Looking for properly designed EIUL from NA

[jboussea]

I disagree on all points.

This conversation has to be a "then and now" type of thing because the products have changed so much over the past few years.

Now-
The EC5 outperforms the CV5 assuming the same Credited Rate.

At Preferred Rates and the same Credited Rate, it beats it with and without the Waiver of Surrender Rider.

The EC5 also produces more income, both with and without WOS.


The only real questions are:
1. Does the higher Cap on the CV5 justify running it at a higher Credited Rate?
2. Will they keep the Cap higher in the long run?

My opinions:
You are asking for trouble assuming the higher Cap will yield significantly higher returns in the future.

The next decade will not look like the past decade in the stock market. Assuming Caps will be maxed out as much as they have recently, is begging for an E&O claim imo.

With a moderate market, there will not be a large difference, or even any difference, between an 11% Cap and a 12% Cap.

From a historical standpoint, any Cap over 10% tends to give nominal return when compared at 30/40/50 year periods. Unfortunately, there is a reason the carriers lobbied the NAIC to only show a 20-year lookback on illustrations. Take a look at a 30 or 40 year lookback and it is very revealing.


You can always expect Caps to be lower in the future to some extent at some point in the policy. They might not stay that way, but it can and probably will happen at some point.

Saying "this product will have a higher Credited Rate than that product", is asking for trouble. It is also impossible for anyone to know for sure. Its not a game I play.


Product comparison in the past:
In the past, the normal CV product did outperform the EC product. But not by much. And the outperformance was even less on the income projection.


4% Spread Question:
I dont use it. From a historical standpoint (beyond 20 years) a Cap above 8% beats almost every other option out there. And it is by far the most consistent option. And consistent returns are key with life insurance.

I might use it for a small portion off my allocation. But never for the majority.

You are looking at numbers that include the past decade. If the next decade, looks like the decade before last, a 4% spread will be a horrible option compared to a yearly Cap.

I don't get which decades you specifically talking about . .. the past decade as in 07-17? or 01-10? .. It seems as if the 4% spread would do better in a volatile market. let's say a 30% down year and then a 30% up year .. but in a steady market where it's going up steadily, the cap is always better and the cap is less risky in general.

Don't get me wrong .. I understand the risk of the 4% spread, and I don't plan on selling it to my clients but it's an option that I think I would find viable for myself. But the risk to me seems like in a less volatile market where there are not a lot of big swings from year to year the spread option is really risky but the past decade has been pretty wild IMO.

See how there is a 50 year look back and a 66 yr .. the 50 yr look back still has a very good "worst case scenario" .. but in the 66 yr look back the penn option has a better "worst case scenario" ..

 

[scagnt83]

But given your take on the two IUL options, should we assume that you would lean toward the HECV option for Mass Mutual over their regular Par-WL product? Would your clients value liquidity enough to go with the 100% liquidity rider that some IUL offer?

The difference in performance between the Mass HECV WL and the 10pay is greater than the difference that used to exist between the CV and ECV IULs. So Im not a huge fan of the product.

Plus, I use WL for cases that are more protection/DB focused. UL in general is much better for situations that CV is a primary concern. (because of the ability to use GPT and change DB options)


I give clients the option of the Rider usually. I show a comparison of with and without the Rider. Let them decide. Of course, some situations lend themselves more to using the Rider vs. others. The Rider does not affect the CV that much long term, and even less on the income.

 

[scagnt83]

Caps lend themselves better to a volatile market or low/medium return market. A Spread is best for a consistent bull market, same with Monthly Point to Point.

If you like an Indexing Option, use it as part of your allocation. At the end of 30 or 40 years there is no way to know which will be best for sure. So I dont spend a lot of time nit-picking between the various options anymore. The goal is a long term return in the 5%-7% range. Most of the options will most likely accomplish that But from my research over the years, the traditional yearly Cap does it the most consistently.

 

[shooter]

I deal with both types. But the product itself lends itself to people with assets vs. someone making $50k per year. But "HNW" is subjective. Is someone with $100k in the bank HNW? Maybe, maybe not. I have IUL clients who make under $100k, and those who make well over it.


I dont care how much you make. Everyone values liquidity.
And every advisor damn sure better value it if they care about their clients well being.

A lower net worth client needs liquidity even more than a high net worth client does. It would be more suitable to sell the HNW client the less liquid product, not the LNW client.

The lower net worth client will not have the spare assets in an emergency that a HNW client would. They are the ones who will be the most negatively affected by tying up their money needlessly, when there is a competitive alternative that gives liquidity.


---------


I have seen WAY too many people get caught up in high WL or IUL premiums and then "life happens", and they need to get out. Then they are PISSED that they have sunk $100k into this thing and can only get $40k out of it.

Thankfully, these people are not my clients, but people who come to me for help trying to figure out a solution. You dont want to hear what they have to say about the agent that sold it to them....

Ive seen so much of that, I will no longer sell the normal CV product. No matter what their income or assets are.

I have always shown comparisons in the past. Every single client has chosen the EC product when given a choice, no matter what their income/net worth, even when it gave a slightly lower long term return.

-------

Insurance is about the "what if's" when life happens and the sh*t hits the fan. The less assets a person has, the more they need that "what if" safety net.

A nominal increase in return, is almost never worth a significant loss in liquidity.

 

[shooter]

I deal with both types. But the product itself lends itself to people with assets vs. someone making $50k per year. But "HNW" is subjective. Is someone with $100k in the bank HNW? Maybe, maybe not. I have IUL clients who make under $100k, and those who make well over it.


I dont care how much you make. Everyone values liquidity.
And every advisor damn sure better value it if they care about their clients well being.

A lower net worth client needs liquidity even more than a high net worth client does. It would be more suitable to sell the HNW client the less liquid product, not the LNW client.

The lower net worth client will not have the spare assets in an emergency that a HNW client would. They are the ones who will be the most negatively affected by tying up their money needlessly, when there is a competitive alternative that gives liquidity.


---------


I have seen WAY too many people get caught up in high WL or IUL premiums and then "life happens", and they need to get out. Then they are PISSED that they have sunk $100k into this thing and can only get $40k out of it.

Thankfully, these people are not my clients, but people who come to me for help trying to figure out a solution. You dont want to hear what they have to say about the agent that sold it to them....

Ive seen so much of that, I will no longer sell the normal CV product. No matter what their income or assets are.

I have always shown comparisons in the past. Every single client has chosen the EC product when given a choice, no matter what their income/net worth, even when it gave a slightly lower long term return.

-------

Insurance is about the "what if's" when life happens and the sh*t hits the fan. The less assets a person has, the more they need that "what if" safety net.

A nominal increase in return, is almost never worth a significant loss in liquidity.

I deal with both types. But the product itself lends itself to people with assets vs. someone making $50k per year. But "HNW" is subjective. Is someone with $100k in the bank HNW? Maybe, maybe not. I have IUL clients who make under $100k, and those who make well over it.


I dont care how much you make. Everyone values liquidity.
And every advisor damn sure better value it if they care about their clients well being.

A lower net worth client needs liquidity even more than a high net worth client does. It would be more suitable to sell the HNW client the less liquid product, not the LNW client.

The lower net worth client will not have the spare assets in an emergency that a HNW client would. They are the ones who will be the most negatively affected by tying up their money needlessly, when there is a competitive alternative that gives liquidity.


---------


I have seen WAY too many people get caught up in high WL or IUL premiums and then "life happens", and they need to get out. Then they are PISSED that they have sunk $100k into this thing and can only get $40k out of it.

Thankfully, these people are not my clients, but people who come to me for help trying to figure out a solution. You dont want to hear what they have to say about the agent that sold it to them....

Ive seen so much of that, I will no longer sell the normal CV product. No matter what their income or assets are.

I have always shown comparisons in the past. Every single client has chosen the EC product when given a choice, no matter what their income/net worth, even when it gave a slightly lower long term return.

-------

Insurance is about the "what if's" when life happens and the sh*t hits the fan. The less assets a person has, the more they need that "what if" safety net.

A nominal increase in return, is almost never worth a significant loss in liquidity.

 

[shooter]

Scagnt83
You said you never sell the normal cv product anymore.
I am not contracted with Midland or North American, so
I don't know anything about there IUL products.

Did you mean you sell a product with high early cash value
opposed to one with zero and little cash value in the first few years?
Would you be more comfortable that the projections would be more
accurate with an IUL or a par whole life?

I am have trouble getting excited about IUL.
All I see are lots of zero's on the IUL guarantee side.
You have had IUL on the books for ten years so you can see
a track record that a new guy can't.

Do you have a preference IUL or Par WL?
Thanks,
Shooter

 

[js44]

S&P index will be around 30 years from now even if FAANG like stocks go out of business. They will be replaced by other big businesses and will be added to S&P Index. There is an be an upward bias built into it. Plus, There will definitely be dividends. If one is looking for investment, this seems to lot safer, except for fear of market crashes. That's where these life insurance products come into play with a promise of floors and tax free withdrawals.
But these products seem so complicated. I just want to know how much are the expenses taken out every year. Can they increase those expenses by any amount or is there a cap?
Then, how can we combat these expenses? How much premium should we deposit in them so that yearly return on them(however much, maybe 10%) will not only offset these expenses but also provide for my retirement?
Next, can we reduce that 10% by how much and still accomplish my goal. It all comes down to this. Can anyone address this?

 

[jboussea]

S&P index will be around 30 years from now even if FAANG like stocks go out of business. They will be replaced by other big businesses and will be added to S&P Index. There is an be an upward bias built into it. Plus, There will definitely be dividends. If one is looking for investment, this seems to lot safer, except for fear of market crashes. That's where these life insurance products come into play with a promise of floors and tax free withdrawals.
But these products seem so complicated. I just want to know how much are the expenses taken out every year. Can they increase those expenses by any amount or is there a cap?
Then, how can we combat these expenses? How much premium should we deposit in them so that yearly return on them(however much, maybe 10%) will not only offset these expenses but also provide for my retirement?
Next, can we reduce that 10% by how much and still accomplish my goal. It all comes down to this. Can anyone address this?

Why are you looking at an either or scenario? The IUL can be less volatile more predictable money, that's highly liquid .. while investing in the market will potentially yield higher return .. that's how you hedge your bets.

When you lose your job.. and your emergency funds is depleted .. you will have access to the IUL money rather than getting penalized for taking money out a retirement plan
not to mention you're most likely to lose your job in a down market so that's definitely not the ideal time to deplete your retirment funds.
when you want to take advantage of a business opportunity that could net you some great returns, you can use the IUL cash.

During the distribution years, when the market crash .. you use the IUL money..
when the market is up.. you use get distribution from your gains

Wouldn't that give you more of a peace of mind .knowing you got options?

 

[js44]

Why are you looking at an either or scenario? The IUL can be less volatile more predictable money, that's highly liquid .. while investing in the market will potentially yield higher return .. that's how you hedge your bets.

When you lose your job.. and your emergency funds is depleted .. you will have access to the IUL money rather than getting penalized for taking money out a retirement plan
not to mention you're most likely to lose your job in a down market so that's definitely not the ideal time to deplete your retirment funds.
when you want to take advantage of a business opportunity that could net you some great returns, you can use the IUL cash.

During the distribution years, when the market crash .. you use the IUL money..
when the market is up.. you use get distribution from your gains

Wouldn't that give you more of a peace of mind .knowing you got options?

lol. Please spare me the sales talk. I am looking for answers at a deeper level. You are talking about peace of mind? I am worried insurance company suddenly increasing the expenses and taking all my CV. If you can't answer my specific questions like can insurance company increase the expenses by however much they see fit or is there a cap, please let other experienced agents answer. Thanks

 

[jboussea]

lol. Please spare me the sales talk. I am looking for answers at a deeper level. You are talking about peace of mind? I am worried insurance company suddenly increasing the expenses and taking all my CV. If you can't answer my specific questions like can insurance company increase the expenses by however much they see fit or is there a cap, please let other experienced agents answer. Thanks

There are many ways to skin the cat. Increasing cost of insurance is one of many. Decreasing the cap is another. Increasing loan rates is another.

Those questions are specific to the product you select. So get multiple illustrations from your agent and compare them thoroughly.

FYI.. I have no intentions of selling you an IUL.