ThinkAdvisor: IRS Ruling Could Help Fee-Only Advisors Use Life Insurance

[DHK]

No load VUL products shouldn't have needed this PLR because they should be designed from the start for lower expenses and an advisory fee disclosed to the client. I guess they did? *smh*

I'm more familiar with PPLI these days (although that's still dangerous territory for me) than a no-load VUL.

 

[Tahoe Ray]

No load VUL products shouldn't have needed this PLR because they should be designed from the start for lower expenses and an advisory fee disclosed to the client. I guess they did? *smh*

I'm more familiar with PPLI these days (although that's still dangerous territory for me) than a no-load VUL.

But you can't pull the fees out of them without it being really cumbersome (reducing the clients basis/no-fee loans, etc). I'm interpreting this as a solution to that problem.

I'm more familiar with PPLI these days

You must run in a much higher net worth circle than I do if that's what you're into these days.

 

[DHK]

You must run in a much higher net worth circle than I do if that's what you're into these days.

I'm learning!

 

[fred thompson]

DHK

It is not another fee on top of fee's. It is a very clean and clear policy as far as fee's are concerned. State premium tax is charged and is clear, COI, a very small policy fee, and the expense ratio for
each different mutual funds.That is all the fee's. Then the RIA can add their fee for managing the assets as they do with all other investment accounts, up to a max fee. This is actually how IMHO all life insurance should be so clients can see all the actual costs of the policy

The reason fr the PLI is to charge the insurance policy without risking pulling out money that the policyholder would be taxed on.to pay management fee's. All other fee's are deducted as part of internal policy costs. This puts the RIA/IAR of the same footing as the mutual fund manager when it comes to fee's being internal instead of an external maybe taxable add on however the management fee is clearly spelled out.

Imagine if total whole life insurance commissions and other compensation were known to the consumer before they purchased a policy!

 

[Tahoe Ray]

Imagine if total whole life insurance commissions and other compensation were known to the consumer before they purchased a policy!

If they amortized the compensation over the life of the policy, it would look similar to an AUM fee.

 

[fred thompson]

Yes it would however to be accurate they would have to show the 150% in upfront commission and expense payments vs a 30 year amortization. To get paid for 30 years RIA has to service and keep client happy for 30 years. With basic commission structure insurance agent does not have to service past the charge back period and many don/t even do that. Plus insurance companies may find profit in lapses

 

[walthamny]

For one thing if this really takes off, I can easily see many RIA's saying dont invest in whole life, look you only get 4.5% with whole life you can get much higher at 8% with this VUL. RIA's will never spend time to learn in detail the products or strategies. This actually hurts commission based VUL's because if the client goes to a RIA for opinion they will just talk about fees and steal the business. May be fees on the commission side will come down.

 

[Tahoe Ray]

Yes it would however to be accurate they would have to show the 150% in upfront commission and expense payments vs a 30 year amortization. To get paid for 30 years RIA has to service and keep client happy for 30 years. With basic commission structure insurance agent does not have to service past the charge back period and many don/t even do that. Plus insurance companies may find profit in lapses

Not disagreeing with you that a lot of agents don't properly manage their WL policy relationships but a 10 pay or a life pay maximized for cash will maybe pay an agent 35-40%. The big WL players don't need to bake in 150% in comp because there aren't uplines and IMOs that need to eat.

And any agent working the higher-end market absolutely should be doing annual reviews/touching base. They're foolish not to.

 

[Tahoe Ray]

For one thing if this really takes off, I can easily see many RIA's saying dont invest in whole life, look you only get 4.5% with whole life you can get much higher at 8% with this VUL. RIA's will never spend time to learn in detail the products or strategies. This actually hurts commission based VUL's because if the client goes to a RIA for opinion they will just talk about fees and steal the business. May be fees on the commission side will come down.

Set up an RIA and partner with them and split the fees. You can write it and service it and the advisor can dictate the allocation.

Win/win.

My (and everyone who doesn't sell them) biggest complaint with VUL has always been the cost. It's certainly not the upside of the market, the tax deferral, the tax-free income, or the tax-free death benefit.

If more carriers launch no-load products, the IRS allows the fees to be withdrawn from the cash value without being punitive to the client, AND there is a way to educate the RIA market on these products, I see a real opportunity.

 

[PrivClientSG]

I am not going to jump into the mud pool about this, but I will say one thing -- no other insurance company, agency, producer group, or agent, nobody, will act upon either of these PLR's. No other person or company, nobody will change the way they do business, the way they charge, their commissions, or their products, based upon either of these PLR's. These PLR's will not help another party, company, or person. They may be a catalyst, but that's it. These PLR's will not change anything for anyone else. Carry on.