Pacific Life Policy Performed 22%

[marindependent]

As of 12/31/21, the S&P 500 index was up 106% from its lows in march/april of 2020. Did the Pac Life product capture all 106% of that too along with the dividends that were credited from the 500 companies in the S&P

I love this question, but it does need a.... question mark [?]

Perhaps someone will answer it at that point. There are really two questions that are in it and I am waiting for someone to approach it.

 

[Allen Trent]

I love this question, but it does need a.... question mark [?]

Perhaps someone will answer it at that point. There are really two questions that are in it and I am waiting for someone to approach it.

For sure. Those that could answer it, won't answer it as it doesn't support the narrative of the original post.

 

[Edwardfin]

Glad you offer other options, that is good. From the post, I assumed wrong because it is rare for a broker would make a post about life insurance in such a singular way. I read too much into it.

So, do you guarantee my IUL will not have less money in it next year compared to this year? Or does that rider/multiplier come at a cost that takes away the guarantee of 0% downside risk? Will the rider cost be a negative to the policy in flat or down years? Are the COI & internal fees competitive?

I like these conversations. If structured correctly an IUL will not lose money and at its worst will stay the same as the year before. Especially if the purpose is for cash accumulation. Generally, if that is the case there are no riders attached which could have a negative impact. If the agent is a specialist then he or she knows how to compare internal costs although higher internal costs don't mean that a lower internal cost policy will always have higher cash value growth.

For sure. Those that could answer it, won't answer it as it doesn't support the narrative of the original post.

The answer is no and IUL doesn't capture all of the upsides of the market the product is a good safe money option designed to capture some of the upsides with none of the downside. It also isn't taxed in the distribution phase which depending on a client's tax bracket and where they are saving could save that client 40% of the total balance at today's current rates. Not to mention we actually don't know what the future taxable rates are.

An IUL is not the financial answer to everything. Nor is the market.

 

[ejbarraza]

Yeah. My S&P 500 12/31 statement was up 28.3% & had no cost of insurance fees deducted, no premium loads on each deposit, no policy issue fees for the 1st 10 years, etc

not against IUL at all, just against the 1-sided post you are making as if other investments were not up.

As of 12/31/21, the S&P 500 index was up 106% from its lows in march/april of 2020. Did the Pac Life product capture all 106% of that too along with the dividends that were credited from the 500 companies in the S&P?

I wonder why some might be pursuing class action status......hmmmmmmm

Pacific Life Insurance Company Misleads Consumers Into Purchasing PDX IUL Policies, Alleges Class Action - Top Class Actions

Correct me if I'm wrong, but your criticism is that IULs are going to underperform stock market investing over the long run because the policy fees, participation rates, surrender charges, etc. make bundling term life and an "investment vehicle" a bad choice for the client? I can say that my own $10k/year Pacific Life policy only costs $355 in commission for a $185k death benefit. That is a low cost and can go even lower if you go with a survivorship policy from PennMutual. However, the upside potential is much greater for Pacific Life since they have an UNCAPPED 5-year index option with a guaranteed 105% participation rate (currently 110%) and no spread. Also, you can multiply these returns by 2.7 times. Even during the most inopportune time to have an index option mature which was 3/15/2015-3/15/2022, the S&P returned 14.65%, and the index crediting rate was 49.77%. This could turn into triple-digit returns with the 2.7x multiplier.

 

[Tahoe Ray]

Correct me if I'm wrong, but your criticism is that IULs are going to underperform stock market investing over the long run because the policy fees, participation rates, surrender charges, etc. make bundling term life and an "investment vehicle" a bad choice for the client? I can say that my own $10k/year Pacific Life policy only costs $355 in commission for a $185k death benefit. That is a low cost and can go even lower if you go with a survivorship policy from PennMutual. However, the upside potential is much greater for Pacific Life since they have an UNCAPPED 5-year index option with a guaranteed 105% participation rate (currently 110%) and no spread. Also, you can multiply these returns by 2.7 times. Even during the most inopportune time to have an index option mature which was 3/15/2015-3/15/20220, the S&P returned 14.65%, and the index crediting rate was 49.77%. This could turn into triple-digit returns with the 2.7x multiplier.
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We all sell IUL but I will tell you that IUL will 100% underperform the stock market over the life of the policy (unless you die).

Carriers don't have a magic wand in their general accounts nor do they have some crediting strategy that will make the policyowner outperform equities (which is what the crediting based on in the first place).

IULs should outperform bonds. Not equities.

My responses are based on actual performance data for almost 20 years. Not the hopes and dreams of a Paclife or Penn Mutual (both of which I write as do many others on this forum) illustration.

Subscribe to a few websites that use actual policy performance data and you'll see what I mean.

 

[ejbarraza]

We all sell IUL but I will tell you that IUL will 100% underperform the stock market over the life of the policy (unless you die).

Carriers don't have a magic wand in their general accounts nor do they have some crediting strategy that will make the policyowner outperform equities (which is what the crediting based on in the first place).

IULs should outperform bonds. Not equities.

My responses are based on actual performance data for almost 20 years. Not the hopes and dreams of a Paclife or Penn Mutual (both of which I write as do many others on this forum) illustration.

Subscribe to a few websites that use actual policy performance data and you'll see what I mean.

These are ACTUAL policy returns, not wishful thinking. If you don't believe me go to youtube and search for Doug Andrews actual policy performance videos. If you still don't want to believe that the cash value can compound that quickly then I don't know what to tell you.

 

[marindependent]

IULs should outperform bonds. Not equities.

Sage Advice.

 

[ejbarraza]

Sage Advice.

Let's do a little arithmetic. Nationwide, Pacific Life, and PennMutual each have IULs with uncapped annual point-to-point index options. Between March 2020-2021, the index rose 67%. With a 7% spread, that means each of these policies delivered 60% dividends in a single year free of any downside risk. Can we at least agree on that much? Or is even that much considered a scam or too good to be true? I am not at all saying that you should be telling anyone that this is the norm and that they should expect it. Just making the point that life insurance can generate massive returns without the risk associated with stocks.

Now, if they also contractually guarantee a 2.7x multiplier on performance minus a 7.5% fee, then the returns are 150%. This is achievable because they are purchasing options. I am not condescending but do you guys know how options work? They carry a massive amount of embedded leverage. For example, in October 2019 I purchased 2 far out-of-the-money VIX options for $30 total. That means worst-case scenario I lose $30 if the options expire worthless. However, if the options are in the money at expiration I receive a massive cash-settled capital gain. If the strike price at expiration is $80 and I have 2 options, then my gains are $16,000 minus the premiums paid. If these gains are inside of a tax-free investment vehicle, then it is all pure profit. This is what insurance companies are doing at a billion-dollar scale. There is no "magic wand" just the interest earned (e.g. 3%) on US Treasuries and fees charged by the riders (7.5%) equal their options budget which can be profitable since they are far out of the money with long-duration risk (e.g. 2 year or 5 year options). So if you had $100,000 in cash value and went all in on the uncapped annual index option with 2.7 times leverage, you would have earned $150,000 in 1 year.

Guardian Life does the same thing with their index participation rider for the whole life insurance policies to get more equity upside without any downside risk. Had you started the policy before the 7702 changes, it would guarantee a minimum return of 4% and a potential cap of 11%.

 

[Tahoe Ray]

Let's do a little arithmetic. Nationwide, Pacific Life, and PennMutual each have IULs with uncapped annual point-to-point index options. Between March 2020-2021, the index rose 67%. With a 7% spread, that means each of these policies delivered 60% dividends in a single year free of any downside risk. Can we at least agree on that much? Or is even that much considered a scam or too good to be true? I am not at all saying that you should be telling anyone that this is the norm and that they should expect it. Just making the point that life insurance can generate massive returns without the risk associated with stocks.

Now, if they also contractually guarantee a 2.7x multiplier on performance minus a 7.5% fee, then the returns are 150%. This is achievable because they are purchasing options. I am not condescending but do you guys know how options work? They carry a massive amount of embedded leverage. For example, in October 2019 I purchased 2 far out-of-the-money VIX options for $30 total. That means worst-case scenario I lose $30 if the options expire worthless. However, if the options are in the money at expiration I receive a massive cash-settled capital gain. If the strike price at expiration is $80 and I have 2 options, then my gains are $16,000 minus the premiums paid. If these gains are inside of a tax-free investment vehicle, then it is all pure profit. This is what insurance companies are doing at a billion-dollar scale. There is no "magic wand" just the interest earned (e.g. 3%) on US Treasuries and fees charged by the riders (7.5%) equal their options budget which can be profitable since they are far out of the money with long-duration risk (e.g. 2 year or 5 year options). So if you had $100,000 in cash value and went all in on the uncapped annual index option with 2.7 times leverage, you would have earned $150,000 in 1 year.

Guardian Life does the same thing with their index participation rider for the whole life insurance policies to get more equity upside without any downside risk. Had you started the policy before the 7702 changes, it would guarantee a minimum return of 4% and a potential cap of 11%.
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I have an investment account where I buy nothing but options.

I also understand how IUL works.

I am just going to say that if you imply to clients that they will outperform equities in an IUL over a 10-20+ year time period, you're going to have a bad time.

 

[ejbarraza]

I have an investment account where I buy nothing but options.

I also understand how IUL works.

I am just going to say that if you imply to clients that they will outperform equities in an IUL over a 10-20+ year time period, you're going to have a bad time.

I only became licensed so I can sell myself IULs. I eat my own cooking. And if I sold a policy it would be at an illustrated rate of no more than 6%. Better to be safe than sorry. Did you know the class action lawsuit of Pacific Life is based on agents not blending IULs with an annually renewable term rider to compress the death benefit to the lowest amount possible? I would never do that because it inflates the commission and lowers future returns. However, bad actors exist in every industry and unfortunately have given all of us a bad name. Now people like you guys think it's a complete scam that Pacific Life can generate triple-digit returns under any circumstance. I am in the process of working with a whole life insurance line of credit bank that will be onboarding IULs by the end of the year. The hope is to eventually issue secured business credit cards with cash back rewards on spending. Pacific Life being the perfect candidate as collateral in my opinion.