Guardian Announces, And the Dividend Is...
- Thread starter BNTRS
- Start date
- 281
So this is exactly what I want to clear up. Do you all think it is dishonest for eg say a mass mutual agent to say their dividend is higher which is gross; doesn't include expense to compare it to say another company that uses the net figure yet does not explain that to client but just says our company pays z higher dividend than this x company yet one uses a net figure and the other a gross figure.
- 11,305
I think if you're talking too much about dividend performance... then you are majoring in minor things when talking to your prospects & clients.
And let me tell you this: comparing dividend history to try to "win" over the client MAY work in the short term. But so what? No one understands it anyway, and it's a small concern. I wouldn't focus on it.
Your clients only need to know that your company is GOOD. If the PROSPECT is trying to compare dividend performance... change the topic to talk about underwriting classification.
Dividends CREDITED to policies are based on policies that have good underwriting (meaning better than standard), well-funded and stay on the books... basically LOW RISK policies.
Talking about the company's dividend doesn't matter one plug nickel when you really need to talk about how you will help the client to manage their policy to its maximum effectiveness and efficiency.
Get your client examined and talk about protection. Get an application in. Once you have an underwriting decision... NOW you can talk about how to maximize the policy and how the company's positive dividend history CAN work in the client's favor.
To talk about the mechanics of the dividend between various companies is stupid, foolish and a waste of the agent & prospect's time.
And let me tell you this: comparing dividend history to try to "win" over the client MAY work in the short term. But so what? No one understands it anyway, and it's a small concern. I wouldn't focus on it.
Your clients only need to know that your company is GOOD. If the PROSPECT is trying to compare dividend performance... change the topic to talk about underwriting classification.
Dividends CREDITED to policies are based on policies that have good underwriting (meaning better than standard), well-funded and stay on the books... basically LOW RISK policies.
Talking about the company's dividend doesn't matter one plug nickel when you really need to talk about how you will help the client to manage their policy to its maximum effectiveness and efficiency.
Get your client examined and talk about protection. Get an application in. Once you have an underwriting decision... NOW you can talk about how to maximize the policy and how the company's positive dividend history CAN work in the client's favor.
To talk about the mechanics of the dividend between various companies is stupid, foolish and a waste of the agent & prospect's time.
- 281
Ya, but this is something I want to know mainly for my conscience sake so that when I talk I can feel that I am being honest. It is not something I want to major in at all. It's just the brochure said... And then you also have the company comparing their dividend.. What I'm trying to get at. Is it then ads fair comparison if it's not apple to apple? @. DHK.. You say dividend applies to someone who has a rating of higher than standard ** so does that mean that if I wrote a policy for someone who was rated standard that the guaranteed interest would not apply to them. This was not taught to me. Please elaborate.
- 11,305
Guaranteed interest is NOT the same as a dividend.
That's why one is called INTEREST and the other is called a DIVIDEND.
When a company has a surplus and declares a dividend, first they like to publish a rate.
If a $1 Billion company declares a $70 million dividend, that's a 7% dividend, right? (I'm keeping the numbers small to keep it simple.)
But that still has NOTHING to do with the issued policy as dividends are distributed according to some mathematical model. No one said that the dividends are distributed equally among all in-force policy holders.
A rated policy (table F for example) on the books for less than a year will not receive the same dividend as an Ultra Preferred policy, well funded for 20 years.
Which business would you reward? The new business? Or the loyal, good risk, high return business?
Look at your illusions...er, I mean illustrations and do the math on every year in that column. It does NOT show a 7% year over year return in the dividend.
It WILL show an INCREASING dividend performance as cash values accumulate.
You can do a similar comparison for rated policies or policies that have more favorable underwriting. You will NOT find a 7% rate of return happening year over year using the current dividend scale.
What you really need to know is this:
- If your prospect is trying to compare dividends between company X and company Y... tell them that it doesn't matter at all until they have been examined and issued a policy.
- Once they have a policy, KEEP it and manage it with your agent.
- If your health changes to be more positive, THEN you may want to consider a replacement.
I would simply show that your company has a HISTORY of paying dividends... but don't get too hung up on the numbers themselves. Only that the company is managing their sales, claims and underwriting to be profitable year in and year out.
I don't care WHAT the brochure says. Brochures about dividend history are misleading simply because they assign a % for every single year... and we as the lay public have been BRAINWASHED to equate that to a policy's cash surrender value return every year.
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You cannot equate a guaranteded interest rate with a non-guaranteed dividend. They are not the same.
BTW, that part is so basic, that it SHOULD'VE been explained to you when you first got into the business.
That's why one is called INTEREST and the other is called a DIVIDEND.
When a company has a surplus and declares a dividend, first they like to publish a rate.
If a $1 Billion company declares a $70 million dividend, that's a 7% dividend, right? (I'm keeping the numbers small to keep it simple.)
But that still has NOTHING to do with the issued policy as dividends are distributed according to some mathematical model. No one said that the dividends are distributed equally among all in-force policy holders.
A rated policy (table F for example) on the books for less than a year will not receive the same dividend as an Ultra Preferred policy, well funded for 20 years.
Which business would you reward? The new business? Or the loyal, good risk, high return business?
Look at your illusions...er, I mean illustrations and do the math on every year in that column. It does NOT show a 7% year over year return in the dividend.
It WILL show an INCREASING dividend performance as cash values accumulate.
You can do a similar comparison for rated policies or policies that have more favorable underwriting. You will NOT find a 7% rate of return happening year over year using the current dividend scale.
What you really need to know is this:
- If your prospect is trying to compare dividends between company X and company Y... tell them that it doesn't matter at all until they have been examined and issued a policy.
- Once they have a policy, KEEP it and manage it with your agent.
- If your health changes to be more positive, THEN you may want to consider a replacement.
I would simply show that your company has a HISTORY of paying dividends... but don't get too hung up on the numbers themselves. Only that the company is managing their sales, claims and underwriting to be profitable year in and year out.
I don't care WHAT the brochure says. Brochures about dividend history are misleading simply because they assign a % for every single year... and we as the lay public have been BRAINWASHED to equate that to a policy's cash surrender value return every year.
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You cannot equate a guaranteded interest rate with a non-guaranteed dividend. They are not the same.
BTW, that part is so basic, that it SHOULD'VE been explained to you when you first got into the business.
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- 281
At DHk, thank you. At Larry Tew, your right.. Can you please explain?
I'm sure someone can come along and write a novel about it later but let me give you the "postcard" version...
Mortality Margin + Expense Margin X Interest Rate = Dividend Scale.
The interest rate used in setting the dividend scale is only one part. The interest rate used is not the same as earning a particular interest rate on a sum of money.
- 281
Thanks Larry. It sounds a bit complicated so like in Mass for instance where they do not include the expenses in their interest rate.. Talking about gross vs net, it would in the end still be computed differently, right? So you wouldn't be able to compare apples to apples if one uses net and the other gross?
I don't understand your question. The interest rate a company uses in their calculation is a somewhat arbitrary number they choose primarily based on their yield on assets and their estimation of what they will earn into the future.
What do you mean by "including the expenses in their interest rate"?
