Originally Posted by Larry Tew
How does IUL work if your client wants access to the CV throughout the life of the policy?
"Joe, this IUL will receive the better of the index-based interest calculation or the guarantees... as long as you don't use the CV."
That isn't the conversation I want to have.
Depends on the product but here is how mine works. I can access my money either via withdrawals, guaranteed zero cost loans (if I'm dipping into gains) or via variable rate loans where my money stays in the index and I pay a market rate of interest (between 4-10% based on the Moody mid term bond index rate).
I'm not a big fan of the variable rate loan because to me it's nothing more than a margin loan against my cash values. I probably wouldn't do that personally and I don't think most of my clients would do that either but it is an option that I might choose in the future if my investment view plays out.
I have no problems telling my clients that they can get their money today, tomorrow or 30 years down the road with no charges, fees or interest. That is a conversation I enjoy having because no one else is having it with them or will have it with them.
As for IUL not performing like fixed products.?? Really??
What fixed products have earned over 7% in the last decade or done more than 8% over the past 5 yrs or 15% the past 2 years?
Now the past decade has also been the worst in the markets history yet my clients and I have earned returns higher than fixed and much higher than registered products.
What are those fixed products going to look like in the next 10 yrs with our prolonged low rates, terrible real estate market? Will the mutual companies all be out of the reserves they use to artificially boost dividends so they can still sell policies? I think that's highly likely.
And how will your clients reallocate in a fixed product when they realize that the Fed will not allow interest rates to rise and their paltry returns on fixed assets never increases but prices of goods and the stock market do? How do they get out with those surrender charges and front loads they paid?? Do you have to keep them in an under performing product because you had to make a bigger commission?
Now that's a conversation I don't want to have!
IUL is the perfect product for the Ben Bernenke world. He'll print the stock market higher and force bond rates to remain extremely low by being the only real buyer of debt because if rates go up the housing problem is even worse and if housing is worse then the banks are even more bankrupt and that won't be able to be hidden any longer.
He has only one tool he can use and that's the printing press and that means low rates and higher indexes, much, much higher. JMHO as someone with over 25yrs in insurance, investments and a high level degree in economics from a major econ school.