 a month. And with either of Indianapolis Life's plans you have a 5% premium charge plus $5 or $6 per month or 3% plus $5 per month depending on which product you choose.

So right off the bat, you've got to make up for these charges and the COI in return. That's a tall order.

 

[indaville]

Have you actually taken a look at a EIUL designed to take cash out at some point.
Take a look at F&G, Indy Life and LSW. These 3 are way ahead of the other EIUL products. And although WL looks good. These look alot better. With much better chance of higher gains than WL could get.

Yes I have taken a look a them. An agent can make the numbers look good. I don't care so much what the illustration looks like, I care about the real numbers. With a properly designed WL I can guarantee profits for the client. With EIUL the client has to hope for profits.

 

[James]

What kind of person?

Good guestion, yet I do strongly believe that the idea of home ownership is viewed somewhat different today then ever before. With the average homeowner today likely living and owning 3-4 different homes in their lives understand that having a actual deed isn't the end game at all. Too me, like many I believe have an idea of a dream home that they'll move into as they near retirement age. Too me that is a large home that I personally design in a location that best serves my later age.

Do me understanding this idea is too understand that actually having a paid off home is simply not important. Looking back in the last twenty years of my life, I can see that if I employed this early on it would of save me more then once. Now I'm not saying that Insurance is the perfect product but it is diffently in the top 3 on my list along with Bonds or a well planned Fund built with Stocks and other Assorted investments.

 

[policy doctor]

EIUL

Jumping in on your discussion, I think for the right person this can work very well. The right person would be someone who doesn't foolishly go into debt but is a careful, budget minded person.

By using a simple interest mtg approach, that difference in monthly pymt could be used to fund a retirement/emergency fund. The problem for most people is when they retire they are house rich and cash poor.

If people could accumulate a lot of money in the early years for it to build a large nest egg, then they could adjust after 15-17 yrs, and then concentrate on paying off the house, and letting the funds just sit and grow on compound interest.

But i think IUL is great also to fund a future retirement. Amazing what $100/mo can build up to thru the years...tax deferred

 

[johncm]

This is not for the mass population.

Is there an echo in here?

Yeah, but it would be mean for me to say it.

It works if you can get around this.

This is the exception and not the norm and based on faulty assumptions if you ask me.

I wasn't asking you. you have your opinion and I have mine. But I am younger and can out run you. ( I assumed again, about being younger)

If you get tired of putting money into anything, it will fall apart.

Yes, but at least with equities you still have access to those monies you've saved. With the EIUL, you've suffered from a drag due to the load fees and COI. In addition, you've got lengthy surrender charges.

Yeah but mine comes with LI and tax free benefits. Surrender charges are a part in back loaded MF. They are also declining 10 years products out there. Hell That is what I use This is not a short term set up. Over the long haul it has to perform. If it doesn't, nothing else performed well either.

SOME people jsut do not want the risk of securities and WANT safety. What's wrong with that.

There is absolutely nothing wrong with that. However, those are generally the people who would rather have a home paid for and not mortgaged to the hilt in "HOPES" that what the agent showed them will work.
Look, you can be glass half full or glass half empty. Securities are sold in the same fashion. Hope and greed. All I say is if we can get 6,7,or 8 % overall, would that make you happy. That's my crowd. Not the people looking at higher more risk type gains.

But, I still wonder if you are not just set in your own way and can not see any different.

Nope. I have to study everything that comes out on the market. You either study it and use it or study it and refute it. You use it if it's a good deal for the client. You refute it if you believe it will do more harm than good. After studying it, I choose the latter.

I am so glad you do. But I have a question. Do you go into with doubtful and with a jaded option?

Not saying it's bad, but until you do a little more than just read the book, why bash it.

It's faulty for you to assume I've done little more than read a book.

My bad

It is only a few companies that this works with and no it's not because of what's in the book. I don't think he mentions any names in the book. It is only a few only because when yuo do a side by side only a few come out on top with the rest not even close behind.

Ah yes, it works when the numbers used in the illustration are obtained. When there is no increase in COI. When there is no reduction in premium due to the Option ARM loan having rising interest rates. It amazes me how agents will accept the "historic" returns when offering this product, and turn around and bash equities (most that do this aren't even licensed to sell equities) and use the "past results don't guarantee future returns" argument. How is it that you think and index product can outperform the index itself when it doesn't even include the dividends of that index? And don't give me the whole "it doesn't participate in the downturns of the market".

Whoa! That's a mouth full huh. COI has not been going up. expenses at some not so well company's maybe, but I do not have much of a reference on this. Yo DO NOT have to use the Option ARM to make this work. Who told you this. I use it and recommend it to those that I feel can handle it. But never to spenders. That is just asking for trouble. SOme people do not even get to hear about arbitrage. just cash value.
What amazes me is that you think you can use "historic" figures to sell mutual funds but it is not ok to use to show the index gains. Who ever said the EIUL can "outperform the index" Who care about dividend. We are not investing in the index. otherwise we would not be on this horse.
and Yeah, I will give you past performance does not .... If it's good enough for MF it's good enough for.
I'm not licensed to talk about equities. So I don't. That is not what I am there for. If that is what they want. I refer them to an associate. No foul. Move on.

Are we counting paces yet?

I know that the two most used carriers for this approach are F&G and Indianapolis Life. With F&G's MasterChoice, you've got a 7.5% load up to target (then 5% of excess) plus $10 a month. And with either of Indianapolis Life's plans you have a 5% premium charge plus $5 or $6 per month or 3% plus $5 per month depending on which product you choose.

So right off the bat, you've got to make up for these charges and the COI in return. That's a tall order.

See the attachment. It will speak for itself. I like LSW. I think the 12% on the P2P and 10.28% on the point to average speaks for itself. COI is looking pretty good about now. oh yeah. for got to mention We don't participate in the downward cycle, so there, I told you.

sman, I just want to be clear. I do not think you are wrong in any manner. You have been around a while and you do what you know in your heart is best for your client. I applaud that. To many do not. I just happen to be from a different camp and want the same for my clients. I did poke a little fun, but I was hoping lighten things up and not turn this into a pissing match. Lets face it. We are both here to improve ourselves.

I would be happy to talk more about this if you would like. But I already think I made a mess out of this post and would rather not keep it going. Cause lord knows I can type/ talk what ever.
Look at the attachment. It looks very good. It's hard to argue numbers. But it is only one year. But it looks good.

 

[sman]

Yeah but mine comes with LI and tax free benefits. Surrender charges are a part in back loaded MF. They are also declining 10 years products out there. Hell That is what I use This is not a short term set up. Over the long haul it has to perform. If it doesn't, nothing else performed well either.

There are other scenarios where a person can have life insurance and tax-free benefits and not be in an EIUL. In addition, if you think just because your LSW EIUL doesn't perform that "nothing else performed" you are sadly mistaken. The S&P 500 is but one asset class. There are many times other asset classes outperform the S&P 500.

Look, you can be glass half full or glass half empty. Securities are sold in the same fashion. Hope and greed. All I say is if we can get 6,7,or 8 % overall, would that make you happy. That's my crowd. Not the people looking at higher more risk type gains.

So do you run your proposals using a 6% rate of return? If that's "your crowd", there is a much safer way to get a 6% rate of return than maxing out a loan on a house (a poor loan at that) and placing those monies into an EIUL.

I am so glad you do. But I have a question. Do you go into with doubtful and with a jaded option?

.

I think you probably meant "opinion". And the answer is no. I've studied the plan and don't deem it a fit for 95%+ of the population. If you can "convince" them otherwise, more power to you. Just be ready to have a claim filed on your E&O.

Whoa! That's a mouth full huh. COI has not been going up. expenses at some not so well company's maybe, but I do not have much of a reference on this. Yo DO NOT have to use the Option ARM to make this work. Who told you this. I use it and recommend it to those that I feel can handle it. But never to spenders. That is just asking for trouble. SOme people do not even get to hear about arbitrage. just cash value.
What amazes me is that you think you can use "historic" figures to sell mutual funds but it is not ok to use to show the index gains. Who ever said the EIUL can "outperform the index" Who care about dividend. We are not investing in the index. otherwise we would not be on this horse.
and Yeah, I will give you past performance does not .... If it's good enough for MF it's good enough for.
I'm not licensed to talk about equities. So I don't. That is not what I am there for. If that is what they want. I refer them to an associate. No foul. Move on.

Talk about a mouthful. COI may not be going up. And it may never go up. But I have seen it go up. Companies like American General and Reliastar. These are no fly by night companies. They are A++ and A+ rated carriers. Both of which are higher than LSW. And if it's not a possibility, why put it in the contract?

And yes, it's not right to show index returns when discussing index products. Why? Because index products don't participate in the dividends of the index. Why is that important? Because dividends increase the return on the S&P 500 by about 2% per year. So right off the bat, in an up year the index product return will underperform the S&P 500 by approximately 2% (of course, this is only on the portions of the money that is not designated for all the other expenses in the EIUL).

See the attachment. It will speak for itself. I like LSW. I think the 12% on the P2P and 10.28% on the point to average speaks for itself. COI is looking pretty good about now. oh yeah. for got to mention We don't participate in the downward cycle, so there, I told you.

Yipee. One year return. Any idea what an S&P 500 index fund returned over the 12-months ending 10/31/06. About 16.18%. The old, "we don't participate in the downward cycle" argument. That's fine. You don't participate in the full gains of the index either. And as I said before, there is much more to the market than the S&P 500. Can those in the LSW product participate in the Russell 2000, S&P 400, Real Estate, Health Sector, Financial Sector, Foreign Markets, etc? Absolutely not. Do a little research and you'll see that just because the S&P 500 is down, doesn't mean the other areas of the market are down.

sman, I just want to be clear. I do not think you are wrong in any manner.

That's good. Because I don't think I am either.

You have been around a while and you do what you know in your heart is best for your client.

Absolutely. No one size fits all.

I just happen to be from a different camp and want the same for my clients.

That may be so. But I stand by my comments that this whole Missed Fortune concept is WAY oversold and will do more harm than good for the majority that have jumped on board (except for the agents who will make a mint).

I did poke a little fun, but I was hoping lighten things up and not turn this into a pissing match.

I got no problem with it.

Look at the attachment. It looks very good. It's hard to argue numbers. But it is only one year. But it looks good.

Like I said (and you said) it's just one year and it's well below what investors in the index realized.