Index UL

[xrac]

Indexed UL is not a fad

 

[Justin Bilyj]

I like to talk to many financial professionals in my area and I noticed a distinction.
If they are captive, they are AGAINST IUL/FIA's, saying there will be many lawsuits soon to happen against agents with no securities license, pitching this.
I can kinda understand, especially with Security Benefits TVA, too many currency, indice options, and how do you explain the composite and the volatility controls without giving out advice?

Whereas Independents have no problem pitching these products.

Now we are heading into higher interest rates, whether the FED wants it or not, and that will crush the indices and bonds (not to mention the derivative bombs will go off and our debt would balloon), but is good for our currency. So if I see the bond market tanking and the S&P tanking, how useful are these indexed annuities gonna be in that environment?

 

[DHK]

I can kinda understand, especially with Security Benefits TVA, too many currency, indice options, and how do you explain the composite and the volatility controls without giving out advice?

I'm confused by your question. What is your definition of 'advice'?

If the definition is giving a prediction on specific securities or indexes, then I can probably agree with you.

If you're looking at someone's portfolio and giving specific advice or recommendations about individual holdings... that can be considered advice.

If you're simply having a conversation on how these factors work... then that is not advice. That is a conversation. All of the listed factors above are a part of a conversation.

To have ethical conversations to discuss fixed indexed products, you need to talk about 'what is'.

Volatility is 'what is'. Volatility in the stock & bond markets is not going to go away. Would you rather reap the upside without the downside with guarantees? Then simply explain how the product works.

Way back when I was taking my Series 7 exam, I had to study options. Even then, my mind was looking for ways to have the upside without the downside... and I knew that options could play a part in an overall strategy. The problem was the COST of buying the options that would erode the overall return of that portfolio. Fixed Index Annuities help have that kind of return without the costs. The insurance company's general account pays for the options. Because of the guarantees, you don't need to have a securities license in order to offer FIA/FIUL.

There's nothing wrong with having a conversation about the general economy and having a general opinion on what's happening or what you think is going to happen. There's also nothing wrong with talking about risk tolerance. Most people OVER-ESTIMATE their risk tolerance. Even FINRA got that one right in the 2009 National Financial Capability Study on page 18.

Financial Capability Study: Data and Downloads

But if you're relaying this information to give specific advice on securities or portfolio asset allocation... that's when you're going to have problems, if you are not properly licensed and registered.
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Now we are heading into higher interest rates, whether the FED wants it or not, and that will crush the indices and bonds (not to mention the derivative bombs will go off and our debt would balloon), but is good for our currency. So if I see the bond market tanking and the S&P tanking, how useful are these indexed annuities gonna be in that environment?

They are going to do their job of providing the protection against the downside. Principal balances will be protected and preserved.

They will be better protected than if they were directly invested in similar securities.

If these markets tank -15% (for example), how much better off will those be in FIUL/FIA? They are 100% better off! Why 100%? Because they saw NONE of the downside.

In addition, their balances are preserved to take FULL advantage of the next bubble up-swing! They won't have to play "catch up" on their portfolio to get to where they were before the downside.

BTW, this kind of conversation isn't advice. It is a conversation about volatility and how FIA/FIUL can be a strategic advantage to those that have these products.

 

[xrac]

I like to talk to many financial professionals in my area and I noticed a distinction.
If they are captive, they are AGAINST IUL/FIA's, saying there will be many lawsuits soon to happen against agents with no securities license, pitching this.
I can kinda understand, especially with Security Benefits TVA, too many currency, indice options, and how do you explain the composite and the volatility controls without giving out advice?

Whereas Independents have no problem pitching these products...........

They are against them because their captive company or broker dealer won't let them sell them. FIA's and IUL's pull money away from the BD's and FINRA. That is why they oppose them.

 

[VolAgent]

They are against them because their captive company or broker dealer won't let them sell them. FIA's and IUL's pull money away from the BD's and FINRA. That is why they oppose them.

They also remember getting the pants sued off them the last time around with WL, UL and now VA's.

There is nothing wrong with indexed products. But a lot of people are making the same mistakes that were made with products in the past. Chronically over-promising and then the product under-delivers.

Use reasonable returns with sufficient premium and your client will be fine. There are a number of studies, both company specific and non-specific that shows somewhere around 6% has a very high probability of consistently being met.