Like we've discussed before, if the client realizes the risks and can shoulder that burden, it can be a great option.
For most (and the way it is often sold) it is not a great option.
Ok, so IUL's have gotten my attention ...
- Thread starter DayTimer
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For most (and the way it is often sold) it is not a great option.
- 11,277
You know how much I love Tom. (No pun intended.) And when I finally get started with him, I'll ask him to show me his IUL presentation.
For me, I know that IULs are not really a product that should be sold by illustration. It's a concept sale. And, perhaps for the premiums being discussed, it's not a good idea to use something you can't quantify as well as you can with a whole life. I have no problem with that.
But with IUL... as long as:
- Your cash values can continue to earn indexed interest (which will vary year to year based on the underlying index performance and caps/spreads - but not those evil multipliers)
- Your loan amounts are responsibly taken at 6% or less of cash values
- The policy was max-funded with a minimum death benefit (either Level DB (ideal for younger people) or increasing DB to convert to level after the funding periods (ideal for older people))
Now, here's the rub:
- If you're doing $100,000 premiums into a 10-pay WL with Ohio National... your comp may be around 70% or higher.
- If you're doing an 'increasing DB' IUL, your comp will be only about 30-40%.
You'll earn more selling the 10-pay along with selling contractual guarantees with the 10-pay compared to selling IUL.
So that's why I know that IUL can work, because of the numbers and concepts. But I also know that you can earn FAR more doing it Tom's way with the premiums he's talking about.
With that in mind, I'd follow the premiums to the guarantees and the higher comp than I would follow the notion that IUL is "always better". All I'm saying is that it can still work. But why bother with it if you can get a better comp with guarantees?
The Cost of Insurance is just one of many Levers the insurance comapny controls.. at the end of the day illustration is an assumption no matter how you look at it. You as a professional can make an educated assumption but it's just a guide.. it's not for the consumer to expect those exact numbers.
let 's say COI was guaranteed.. would that make you more comfortable? .. if so I have bad news for you , since the Insurance company still controls the cap , par rate etc... They have many things at their disposal.. and at the end of the day COI should be the least of your concern because it takes a lot more effort on the insurance company's part to raise it than the other levers they control.
If you want a guranteed income in retirment .. the only option I can think of is a Deferred Income annuity I guess... and from what I gather I don't think you can even sell those to young folks. Or I guess a whole life assuming the guaranteed column only
Otherwise, there's no product that I can think of that guarantees you a certain return 30 years from now.. even the interest on your cash in the bank is not guaranteed (though it has a floor like WL)
- 11,277
Hopefully we don't get negative interest rates...
Determine your clients needs. Sometimes WL can be a good choice for a client. IUL is a great product if it is designed and funded properly.
If you look at the performance of the any index they most likely average between 8-10%. Keep in mind there is a guarantee of no loss.
So the here's the question to consider....Why put a client in a program where they can get a low fixed rate of return when they could have gotten more interest on another program?
The answer is it all depends on the clients wants and needs.
If you look at the performance of the any index they most likely average between 8-10%. Keep in mind there is a guarantee of no loss.
So the here's the question to consider....Why put a client in a program where they can get a low fixed rate of return when they could have gotten more interest on another program?
The answer is it all depends on the clients wants and needs.
- 4,576
Please show me in the contract or illustration where that is stated? I believe you may be including the dividends of the index which are not part of the index crediting like a S&P 500 fund-EFT does.
Also, there is not a guarantee of no loss in the policy. The policy includes load fees, surrender charges and cost of insurance. There are many ways a UL or IUL can lose money. However, it cannot lose account value in a given year due to losses in a given index, but it surely can go backwards in cash value between years.
Your statements in this post could be used in a lawsuit by a disgruntled client who pays in $10,000 per year for 5 years & wonders why they are only getting $20,000 back after you stated they couldnt lose money & would be getting 8-10% interest
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- 4,576
that statement says a lot about your open mindedness to properly analyze and evaluate the product.
IUL can be a great product when properly used. however, your statement that it will outperform your investment options is not factually true unless you have no other investment options. It can perform nicely, but historically it will not outperform investment wise. It will generally lag other investment options such as index funds, Roth IRA in a diversified portfolio, ETFs, etc.
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- 10,330
This x10.
Over time, IUL will never outperform the index on a percentage/dollar basis. It's specifically designed not to...
Maybe your tax situation makes it outperform on a NET basis after taking withdrawals or loans. And using GPT can certainly create a high payout rate.
But its not going to outperform the index. And "non-index" investments should always outperform the index long term if managed correctly.
What percentage of mutual funds outperform any index?
- 11,277
Only non-investment professionals ask that question.
It's not about out-performing anything, but about choosing an appropriate portfolio or mutual fund to match the risk tolerance for the client.
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