Help Me Decide Between Guardian or MM, what Should I Be Looking Out For?

[DHK]

Oh boy. Somebody's new.

#1 - You don't know how dividends work. A dividend RATE is completely different than a rate of return on a policy.

#2 - Because you don't know how dividends work, you are misrepresenting dividends and unethically replacing policies.

If your post is an example of the training at a captive agency... you're better off by NOT going captive.

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Misrepresentation and ignorance: A dangerous blend for ethics | LifeHealthPro

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Ever wonder why you don't get 7% per year for the first 10 years in the illustration?

Do the math sometime and figure it out.

I have. Here's the deal: company earnings surplus for dividends are distributed in a proprietary way - primarily: length of time the policy is in force, current cash values (may be affected by loans or not - depending on company), underwriting status, and other criteria.

That's why you want a favorable underwriting classification and keep the policy in force long-term... like a fine wine.

But if you're promising 7.1% per year from year one... you're going to have problems.

 

[MM_advisor]

DHK, your reading comprehension is poor. I know how dividends work. Nowhere did I say that the dividend was the rate of return. My point was that MM offers their policy holders the highest dividend rate in the industry, so the clients' cash value and death benefit grow faster.

 

[DHK]

The biggest advantage about MM is that it pays the highest dividend rate, so it's easy to rollover clients with whole life policies with NYL or Guardian:


Nowhere did I say that the dividend was the rate of return. My point was that MM offers their policy holders the highest dividend rate in the industry, so the clients' cash value and death benefit grow faster.

Yeah... that's it. I'm misunderstanding you. You didn't SAY "rate of return".

You said "replace policies due to dividend rate" and "cash value and death benefit grow faster".

Your ignorance is astounding. That... or you don't understand English and simple financial terms.

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And yet, according to your post, you freely admit to replacing policies from other very highly rated companies due to 'dividend rate'?

Isn't that irresponsible, twisting, and even churning?

Does your office TEACH you this?

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What I'm trying to get across to you is that the DIVIDEND RATE is MEANINGLESS!

Here's a very simplistic example:

Let's assume that a 1 Billion Company has a 5% dividend... or $50 million surplus to distribute among 5,000 policies. To keep everything simple, we'll assume they're all in force, same cash values, same length of time in force, etc.

How much would the dividend be? $10,000 dividend each policy. ($50 m / 5,000 policies)

What is the rate of return on the policy? We don't know.

Yet, this was only a "5% dividend", right? If you're "selling dividends" you're not doing it right.

Marvin Feldman said this: "Always remember the rule 1 to 100. In one year, 100% of your illustrations will be wrong."

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The fact is... is that the vast majority of WL policies don't "break even" (cash values exceed premiums paid) until at LEAST after 10 years. Dividend performance may help accelerate the performance, but in the early years, it's minimal... regardless of which company you're representing.

Now, if you're replacing other policies, you're "restarting the clock" again on that policy - not to mention a new constestability period.

True, you could be doing 1035 exchanges (hopefully into ALIR/PUA rider only) to help keep dividends high for that level of cash value.

It's still not the best idea to be doing 1035's from strong companies... as long as they are still affordable for the client, meeting their needs, and they are okay with the risk/reward of the policy.

 

[MM_advisor]

LOL, you are misunderstanding me. For a former MM agent and CFP, I expected your reading comprehension to be better. You're jumping to conclusions.

-Yes, I know that a dividend rate and rate of return are different things. Because I understand English and finance, I was careful not to write that the "rate of return" was 7.1%.

-You have to remember who my audience is. My post was written to life insurance agents and not prospects. If a prospect asks about the rate of return, I show them the page of the illustration that has the internal rate of return at various years. For a healthy person, the IRR is 5-6%.

-No, I don't think it's unethical to replace a prospect's whole life policy with something better. MM has the highest dividend rate and a client's whole life policy's cash value and death benefit will grow faster than the competition.

As an example, I have a client who was contributing $20K/year into a NYL pay to age 100 policy that he got 3 years ago. Even though he was 3 years older, the MM illustration showed that for the same $20K/year premium his cash value and death benefit would be $1M greater at age 85. That was an easy 1035 since his premium didn't change.

 

[DHK]

You are promoting your dividend rate to your CLIENTS. That was the audience that you were referencing in your post as to how you conduct business as a MassMutual agent.

Can you GUARANTEE that the new policy WILL GROW faster than the competition? No you cannot. Because in every place that discusses dividends, there's the disclaimer that dividends are not guaranteed... due to the performance of the insurance company.

Which is primarily dependent upon 3 main variables:
1 - New sales and new premium coming in
2 - General account performance
3 - Mortality experience being more favorable than anticipated

By promising performance based on CURRENT dividends, you *may* be misleading your clients... because dividend scales WILL VARY year to year.

Dividends as illustrated are merely projections. Even Ben Feldman said that most mutual companies earn about the same, but may show a different projection in their illustration.

Be careful about using the terms "would be" when you said that the cash value and death benefit would be $1M greater at age 85.

I do agree that mutual companies have a long standing reputation for consistency in declaring dividends, but that's not a guarantee.


BTW, I was never a CFP.

 

[scagnt83]

I'm an agent with MassMutual in San Francisco.
Pros:
-Fortune 100 company with highest credit rating.
-Very profitable due to its many business lines (commercial real estate, owns investment companies like Oppenheimer, Hartford's 401k, Babson Capital, etc.)
-Thus pays the highest dividend rates in the insurance industry
-MM is non-captive which allows me to sell another carrier's cheaper term or disability insurance.
-Training by the wholesalers is pretty good (2x a week).
-Sales manager doesn't micro manage you. Agents don't work from the office everyday.
-Teach you the Sandler sales system and LEAP philosophy (financial planning software) which is a powerful skill set.
-90% commission bonus your first year
-Pays for 50% of your marketing expenses
-The whole life insurance with long term care rider is a fantastic product
-There are several sales contests a year in which you win vacations

All of this is standard for pretty much every major mutual carrier. And Mass does not pay the highest Dividend every single year, so that statement is misleading.

The biggest advantage about MM is that it pays the highest dividend rate, so it's easy to rollover clients with whole life policies with NYL or Guardian:
2015 Dividend Rates
MassMutual - 7.1%
New York Life - 6.2%
Guardian - 6.05%
North Western - 5.6%
John Hancock - 5.3%
MetLife - 5.1%

Again, that is a misleading statement in multiple ways.

First, Mass does not pay the highest Dividend every single year. Guardian has paid a higher Dividend than Mass multiple times in years past.


Second, a higher Dividend does not equal a higher CV or DB. Each company uses a different COI & Admin/Expense charge. That combined with the Dividend rate is what creates the CV & DB.

If you run a Mass 10pay vs. a Guardian 10pay on a Select Preferred 45 year old male who is paying $10k/y you get this in year 11:

Mass........... $111,217 CV - 1.63% RoR on CV - $263,056 DB

Guardian..... $116,045 CV - 2.28% RoR on CV - $272,413 DB

So Dividend Rate is not everything. Obviously you want a strong dividend, but there is more to consider than the Dividend alone.

Also, Guardian has more WL products to choose from than MM. So you have more flexibility to find a product that fits the clients needs the best.


Mass has a great WL product, I have sold it plenty over the years. But to claim that it is hands down the best would not be an accurate statement at all. No one single carrier will always be the best for every situation. As a captive agent you are forced to spin your product as the best all the time... which is just the nature of the job... but in reality sometimes Guardian fits the situation the best and sometimes Mass fits the best. As an indy agent i have the luxury of using what is best for the client no matter which carrier it is.

 

[MM_advisor]

I can't run the numbers so I'll take your word for it. How do the illustrations compare at year 20 or 30?

Dividend rates can easily be Googled, so here they are:

MM Guardian​

2002 8.05 8.00
2003 7.90 7.00
2004 7.50 6.60
2005 7.00 6.75
2006 7.40 6.50
2007 7.50 6.75
2008 7.90 7.25
2009 7.60 7.30
2010 7.00 7.00
2011 6.85 6.85
2012 7.00 6.95
2013 7.00 6.65
2014 7.10 6.25
2015 7.10 6.05

Guardian hasn't had a higher dividend in any of the past 14 years.
On a positive note, Guardian's disability income insurance for dentists is less expensive.

 

[scagnt83]

I can't run the numbers so I'll take your word for it. How do the illustrations compare at year 20 or 30?

Dividend rates can easily be Googled, so here they are:

MM Guardian​

2002 8.05 8.00
2003 7.90 7.00
2004 7.50 6.60
2005 7.00 6.75
2006 7.40 6.50
2007 7.50 6.75
2008 7.90 7.25
2009 7.60 7.30
2010 7.00 7.00
2011 6.85 6.85
2012 7.00 6.95
2013 7.00 6.65
2014 7.10 6.25
2015 7.10 6.05

Guardian hasn't had a higher dividend in any of the past 14 years.
On a positive note, Guardian's disability income insurance for dentists is less expensive.

And if you go back into the 90s and 80s Guardian has paid a higher Dividend than Mass in many of those years. WL is a product with a 40-60 year time frame, a 14 year time sample is not the full story. If you look at the 30 year average Mass does beat Guardian, but only by about 30bps.

20 or 30 years out Mass does eventually catch up to Guardian. But my point is that a higher Dividend does not automatically equal higher performance, there is more to factor in.


If you are selling DI based on price then you are doing your clients no favors at all. Guardian has the most comprehensive DI policy hands down. But they are especially the best for any medical profession.


But to circle back to the greater point, no one single carrier is always best. Even if they do always pay a higher dividend (again, no carrier always pays a higher dividend, over the past 150 years top dividend rates have fluctuated between Mass, Guardian, NYL, NWM, Penn, ON, and a few random others)

 

[David88k]

Just got off the meeting with the Guardian GA and I'm not really impressed.

He seemed very intelligent and you could tell that his been around for a long time but he seemed very micro managerial and that pushed me away.

Here is the deal
6 apps in 90 days + 10k in premium to validate your contract. After that you get salary of 2k a month which is simply your future commission advanced to you.

I asked if the salary can be declined and he said no.

They want you to do your first 6 apps with one of their top performing agents and here is the breakdown of the split. 50% to you, 30% to the other agent and 20% for the back room to do the paper work for you and complete the underwriting. His excuse was that they want their agents to focus on production and not waste any time on none production tasks. To me it sounds like bunch of bologna.

I asked him if I come on board and close 6 apps on my own would that qualify me and I was told no.

Basically what I got from this is just like what any other career agency does. Take new agents in make them do a project 100/200, sell to their relatives and friends and then show the agent the door. No thnx Jeff!


The office had some staff members in there and other agents but there was total silence, not a single phone was being used to solicit business. It felt like there was literally no connection between anyone in there.

Expenses were disclosed and there were no office fees if 16k minimum production met.


Living Balance sheet was the only thing that grabbed my attention and I have to say that its an amazing tool and I could see it coming in handy in many situations but there is a fee for it. 100 for your first year which the GA pays for, 200 your second year and 300 after your 3rd year. (Per Month)


Over all captive with Guardian looks the same as being an employee at a bank. That is the exact opposite of what I am looking for so I think I'll pass. It seemed like a very corporate environment with the employee and employer mentality and no matter how much training is provided and even if they did give me salary which was not a commission advance it still wouldn't make sense to me.


I have another meeting with one of the Mass GA offices tomorrow so hopefully that goes better, I will update on that later.

 

[DHK]

The office had some staff members in there and other agents but there was total silence, not a single phone was being used to solicit business. It felt like there was literally no connection between anyone in there.

It felt like that at my old Mass agency too. Even though there was a "bull pen", it's not like people were making any calls.

I felt quite self-conscious when I was making calls, because I have a resonating voice and I know everyone could overhear me. One agent tried to give me advice, but I was still battling my own self-consciousness of making the calls... I didn't want to hear any criticisms when I just wanted to make the calls, regardless of results.

So, if you find the same environment at Mass, don't say I didn't warn you.