Ohio National - Demutualization

[scagnt83]

I feel sorry for agents who chose profit partnership and deferred a part of their commissions. The deferred commissions avoided taxation and ONL has been crediting them about 10% a year. But now those assetts sit on the balance sheet of ONL. And if you terminate your contract, ONL will be paying you a pension after age 60 for life. Good luck on receiving them.

Over and over, Ive seen that you better get your money from carriers sooner vs. later.

 

[david_lewis]

Same here. No way there wont be some huge lawsuits coming out of this.... probably class actions suits against "groups" whos only directive was to promote this "strategy".

There is no defending putting someones ENTIRE 401k info WL. Especially funneling it through an annuity just to do so.

The carriers specifically warn against this. I guarantee those apps do not disclose the TRUE source of funds the money is coming from. And by carrier regs and state regs they are supposed to.

Take Penn for example, they restrict "retirement funding" to 10%-25% of the clients income...

So how can an agent take 100% of a 60 year olds retirement account, and use it to fund WL? They must have one hell of a pension and SS benefit coming into them if they are properly disclosing source of funds and the "plan". But we all know what is really happening... they are failing to disclose the true source of funds.

And we should all know from our AML classes, CE classes, and carrier guidelines... that the source of funds is not just the last product the money flowed through.... it is where the agent originally came into contact with those funds.

Then there is the annuity carrier and suitability. They certainly are not telling the annuity carrier the true intention of the annuity transaction. They are not going to approve a client taking 70% of their 401k and putting it into an FIA, just to funnel it into WL.

This is exactly they kind of thing agents get sued over, get licenses suspended, carrier contracts terminated, etc.

While I dont claim to know exactly what TBL is telling agents to do.... assuming they are promoting this scheme of funneling through annuities and hiding the true SOF.... they could be seen by a court of law or regulator as a "co-conspirator" to insurance fraud. Because lets call it what it is, if you lie on the app about SOF, you are committing insurance fraud.

I'm not arguing for putting all one's money into life insurance, but I do think quite a lot of an individual's money could legitimately go into life insurance to build a large financial foundation.

What always gets me is no one really has a problem with an investment advisor telling their clients to plow every last dime into the stock market, or even a mix of stocks and bonds, but if an insurance agent suggests doing it with a guaranteed life insurance policy, suddenly everyone loses their mind.

 

[scagnt83]

I'm not arguing for putting all one's money into life insurance, but I do think quite a lot of an individual's money could legitimately go into life insurance to build a large financial foundation.

What always gets me is no one really has a problem with an investment advisor telling their clients to plow every last dime into the stock market, or even a mix of stocks and bonds, but if an insurance agent suggests doing it with a guaranteed life insurance policy, suddenly everyone loses their mind.

Nobody around here is "losing their minds" over people putting assets into WL or IUL.

But when an agent "advises" a consumer to take their entire 401k, put it into a 10 year annuity, and take annual distributions from the annuity to fund a 10pay WL.... and tells them it will provide a higher income vs. keeping that money in the market.... it violates multiple insurance and security regulations. This scenario is what I was referencing, as it was the topic of discussion earlier in this thread.

Almost every agent posting on this thread sells WL & IUL for CV purposes. But doing it in an irresponsible way is frowned upon by most agents. Its a fantastic alternative to low risk positions within a persons overall portfolio... even an alternative to certain medium risk assets.... but not a suitable alternative for medium-high risk assets.

 

[Allen Trent]

I'm not arguing for putting all one's money into life insurance, but I do think quite a lot of an individual's money could legitimately go into life insurance to build a large financial foundation.

What always gets me is no one really has a problem with an investment advisor telling their clients to plow every last dime into the stock market, or even a mix of stocks and bonds, but if an insurance agent suggests doing it with a guaranteed life insurance policy, suddenly everyone loses their mind.

Everything in moderation. I don't sell stocks, but I have seen way more insurance agents tell people to never put money in 401k & to put it all in life insurance. On the flip side, when I have seen financial people or stock brokers, most have suggested a combination of bonds/stocks. And relatively speaking, if a 25 year old put alot of money into WL, they will not have a "large financial foundation" relative to what would be in a combination employer 401k/401kRoth plan at age 65.
My belief is term life + employer plan up to match while getting rid of debt. Make sure disability insurance in place, then some minimal permanent for long term needs, then save more in employer plan & Roth along with looking at overfunding life policy & college savings for kids. All depends on income levels, etc.

Too many people in my life insurance industry find a good saver & start with max funding WL or IUL as step #1 & try to position it as covering all the other possibilities

 

[Allen Trent]

Nobody around here is "losing their minds" over people putting assets into WL or IUL.

But when an agent "advises" a consumer to take their entire 401k, put it into a 10 year annuity, and take annual distributions from the annuity to fund a 10pay WL.... and tells them it will provide a higher income vs. keeping that money in the market.... it violates multiple insurance and security regulations. This scenario is what I was referencing, as it was the topic of discussion earlier in this thread.

Almost every agent posting on this thread sells WL & IUL for CV purposes. But doing it in an irresponsible way is frowned upon by most agents. Its a fantastic alternative to low risk positions within a persons overall portfolio... even an alternative to certain medium risk assets.... but not a suitable alternative for medium-high risk assets.

Lol, said nearly exact same exactly when you posted. You were more concise. Lol

 

[Lloyds of Lubbock]

When an agent tells you 100% of your money should be doing this.
RUN! Everything in moderation WELL SAID!
As I am in retirement, I can tell you some things I did right and some things not so right.
I always maintained a balance so if something did not not work right, the effect was not a disaster.
One thing I can tell you 401k plans and similar sound great, you get a tax deductions tax deferred growth and that sounds great.......until you have to pay the tax.

 

[david_lewis]

When an agent tells you 100% of your money should be doing this.
RUN! Everything in moderation WELL SAID!
As I am in retirement, I can tell you some things I did right and some things not so right.
I always maintained a balance so if something did not not work right, the effect was not a disaster.
One thing I can tell you 401k plans and similar sound great, you get a tax deductions tax deferred growth and that sounds great.......until you have to pay the tax.

There was a Society of Actuaries article put out about this years ago, about how the upfront tax benefits are paid back later, so the tax benefits are, more or less, a gimmick. They didn't come out and state it exactly that way, but that was the gist.

As for the returns achievable in equities, it really depends on when one buys and sells. If you started investing in 1973, you'd have a very different result than if you started in 1990. Every year, people who were not old enough to invest become old enough to open a brokerage and start placing their bets.

Everyone can think of an example of when equities could have beaten, or did beat, the returns on whole life insurance. But, there have also been very long time periods when the returns of whole life insurance were comparable to the after-tax returns on equities, and I think this sort of makes people nuts because it "shouldn't" be that way. So, for example, the price of shares in VFINX in April of 1983 was $8.14 per share. Fast forward 30 years, and the share price of VFINX was listed at $114.85. If an investor consistently bought shares in the index every single month, it worked out to a gross return before taxes of 8.5%. During that same time period, putting money into a policy from, say NML or maybe MassMutual, was an exceptional value and would have yielded close to 7% return on cash value. Net out the taxes from the VFINX fund, and you're going to be very close in returns to the life insurance policy, and in many cases probably better off on the life insurance side.

What was the difference? There was no investment risk in the life insurance policy. For whatever reason, that bugs a lot of folks.

Hypothetically, one could argue future returns on equities will be higher because that's the expectation and it's a very strong expectation. But, we won't know for sure until after the fact.

 

[pfg1]

So the sale & demutualization is approved. Anyone dealing with clients and 1035's?

I did very little with ON, thankfully. I do have one client with a decent case. I ran an inforce illustration and his dividends after being paid up (at age 65) dropped from projected $33k/yr to $1500/yr. Projected "supplemental income" from ON policy illustrates about 50% less than Penn Mutual.

I am planning to 1035 him to a max funded WL w Penn Mutual right after his anniversary date in a few months. His crossover will be 5yrs, and his net will be $500k more cash value at age 65. This whole debacle makes me so mad. And I am soooooo glad I never got involved in the process of routing retirement funds into WL. Those conversations with clients have to be ugly, unless they are totally being spun. I mean our current administration counted all the people going back to work after COVID as "new jobs created" SMH so its obvious alot of folks will believe anything that is said.

 

[Lloyds of Lubbock]

I know agents who had financed some of their 10 pays.....what a nightmare!

 

[scagnt83]

If an investor consistently bought shares in the index every single month, it worked out to a gross return before taxes of 8.5%. During that same time period, putting money into a policy from, say NML or maybe MassMutual, was an exceptional value and would have yielded close to 7% return on cash value. Net out the taxes from the VFINX fund, and you're going to be very close in returns to the life insurance policy, and in many cases probably better off on the life insurance side.

What was the difference? There was no investment risk in the life insurance policy. For whatever reason, that bugs a lot of folks.

The difference is that after that period, you were stuck in the WL for 30 years of ultra low rates... while the market was on fire. And still stuck. Liquidity matters.

Trying to compare WL against the stock market is a fools game. They both have their place in a balanced financial plan.

Putting all your money in the same type of investment is the most foolish thing a person could do.