Chuckler
Super Genius
- 109
Just getting my investments licenses for the purpose of selling VUL through my employer as a type of "retirement planning". Don't know enough about it. Anyone help me out and share some insight, pros and cons? Thanks!
Is VUL a good product?
- Thread starter Chuckler
- Start date
-
- Tags
- variable life vul
- 11,277
The biggest issue with VUL is that there aren't any guarantees on the investments for the distribution side. As share values fall, the net amount at risk (pure insurance) increases... and that amount has a cost of insurance charged against the remaining cash values.
I wouldn't sell VUL for retirement planning when WL and IUL exist. (Your employer may not like IUL, but at least IUL has principal guarantees against market risk.)
I wouldn't sell VUL for retirement planning when WL and IUL exist. (Your employer may not like IUL, but at least IUL has principal guarantees against market risk.)
- Thread starter
- #3
- 11,277
If I were a registered rep looking to sell VUL, I would sell it as an executive compensation plan for a company for highly compensated employees.
Guaranteed VULs are currently price better than guaranteed UL...
Plus, max funding a VUL has the potential to have better cash values than any other life product.
I don't agree with this philosophy. A good VUL will almost always outperform IUL and WL over a long (20+ yr) time frame.
Most folks should have a lot of risk in their investments if they're a ways out from retirement. Guarantees are for people much closer to their distribution phase, imo.
- 4,575
It is better currently because the markets are in a bull market so VUL illustrates better today....................then when the bear markets happen, all hell breaks lose & consumers come running saying they didnt know they could lose most of their cash values & now have to pay more to keep the policy going because the cost of insurance increases(on a level death benefit policy) . It can be disaster in some scenarios
I own almost every insurance & securities related products to diversify my overall portfolio. VUL will never be in my personal portfolio as I was lucky enough in the 1st 4 years of my career to witness 2 massive policies disintegrate where the client lost everything in it & couldnt put money into the policies to save them.
1. Client purchased a Hartford VUL from a broker in about 1998-99 Client was around age 70 & put $120K into a $300k level death benefit policy. 2-3 years later, his cash value had dropped from the $120k he put in to $60k. If that wasnt bad enough, he couldnt legally fit any more money in to help the policy & the policy needed to make 9-11% each year going forward just to cover the cost of insurance on his much larger net amount at risk (what was only $180k insurance at issue was now $240k & he was now in his mid 70s with the cost of insurance increasing because of his age & the fact that he now had 33% more insurance from losing so much in the markets in his policy. He cashed it out
2. Super wealthy clients was directed by his lawyers in the late 1990s to buy a 2nd to die Variable Life policy from Manulife for something like $12M to cover estate taxes by using an Irrevocable Life insurance trust to gift the $120k per year in premiums because the couple had 6 beneficiaries & each spouse could gift $10k per beneficiary. Instead of funding properly, they solved for the best case situation & bought the max face amount based on some interest rate like 10-12% just to stay active. markets crashed & cash value was zero & needed more money to cover costs. But the client couldnt put more money into the ILIT as they had no more beneficiaries & couldnt gift more then 10k & were not willing to fund it any more.
Those 2 situations told me with no protection of zero, there was no way I was going to put my name on those products as those were needed coverages for clients tied to investments that had no guarantee.
I can see alot more VUL being sold in the future for accumulation focused products if the new 7702 rules provide 40-60% more premiums to fit into smaller policies helping to keep the internal costs drags on them. But I dont have the stomach for it as a consumer or an advisor
Keep in mind, 1 of the examples I gave was a compete design problem for sure. With max funding, VUL can work but I see many that are far from max funded as it looks more like the advisor is trying to max the target premium for commission than for the client benefit (can be true with WL, UL & IUL also)
- Thread starter
- #8
Chuckler
Super Genius
- 109
I just want to thank everyone for the insight and experiences shared! What else can I do with my Series 6 then?
- 11,277
- 11,277
Series 6 = Mutual funds (Investment Companies), variable life (ugh), and variable annuities.
The variable annuities are more expensive for what they do these days compared to about 10-12 years ago, but knowing the company you're with, you won't be allowed to sell fixed indexed annuities. Gotta offer what they allow you to offer to help your clients solve their problems.
