Someone mentioned earlier about the "buy term and invest the difference" concept. This of course was started by A. L. Williams. This was one hell of a concept and was good for the client. The only problem was that an overwhelming majority DID NOT invest the difference or didn't continue investing the difference. Great concepts only work if they are carried out. I did the Primerica thing when I first started out in insurance many years ago. It didn't take long to realize that even though it was a fantastic concept, for the most part, it just didn't pan out. First of all, it was too easy for the client to access the investment. When that happened, the whole concept went down the drain. They were back to square one. ROP 'forces' the client to save, which is the only way most of them will save any money. Just remember, the vast majority of the people out there are not investment gurus or do not have one working for them. They are just everyday folks scraping by. Yes, ROP is great for the insurance company, but for the vast majority it's great for the client too.
My question to you then is this...Why do you assume a client who will NOT "invest the rest," will keep his ROP term the entire length until he receives his $ back? If LIMRA reports show that ROP terms only last a few more years than regular term policies, hasn't the client just wasted even more money he could have spent on beer?
The average growth stock mutual fund will give you 12% each year over time. I have my 6 &63, so I give my clients the ROP/"invest the rest option." I explain what I feel is the better route to take and why and then let them decide. A lot of agents who aren't securities licensed don't have this luxury and therefore CAN'T offer this option, nor do they know the average % one can get in the mutual fund world having only been in the life insurance side of things. Dave Ramsey is always stating how ROP is a HORRIBLE idea. I happen to think he has good reasons for this AND I also happen to think he knows just about as much or MORE THAN ANYONE on this forum. Just my thoughts...
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Originally Posted by Markingriffin
As long as the client pay the premuim on a R.O.P. Plan, and if the company goes under. Then something called the " Reserve Kicks in" The Ins Dept over takes the company and stand in for the company. Now there are limits to about of Insurance. Most states honors any amount under $250,000.
This is something that does not get talked about for many reasons. If you read the Clark Howard Post on the forum you will see how many states handles this.
But as of today, there has never been a company, go out of business and not pay a death claim, or honor the R.O.P. option.
If you don't understand or believe me. Try this. Call the Insurance Dept in your state and ask them. Ask them if the company you bought this from goes out of business or does not give your money back, what will happen?
IN 1999 I learned about the Triple X law, we called it. Everytime you buy a policy, some of the cost of insurance goes into a fund. That some of use call the Reserve. It does not get talked amount much for many reason. One being the Ins Dept, does not want to have to take control of a company or wants LIfe Companies to pass the buck to them.
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Yes I will in a heartbeat. I want R.O.P. on everything, not just insurance.
If I was renting a house, and the landlord told me if I pay more rent to get my money back, after I move out. I would jump on it.
Not all agents are going to like R.O.P. or offer it to their clients or push it. I'm glad that they don't or I might not be able to come in behind them and make a sale. To those agents that don't get it, I thank you and a lot of agents do also.
There are limits to what each state will guarantee. Here is a link with each states limits and their guarantees... nolhga.com :: Law Summaries
Last edited by pebble head : 12-25-2008 at 02:54 AM.
Reason: Posts merged
The average growth stock mutual fund will give you 12% each year over time.
lol. 85% of mutual funds underperform the market over the long-run.
After fees -- your's and the fund's -- they are lucky to get 5%/yr.
And for those who put their money in an etf.... Nice return the past ten years.
The world is becoming more susceptible to black swan events, and that risk is not priced into the market.
Now if you want to do Gramm & Dodd and make serious, studied recommendations instead of whatever mix of mutual funds your B-D recommends under the guise of portfolio theory, then hats off.
lol. 85% of mutual funds underperform the market over the long-run.
After fees -- your's and the fund's -- they are lucky to get 5%/yr.
And for those who put their money in an etf.... Nice return the past ten years.
The world is becoming more susceptible to black swan events, and that risk is not priced into the market.
Now if you want to do Gramm & Dodd and make serious, studied recommendations instead of whatever mix of mutual funds your B-D recommends under the guise of portfolio theory, then hats off.
LOL Yes, WISEGUY that's why when you're with a client you should set them up with a mutual fund with a LONG track record. Does that mean you are 100% safe...NO, BUT it sure helps to know if the mutual fund has been around for a LONG time with a GOOD return over that time it is the BETTER OPTION NO MATTER HOW YOU SLICE IT!
Fees is now your next argument? AGAIN, which mutual funds are you setting your clients up with? Or are you just stating things from what you have heard? There are MANY mutual funds out there with favorable fee structures. COUNTLESS of GOOD ONES!
Do you have a 6 & 63? If so, I doubt you would have responded the way you did. You don't just slap on ANY mutual fund with a client.
Sure you pay taxes after that 12%...BIG DEAL! I'll be glad to take that 9% profit EVERYTIME!
Last edited by pebble head : 12-25-2008 at 04:08 PM.
I mean if ROP term was the best way to invest money then there would be no or a lot less 401K's out there. Everyone would just buy ROP terms to fund their retirements LOL.
What would ESA plans be funded with or 529 plans? You would suggest the parents buy ROP terms on themselves?
There are reasons why mutual funds are more prevalent!
Last edited by pebble head : 12-25-2008 at 05:38 PM.
1. It is really amazing these debates never come up on other subjects, i.e., go to Red Lobster versus go to McDonalds, eat off the dollar menu, and invest the difference.
2. The reason these debates can go on and on with no resolution is that both parties to them are right, AND WRONG. Of course, the strategy of BTID is sound for anyone. That is because no one can afford a participating W/L or ROP for the amount of LI they need. So it is proper to tell them to BTID. Sure, buy the amount of term you need and save/invest the difference. For example, someone making $60,000 looking to protect their family with a $1,000,000 policy simply could never afford the W/L premium. So, yes, go buy term. And, the insurance agent that touts the rock solid guarantees and benefits of that $1m W/L policy is just as correct (but wrong for not acknowleding the prospect simply cannot afford it).
What no one mentions in these debates is that the prospect might be best served with say $900,000 term which he can afford AND a W/L or ROP policy for $100,000 which he can afford.
He gets: (1) the desired coverage for a premium he can afford. (2) he derives benefits from both the term and, to a lesser extent the W/L or ROP.
It does not have to be an "either or" situation. It can be both.
Last edited by marcircus : 12-25-2008 at 04:50 PM.
So your solution is to buy some term and buy some WL? WL will gain about 3%...
Why not use that EXTRA money that would go for the outrageous WL premiums and get 12%? AGAIN, do the math!
AGAIN, I go back to Dave Ramsey and Suze Orman on this issue...these financial guru's know just about as much OR MORE than anyone on this forum, therefore what they say holds more water than what you say. Hell, they BOTH have forgot more than most on here will ever know! THEY BOTH agree that WL is a CROCK and you're better off not getting a ROP. ENOUGH SAID!
Dave Ramsey and Suzi Orman both know a lot of things but neither is real well versed in insurance. For you to assume they know more than anyone on this board about insurance is absurd.
Dave knows if he can get you to buy from Zander, he gets a paycheck.
I haven't heard a lot of intelligent conversation from either one of them about insurance.
If Dave and Suzi and Clark Howard and the like are always correct, why do they disagree on so many things?
Dave Ramsey and Suzi Orman both know a lot of things but neither is real well versed in insurance. For you to assume they know more than anyone on this board about insurance is absurd.
Dave knows if he can get you to buy from Zander, he gets a paycheck.
I haven't heard a lot of intelligent conversation from either one of them about insurance.
If Dave and Suzi and Clark Howard and the like are always correct, why do they disagree on so many things?
....The average growth stock mutual fund will give you 12% each year over time. I have my 6 &63, so I give my clients the ROP/"invest the rest option." I explain what I feel is the better route to take and why and then let them decide. A lot of agents who aren't securities licensed don't have this luxury and therefore CAN'T offer this option, nor do they know the average % one can get in the mutual fund world having only been in the life insurance side of things. Dave Ramsey is always stating how ROP is a HORRIBLE idea. I happen to think he has good reasons for this AND I also happen to think he knows just about as much or MORE THAN ANYONE on this forum. Just my thoughts...
How are your clients enjoying their returns in this market? Any of them not able to sleep at night or having to put off retirement? Do you think someone who started investing say in the late 90's is still going to average 12%. How long will it be before the stock market recovers?
Last edited by xrac : 12-25-2008 at 11:07 PM.
Reason: Posts merged
Mutual funds are a LONG term investment. Do you think a ROP will beat a mutual fund with a LONG track record over a 15-20-30 year period? I DON'T think so LOL
Right now mutual funds are down...Did you know that by the third year after a recession the market goes up close to 30% on average? I know I don't want to miss that upswing...you can! You get your ROP and call that a return? There is a reason you don't need a securities license to sell a ROP as IT IS NOT CONSIDERED AN INVESTMENT. You are simply getting your own money back over time, all the while the insurance company is the REAL BENEFICIARY MAKING THE MONEY on your money. Then at the end they give you back money that inflation has eaten up. NO THANKS!
And I still stand behind my Orman/Ramsey comment. I would listen to them before ANYONE here. Sorry...just my prerogative!
How are your clients enjoying their returns in this market? Any of them not able to sleep at night or having to put off retirement? Do you think someone who started investing say in the late 90's is still going to average 12%. How long will it be before the stock market recovers?
ACTUALLY "IF" my clients are about to retire we are not 100% in mutual funds and not 100% EXPOSED to the market.
It was announced that this current recession started in Dec. 07. So it's been 12 months already. The longest recession thus far has been 16 months. Now, we know past results don't mean squat BUT it sure looks like things might start to look up here pretty soon! I sure want to take this WAVE for a ride while you "INVEST" in your ROP terms LOL
Mutual funds are a LONG term investment. Do you think a ROP will beat a mutual fund with a LONG track record over a 15-20-30 year period? I DON'T think so LOL.....
How long is long term? Is ten years long term?
The news that the Standard & Poor's 500 stock index returned just 0.06% a year for the 10 years ended June 30 has spurred talk about a "lost decade" for large-cap stocks and has sent financial advisers scrambling to find alternative investment strategies.
The stock market has moved further into negative territory since this article was written.
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Originally Posted by pebble head
.....ACTUALLY "IF" my clients are about to retire we are not 100% in mutual funds and not 100% EXPOSED to the market.
So if they were only 50% exposed to the stock market this means they have only lost about 25% of their investment??????
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Originally Posted by pebble head
.....You get your ROP and call that a return? There is a reason you don't need a securities license to sell a ROP as IT IS NOT CONSIDERED AN INVESTMENT. You are simply getting your own money back over time,......
I am not particularly a fan of ROP but ROP is useful if it motivates people to buy life insurance or to buy more life insurance. No it is not a great return but it is a forced savings and they DO have the death benefit and if they live or die they are better off in the end.
Sure they can go into the market. Don't think I haven't. My first investment was about 6 weeks before the crash of October, 1987. I have a little of the gambler in me and I can tolerate risk but I also have read enough to know that the bullmarket of the 1990's is probably an abberation that will not be repeated. I also know that there were a lot of factors driving the market that we no longer have including easy lending policies driving the housing market and boomers saving for retirement. We know what has happened to the credit markets and boomers are now starting to retire and consume savings.
My point is this, how many years did it take for the market to recover from the crash of 1929? How many years has it taken for the Japanese market to recover from the crash of 1989? The stock market is not a good deal for everyone because it all depends upon time frame and when you get in and get out.
Pebblehead, I use to think just like you do and was a BTID adherent and I thought people like Ramsey and Orman were the berries. All I wanted to be was a broker and I had that opportunity. But that was all the training and thinking I had ever been exposed to. Now I see things in a totally differently light.
Last edited by xrac : 12-26-2008 at 10:18 AM.
Reason: Posts merged
The news that the Standard & Poor's 500 stock index returned just 0.06% a year for the 10 years ended June 30 has spurred talk about a "lost decade" for large-cap stocks and has sent financial advisers scrambling to find alternative investment strategies.
The stock market has moved further into negative territory since this article was written.
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So if they were only 50% exposed to the stock market this means they have only lost about 25% of their investment??????
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I am not particularly a fan of ROP but ROP is useful if it motivates people to buy life insurance or to buy more life insurance. No it is not a great return but it is a forced savings and they DO have the death benefit and if they live or die they are better off in the end.
Sure they can go into the market. Don't think I haven't. My first investment was about 6 weeks before the crash of October, 1987. I have a little of the gambler in me and I can tolerate risk but I also have read enough to know that the bullmarket of the 1990's is probably an abberation that will not be repeated. I also know that there were a lot of factors driving the market that we no longer have including easy lending policies driving the housing market and boomers saving for retirement. We know what has happened to the credit markets and boomers are now starting to retire and consume savings.
My point is this, how many years did it take for the market to recover from the crash of 1929? How many years has it taken for the Japanese market to recover from the crash of 1989? The stock market is not a good deal for everyone because it all depends upon time frame and when you get in and get out.
Pebblehead, I use to think just like you do and was a BTID adherent and I thought people like Ramsey and Orman were the berries. All I wanted to be was a broker and I had that opportunity. But that was all the training and thinking I had ever been exposed to. Now I see things in a totally differently light.
The average Large Company growth stocks averaged about 8% over the last 20 years. There are 20+ mutual funds that have averaged OVER 10% over the last 20 years EVEN with this most serious recession and the 2001 recession. BUT Large Cap is not the end all be all. There are SEVERAL more options out there!
My question to you then is this...Why do you assume a client who will NOT "invest the rest," will keep his ROP term the entire length until he receives his $ back? If LIMRA reports show that ROP terms only last a few more years than regular term policies, hasn't the client just wasted even more money he could have spent on beer?
The average growth stock mutual fund will give you 12% each year over time. I have my 6 &63, so I give my clients the ROP/"invest the rest option." I explain what I feel is the better route to take and why and then let them decide. A lot of agents who aren't securities licensed don't have this luxury and therefore CAN'T offer this option, nor do they know the average % one can get in the mutual fund world having only been in the life insurance side of things. Dave Ramsey is always stating how ROP is a HORRIBLE idea. I happen to think he has good reasons for this AND I also happen to think he knows just about as much or MORE THAN ANYONE on this forum. Just my thoughts...
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There are limits to what each state will guarantee. Here is a link with each states limits and their guarantees... nolhga.com :: Law Summaries
First off, I didn't ASSUME anything. You did. I said that the overwhelming majority won't invest the difference or won't continue it once they started it. Since you seem to want to perpetuate that you know so much about investing, maybe you can answer this....what is the percentage of income producing people that invest outside of their 401K's etc. as compared to those who don't? No, I don't know the answer to that, but I'll be willing to bet money that there are more who don't than those who do.
Secondly, I did not say they would keep the ROP policy the entire time either. Once again you are the one that seems to be assuming here. I could be wrong, but it just seems like you want to justify your own means and that's fine, just don't put words in my mouth. If you and your clients are happy with what you do with them, then fine, great, happy for ya. Go get 'em tiger!
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Since one cannot predict what sector will be "hot" in any given time span, can you provide the name of some balanced mutual funds that have returned 8% over the past 10, 15, and 20 years? If you need to, go ahead and go out to 30 years.
The average Large Company growth stocks averaged about 8% over the last 20 years. There are 20+ mutual funds that have averaged OVER 10% over the last 20 years EVEN with this most serious recession and the 2001 recession. BUT Large Cap is not the end all be all. There are SEVERAL more options out there!
Isn't the S&P 500 basically made up of the 500 largest companies? Wouldn't you be better off buying no-load index funds than buying much more expensive Large Cap Mutuals which have management expenses and loads? Dave Ramsey only believes in buying loaded funds...I wonder why that is?
Hasn't the S&P 500 outperformed almost every single Large Cap Mutual (after all expenses) over any given 10-year period in history?
I know this goes against Dave's "teachings" but isn't it correct?
Re: Why Does ROP Get a Bad Name?
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