Hey everyone, quick heads-up. RUclips has this crazy issue. I had to change my channel so that I could add an admin person to help me. When I did that, RUclips takes away my comments below. All other comments remained, but mine were deleted. Not sure why that's a policy, but oh well. Rest assured I answered every question/comment below.
A 20 year old buys a Universal Life Insurance policy or lets say his parents do.! They keep the premium paid just like an old Christmas Club account. He is diagnosed with cancer at 51. What does he do? As a financial adviser what do you do if you are good to conserve his parents and his investment? Oh take your money from your 401K that has xxx amount and oh, you have to pay a TAX penalty for the early withdraw. XXX amount will last ? OR if you bought an Universal Life Policy with a critical illness, and a disability rider you will conserve your legacy and wealth.
Thank You for being brutally honest Dan. I have to figure out what is smoke and mirrors and you have provided me with a starting point. As a consumer, the IUL seemed like a very practical chassy to illustrate true compounding of preserved capital that is not participating in the stock market. I had to dig deeper because I wanted to know where the fees were. I even got my life and health license just to see if I could get the inside scoop from the insurance companies. I saw my in-laws drop their term insurance at 65 due to a $14,000 annual premium if they wanted to keep their policy in force. Then the so called money managers were no where to be found when 2008 hit while my mother in law had to pull money from funds to pay $95,000/yr for Alzheimer's care for her husband. They worked hard for their money only to be subjected to market risks when they needed their money the most. As a Nurse, I want to be informed, not only to take care of my family, but the other health caregivers and first responders who may be "seduced" by insurance products that they will not be able to use in their later years. Unfortunately, I see regular folks struggle to pay for their healthcare because life insurance products were not properly structured. I need to be the one who will spread a solution to my colleagues. I did the term and invest the difference for the past 20 years. Now, I am probably a substandard medical risk for a mutual whole life with PUA, dividends, NDRI, DI waiver, etc... I am a fan of Nelson Nash and IBC. I may just pay the higher fees to take advantage of IBC. Keep up the great work Dan.
I love what you are saying about Universal Life policies, but in all reality whole life is no better. There are still policy fees and costs along with cost of insurance and interest rates comparable to what you'd get on a long term CD. You're better off with a solid level term policy and getting other investments outside of your life insurance.
You should really do more research on the products that are out on the market. Global indexes and uncapped strategies. Also you need to understand how to run the illustrations, even at a 3% return the policy doesn't lapse. The key for those who read this is buy lowest cost of insurance for the most amount of premium and you can even stop paying on the policy after ten years and the policy pays its self FOR LIFE. All the examples this guy gives on down sides of the market will really hurt if he's managing his your money not to mention he's not talking about his cut for handling your investments. Do the real homework from a no bias opinion, I like both investments and IUL, you can't bash something you've never sold.
i like your video, I was in a MLM called the WFG before, those blood sucker try to sell me the Universal life insurance, thank god , i didnt buy it, they make me almost sell this to my relatives. they always use the 20 years average index to predict the future,they told me not to worry about the market, it always goes up and down. the guy who recruited me to this MLM, he bought 1M policy, he is age 25, he paying like almost 500 a month, i honestly think he will fail this policy. this type of policy for people who got extra money can handle the loss. i quit that MLM after i found out they have very bad reputation.
Ah yes. World Financial Groupies. And their flagship policy, Transamerica's Fatally Flawed IUL (FFIUL). WFG and FFIUL are the poster meth-head mother and child for ultra-predatory B/Ds that hawk horrible products. Don't walk--RUN--fast as you can from these toxic zombies!
"...1M policy...paying like almost 500 a month..." * LAUGH * Your recruiter's upline must've illustrated that "vapor on paper" at 9+% to conjure this stupidly low premium. The upside: At that insane fiction of a rate, his FFIUL will crash and burn sooner! Maybe in 5--10 years instead of 15--20. He'll "save" some $10,000s in totally wasted premiums.
I agree with everything said about the VUL, but the confusion/deception is when he keeps lumping both the IUL and VUL in the same conversation as if they act and perform the same. That is the "smoke & mirrors" as he says. You need to read the book called The Retirement Miracle by Patrick Kelly where he explains in layman's terms the difference between all these different Insurance products (WL, UL, VUL, IUL, etc.). Secondly, not all IUL's are the same and as with ANY insurance product, is must be set up/structured correctly in order to perform as advertised and that largely depends on the agent and his/her knowledge and expertise. Not all IUL's have A.R.T.'s within them and to make that assumptive statement is deceptive and wrong. More importantly, it's doing the consumer a disservice. He talks about a WL policy being "well designed" implying that there is a possibly that you can have a poorly designed WL policy. The same is true for an IUL and Term contract and NOT explaining that fact is ignoring the truth. Thirdly, he is completely disregarding or ignoring the fact that these products are first and foremost insurance and not investment vehicles, therefore your main costs (COI) are for the insurance itself for which you get benefits for having in the first place. There are also "Living benefits" in the IUL and guaranteed tax-free income as well. He is all over the map talking about Term, VUL's & IUL's in the same breath as if they are the same and their are not. He mentions the negative aspects of the VUL and Term insurance implying those are negatives with all three. There is just too much jumping around vs. straight up comparisons of WL compared to each product he is trying to degrade. Lastly, you can design an IUL with a "fixed interest rate" too but he doesn't say that either. If you are reading this as a consumer, PLEASE DO NOT take this video as gospel and do your own research to see what's right for you. I would suggest you look at UNBIASED 3rd Party resources that are credible as well such as the book The Retirement Miracle by Patrick Kelly. As one in the industry, I would never degrade WL because I do think it's a good product but it's not for everyone (it's mainly for those in your late 60's & 70's that didn't plan two decades earlier and need a safe strategy). BTW - the IUL can do that and more if "well designed" also.
You say "...Not all IUL's have A.R.T.'s within them..." Wayne, please name an IUL--carrier and policy name--whose Cost of Insurance (COI) charges do NOT reset during the life of the policy. It's very unlikely you'll be able to name such a policy. Thanks.
Donald, maybe you will give us a concrete example of how to "properly structure" an IUL? Let's go with a $500k death bennie for a 30yo healthy male non-smoker. First please tell us just one thing: At what annual return rate would you illustrate this policy? Thanks.
I truly enjoyed your video. It's not often anyone will go into such depth in explaining UL's or any type of policy. Thank you so much please keep the videos coming
Do your research. There is a lot of misinformation out there. Do not be persuaded by a video or two on any subject, especially one that involves your financial future, because you will not be able to truly know, until you actually retire. By then it is too late.
Javier, right you are! Don't buy an IUL just to have it implode on you after you retire, and you LOSE EVERYTHING--your death bennie and the $100,000s you poured into this toxic pig in a poke. By then it's too late!
We don't use average returns to calculate anything in IUL illustrations. That is a stock broker/mutual fund ploy. When we say the S&P did x% over the last 25 years it actually did that x%, it's not an average return. They best IUL policy also has a 3% underlying guarantee so 0% is not necessarily the floor. The major problem with WL is that most whole life policies use direct recognition and now pay lower dividends when you borrow money, whole life policies also require the full premium including the cash value buildup portion and insurance costs to be paid or borrowed to be paid even after you no longer want to contribute to the cash value build up and they generally have 6% to 8% loans forever. IUL's allow the client to change from variable loans to 0% cost wash loans if the market tanks. Those loans currently are about 4% and my product of choice earned 10.75% last year on those 4% borrowed funds and made 6.75% on money they took out and spent. Because of the Non-MEC rules, the insurance amount required to keep the life insurance tax benefits for use of the cash values actually goes down as one gets older and that offsets much of the increasing cost per thousand for insurance coverage as one gets older. Whole life contracts project numbers that come out of some black box calculator with no proof or justification as to why they project those numbers and there is no way to prove that they actually paid what they should be paying.
With the recent rule changes that came in about a year or so ago, illustrations can no longer include average performance of the index selected. "Thanks" to our all-wise government, no illustration can be shown above 7.02%, regardless of the index' historical average. You make a big issue about the non-guaranteed phraseology. First off, that is there by law, (and you and I know, or you should know, how wise the government has been in any of its undertakings), but because no one knows how high or low the index will rise or fall from one year to the next, period. This is akin to the phrase "Past performance is no guarantee of future results", found in any investment prospectus or brochure. The difference with the IUL is that you are guaranteed to not have a below 0% return in ANY year, as you would in the stock market. Yes, I know, you have harped on the actuality of the 0% return in many other places, and that is a different topic altogether. To stay on topic, however, that is the only reason for that disclaimer. I deal with companies whose track record is higher than the required limit, but can not illustrate it as such. Dan, once you truly study the IUL, with the intent of exploring its possibilities, without prejudice, you will discover it truly is the investment vehicle of the 21st century. It is life insurance, grown up.
Comparing how IUL is sold today to how UL was sold in the past is like comparing apples to oranges. The major reason UL failed is it was sold on the basis on the most amount of insurance for the least amount of money using unsustainable interests rates in the double digits initially whereas max funded IUL is sold based on the least amount of coverage for the most amount of money and has for the most part actually performed at the rates or above the rates illustrated. The highest rate that we ever illustrated was 8.2% and that product if implemented 20 years ago would have done better than 8.7% The UL's that were also initially sold based on current interests in the teens and the policy holders either didn't listen or didn't understand that if the rates dropped their premiums would have to go up. None of my agents had to go back and apologize for the IUL illustrations they ran because for the most products either out performed what was illustrated or were very close to it. My product of choice earned 10.5% last year, not one whole life company had a product that even came close.
Louis, you call 6, 7, 8%+ "sustainable?" When 2.5--4% over the very long term--the 40, 50, 60 years the IUL holder expects to own his policy--is much closer to the truth? Louis, we're on the tail end of one of the biggest and oldest bull market runs in history. Historical dividend-less S&P 500 returns are in the low 4% and you can expect your insurance carrier to do worse than that. We will see much anger and many tears here just like we're seeing with the ULs issued in the 80s. Doesn't matter if it's interest rates or market returns, the xUL agents are overillustrating the utter crzp out of their xULs and they don't care--these agents will likely be long gone when the fecal matter hits the fan 20--30 years hence.
Javier, I'd like to read your answer to Dan's question, too. Post AG49, have you gone back to all your clients and apologized to them for showing deceptive returns? And then gave them new illustrations?
Yoo-hoo! Javier? Where have you gone? Are you too busy begging forgiveness from your IUL clients that you vastly overillustrated their policies at fraudulent return rates? :-)))?
if you borrow against your CV 10k and pay it back as you would a bank loan with interest (using it as a personal bank) would this be a good long term investment strategy. Being your own bank?
the %s are guaranteed as well the riders if you go through National Life Group. I have spent 10yrs as a business and investment banker. I then went to the insurance world 4 a few years when I discovered N.L.G and I would love to hear something that can beat their prommises.
"...the %s are guaranteed..." Really Vincent? What index account crediting guarantee does NLG give you above the 0--1% (annual/annualized) index floor? And what's the name of that policy? Very curious to learn your answers Vincent. Thanks.
You tried to pull a fast one on your example of ''serial risk" when disqualifying, correctly in my opinion, the deception behind any reported averages in a time series when one of the factors is negative. Like stock markets, bonds, everything money is thrown into to make businesses run. IUL's don't have negatives to average. They project reasonable growth reliably just for that purpose alone. As for all of your other condemnations of cost in IULs no matter what you have to maintain a corridor between death benefit and accumulated cash value to maintain the tax advantaged status of the asset. Compare that cost to what you get with managed money taxed.
Dan's right, proof's in the pudding. 15 years old, heck, try to find a solid IUL at even 10 years old. I've reviewed many dozens of these policies and NONE of had healthy CV and they were typically not more than 6--7 years old. The sales agents did tell many of my clients "overfunding is better" but never stressed the dangers down the line. They certainly didn't tell them they had to "overfund" their IULs as much or more as WL policies just to hope to stay out of danger in your retirement years. Plus, the B/Ds without exception, overillustrated the bejeezus out of these IULs with 6, 7, 8% and higher rates of return. As almost always configured by carriers and B/Ds, IULs are *disasters.* These slo-mo time bombs are set to blast away your death bennie and the many thousands you dumped into it. Absolutely the worst most exploitative policies I've seen in 30+ years in this biz.
Dan, I wish we would see a quick end to the 35+ year xUL client debacle so we can begin to heal from the damage it's done to the industry. I can't think of such a massive and highly institutionalized long-term confidence game in any industry anywhere like I've seen with xUL (UL-> VUL -> IUL etc) for the middle market, for Ma and Pa Kettle. Alas, the xUL makes an excellent chameleon, with purveyors changing its skin just deep enough to keep the many state reg agencies bogged down and always playing catch-up, and failing at it. Meanwhile the xUL always retains its core fatal flaw--soaring late-life COI charges. Then during the '90s we saw increased globalization, demutualization to publicly-traded carriers, and ever greater push to pump up carriers' capital reserves, all conspiring to compel carriers to push for ever greater profits and lower reserves for the at-risk amounts. xUL is irresistible for all that. With the new US Fed admin, we can expect even fewer consumer protections. xUL's already been through the long cycle of high interest rates then high equity performance, with B/D's criminally overillustrating both sides, triggering the first wave of the inevitable class-action suits as the original ULs fail en masse. I expect the carriers' legal depts and bean counters already spreadsheeted it all out, Monsanto-style, the numbers so they still come out way ahead with the out-of-court settlements. Now that the xUL carriers and B/Ds have to begin that long 30+ year cycle anew, maybe they'll change xUL's names entirely, like from "x Universal Life " to "x MaxFlex Life" or some such, just to keep muddying the waters. At the moment, my biggest hope for the industry is Canada. Its Fed govt has already tightened up considerably on xUL. Will this country provide enough of a touchstone for the entire North American industry to reform? We'll see. Dan if Canada does take the lead, it'd be poetic. The Canadian G.R. Dinney at Great-West Life invented Universal Life a half century ago.
Hi Daniel I'm going to be 59 this yr is it too late to get whole life,what would my payments be per $100,000 dollars ins. At my age.or is it possible thx
Thank you. I sell IUL and I like how you are explaining it all in details. I can't say much about other companies but the ones I sell for will illustrate a floor, mid, and current rate which in most agents will not tell the clients.
This situation happened more often than people recognized. In this case the agent could walk away with the highest commission while the policy lapse a few years after it's issued. Many people buy life insurance with less policy scrutiny than when they bought a car. The illustration does not reflect the true outcome of a policy, but it provides a good forecast of possible troubles in the future. It shows you where/when the policy could lapse. Worst case if the client is older with a high face value policy a life settlement could still make the client some money.
One solution is to get a universal life that has a contractual guarantee NOT to die, implode or whatever..These policies do not build up cash as quickly and are best used for someone that wants a lifetime premium that does not go up and a place to park cash for later use rather than a lifetime retirement vehicle. For maximum yield, the key with any universal life is to have an honest sales person that will give you too much insurance relative to your planned premium. Everyone should ask their rep, "What is my guideline premium for policy that will allow me tax free loans.
You can purchase a life paid up at 65 or paid up in 20 years IUL or even a single premium premium IUL. So the lifetime premium excuse being available only in Whole life is just misinformation.
Louis, why on Earth would anyone want to buy a single premium IUL when that MECifies the policy and they lose the tax shelter on the cash value and the advantageous FIFO accounting for loans against the policy? Plus, Louis, there's no such thing as a "paid-up" IUL. That's pure fiction. You can't endow xUL policies like you can WL. You can't fully match cash value to death benefit until you're 95 years old--unless you MECify the policy. So unless you MECify this policy you'll always have to pay Cost of Insurance (COI) on some net risk till you're 95. And even then, once you cash value equals your death bennie and you eliminated COI charges, you *still* have to pay a monthly index account fee! E.g. if you have a $500k policy that can be $300 or more per month! Louis where'd you get your life license--from the bubble-gum machine? Are you an agent for WFG?
Real IULmath: some people aren't looking for cash but pure death benefit for legacy or estate tax purposes. that's the beauty of a flexible premium policy you make it work a number of ways to fit the clients situation.
Louis, what the point of "pure death benefit" a "flexible premium policy" and the rest you purport when the IUL holder is virtually guaranteed to lose his policy anyway? What does all that matter when he's virtually guaranteed to lose his death bennie and the $100,000 he poured into it?
Dan while much of what you're saying is true, it's a gross over exaggeration. You failed to mention that insurance companies have an interest in making what you call unreasonable returns. The purpose of the UL is to eventually become self insured. That's why it's an ART. Every year you purchase less insurance because your investment fund is catching up to the face amount.Once the investment surpasses the face amount you have no need to purchase insurance, that eliminates the risk from the insurance company to pay out the death benefit out of pocket. So in essence you're purchasing insurance until your investment catches ups to the face amount (and then some). That said insurance companies definitely have an interest in making those returns, that's why they partner with investment firms to obtain those results . Needless to say not every UL insurance provider partners with investment firms and that's an area of concern.
I'm sure you're an advocate for whole life policies. Have you mentioned that they're more expensive and that the cash value they build up is a joke? Clients end up cashing in those policies when they see the cash value and end up terminating the contract. What a win for the insurance company, they no longer need to pay out the death benefit. Did you also mention that agents who sell them make way more commission because the premiums are much more expensive? Now I'm not saying that whole life policies don't have their uses, because as we all know there's no such thing as a one size fits all product in this industry, however stop trying to discredit other products when you're clearly not giving the whole picture.
Thanks for replying Dan. I can appreciate the fact that your videos are designed to bring awareness about the tools available to build and protect wealth to the consumer marketplace . However, I am greatly concerned with the fact that you clearly don't understand the industry let alone the tools available well enough to provide proper awareness. Case-in-point #1: Anyone who understands the fundamentals of insurance, understands the difference between ART and LCOI. And no, we're not talking about painting and sculpting. Clearly you missed one of the most important concepts of cost structure for any policy: Is the cost of insurance calculated by the Annual Renewable Term (or YRT: Yearly Renewable Term) or Level Cost Of Insurance? Understanding that fundamental difference will help you guide your client to the right insurance for them based on their needs, goals and time horizon. Insurance is not a one-size-fits-all ball game. There are scenarios where it makes perfect sense for a client to buy Term, Whole life, Term 100 and Universal Life (whether Indexed or Variable). However if you don't understand the differences between each of these, you're clearly not looking out for the best interest of your client, but rather searching for the product with the highest commission rate for yourself. I'm sorry for your clients. Follow me and watch for my content in the coming months to debunk the myths you have recorded here. Case-in-point #2: You use a great example of "renting vs. owning" when referring to whether your client should buy Term or PERMANENT (that could be Whole Life, Term to 100 or Universal Life - we can't generalise as every client's needs and goals differ) insurance. However, your terminology is unclear to the uneducated individual. You talk about "you could actually own your policy". Well firstly, what does that even mean? Being self-insured? Sorry, that's not what a Whole Life policy is designed to do (more info in Case-in-point #3). If you're looking for a policy where you'll be self-insured you need a Variable Universal Life - that's what it's designed to do. That said, you need to be clear as to why someone would need permanent insurance in the first place. Why should your client care if they leave a death benefit behind? You obviously don't know the reasons why someone NEEDS life insurance when they pass away. Don't worry, I'll cover that in my online content. You simply make a case of "it doesn't make sense to not have it when you're older" and "if you have the right agent they can make you rich with a whole life and you can use the living benefits" - forgive me for paraphrasing - yes you sound that stupid to me. Do they not "own" their Universal Life? (Referring to your video on "Should I Buy Whole Life Insurance".) Clearly you don't understand how a UL works and so you answered "no". By making grossly exaggerated comparisons between products, you're doing the same thing you accused Dave Ramsey of when he uses an example of 12% annual returns. Case-in-point #3: Please tell your viewers how a Whole Life policy will create real wealth for them. You can't? No problem, I'll tell them the misconceptions now. Firstly, understand that a whole life uses a costing structure called LCOI which means you are always purchasing the same amount of coverage. That said, the insurance company determines what buying a set amount of insurance would cost you every year until age 100 (typically) and then divides that cost evenly from now until age 100. What that means for someone young is that their cost of insurance is very high from day one. Leaving little to be earned on the peanuts building up in their cash value fund. Then, the insurance company will pay dividends, maybe, each year. If the insurance company decides to pay dividends on what you've paid that year, you'll hope to gain 1 to 3 percent on average. Well, let's use this example: parents buy their baby a $50,000 Whole Life 25 years ago for $310 a year. After 25 years, there is $1500 in dividends, after the parents have paid $7500 into the policy. The client is then encouraged to (1) use their dividends to pay the premiums, or (2) take the cash value of $4800 + $1500 Dividends and cancel the policy. The third option is to (3) continue to pay the annual premium until the client passes away. In the first option, the $1500 dividends will only cover the next 5 years of premiums and then the client will need to make annual payments towards the policy again. And the cash value of $4800 it took them 25 years to accumulate will continue to grow. Hopefully you eventually triple your growth. Now Dan, is this the wealth you've built for your clients? I certainly hope not. This is called smoke-and-mirrors. Option number 2: this is the insurance companies favourite! You take the cash value and dividends for yourself, meanwhile the insurance company has reinvested your premiums over the past 25 years and made much more for themselves. And now the insurance company is off the hook for the $50,000 death benefit. Finally scenario number 3: here's your chance to build some wealth using your whole life policy, however, does the client "own" it, as you would say? Not in the way you suggested because they need to continue to pay the premiums in order to maximise the benefits of the policy. Now, I won't only list the cons, as many others like to do. The whole life provides 20 year premium options, that means they take your average cost of insurance and calculate the premiums over 20 years, instead of age 100. Is that any better? Yes - not much though. Your premiums would be much higher with a slight discount for giving the insurance company more money sooner. They give you this discount so they can reinvest with a longer time horizon for themselves. In any case, are you suggesting to your clients that the dividends in their policy are guaranteed? Because that's absolutely not true. Is there guaranteed cash value? Yes. So the insurance company can entice you to cash out at approx. 70% of what you've invested in the policy so far. That's like using a negative savings account for 25 years and now the insurance company is off the hook for the death benefit. And if the clients keep their policy they get peanut returns, hopefully, in dividends? Remember the insurance company doesn't promise dividends. So are you not taking a risk with that too? The objective as an Advisor is to balance the risk with the return based on your clients needs, goals, time horizon and risk tolerance. By employing a one-size-fits-all mentality you're suggesting that you're not following protocol and perhaps you should review your notes on compliance regulations and ethical conduct. Case-in-point #4: You say Universal Life is guaranteed to fail. Show me. I didn't need to watch much of your content to understand how little you understand. You talk a lot of what I like to call popcorn. It sounds nice, however there isn't much substance. You don't back up any of what you're saying with anything more than your opinions. That said, a properly funded Universal Life, geared to a younger audience, will use an ART cost structure. I'm not talking about paint supplies. The Annual cost of insurance allows the client to have the majority of their premiums fund their cash value when they're younger, allowing for substantial growth of their cash value (compared to whole life). They do this by investing in real investments, focused and actively managed portfolios - not hoping that the insurance company will pay a dividend each year. As their cash value grows higher, the ART will decrease. They purchase less insurance, because they are becoming "self-insured" inside their Universal Life. As a result the insurance company's risk is reduced, which is exactly what they want. Eventually the ART cost is eliminated entirely and they have a substantial amount of cash value to enjoy as a living benefit. So you could imagine that the insurance company will partner with the right investment firms to make that happen. Now, you mainly talk about the Indexed UL. I agree, I don't sell that to my clients either. Why? For the same reason I don't sell them stocks in the S&P 500. The client's best interest isn't to index the market's benchmark. It's to invest in Mutual and Segregated Fund investment firms who believe and employ focused and active management strategies. It's true, not every UL is created equal. And perhaps you don't like UL's because you use inferior product providers. In any case, the client has access to focused and actively managed funds inside their Variable UL. Obviously this would be in the case of utilising the strongest UL products in the marketplace. After all, why wouldn't you package their insurance and investment needs together to maximise their benefits? Sure, you take a loss with commission, as you could find a way to justify whole Life, however that's not in a young client's best interest. Even to clients over 55: offer a LCOI Variable UL in lower risk portfolios, they'll be much happier with the monthly premiums and flexibility offered that they can't get in any other product. Yes, it's true some of those features are also available in a Whole Life, but why limit your clients? I could go on all day with "case-in-points" however I'm not interested in continuing a back-and-forth with you as I have clients to attend to and I'm sure you may too. Like I said, I appreciate the fact that you intend to bring about awareness, however please do your following a favour and educate yourself first. I know you'll love the channel I'll be opening with my partners in the coming months as it will be purely substance based. The public needs financial knowledge, not industry opinions. Keep up the hard work Dan, and all the best to your future success.
Hey Dan, I appreciate your concerns; however, you shouldn't make assumptions of my experience or source of knowledge and education. Furthermore, I understand the problem clearly now. Why would you EVER even entertain running an illustration using a 6.5% return in an Indexed Universal Life? That's like when Dave Ramsey shows investment potential based on a 12% annual return. I understand that you've clearly misinterpreted how a Universal Life, whether Indexed or Variable, are designed to work. You're not the first to do so. Many clients "coming to you now" with their IUL or VUL, probably had an Advisor like you, who grossly exaggerated the investment potential of the policy, and yes the policy later imploded, as you would say. Being ignorant to the design is no excuse to employ a one-size-fits-all mentality. You're a salesman and an Advisor at the end of the day. You chose what you wanted to sell and only told your clients the pros of that product and the cons of the other. Then you call that, and I quote, "they choose a solid WL every day, all day!" You need to take your own advice here and properly learn the fundamentals on all permanent life insurance options before taking the Dave Ramsey approach. See Case-In-Point #4 in my last comment for basic learning. Then partner up with some better insurance companies. At the end of the day, it's not the UL that fails, but rather the agents lack of product knowledge and inferior product providers. All the best Dan
IF the idea is that your investmentss will eventually let you become self insured, eliminating the need to buy so much insurance, then why not just opt for buying SUPER cheap term insurance and investing in a separate account (Like Suze Oreman and Dave Ramsey recommend)
Thanks +Dan Thompson for this video.. I have a Infinite banking policy set up thru another company.. but I have seen other videos that talk about IUL and VUL with infinite banking and they do not explain this.. They Pretend that these policies are better then WL due to the "returns". So glad I did not go with those policies. You definitely opened my eyes to the flaws in these policies. I read Nelson Nash's book and his Wisdom rang true with me.
+Dan Thompson I agree that's why it's up to the ones who know better to correct the false representation of whole life. I totally agree and can see that happening and then the industry as a whole will suffer because of some "Harvard stinking thinking" as mr Nash would put it.
i also have a aunt who has this IUL, i think she lump sump it, and i cant even tell her that cost of her insurance later on, it just gonnaa piss her so bad
if she were to look at her annual report the costs are all laid out unlike WL which is a total mystery as to what the costs are because they aren't spelled out.
So are you a true unbiased life insurance professional and/or financial adviser OR are you just another licensed agent that has bought into the idea (and myth) that whole life insurance is the best and only type of permanent life insurance that people should buy?? Dan, you seem like a pretty smart and nice guy, but I have to say, you're a little misinformed about some of the details within UL, IUL and VUL. Generally speaking, I advocate for UL, IUL and Whole Life insurance. Personally, I tend to steer clear from VUL, primarily because of the risk and expenses. VUL still has its place for some situations, though. The fact is when IUL was introduced in the United States in 1997 the insurance industry finally introduced another "fixed" insurance option for folks who would like permanent insurance with some better upside potential without the stock market risk. The difference between you and me is pretty simple --- I understand the pros and cons of both UL/IUL and whole life and I do NOT exhaust or spend so much energy and time trying to beat up or bash the other. Bottom line is this - There's pros and cons to whole life and universal life insurance. Nothing is free. Smoke and mirrors? Hmm...that seems like a hypocritical comment to me. Dan, where is your 45 minute video explaining the negatives and cons of whole life insurance and explaining the pros and positives of UL, IUL and VUL? Oh, let me guess, that doesn't exist, right? I'm a 20 year veteran and third generation in my family to dedicate my career and professional life to the insurance and financial services industry. My father and grandfather taught me to do what's best for the client, always. No exceptions. But they also taught me this --- It's not my money. Our job is to give people options and allow them to make an educated and informed decision. Just my 2 cents and I wish you the best!! My stance is this --- Permanent life insurance can be one of the greatest and safest places for people to place their hard-earned money. No insurance company is created equal and certainly not all insurance agents or financial advisers are created equal either. ~ Jay
Jay btw, if you have a lot of bread to invest--millions--and a savvy money manager, then for a cash-value policy, the VUL's the *only* way to go. You tuck it inside a PPLI wrapper. Chances are very good *you* (i.e. your money manager) will grow your money much faster than the ultra-conservative insurance companies. But for middle market folks who want Perm Life, Whole Life is best.
Like you've often asked folks here: "Find me even *one* IUL that's more than 10 years old." The IULs I've seen are 6--7yo max. And all of them sick little puppies.
Dan, I respect your opinion and the fact you actually have one! LOL I have read your reply. This year 2017 is only my 20th year in business, which ironically matches the 20th Anniversary since the inception of indexed universal life (IUL). Truth be told, I no longer argue or "try to convince people" about UL, IUL or Whole Life etc. Those days are long gone, thank goodness. Instead, I prefer to educate people and then give them some options. Again, like I said before, I personally think you're missing the boat about Indexed UL, but that's just my opinion. I have always found it very ironic that within our own industry there only seems to be two camps when it comes to permanent life insurance: 1. Whole Life Camp and 2. Universal Life Camp The sad fact is this --- that will probably never change! Agents and advisers are either UL fans or WL fans, not both. I'm in the minority that sees and understands the merits of both. Good luck! - JB
Usually 6% to 7%, but NEVER higher than 7%. That's just me, though. I am actually of the belief that AG-49 was a good thing for the industry, plus it helps control some of the aggressive illustrators out there...
Did you say safe investments like "real state, lending and government bongs" Government bonds are paying a negative return, lending is in a huge bubble and housing crashed in 2007/2008.
One of the biggies North Western Mutual has 230 billion in assets and brags about paying 5.6 billion in dividends in 2016 to the policy holders who technically own the company. that works out to less than 2.5%! these policy holders are really killing it and oh yeah they still have to pay premiums every years to get that 2.5%if they take it in th eform of dividends it reduces their future dividends.
The problem with your advocating that WL is better than bonds and I would agree with you on that point but the fact is that no one is talking about buying bonds! Because WL is better than buying bonds has nothing to do with WL vs. IUL.
If you properly fund an IUL and you have a CAGR of 5%, which is extremely reasonable, a policy will not fail. The CAGR on an IUL should be closer to 6%. I do not sell IUL's personally, because I think fed intervention makes them as risky as VUL's. An IUL needs volitility to thrive. The fed has shown willingness to buy non government assets to put a bandaid on the economy. Illustrate a good VUL with a max non-MEC contribution for 10 years and a CAGR of even 5% will carry it through. 6% is a more reasonable expectation if you are looking long term. A 40 year old who will live to 90 has a 50 year time horizon. The only problem with VUL and IUL policies is that they build cash value so much more efficiently than whole life policies, clients need to be coached to leave it alone. The cash value needs to stay in and grow. Doing that, will make mortality expenses at age 80 seem small compared to the balance.
That's a real strange reason to not sell them "they build cash values so efficiently clients need to warned about taking their own money!" I can see where it is much better to give a poor return so that they won't want to touch it! NOT!
Thank you for this video Dan. Please correct me if I'm wrong. Would you say it is more reasonable to buy this for people at a young age? Perhaps kids? Since it is cheap and assuming premiums are paid until retirement (say age 65), the cash value will constantly build up. Even if the market turns out to be bad in a couple of recession years, it would still be even out due to dollar cost averaging. By the time you hit 65 when you stop contributing, I would assume there would be enough cash value in the policy to last for the rest of the lifetime. Given that the premium is not paid in minimum and will be steady from the early age to year 65.
You clearly don't understand IUL's. Mixing VUL with IUL in your explanation is misleading as they are clearly different. I could go on and on about your inaccuracies in this video but I am not going to waste my time. Plus many others have already pointed them out.
You are still comparing IUL to UL and VUL...not applicable. IUL is so much different. I totally get the VUL danger. really no different than a mutual fund with more fees. I've seen proof of successful IUL's. Agents and clients that have owned them and they are very impressive. You sighting seeing a few implode is certainly no proof that they aren't a good product. They could have been underfunded or client stopped funding or money borrowed from the policy. You either don't know are are not aware that there are also various IUL's available that guarantee death benefit with a fixed premium. You can have that premium go to whatever age you choose. the longer you pay it obviously the lower the fixed premium. Maybe you have not seen a good IUL by a good company. after all...just like any insurance products...all policies are not equal when it comes to different companies.
What you also fail to explain to be objective is that whole life mutual companies have grossly under performed their projections in the last decade or 2. My clients IUL policies have posted earnings of almost 15% this last year and they were in the single digits last year...some closer to 0%. Statistics for IUL policies 1996-2015 show that there are: 8 out of 20 years are max credit years 12-14% 7 out of 20 years are some credit years 5 out of 20 year years of 0% credits The state insurance commission in each state (most the same) requires that the illustrated rates on IUL policies are calculated in a fair and accurate way. IUL illustrations have to take the average 25 years out of 65 in order to come up with this rate. They don't even use the best 25 years. The company I use the most is at 7.46%. That takes into account all of the up and down years.
It seems very enlightening. However, you seem to very conveniently ignore the magic of compound interest. Using the rule of 72, The IUL is far ahead of the game, compared to any other vehicle. True, there are fees and costs. Is there a product that doesn't have them? In an IRA and a 401K, compound interest is almost non existent. Being that compound interest only happens on an up market, you never experience it, whereas in an IUL, you can. Because your money never goes below 0%, compound interest is uninterrupted. As for the fees, in an IRA and 401K, fees compound, as your investment grows. According to NerdWallet, the average costs involved in a 401K averages 3%. 3% of what, you ask? 3% of your accumulated wealth. Initially, that amount is insignificant. 3% of $1,000 is $3 for that year. When your investment grows to $100,000, your paying $3,000 for that year. The more your investment grow, the more you pay in fees. By comparison, an IUL's fees average 1% of the premium paid. Being that the premiums are fixed in an IUL, that amount never increases. As for your solution, I have been in the industry for about 15 years. I have discovered that whole life policies are the best in the market. What makes them great are the guarantees built into them The drawback to that is that, is that you pay dearly for those guarantees. Those guarantees come at a steep price. If you were to pay the same premium you pay into an IUL as you would into a whole life policy, the IUL, even a UL policy would outperform a whole life. You talk about high fees in your video? Whole life policies are the epitome of high fees. I am well aware of how the IUL works. My policy and my clients' have done very well, especially when the market has fallen, my policies have performed way better than the initial illustrations. Why pay more than you have to when you can put that money work for you?
That may be true in a zero floor contract. There are companies that offer a 2% and 3% floor. This way, you are sure to compound continually. There are also companies that offer an uncapped ceiling. So, if the market grows 20%, you benefit from that growth, rather than staying stuck with a dividend that may not come close to it. As for fees, well, as I said earlier, WL fees are much higher year in and year out.
Dan, You are right. Not because your thinking process is accurate, but because you are not prepared to consider anyone else's perspective. You are a stubborn man, even if your convictions are inaccurate. Just like Dave Ramsey, your "one size fits all" approach can be most damaging to your clients' well being. There is a place for every product on the market. Depending on the situation, on any given day, one product may be best for a person, over another. I do not know where you get your information, but in my 15 years in the business, I have researched, compared and spoken to various underwriters, actuaries and product development teams, from different companies, because I want to know what I am selling. As I've explained elsewhere, what makes WL, by most followers, the best product on the market, are the guarantees inherent in it. Yet those guarantees carry a stiff price. That diminishes the projected growth, when compared to an IUL or even a UL. And yes, there is such a thing as a single pay IUL. So you can own your own IUL policy. We can go on and on about every item you speak on against the IUL, but what's the point? If you are not going to take it seriously and consider the possibility that there is room for another product to offer your clients that may work out better for them, it would be a total waste of time. Best wishes, Javier
Dan, to me, you are even scarier. In your world, WL is the "only answer" to anyone's case. That's just as bad as Dave Ramsey or Suze Orman. Ignorant entertainers who are blind to the specific needs of their followers and put them all in the same solution. While it may be the best for some of them, it can not be the best for all. Yet you go on, seeing the world through your own narrow perspective. Open you mind to the possibilities of the 21st century. The IUL, when properly designed, is life insurance, grown up.
Javier, three days ago I asked you: "at which index account rate of return do you illustrate your IUL policies?" I'm not surprised you're in no rush to answer this question. It's inconvenient for salestrons who flog these toxic pigs in pokes for a living. Thanks for reading.
"...[IUL] contracts are unlikely to produce long-term returns in excess of bonds..." Folks, 10y Treasuries now yield a "whopping" 2.2% and investment-grade corporates generally don't yield far north of that. Through most of the years we've tracked bond yields since the beginning of the last century, bond yields have been below 4%, and even as low as under 2%. Bottom line, we're looking at--ta-daaa!--an IUL long-term annual yield of 2.5--4%. Shocking eh? Gee. That's way WAY below the 6+% that NAIC's AG49 *guideline* recommends, and which legions of shyster IUL salstrons and B/Ds have ignored anyway, illustrating their IULs at wild-*ss rates of 7%, 8%, and higher. These stupidly high illustrations virtually *guarantee* you will chronically underfund your IUL causing you to LOSE it 20--30 years hence. In a few decades, you LOSE EVERYTHING: your death bennie and the $100,000s you faithfully fed into this diabolical money black hole. The above comes from CNBC and a well-sourced IUL primer from Valmark Advisers, part of Valmark Financial Group, the links for which I give you here: thebishopcompanyllc.com/wp-content/uploads/pdf/indexed_universal_life.pdf www.cnbc.com/quotes/?symbol=US10Y
Do you even have a clue about how IUL products work? T-bill rates and bond rates have little or nothing to do with the rates of growth in an IUL. The bonds secure the money and the premiums supply the money to buy options on the indexes but the real growth comes from those options on the Index accounts. WL products returns are totally portfolio based and their portfolios are 90% bonds. You statement above about those low returns would effect WL far more than any IUL. That is why mutual companies returns are in the dumps and why they haven't been able to pay the dividends they project.
Louis, excuse me. But YOU seem to be the one sorely lacking essential clues how carriers fund their IUL index account crediting. In fact, you seem downright confused. Louis, *both* WL and IUL are General Account products. As such, carriers fund *both* their WLs and IULs predominately--even overwhelmingly--using bond dividends. Louis, this is also WRONG what you say: "...The bonds secure the money and the premiums supply the money to buy options on the indexes. In fact, the insured's after-expenses portion of the premium buys *both* the bonds to fund the index account floor and the options with whatever few premium dollars are left over. Index call options typically represent 5% or less of the portfolio. See this quote from that Valmark link: "...if the anticipated yield on the carrier’s general account portfolio was 3%, the carrier would allocate 97.1% of each [IUL] premium dollar received towards the purchase of bonds in their general account in order to contractually guarantee the stated floor of 0%. The remaining 2.9% would go towards purchasing packaged call option spreads from an investment bank that cover equity liability between the 0% floor and the cap..." Then there's this from you Louis: "...the real growth comes from those options on the Index accounts..." Uh, no Louis, again, the options sit in the *carrier's General Account.* IULs can't have securities in it remember? Else the Fed government--not the states--would regulate these awful pigs in pokes. And salesfolks would actually have to study and and learn in order to pass the various Series exams. Not just plop down $40 to skate through a 52-hour online Life course before they're unleashed onto the world to mindlessly flog these awful IUL pigs in pokes. Louis. Did you even bother to read that report before you started shooting off your mouth? Just wondering. thebishopcompanyllc.com/wp-content/uploads/pdf/indexed_universal_life.pdf
Your original premise was that because the bonds and tbills are doing so badly the IUL is at risk. the IUL has the opportunity to hedge the market through the purchase of options but WL is wholly dependent on these same bonds and tbills and i guess is just left hanging out to dry.You also left out that the insurance companies buy longer term higher paying bonds than they do for annuities and that is why the caps are in the teens for IUL's since the whole life policy holders are wholly dependent on the abysmal bond returns you originally mentioned, WL doesn't have an opportunity to get a return based on the options, the WL policies therefore are at more risk of these terrible returns that you pointed out, than the IUL products. Since WL dividends are wholly dependent on those abysmal returns, the WL policy's future performance is really at risk. The bishop report is full of a lot of if's and but's, but little of what they warn about has actually happened. I would call them insurance doom and gloomers if anything.They fail to talk about the lack of dividends promised by the WL companies that weren't paid nor can they even show why or if they missed anything because it's a complete "Trust me" kind of black box product and we all know how that goes! Their expectations vs. reality paragraph starts out by saying because people are told the products can grow in value they all of a sudden become overly optimistic or something to that effect whereas no WL product has ever been shown to grow in value and WL agents only sell guarantees (that's pure B.S.)
Louis. Let's pick through your latest word fiesta. First you say: "...Your original premise was that because the bonds and tbills are doing so badly the IUL is at risk..." Louis, please find where I ever said anything like that. Don't put words in my mouth, Louis. Give QUOTES please. Then this tidbit from you: "...insurance companies buy longer term higher paying bonds than they do for annuities and that is why the caps are in the teens for IUL's..." Again Louis you're WRONG. IUL carriers *charge whopping fees* to subsidize the high caps. See here from that Valmark piece: "...During times of sustained low interest rates and/or cyclical volatility, carriers often use increases in policy charges to subsidize higher, more attractive caps and participation rates..." and, "...cumulative policy charges per $1M of Net Amount at Risk between an IUL product and a traditional UL product the IUL policy charges were approximately 45% higher over a 45-year period..." And anyway Louis, have you seen Treasury yields recently? That curve's looking mighty tame. 30-years are yielding a "whopping" 2.87%. Then you serve up this piece of undercooked tripe: "...WL doesn't have an opportunity to get a return based on the options, the WL policies therefore are at more risk of these terrible returns..." Louis, mostly WRONG. Options are not magic "something-for-nothing" derivatives. You think the big investment houses that sell these options to the carriers are in it to lose money? No, the investment houses are much keener to make money for themselves than the carrier is to make money for YOU the insured. If the option doesn't pan out, if the option doesn't hit the strike price, then big whoop, it's the insured's premium dollar anyway, not the carrier's money. And anyway you the insured are not "down" right?--except of course you *are* down because of the IUL's monstrous expenses. Meanwhile, the carrier's already meeting its contractual obligations through the bonds it bought with the rest of your post-expenses premium dollars. Options are why the carrier has all the participation dials--participation rate %s, caps, and spreads, which it can reset at least once per year in all policies new and inforce. The more bonds and/or the costlier the options, the tighter and more restrictive the carrier can dial in the participation limits. There are rare market climates when IULs could perform at least decently--high bond yields and low volatility. Guess what Louis? We haven't seen those days since the mid 90s--before the first IUL hit the market! About the WLs, Louis, the highly-rated carriers are nothing if not good at managing risk, and the proof's in the pudding. Louis, in WL's 150+ history, when was the last time we saw a top-rated carrier default on a WL policy? About this puffery you spew: ...The bishop report is full of a lot of if's and but's, but little of what they warn about has actually happened. I would call them insurance doom and gloomers if anything...” Sure, Louis. How you feel and all that jazz. Valmark is an independent broker-dealer licensed in all states for life insurance and securities. It wouldn’t serve Valmark’s interests to be all doom and gloom on insurance now would it Louis? Then this nonsense you spew: “...They [Valmark] fail to talk about the lack of dividends promised by the WL companies that weren't paid nor can they even show why or if they missed anything because it's a complete 'Trust me' kind of black box product and we all know how that goes!...” Yes, Louis, blah-blah, etc. Once again--with feeling--ask it with me Louis: In WL's 150+ history, when was the last time we saw a top-rated carrier default on a WL policy? Then finally Louis you dash your word gumbo with this crescendo of crapola: “... Their expectations vs. reality paragraph starts out by saying because people are told the products can grow in value they all of a sudden become overly optimistic or something to that effect whereas no WL product has ever been shown to grow in value and WL agents only sell guarantees (that's pure B.S.)...” Louis, what is the “pure B.S.?”What are you even trying to say here?! Just wondering Louis. Maybe try to clarify all this. Only if you want. Thanks for reading. www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Hey everyone, quick heads-up. RUclips has this crazy issue.
I had to change my channel so that I could add an admin person to help me. When I did that, RUclips takes away my comments below. All other comments remained, but mine were deleted. Not sure why that's a policy, but oh well.
Rest assured I answered every question/comment below.
have a license , this guy is spot on. period. learn my friends ,learn.
A 20 year old buys a Universal Life Insurance policy or lets say his parents do.! They keep the premium paid just like an old Christmas Club account. He is diagnosed with cancer at 51. What does he do? As a financial adviser what do you do if you are good to conserve his parents and his investment? Oh take your money from your 401K that has xxx amount and oh, you have to pay a TAX penalty for the early withdraw. XXX amount will last ? OR if you bought an Universal Life Policy with a critical illness, and a disability rider you will conserve your legacy and wealth.
Thank You for being brutally honest Dan. I have to figure out what is smoke and mirrors and you have provided me with a starting point. As a consumer, the IUL seemed like a very practical chassy to illustrate true compounding of preserved capital that is not participating in the stock market. I had to dig deeper because I wanted to know where the fees were. I even got my life and health license just to see if I could get the inside scoop from the insurance companies.
I saw my in-laws drop their term insurance at 65 due to a $14,000 annual premium if they wanted to keep their policy in force. Then the so called money managers were no where to be found when 2008 hit while my mother in law had to pull money from funds to pay $95,000/yr for Alzheimer's care for her husband. They worked hard for their money only to be subjected to market risks when they needed their money the most.
As a Nurse, I want to be informed, not only to take care of my family, but the other health caregivers and first responders who may be "seduced" by insurance products that they will not be able to use in their later years. Unfortunately, I see regular folks struggle to pay for their healthcare because life insurance products were not properly structured. I need to be the one who will spread a solution to my colleagues.
I did the term and invest the difference for the past 20 years. Now, I am probably a substandard medical risk for a mutual whole life with PUA, dividends, NDRI, DI waiver, etc... I am a fan of Nelson Nash and IBC. I may just pay the higher fees to take advantage of IBC. Keep up the great work Dan.
I love what you are saying about Universal Life policies, but in all reality whole life is no better. There are still policy fees and costs along with cost of insurance and interest rates comparable to what you'd get on a long term CD. You're better off with a solid level term policy and getting other investments outside of your life insurance.
You should really do more research on the products that are out on the market. Global indexes and uncapped strategies. Also you need to understand how to run the illustrations, even at a 3% return the policy doesn't lapse. The key for those who read this is buy lowest cost of insurance for the most amount of premium and you can even stop paying on the policy after ten years and the policy pays its self FOR LIFE. All the examples this guy gives on down sides of the market will really hurt if he's managing his your money not to mention he's not talking about his cut for handling your investments. Do the real homework from a no bias opinion, I like both investments and IUL, you can't bash something you've never sold.
i like your video, I was in a MLM called the WFG before, those blood sucker try to sell me the Universal life insurance, thank god , i didnt buy it, they make me almost sell this to my relatives. they always use the 20 years average index to predict the future,they told me not to worry about the market, it always goes up and down. the guy who recruited me to this MLM, he bought 1M policy, he is age 25, he paying like almost 500 a month, i honestly think he will fail this policy. this type of policy for people who got extra money can handle the loss. i quit that MLM after i found out they have very bad reputation.
Ah yes. World Financial Groupies. And their flagship policy, Transamerica's Fatally Flawed IUL (FFIUL).
WFG and FFIUL are the poster meth-head mother and child for ultra-predatory B/Ds that hawk horrible products.
Don't walk--RUN--fast as you can from these toxic zombies!
"...1M policy...paying like almost 500 a month..."
* LAUGH *
Your recruiter's upline must've illustrated that "vapor on paper" at 9+% to conjure this stupidly low premium.
The upside: At that insane fiction of a rate, his FFIUL will crash and burn sooner! Maybe in 5--10 years instead of 15--20. He'll "save" some $10,000s in totally wasted premiums.
talking about putting 500 dollar into that crap, i rather invest on a house and rent it out.
I agree with everything said about the VUL, but the confusion/deception is when he keeps lumping both the IUL and VUL in the same conversation as if they act and perform the same. That is the "smoke & mirrors" as he says. You need to read the book called The Retirement Miracle by Patrick Kelly where he explains in layman's terms the difference between all these different Insurance products (WL, UL, VUL, IUL, etc.).
Secondly, not all IUL's are the same and as with ANY insurance product, is must be set up/structured correctly in order to perform as advertised and that largely depends on the agent and his/her knowledge and expertise. Not all IUL's have A.R.T.'s within them and to make that assumptive statement is deceptive and wrong. More importantly, it's doing the consumer a disservice. He talks about a WL policy being "well designed" implying that there is a possibly that you can have a poorly designed WL policy. The same is true for an IUL and Term contract and NOT explaining that fact is ignoring the truth.
Thirdly, he is completely disregarding or ignoring the fact that these products are first and foremost insurance and not investment vehicles, therefore your main costs (COI) are for the insurance itself for which you get benefits for having in the first place. There are also "Living benefits" in the IUL and guaranteed tax-free income as well. He is all over the map talking about Term, VUL's & IUL's in the same breath as if they are the same and their are not. He mentions the negative aspects of the VUL and Term insurance implying those are negatives with all three. There is just too much jumping around vs. straight up comparisons of WL compared to each product he is trying to degrade.
Lastly, you can design an IUL with a "fixed interest rate" too but he doesn't say that either. If you are reading this as a consumer, PLEASE DO NOT take this video as gospel and do your own research to see what's right for you. I would suggest you look at UNBIASED 3rd Party resources that are credible as well such as the book The Retirement Miracle by Patrick Kelly. As one in the industry, I would never degrade WL because I do think it's a good product but it's not for everyone (it's mainly for those in your late 60's & 70's that didn't plan two decades earlier and need a safe strategy). BTW - the IUL can do that and more if "well designed" also.
Wayne, just wondering, what index account return rate do you illustrate IUL policies? 6%, 7%, more? Thank you.
Real IULmath - With the main carrier I deal with on an IUL, we show from 4% to 7%.
Thanks Wayne. Who is that main carrier?
Also, Wayne, that range is quite large--a 3 point spread. What factors do you take into account to settle on a rate? Thanks.
You say "...Not all IUL's have A.R.T.'s within them..." Wayne, please name an IUL--carrier and policy name--whose Cost of Insurance (COI) charges do NOT reset during the life of the policy. It's very unlikely you'll be able to name such a policy. Thanks.
I totally agree IUL's if they're not properly structured then anyone who purchases them should through it down the drain!
Donald, maybe you will give us a concrete example of how to "properly structure" an IUL?
Let's go with a $500k death bennie for a 30yo healthy male non-smoker.
First please tell us just one thing: At what annual return rate would you illustrate this policy?
Thanks.
Thank you for telling the truth most people won't know.
I truly enjoyed your video. It's not often anyone will go into such depth in explaining UL's or any type of policy. Thank you so much please keep the videos coming
Do your research. There is a lot of misinformation out there. Do not be persuaded by a video or two on any subject, especially one that involves your financial future, because you will not be able to truly know, until you actually retire. By then it is too late.
Javier, right you are! Don't buy an IUL just to have it implode on you after you retire, and you LOSE EVERYTHING--your death bennie and the $100,000s you poured into this toxic pig in a poke. By then it's too late!
We don't use average returns to calculate anything in IUL illustrations. That is a stock broker/mutual fund ploy. When we say the S&P did x% over the last 25 years it actually did that x%, it's not an average return. They best IUL policy also has a 3% underlying guarantee so 0% is not necessarily the floor. The major problem with WL is that most whole life policies use direct recognition and now pay lower dividends when you borrow money, whole life policies also require the full premium including the cash value buildup portion and insurance costs to be paid or borrowed to be paid even after you no longer want to contribute to the cash value build up and they generally have 6% to 8% loans forever. IUL's allow the client to change from variable loans to 0% cost wash loans if the market tanks. Those loans currently are about 4% and my product of choice earned 10.75% last year on those 4% borrowed funds and made 6.75% on money they took out and spent. Because of the Non-MEC rules, the insurance amount required to keep the life insurance tax benefits for use of the cash values actually goes down as one gets older and that offsets much of the increasing cost per thousand for insurance coverage as one gets older. Whole life contracts project numbers that come out of some black box calculator with no proof or justification as to why they project those numbers and there is no way to prove that they actually paid what they should be paying.
With the recent rule changes that came in about a year or so ago, illustrations can no longer include average performance of the index selected. "Thanks" to our all-wise government, no illustration can be shown above 7.02%, regardless of the index' historical average.
You make a big issue about the non-guaranteed phraseology. First off, that is there by law, (and you and I know, or you should know, how wise the government has been in any of its undertakings), but because no one knows how high or low the index will rise or fall from one year to the next, period. This is akin to the phrase "Past performance is no guarantee of future results", found in any investment prospectus or brochure. The difference with the IUL is that you are guaranteed to not have a below 0% return in ANY year, as you would in the stock market. Yes, I know, you have harped on the actuality of the 0% return in many other places, and that is a different topic altogether. To stay on topic, however, that is the only reason for that disclaimer. I deal with companies whose track record is higher than the required limit, but can not illustrate it as such.
Dan, once you truly study the IUL, with the intent of exploring its possibilities, without prejudice, you will discover it truly is the investment vehicle of the 21st century. It is life insurance, grown up.
Comparing how IUL is sold today to how UL was sold in the past is like comparing apples to oranges. The major reason UL failed is it was sold on the basis on the most amount of insurance for the least amount of money using unsustainable interests rates in the double digits initially whereas max funded IUL is sold based on the least amount of coverage for the most amount of money and has for the most part actually performed at the rates or above the rates illustrated. The highest rate that we ever illustrated was 8.2% and that product if implemented 20 years ago would have done better than 8.7% The UL's that were also initially sold based on current interests in the teens and the policy holders either didn't listen or didn't understand that if the rates dropped their premiums would have to go up. None of my agents had to go back and apologize for the IUL illustrations they ran because for the most products either out performed what was illustrated or were very close to it. My product of choice earned 10.5% last year, not one whole life company had a product that even came close.
Louis, you call 6, 7, 8%+ "sustainable?" When 2.5--4% over the very long term--the 40, 50, 60 years the IUL holder expects to own his policy--is much closer to the truth?
Louis, we're on the tail end of one of the biggest and oldest bull market runs in history. Historical dividend-less S&P 500 returns are in the low 4% and you can expect your insurance carrier to do worse than that.
We will see much anger and many tears here just like we're seeing with the ULs issued in the 80s. Doesn't matter if it's interest rates or market returns, the xUL agents are overillustrating the utter crzp out of their xULs and they don't care--these agents will likely be long gone when the fecal matter hits the fan 20--30 years hence.
Javier, I'd like to read your answer to Dan's question, too. Post AG49, have you gone back to all your clients and apologized to them for showing deceptive returns? And then gave them new illustrations?
Yoo-hoo! Javier? Where have you gone?
Are you too busy begging forgiveness from your IUL clients that you vastly overillustrated their policies at fraudulent return rates? :-)))?
if you borrow against your CV 10k and pay it back as you would a bank loan with interest (using it as a personal bank) would this be a good long term investment strategy. Being your own bank?
I truly dont know where this guy is getting he #s, fees and cost? Now he got a spot on youtube i waisted 8 minutes i cant gety back now
the %s are guaranteed as well the riders if you go through National Life Group. I have spent 10yrs as a business and investment banker. I then went to the insurance world 4 a few years when I discovered N.L.G and I would love to hear something that can beat their prommises.
"...the %s are guaranteed..." Really Vincent? What index account crediting guarantee does NLG give you above the 0--1% (annual/annualized) index floor? And what's the name of that policy? Very curious to learn your answers Vincent. Thanks.
You tried to pull a fast one on your example of ''serial risk" when disqualifying, correctly in my opinion, the deception behind any reported averages in a time series when one of the factors is negative. Like stock markets, bonds, everything money is thrown into to make businesses run. IUL's don't have negatives to average. They project reasonable growth reliably just for that purpose alone. As for all of your other condemnations of cost in IULs no matter what you have to maintain a corridor between death benefit and accumulated cash value to maintain the tax advantaged status of the asset. Compare that cost to what you get with managed money taxed.
Dan's right, proof's in the pudding. 15 years old, heck, try to find a solid IUL at even 10 years old. I've reviewed many dozens of these policies and NONE of had healthy CV and they were typically not more than 6--7 years old. The sales agents did tell many of my clients "overfunding is better" but never stressed the dangers down the line. They certainly didn't tell them they had to "overfund" their IULs as much or more as WL policies just to hope to stay out of danger in your retirement years. Plus, the B/Ds without exception, overillustrated the bejeezus out of these IULs with 6, 7, 8% and higher rates of return. As almost always configured by carriers and B/Ds, IULs are *disasters.* These slo-mo time bombs are set to blast away your death bennie and the many thousands you dumped into it. Absolutely the worst most exploitative policies I've seen in 30+ years in this biz.
I will examine what you have proposed and report it back. That really is a great challenge and I appreciate your offering that suggestion.
Dan, I wish we would see a quick end to the 35+ year xUL client debacle so we can begin to heal from the damage it's done to the industry. I can't think of such a massive and highly institutionalized long-term confidence game in any industry anywhere like I've seen with xUL (UL-> VUL -> IUL etc) for the middle market, for Ma and Pa Kettle.
Alas, the xUL makes an excellent chameleon, with purveyors changing its skin just deep enough to keep the many state reg agencies bogged down and always playing catch-up, and failing at it. Meanwhile the xUL always retains its core fatal flaw--soaring late-life COI charges. Then during the '90s we saw increased globalization, demutualization to publicly-traded carriers, and ever greater push to pump up carriers' capital reserves, all conspiring to compel carriers to push for ever greater profits and lower reserves for the at-risk amounts. xUL is irresistible for all that. With the new US Fed admin, we can expect even fewer consumer protections.
xUL's already been through the long cycle of high interest rates then high equity performance, with B/D's criminally overillustrating both sides, triggering the first wave of the inevitable class-action suits as the original ULs fail en masse. I expect the carriers' legal depts and bean counters already spreadsheeted it all out, Monsanto-style, the numbers so they still come out way ahead with the out-of-court settlements.
Now that the xUL carriers and B/Ds have to begin that long 30+ year cycle anew, maybe they'll change xUL's names entirely, like from "x Universal Life " to "x MaxFlex Life" or some such, just to keep muddying the waters.
At the moment, my biggest hope for the industry is Canada. Its Fed govt has already tightened up considerably on xUL. Will this country provide enough of a touchstone for the entire North American industry to reform? We'll see. Dan if Canada does take the lead, it'd be poetic. The Canadian G.R. Dinney at Great-West Life invented Universal Life a half century ago.
Hi Daniel I'm going to be 59 this yr is it too late to get whole life,what would my payments be per $100,000 dollars ins. At my age.or is it possible thx
What's your email address
Thank you. I sell IUL and I like how you are explaining it all in details. I can't say much about other companies but the ones I sell for will illustrate a floor, mid, and current rate which in most agents will not tell the clients.
This situation happened more often than people recognized. In this case the agent could walk away with the highest commission while the policy lapse a few years after it's issued. Many people buy life insurance with less policy scrutiny than when they bought a car. The illustration does not reflect the true outcome of a policy, but it provides a good forecast of possible troubles in the future. It shows you where/when the policy could lapse. Worst case if the client is older with a high face value policy a life settlement could still make the client some money.
sadly.. you are miss informed about options to grow money with insurance .. if you compare all investment tools .. this is a great tool to have.
One solution is to get a universal life that has a contractual guarantee NOT to die, implode or whatever..These policies do not build up cash as quickly and are best used for someone that wants a lifetime premium that does not go up and a place to park cash for later use rather than a lifetime retirement vehicle. For maximum yield, the key with any universal life is to have an honest sales person that will give you too much insurance relative to your planned premium. Everyone should ask their rep, "What is my guideline premium for policy that will allow me tax free loans.
You can purchase a life paid up at 65 or paid up in 20 years IUL or even a single premium premium IUL. So the lifetime premium excuse being available only in Whole life is just misinformation.
Louis, why on Earth would anyone want to buy a single premium IUL when that MECifies the policy and they lose the tax shelter on the cash value and the advantageous FIFO accounting for loans against the policy?
Plus, Louis, there's no such thing as a "paid-up" IUL. That's pure fiction. You can't endow xUL policies like you can WL. You can't fully match cash value to death benefit until you're 95 years old--unless you MECify the policy. So unless you MECify this policy you'll always have to pay Cost of Insurance (COI) on some net risk till you're 95. And even then, once you cash value equals your death bennie and you eliminated COI charges, you *still* have to pay a monthly index account fee! E.g. if you have a $500k policy that can be $300 or more per month!
Louis where'd you get your life license--from the bubble-gum machine? Are you an agent for WFG?
Real IULmath: some people aren't looking for cash but pure death benefit for legacy or estate tax purposes. that's the beauty of a flexible premium policy you make it work a number of ways to fit the clients situation.
Louis, what the point of "pure death benefit" a "flexible premium policy" and the rest you purport when the IUL holder is virtually guaranteed to lose his policy anyway? What does all that matter when he's virtually guaranteed to lose his death bennie and the $100,000 he poured into it?
Louis, at what annual return rate do you illustrate IULs? Thanks.
Dan while much of what you're saying is true, it's a gross over exaggeration. You failed to mention that insurance companies have an interest in making what you call unreasonable returns. The purpose of the UL is to eventually become self insured. That's why it's an ART. Every year you purchase less insurance because your investment fund is catching up to the face amount.Once the investment surpasses the face amount you have no need to purchase insurance, that eliminates the risk from the insurance company to pay out the death benefit out of pocket. So in essence you're purchasing insurance until your investment catches ups to the face amount (and then some). That said insurance companies definitely have an interest in making those returns, that's why they partner with investment firms to obtain those results . Needless to say not every UL insurance provider partners with investment firms and that's an area of concern.
I'm sure you're an advocate for whole life policies. Have you mentioned that they're more expensive and that the cash value they build up is a joke? Clients end up cashing in those policies when they see the cash value and end up terminating the contract. What a win for the insurance company, they no longer need to pay out the death benefit. Did you also mention that agents who sell them make way more commission because the premiums are much more expensive? Now I'm not saying that whole life policies don't have their uses, because as we all know there's no such thing as a one size fits all product in this industry, however stop trying to discredit other products when you're clearly not giving the whole picture.
Thanks for replying Dan.
I can appreciate the fact that your videos are designed to bring awareness about the tools available to build and protect wealth to the consumer marketplace . However, I am greatly concerned with the fact that you clearly don't understand the industry let alone the tools available well enough to provide proper awareness.
Case-in-point #1: Anyone who understands the fundamentals of insurance, understands the difference between ART and LCOI. And no, we're not talking about painting and sculpting. Clearly you missed one of the most important concepts of cost structure for any policy: Is the cost of insurance calculated by the Annual Renewable Term (or YRT: Yearly Renewable Term) or Level Cost Of Insurance? Understanding that fundamental difference will help you guide your client to the right insurance for them based on their needs, goals and time horizon. Insurance is not a one-size-fits-all ball game. There are scenarios where it makes perfect sense for a client to buy Term, Whole life, Term 100 and Universal Life (whether Indexed or Variable). However if you don't understand the differences between each of these, you're clearly not looking out for the best interest of your client, but rather searching for the product with the highest commission rate for yourself. I'm sorry for your clients. Follow me and watch for my content in the coming months to debunk the myths you have recorded here.
Case-in-point #2: You use a great example of "renting vs. owning" when referring to whether your client should buy Term or PERMANENT (that could be Whole Life, Term to 100 or Universal Life - we can't generalise as every client's needs and goals differ) insurance. However, your terminology is unclear to the uneducated individual. You talk about "you could actually own your policy". Well firstly, what does that even mean? Being self-insured? Sorry, that's not what a Whole Life policy is designed to do (more info in Case-in-point #3). If you're looking for a policy where you'll be self-insured you need a Variable Universal Life - that's what it's designed to do. That said, you need to be clear as to why someone would need permanent insurance in the first place. Why should your client care if they leave a death benefit behind? You obviously don't know the reasons why someone NEEDS life insurance when they pass away. Don't worry, I'll cover that in my online content. You simply make a case of "it doesn't make sense to not have it when you're older" and "if you have the right agent they can make you rich with a whole life and you can use the living benefits" - forgive me for paraphrasing - yes you sound that stupid to me. Do they not "own" their Universal Life? (Referring to your video on "Should I Buy Whole Life Insurance".) Clearly you don't understand how a UL works and so you answered "no". By making grossly exaggerated comparisons between products, you're doing the same thing you accused Dave Ramsey of when he uses an example of 12% annual returns.
Case-in-point #3: Please tell your viewers how a Whole Life policy will create real wealth for them. You can't? No problem, I'll tell them the misconceptions now. Firstly, understand that a whole life uses a costing structure called LCOI which means you are always purchasing the same amount of coverage. That said, the insurance company determines what buying a set amount of insurance would cost you every year until age 100 (typically) and then divides that cost evenly from now until age 100. What that means for someone young is that their cost of insurance is very high from day one. Leaving little to be earned on the peanuts building up in their cash value fund. Then, the insurance company will pay dividends, maybe, each year. If the insurance company decides to pay dividends on what you've paid that year, you'll hope to gain 1 to 3 percent on average. Well, let's use this example: parents buy their baby a $50,000 Whole Life 25 years ago for $310 a year. After 25 years, there is $1500 in dividends, after the parents have paid $7500 into the policy. The client is then encouraged to (1) use their dividends to pay the premiums, or (2) take the cash value of $4800 + $1500 Dividends and cancel the policy. The third option is to (3) continue to pay the annual premium until the client passes away. In the first option, the $1500 dividends will only cover the next 5 years of premiums and then the client will need to make annual payments towards the policy again. And the cash value of $4800 it took them 25 years to accumulate will continue to grow. Hopefully you eventually triple your growth. Now Dan, is this the wealth you've built for your clients? I certainly hope not. This is called smoke-and-mirrors. Option number 2: this is the insurance companies favourite! You take the cash value and dividends for yourself, meanwhile the insurance company has reinvested your premiums over the past 25 years and made much more for themselves. And now the insurance company is off the hook for the $50,000 death benefit. Finally scenario number 3: here's your chance to build some wealth using your whole life policy, however, does the client "own" it, as you would say? Not in the way you suggested because they need to continue to pay the premiums in order to maximise the benefits of the policy. Now, I won't only list the cons, as many others like to do. The whole life provides 20 year premium options, that means they take your average cost of insurance and calculate the premiums over 20 years, instead of age 100. Is that any better? Yes - not much though. Your premiums would be much higher with a slight discount for giving the insurance company more money sooner. They give you this discount so they can reinvest with a longer time horizon for themselves. In any case, are you suggesting to your clients that the dividends in their policy are guaranteed? Because that's absolutely not true. Is there guaranteed cash value? Yes. So the insurance company can entice you to cash out at approx. 70% of what you've invested in the policy so far. That's like using a negative savings account for 25 years and now the insurance company is off the hook for the death benefit. And if the clients keep their policy they get peanut returns, hopefully, in dividends? Remember the insurance company doesn't promise dividends. So are you not taking a risk with that too? The objective as an Advisor is to balance the risk with the return based on your clients needs, goals, time horizon and risk tolerance. By employing a one-size-fits-all mentality you're suggesting that you're not following protocol and perhaps you should review your notes on compliance regulations and ethical conduct.
Case-in-point #4: You say Universal Life is guaranteed to fail. Show me. I didn't need to watch much of your content to understand how little you understand. You talk a lot of what I like to call popcorn. It sounds nice, however there isn't much substance. You don't back up any of what you're saying with anything more than your opinions. That said, a properly funded Universal Life, geared to a younger audience, will use an ART cost structure. I'm not talking about paint supplies. The Annual cost of insurance allows the client to have the majority of their premiums fund their cash value when they're younger, allowing for substantial growth of their cash value (compared to whole life). They do this by investing in real investments, focused and actively managed portfolios - not hoping that the insurance company will pay a dividend each year. As their cash value grows higher, the ART will decrease. They purchase less insurance, because they are becoming "self-insured" inside their Universal Life. As a result the insurance company's risk is reduced, which is exactly what they want. Eventually the ART cost is eliminated entirely and they have a substantial amount of cash value to enjoy as a living benefit. So you could imagine that the insurance company will partner with the right investment firms to make that happen. Now, you mainly talk about the Indexed UL. I agree, I don't sell that to my clients either. Why? For the same reason I don't sell them stocks in the S&P 500. The client's best interest isn't to index the market's benchmark. It's to invest in Mutual and Segregated Fund investment firms who believe and employ focused and active management strategies. It's true, not every UL is created equal. And perhaps you don't like UL's because you use inferior product providers. In any case, the client has access to focused and actively managed funds inside their Variable UL. Obviously this would be in the case of utilising the strongest UL products in the marketplace. After all, why wouldn't you package their insurance and investment needs together to maximise their benefits? Sure, you take a loss with commission, as you could find a way to justify whole Life, however that's not in a young client's best interest. Even to clients over 55: offer a LCOI Variable UL in lower risk portfolios, they'll be much happier with the monthly premiums and flexibility offered that they can't get in any other product. Yes, it's true some of those features are also available in a Whole Life, but why limit your clients?
I could go on all day with "case-in-points" however I'm not interested in continuing a back-and-forth with you as I have clients to attend to and I'm sure you may too. Like I said, I appreciate the fact that you intend to bring about awareness, however please do your following a favour and educate yourself first. I know you'll love the channel I'll be opening with my partners in the coming months as it will be purely substance based. The public needs financial knowledge, not industry opinions. Keep up the hard work Dan, and all the best to your future success.
Hey Dan,
I appreciate your concerns; however, you shouldn't make assumptions of my experience or source of knowledge and education.
Furthermore, I understand the problem clearly now. Why would you EVER even entertain running an illustration using a 6.5% return in an Indexed Universal Life? That's like when Dave Ramsey shows investment potential based on a 12% annual return.
I understand that you've clearly misinterpreted how a Universal Life, whether Indexed or Variable, are designed to work. You're not the first to do so. Many clients "coming to you now" with their IUL or VUL, probably had an Advisor like you, who grossly exaggerated the investment potential of the policy, and yes the policy later imploded, as you would say. Being ignorant to the design is no excuse to employ a one-size-fits-all mentality.
You're a salesman and an Advisor at the end of the day. You chose what you wanted to sell and only told your clients the pros of that product and the cons of the other. Then you call that, and I quote, "they choose a solid WL every day, all day!"
You need to take your own advice here and properly learn the fundamentals on all permanent life insurance options before taking the Dave Ramsey approach. See Case-In-Point #4 in my last comment for basic learning. Then partner up with some better insurance companies. At the end of the day, it's not the UL that fails, but rather the agents lack of product knowledge and inferior product providers.
All the best Dan
Dan Thompson
IF the idea is that your investmentss will eventually let you become self insured, eliminating the need to buy so much insurance, then why not just opt for buying SUPER cheap term insurance and investing in a separate account (Like Suze Oreman and Dave Ramsey recommend)
Which companies are considered good quality whole life companies?
if i post this video to their clients , they will be piss at me!
Thanks +Dan Thompson for this video.. I have a Infinite banking policy set up thru another company.. but I have seen other videos that talk about IUL and VUL with infinite banking and they do not explain this.. They Pretend that these policies are better then WL due to the "returns". So glad I did not go with those policies. You definitely opened my eyes to the flaws in these policies. I read Nelson Nash's book and his Wisdom rang true with me.
+Dan Thompson I agree that's why it's up to the ones who know better to correct the false representation of whole life. I totally agree and can see that happening and then the industry as a whole will suffer because of some "Harvard stinking thinking" as mr Nash would put it.
i also have a aunt who has this IUL, i think she lump sump it, and i cant even tell her that cost of her insurance later on, it just gonnaa piss her so bad
if she were to look at her annual report the costs are all laid out unlike WL which is a total mystery as to what the costs are because they aren't spelled out.
So are you a true unbiased life insurance professional and/or financial adviser OR are you just another licensed agent that has bought into the idea (and myth) that whole life insurance is the best and only type of permanent life insurance that people should buy?? Dan, you seem like a pretty smart and nice guy, but I have to say, you're a little misinformed about some of the details within UL, IUL and VUL. Generally speaking, I advocate for UL, IUL and Whole Life insurance. Personally, I tend to steer clear from VUL, primarily because of the risk and expenses. VUL still has its place for some situations, though. The fact is when IUL was introduced in the United States in 1997 the insurance industry finally introduced another "fixed" insurance option for folks who would like permanent insurance with some better upside potential without the stock market risk. The difference between you and me is pretty simple --- I understand the pros and cons of both UL/IUL and whole life and I do NOT exhaust or spend so much energy and time trying to beat up or bash the other. Bottom line is this - There's pros and cons to whole life and universal life insurance. Nothing is free. Smoke and mirrors? Hmm...that seems like a hypocritical comment to me. Dan, where is your 45 minute video explaining the negatives and cons of whole life insurance and explaining the pros and positives of UL, IUL and VUL? Oh, let me guess, that doesn't exist, right? I'm a 20 year veteran and third generation in my family to dedicate my career and professional life to the insurance and financial services industry. My father and grandfather taught me to do what's best for the client, always. No exceptions. But they also taught me this --- It's not my money. Our job is to give people options and allow them to make an educated and informed decision. Just my 2 cents and I wish you the best!! My stance is this --- Permanent life insurance can be one of the greatest and safest places for people to place their hard-earned money. No insurance company is created equal and certainly not all insurance agents or financial advisers are created equal either. ~ Jay
Jay, just curious. For your IULs, at what annual rates of return do you illustrate them for your clients? Thanks. --William
Jay btw, if you have a lot of bread to invest--millions--and a savvy money manager, then for a cash-value policy, the VUL's the *only* way to go. You tuck it inside a PPLI wrapper. Chances are very good *you* (i.e. your money manager) will grow your money much faster than the ultra-conservative insurance companies.
But for middle market folks who want Perm Life, Whole Life is best.
Like you've often asked folks here: "Find me even *one* IUL that's more than 10 years old."
The IULs I've seen are 6--7yo max. And all of them sick little puppies.
Dan, I respect your opinion and the fact you actually have one! LOL I have read your reply. This year 2017 is only my 20th year in business, which ironically matches the 20th Anniversary since the inception of indexed universal life (IUL). Truth be told, I no longer argue or "try to convince people" about UL, IUL or Whole Life etc. Those days are long gone, thank goodness. Instead, I prefer to educate people and then give them some options. Again, like I said before, I personally think you're missing the boat about Indexed UL, but that's just my opinion. I have always found it very ironic that within our own industry there only seems to be two camps when it comes to permanent life insurance: 1. Whole Life Camp and 2. Universal Life Camp The sad fact is this --- that will probably never change! Agents and advisers are either UL fans or WL fans, not both. I'm in the minority that sees and understands the merits of both. Good luck! - JB
Usually 6% to 7%, but NEVER higher than 7%. That's just me, though. I am actually of the belief that AG-49 was a good thing for the industry, plus it helps control some of the aggressive illustrators out there...
DO NOT TRUST AN INSURANCE COMPANY WITH YOUR INVESTMENTS! INSURANCE AND INVESTMENTS A TWO SEPERATE THINGS!
Hey Dan,
Do you podcast?
Did you say safe investments like "real state, lending and government bongs" Government bonds are paying a negative return, lending is in a huge bubble and housing crashed in 2007/2008.
One of the biggies North Western Mutual has 230 billion in assets and brags about paying 5.6 billion in dividends in 2016 to the policy holders who technically own the company. that works out to less than 2.5%! these policy holders are really killing it and oh yeah they still have to pay premiums every years to get that 2.5%if they take it in th eform of dividends it reduces their future dividends.
The problem with your advocating that WL is better than bonds and I would agree with you on that point but the fact is that no one is talking about buying bonds! Because WL is better than buying bonds has nothing to do with WL vs. IUL.
My Mom turned 88 today
Dan.. are you supporting whole life vs IUL?
the mortality risk is still with the issuer. the client takes on some market risks. it is a measured tradeoff for the right person.
If you properly fund an IUL and you have a CAGR of 5%, which is extremely reasonable, a policy will not fail. The CAGR on an IUL should be closer to 6%. I do not sell IUL's personally, because I think fed intervention makes them as risky as VUL's. An IUL needs volitility to thrive.
The fed has shown willingness to buy non government assets to put a bandaid on the economy. Illustrate a good VUL with a max non-MEC contribution for 10 years and a CAGR of even 5% will carry it through. 6% is a more reasonable expectation if you are looking long term. A 40 year old who will live to 90 has a 50 year time horizon.
The only problem with VUL and IUL policies is that they build cash value so much more efficiently than whole life policies, clients need to be coached to leave it alone. The cash value needs to stay in and grow. Doing that, will make mortality expenses at age 80 seem small compared to the balance.
That's a real strange reason to not sell them "they build cash values so efficiently clients need to warned about taking their own money!" I can see where it is much better to give a poor return so that they won't want to touch it! NOT!
Thank you for this video Dan.
Please correct me if I'm wrong. Would you say it is more reasonable to buy this for people at a young age? Perhaps kids? Since it is cheap and assuming premiums are paid until retirement (say age 65), the cash value will constantly build up. Even if the market turns out to be bad in a couple of recession years, it would still be even out due to dollar cost averaging. By the time you hit 65 when you stop contributing, I would assume there would be enough cash value in the policy to last for the rest of the lifetime. Given that the premium is not paid in minimum and will be steady from the early age to year 65.
Wise Money Tools great video
What about whole life, or comprehensive whole life insurance?
You clearly don't understand IUL's. Mixing VUL with IUL in your explanation is misleading as they are clearly different. I could go on and on about your inaccuracies in this video but I am not going to waste my time. Plus many others have already pointed them out.
You are still comparing IUL to UL and VUL...not applicable. IUL is so much different. I totally get the VUL danger. really no different than a mutual fund with more fees. I've seen proof of successful IUL's. Agents and clients that have owned them and they are very impressive. You sighting seeing a few implode is certainly no proof that they aren't a good product. They could have been underfunded or client stopped funding or money borrowed from the policy. You either don't know are are not aware that there are also various IUL's available that guarantee death benefit with a fixed premium. You can have that premium go to whatever age you choose. the longer you pay it obviously the lower the fixed premium. Maybe you have not seen a good IUL by a good company. after all...just like any insurance products...all policies are not equal when it comes to different companies.
What you also fail to explain to be objective is that whole life mutual companies have grossly under performed their projections in the last decade or 2. My clients IUL policies have posted earnings of almost 15% this last year and they were in the single digits last year...some closer to 0%. Statistics for IUL policies 1996-2015 show that there are:
8 out of 20 years are max credit years 12-14%
7 out of 20 years are some credit years
5 out of 20 year years of 0% credits
The state insurance commission in each state (most the same) requires that the illustrated rates on IUL policies are calculated in a fair and accurate way. IUL illustrations have to take the average 25 years out of 65 in order to come up with this rate. They don't even use the best 25 years. The company I use the most is at 7.46%. That takes into account all of the up and down years.
It seems very enlightening. However, you seem to very conveniently ignore the magic of compound interest. Using the rule of 72, The IUL is far ahead of the game, compared to any other vehicle. True, there are fees and costs. Is there a product that doesn't have them? In an IRA and a 401K, compound interest is almost non existent. Being that compound interest only happens on an up market, you never experience it, whereas in an IUL, you can. Because your money never goes below 0%, compound interest is uninterrupted. As for the fees, in an IRA and 401K, fees compound, as your investment grows. According to NerdWallet, the average costs involved in a 401K averages 3%. 3% of what, you ask? 3% of your accumulated wealth. Initially, that amount is insignificant. 3% of $1,000 is $3 for that year. When your investment grows to $100,000, your paying $3,000 for that year. The more your investment grow, the more you pay in fees. By comparison, an IUL's fees average 1% of the premium paid. Being that the premiums are fixed in an IUL, that amount never increases.
As for your solution, I have been in the industry for about 15 years. I have discovered that whole life policies are the best in the market. What makes them great are the guarantees built into them The drawback to that is that, is that you pay dearly for those guarantees. Those guarantees come at a steep price. If you were to pay the same premium you pay into an IUL as you would into a whole life policy, the IUL, even a UL policy would outperform a whole life. You talk about high fees in your video? Whole life policies are the epitome of high fees. I am well aware of how the IUL works. My policy and my clients' have done very well, especially when the market has fallen, my policies have performed way better than the initial illustrations. Why pay more than you have to when you can put that money work for you?
That may be true in a zero floor contract. There are companies that offer a 2% and 3% floor. This way, you are sure to compound continually. There are also companies that offer an uncapped ceiling. So, if the market grows 20%, you benefit from that growth, rather than staying stuck with a dividend that may not come close to it.
As for fees, well, as I said earlier, WL fees are much higher year in and year out.
Dan, You are right. Not because your thinking process is accurate, but because you are not prepared to consider anyone else's perspective. You are a stubborn man, even if your convictions are inaccurate. Just like Dave Ramsey, your "one size fits all" approach can be most damaging to your clients' well being. There is a place for every product on the market. Depending on the situation, on any given day, one product may be best for a person, over another. I do not know where you get your information, but in my 15 years in the business, I have researched, compared and spoken to various underwriters, actuaries and product development teams, from different companies, because I want to know what I am selling. As I've explained elsewhere, what makes WL, by most followers, the best product on the market, are the guarantees inherent in it. Yet those guarantees carry a stiff price. That diminishes the projected growth, when compared to an IUL or even a UL. And yes, there is such a thing as a single pay IUL. So you can own your own IUL policy. We can go on and on about every item you speak on against the IUL, but what's the point? If you are not going to take it seriously and consider the possibility that there is room for another product to offer your clients that may work out better for them, it would be a total waste of time.
Best wishes,
Javier
Dan, to me, you are even scarier. In your world, WL is the "only answer" to anyone's case. That's just as bad as Dave Ramsey or Suze Orman. Ignorant entertainers who are blind to the specific needs of their followers and put them all in the same solution. While it may be the best for some of them, it can not be the best for all. Yet you go on, seeing the world through your own narrow perspective. Open you mind to the possibilities of the 21st century. The IUL, when properly designed, is life insurance, grown up.
Javier, at which index account rate of return do you illustrate your IUL policies? Thanks.
Javier, three days ago I asked you: "at which index account rate of return do you illustrate your IUL policies?"
I'm not surprised you're in no rush to answer this question. It's inconvenient for salestrons who flog these toxic pigs in pokes for a living. Thanks for reading.
dan, can you something related to cost of insurance in your vedio. Like how you explain the iul
"...[IUL] contracts are unlikely to produce long-term returns in excess of bonds..."
Folks, 10y Treasuries now yield a "whopping" 2.2% and investment-grade corporates generally don't yield far north of that. Through most of the years we've tracked bond yields since the beginning of the last century, bond yields have been below 4%, and even as low as under 2%.
Bottom line, we're looking at--ta-daaa!--an IUL long-term annual yield of 2.5--4%. Shocking eh?
Gee. That's way WAY below the 6+% that NAIC's AG49 *guideline* recommends, and which legions of shyster IUL salstrons and B/Ds have ignored anyway, illustrating their IULs at wild-*ss rates of 7%, 8%, and higher.
These stupidly high illustrations virtually *guarantee* you will chronically underfund your IUL causing you to LOSE it 20--30 years hence. In a few decades, you LOSE EVERYTHING: your death bennie and the $100,000s you faithfully fed into this diabolical money black hole.
The above comes from CNBC and a well-sourced IUL primer from Valmark Advisers, part of Valmark Financial Group, the links for which I give you here:
thebishopcompanyllc.com/wp-content/uploads/pdf/indexed_universal_life.pdf
www.cnbc.com/quotes/?symbol=US10Y
Do you even have a clue about how IUL products work? T-bill rates and bond rates have little or nothing to do with the rates of growth in an IUL. The bonds secure the money and the premiums supply the money to buy options on the indexes but the real growth comes from those options on the Index accounts. WL products returns are totally portfolio based and their portfolios are 90% bonds. You statement above about those low returns would effect WL far more than any IUL. That is why mutual companies returns are in the dumps and why they haven't been able to pay the dividends they project.
Louis, excuse me. But YOU seem to be the one sorely lacking essential clues how carriers fund their IUL index account crediting. In fact, you seem downright confused.
Louis, *both* WL and IUL are General Account products. As such, carriers fund *both* their WLs and IULs predominately--even overwhelmingly--using bond dividends. Louis, this is also WRONG what you say: "...The bonds secure the money and the premiums supply the money to buy options on the indexes. In fact, the insured's after-expenses portion of the premium buys *both* the bonds to fund the index account floor and the options with whatever few premium dollars are left over. Index call options typically represent 5% or less of the portfolio. See this quote from that Valmark link:
"...if the anticipated yield on the carrier’s general account portfolio was 3%, the carrier would allocate 97.1% of each [IUL] premium dollar received towards the purchase of bonds in their general account in order to contractually guarantee the stated floor of 0%. The remaining 2.9% would go towards purchasing packaged call option spreads from an investment bank that cover equity liability between the 0% floor and the cap..."
Then there's this from you Louis: "...the real growth comes from those options on the Index accounts..." Uh, no Louis, again, the options sit in the *carrier's General Account.* IULs can't have securities in it remember? Else the Fed government--not the states--would regulate these awful pigs in pokes. And salesfolks would actually have to study and and learn in order to pass the various Series exams. Not just plop down $40 to skate through a 52-hour online Life course before they're unleashed onto the world to mindlessly flog these awful IUL pigs in pokes.
Louis. Did you even bother to read that report before you started shooting off your mouth? Just wondering.
thebishopcompanyllc.com/wp-content/uploads/pdf/indexed_universal_life.pdf
Your original premise was that because the bonds and tbills are doing so badly the IUL is at risk. the IUL has the opportunity to hedge the market through the purchase of options but WL is wholly dependent on these same bonds and tbills and i guess is just left hanging out to dry.You also left out that the insurance companies buy longer term higher paying bonds than they do for annuities and that is why the caps are in the teens for IUL's since the whole life policy holders are wholly dependent on the abysmal bond returns you originally mentioned, WL doesn't have an opportunity to get a return based on the options, the WL policies therefore are at more risk of these terrible returns that you pointed out, than the IUL products. Since WL dividends are wholly dependent on those abysmal returns, the WL policy's future performance is really at risk. The bishop report is full of a lot of if's and but's, but little of what they warn about has actually happened. I would call them insurance doom and gloomers if anything.They fail to talk about the lack of dividends promised by the WL companies that weren't paid nor can they even show why or if they missed anything because it's a complete "Trust me" kind of black box product and we all know how that goes! Their expectations vs. reality paragraph starts out by saying because people are told the products can grow in value they all of a sudden become overly optimistic or something to that effect whereas no WL product has ever been shown to grow in value and WL agents only sell guarantees (that's pure B.S.)
Louis. Let's pick through your latest word fiesta.
First you say: "...Your original premise was that because the bonds and tbills are doing so badly the IUL is at risk..." Louis, please find where I ever said anything like that. Don't put words in my mouth, Louis. Give QUOTES please.
Then this tidbit from you: "...insurance companies buy longer term higher paying bonds than they do for annuities and that is why the caps are in the teens for IUL's..." Again Louis you're WRONG. IUL carriers *charge whopping fees* to subsidize the high caps. See here from that Valmark piece:
"...During times of sustained low interest rates and/or cyclical volatility, carriers often use increases in policy charges to subsidize higher, more attractive caps and participation rates..." and,
"...cumulative policy charges per $1M of Net Amount at Risk between an IUL product and a traditional UL product the IUL policy charges were approximately 45% higher over a 45-year period..."
And anyway Louis, have you seen Treasury yields recently? That curve's looking mighty tame. 30-years are yielding a "whopping" 2.87%.
Then you serve up this piece of undercooked tripe: "...WL doesn't have an opportunity to get a return based on the options, the WL policies therefore are at more risk of these terrible returns..." Louis, mostly WRONG. Options are not magic "something-for-nothing" derivatives. You think the big investment houses that sell these options to the carriers are in it to lose money? No, the investment houses are much keener to make money for themselves than the carrier is to make money for YOU the insured. If the option doesn't pan out, if the option doesn't hit the strike price, then big whoop, it's the insured's premium dollar anyway, not the carrier's money. And anyway you the insured are not "down" right?--except of course you *are* down because of the IUL's monstrous expenses. Meanwhile, the carrier's already meeting its contractual obligations through the bonds it bought with the rest of your post-expenses premium dollars. Options are why the carrier has all the participation dials--participation rate %s, caps, and spreads, which it can reset at least once per year in all policies new and inforce. The more bonds and/or the costlier the options, the tighter and more restrictive the carrier can dial in the participation limits. There are rare market climates when IULs could perform at least decently--high bond yields and low volatility. Guess what Louis? We haven't seen those days since the mid 90s--before the first IUL hit the market!
About the WLs, Louis, the highly-rated carriers are nothing if not good at managing risk, and the proof's in the pudding. Louis, in WL's 150+ history, when was the last time we saw a top-rated carrier default on a WL policy?
About this puffery you spew: ...The bishop report is full of a lot of if's and but's, but little of what they warn about has actually happened. I would call them insurance doom and gloomers if anything...” Sure, Louis. How you feel and all that jazz. Valmark is an independent broker-dealer licensed in all states for life insurance and securities. It wouldn’t serve Valmark’s interests to be all doom and gloom on insurance now would it Louis?
Then this nonsense you spew: “...They [Valmark] fail to talk about the lack of dividends promised by the WL companies that weren't paid nor can they even show why or if they missed anything because it's a complete 'Trust me' kind of black box product and we all know how that goes!...” Yes, Louis, blah-blah, etc. Once again--with feeling--ask it with me Louis: In WL's 150+ history, when was the last time we saw a top-rated carrier default on a WL policy?
Then finally Louis you dash your word gumbo with this crescendo of crapola: “... Their expectations vs. reality paragraph starts out by saying because people are told the products can grow in value they all of a sudden become overly optimistic or something to that effect whereas no WL product has ever been shown to grow in value and WL agents only sell guarantees (that's pure B.S.)...” Louis, what is the “pure B.S.?”What are you even trying to say here?! Just wondering Louis. Maybe try to clarify all this. Only if you want. Thanks for reading.
www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
kmc, very simple question for you. At what annual return rate do you illustrate your IULs? Thanks
Great video!
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