- 614
What rate are you comfortable showing a client/prospect?
Illustrated Rate
- Thread starter The Gimp
- Start date
- 11,277
50% of current cap.
Why?
1. It helps to account for when the market does do a double-digit gain.
2. Then it "takes it away" when there is no gain.
If that cycle repeats every two years (double-digit gain, then 0)... then your illustration would actually be accurate... as long as caps and participation rates remain consistent.
It's not perfect, but if you can't vary the illustrated returns, it's my method of showing what is possible if everything "evens out" over time.
Why?
1. It helps to account for when the market does do a double-digit gain.
2. Then it "takes it away" when there is no gain.
If that cycle repeats every two years (double-digit gain, then 0)... then your illustration would actually be accurate... as long as caps and participation rates remain consistent.
It's not perfect, but if you can't vary the illustrated returns, it's my method of showing what is possible if everything "evens out" over time.
Last edited:
- 711
I would read the thread next to this one and some of BNTRS articles.
Answer: at this point I am not comfortable showing anything during the accumulation phase. BNTRS article he posted in the other thread has really good info on what rate to illustrate during the income phase.
Answer: at this point I am not comfortable showing anything during the accumulation phase. BNTRS article he posted in the other thread has really good info on what rate to illustrate during the income phase.
- 10,328
I actually start with the Midpoint. I show a rate that has a 99%-100% historical accuracy as the Midpoint (around 4.5%-5.5% depending on the product).
Then I show a Current of 2% above the Midpoint. Usually I show 4.5% Mid and 6.5% Current. Sometimes 5%/7% depending on the client.
50% of current Cap is just arbitrary and has no real statistical reasoning for doing so. Sure the product could do 0% of Cap and then 100% of Cap for its entire life... but it could also do 1001 other various sequences... why is 50% of Cap any more justified than the others? (its not)
I base future assumptions on historical statistics.
LFG/Penn/ING/NA all have historical lookback statistics in various agent marketing pieces. They give breakdowns of percentages that various net rates occurred over the past 50 or so years. 5%ish seems to be the 100% occurrence rate with most carriers. There are also a few 3rd party companies with historical lookback software.
Then I show a Current of 2% above the Midpoint. Usually I show 4.5% Mid and 6.5% Current. Sometimes 5%/7% depending on the client.
50% of current Cap is just arbitrary and has no real statistical reasoning for doing so. Sure the product could do 0% of Cap and then 100% of Cap for its entire life... but it could also do 1001 other various sequences... why is 50% of Cap any more justified than the others? (its not)
I base future assumptions on historical statistics.
LFG/Penn/ING/NA all have historical lookback statistics in various agent marketing pieces. They give breakdowns of percentages that various net rates occurred over the past 50 or so years. 5%ish seems to be the 100% occurrence rate with most carriers. There are also a few 3rd party companies with historical lookback software.
