nocosurvivor
Expert
- 21
What kind of indexing strategies is everyone using currently?
Indexing Strategies
- Thread starter nocosurvivor
- Start date
- 8,707
Depends on the product... My favorite strategy right now is on NWL Global Lookback product...It is a lookback strategy on 4 indexes. Otherwise I use Monthly Average and Annual Point 2 Point depending on what is available I tend to stay away from Monthly Point 2 Point as I have a problem with a cap on positive growth monthly but none on monthly negative activity I think when the market goes up and down it doesn't do it in 1-2 percent amounts.
- 2,455
Depends on product...................20% fixed......20% monthly.......rest in point to point is about how I usually do it. I need that statement to show the client is earning money. I don't go for the go big or go home strategy. The product is not designed for that. If they want to see huge gains they can expect to see some losses and if that is the case then they are looking at the wrong product.
- 8,707
I agree the client should see growth and this is something I discuss with them and since we are typically moving away from or discussed a straight fixed we normally avoid it in the allocations...Also since some of my products don't index new money into policy aniversary they are getting fixed on those contributions anyway plus any bonuses on the contributions.
As I said I tend to avoid Monthly pt2pt as I read a study showing it has lagged behind Monthly Averaging and Annual Pt2pt.
- 1,271
You can fry them or saute them - taste pretty much the same.
- 1,926
Sort of how I see it, they all will tend to come out close to the same over the years.
- 10,708
Idk; with some IUL illustration systems you can run 20 or even 40 year historicals... they always come out better with a Yearly P2P method.
- 8,707
WRONG....The Gross index return might come out that way but since they were not indexing ULs heck ULs didn't exist 40 years ago they are not showing you net returns based on that policy form. You have to keep in might most carrier have a lower Participation rate or cap or larger spread on Annual Pt2Pt options over the Monthly Averaging.
- 10,708
So what is your point beyond the obvious??
It shows the different Indexing method returns, based on the current Indexing Rates.
In other words, based on the current rates, this is the historical return.
How is that not relevant?
Of course they cant go back in time and create an indexed product and see what every business decision after that which is related to the indexed product, and how those decisions would affect IA/IUL caps.
But that is the fatal flaw in any historical model; you cant recreate human decisions.
"Sure, ABC MF did a 20% avg, but how do you know that either you or your broker would have kept you in their the whole time??"
But to look at the historical market returns, and see what they produce based upon todays current rates, is still the best way imo to help predict future returns.
Also, there have been multiple studies on indexed products, and on every one I have seen the "averages" are around the same, but the "median" always favors Yearly P2P
jmo
but to say that a historical model is "wrong" is a bit off base; sure, their are more unknowns in an IA historical than a mutual fund, but you tell me the best way to predict
- 924
I always tell people that whatever strategy they try, they can always change things up next year.
A few years ago I had people making over 20% with monthly averaging because the S&P was drifting up each month against 2.75% caps.
Not the same scenario now, as we all know. So, in response to "Gee, mister expert in the field, what strategy do you recommend for what you just sold me?" I reply "Well, where do you see the market going this coming year?"
If you think it's going to be volatile, then annual point to point makes sense. If you think it's going down, then interest makes sense (unless you have an income rider). If you think it's going to drift upward -then you're crazy.
In any event, it puts the decision back on them. It's all guesswork and I'd rather say in next year's meeting "Well, you said you thought the market was going up."
A few years ago I had people making over 20% with monthly averaging because the S&P was drifting up each month against 2.75% caps.
Not the same scenario now, as we all know. So, in response to "Gee, mister expert in the field, what strategy do you recommend for what you just sold me?" I reply "Well, where do you see the market going this coming year?"
If you think it's going to be volatile, then annual point to point makes sense. If you think it's going down, then interest makes sense (unless you have an income rider). If you think it's going to drift upward -then you're crazy.
In any event, it puts the decision back on them. It's all guesswork and I'd rather say in next year's meeting "Well, you said you thought the market was going up."
