MassMutual Internal memo regarding "banking" strategies:

[scagnt83]

so many tik tok videos out there with misinformation on this topic and whole life & IUL. Half of them are from people that only heard part of the product details & are pushing the kool aid they believed they drank. Seen a few where they give the impression you can borrow from your Million dollar policy without explaining you would have to either put $1.1M in or wait many years before there is much of anything in it to be able to pledge it as collateral for a loan from the insurer. Almost everyone in the comments is wanting to buy & asking for contact info because they think you can borrow from the death benefit.......LOL

Timely comment. Received a text over the weekend from a client with a tiktok screenshot of an IUL "banking" ad that read:
"that moment your realize you can put $500 a month into a 6 figure life insurance policy that you can borrow against tax free to buy an asset that can pay the loan off while the money in your policy is still gaining interest. Be your own bank."
(yes, the "your" is what they wrote)

They asked me if it was really a thing.

I didnt even know where to start with that one. I didnt even think they might have thought the DB was loanable.

 

[Allen Trent]

Timely comment. Received a text over the weekend from a client with a tiktok screenshot of an IUL "banking" ad that read:
"that moment your realize you can put $500 a month into a 6 figure life insurance policy that you can borrow against tax free to buy an asset that can pay the loan off while the money in your policy is still gaining interest. Be your own bank."
(yes, the "your" is what they wrote)

They asked me if it was really a thing.

I didnt even know where to start with that one. I didnt even think they might have thought the DB was loanable.

It is crazy in the comment sections of those. Most of the agents posting them and commenting in support seem to be new agents in an MLM type setup.

So, it is easier to put money 1st into a policy with load fees, admin fees, insurance charges and/surrender charges so that you can wait to take loans against it to buy another investment you could have bought in the 1st place? That seems like a good reason.

It is like some of these agents don't even know how to use a calculator. Literally just had a college kid at my house that is an intern at NWM. He was trying to tell me that I am wrong because I said that their policies are not growing by 8%. This kid believes it & has tried to get all the friends in the friend group to buy $500 per month WL(instead of putting in 401k or paying down debts).......cause it makes 8% that they will be able to use to buy car & house instead of paying interest to bank, they pay interest to themselves (what?). I literally walked over to my kitchen, grabbed old school calculator & had him pick any later year he wanted on his illustration & took cash value minus premium divided by prior year cash value.........3.8%.

Then, I pointed to his illustration & said tell me how it made 8% but still took 12 yrs before it broke even to have CV equal even the premiums paid. Those 12 years of 0%are gonna be a drag on returns.

Lastly, I had him pull up a bank rate calculator & put in the savings goal of the CV shown at age 65 & monthly savings of $500. It only needed to earn around 3%to get to that number......not 8% like he believed

He had drank the Kool aid so much, that I don't think he believed the math on a an actual calculator.

I told him to never say 8% because it isn't remotely true at all, ever & fails to even begin to be honest that the 1st 10 years is 0% on his illustration.

I tried to show him all the places policies can be a good fit, but begged him to not try to fit square pegs in round holes by calling people under the premise he was coming to talk to them about financial planning, college debt, college planning if his only solution is going to be big WL policies that make 8%

 

[scagnt83]

It is crazy in the comment sections of those. Most of the agents posting them and commenting in support seem to be new agents in an MLM type setup.

So, it is easier to put money 1st into a policy with load fees, admin fees, insurance charges and/surrender charges so that you can wait to take loans against it to buy another investment you could have bought in the 1st place? That seems like a good reason.

It is like some of these agents don't even know how to use a calculator. Literally just had a college kid at my house that is an intern at NWM. He was trying to tell me that I am wrong because I said that their policies are not growing by 8%. This kid believes it & has tried to get all the friends in the friend group to buy $500 per month WL(instead of putting in 401k or paying down debts).......cause it makes 8% that they will be able to use to buy car & house instead of paying interest to bank, they pay interest to themselves (what?). I literally walked over to my kitchen, grabbed old school calculator & had him pick any later year he wanted on his illustration & took cash value minus premium divided by prior year cash value.........3.8%.

Then, I pointed to his illustration & said tell me how it made 8% but still took 12 yrs before it broke even to have CV equal even the premiums paid. Those 12 years of 0%are gonna be a drag on returns.

Lastly, I had him pull up a bank rate calculator & put in the savings goal of the CV shown at age 65 & monthly savings of $500. It only needed to earn around 3%to get to that number......not 8% like he believed

He had drank the Kool aid so much, that I don't think he believed the math on a an actual calculator.

I told him to never say 8% because it isn't remotely true at all, ever & fails to even begin to be honest that the 1st 10 years is 0% on his illustration.

I tried to show him all the places policies can be a good fit, but begged him to not try to fit square pegs in round holes by calling people under the premise he was coming to talk to them about financial planning, college debt, college planning if his only solution is going to be big WL policies that make 8%

8%?? That is insane. They didnt even net 8% back in the 80s when dividends were double what they are now.

He probably was confused and someone told him the "taxable equivalent" of the WL return was 8%. While not true.... lots of mutual agents will use that in their pitches to consumers. "At a 30% federal and 8% state tax... your 4% return is the same as a 6.5% return"

Of course that leaves out the fact that taxes are on a progressive scale and the persons net effective rate is much lower than 38%.

 

[Allen Trent]

8%?? That is insane. They didnt even net 8% back in the 80s when dividends were double what they are now.

He probably was confused and someone told him the "taxable equivalent" of the WL return was 8%. While not true.... lots of mutual agents will use that in their pitches to consumers. "At a 30% federal and 8% state tax... your 4% return is the same as a 6.5% return"

Of course that leaves out the fact that taxes are on a progressive scale and the persons net effective rate is much lower than 38%.

Sometimes I think they are also including the annual premium payment in the growth of the cash value year over year

 

[scagnt83]

Sometimes I think they are also including the annual premium payment in the growth of the cash value year over year

I have seen some fail to account for it when doing their own calculations for ROI.

Fortunately the illustration software accounts for it. But I hate that ROI is an optional illustration. It should be required.

Ive known agents that had no clue there was an option to print a ROI report on an illustration.

 

[titeye]

I am so glad you guys are exposing this! A few years ago, I developed a relationship with an "insurance agent" in the FE market. He later joined an agency where he learned about IUL's and infinite banking. I could not believe an insurance agent would fall for this, as if it actually makes sense, and market it to unsophisticated prospects. Then again, I suppose the sophisticated prospect would just stare at the agent in silence, as if they were crazy. To my surprise, a plethora of life insurance agents have been pushing this. YouTube is full of this nonsense. Thanks scagnt83, Allen , DHK. After listening to a couple of YouTube videos over the course of a long road trip, I literally began scratching my head wondering if I was the one, after 30 years in, who did not understand life insurance.

 

[walthamny]

I have to say Tik Tok works for the message you gotta do something now ads, so thats mostly term, medicare, critical illness or FE coverage. It will never work for IUL because the message has to be short and cute. IUL is neither cute nor simple to explain.

 

[Allen Trent]

I have to say Tik Tok works for the message you gotta do something now ads, so thats mostly term, medicare, critical illness or FE coverage. It will never work for IUL because the message has to be short and cute. IUL is neither cute nor simple to explain.

That is why those tik toks about IUL & BYOB are working so well. They only have time to tell you a couple of the most extreme positive possibilities & don't have time for the minutae that would cause people to think before they act

 

[DHK]

 

[JTylerH]

That is why those tik toks about IUL & BYOB are working so well. They only have time to tell you a couple of the most extreme positive possibilities & don't have time for the minutae that would cause people to think before they act

So wait… you’re telling me I CANT learn all there is to learn about IUL through a 30 second tik tok clip?? Insurance is such a scam!