The Financial Procast

Why do otherwise intelligent financial advisors and agents do dumb things?  Not sure if we really know the answer to that one but we're taking a stab at it today. Contrary to what many in the media will say, we don't really believe that most of the bad things that are done by advisors are ... Keep Reading

Today we are going to get into a bit more detail as to why the proper design of a cash value life insurance policy is so crucial.  And we are going to give you some examples that there are numerous ways to design life insurance. If everyone would just listen to us, they'd have more ... Keep Reading

There are many times in our experience in the life insurance and financial services industry where people do all or a majority of their planning with this idea that things will be different 10 years from now. More to the point–my financial picture will look much different than it does today. In other words, that ... Keep Reading

Well, better late than never I guess.  Sunday is the new Thursday anyway...right? It would seem  that once again it pays quite well to be in the life insurance industry.  Earnings for the industry have been steadily climbing upward for the last two years. The Numbers Now, for those of you who are not yet convinced that life insurance is this super-stable, awesome income generating entity...we have some numbers to share with you that may change your mind.   In 2011, statutory earning were $15,5 billion.  Well, the numbers are in for 2013...44.4 billion. That's wee bit of growth don't you think. For an industry that is managed so conservatively, hockey stick growth curves indicate an unbelievable demand for life insurance products.  If you can't tell, we are impressed. The 2011 surplus (money that life insurers have but they don't need right now) $333.5 billion, that number in 2013 $370 billion. That's money the industry is sitting on. In effect, a really large "rainy day" fund. New Sales For the past couple of years the trend line for new policy count has been basically flat.  That's interesting considering that growth in earning. So, that begs the question--why are earnings going up despite a relatively flat line on new policy growth? Well, it has to do with the mechanics of a life insurance policy and the costs associated with issuing them.  Life insurance becomes much more profitable over the long-term much like their policyholders do.  There a great deal of cost involved in issuing a new policy but as time passes there are much less costs for the insurance company which causes earnings to rise. The life insurance industry is incredibly stable and looking at a company over the short term will not create a fair picture of its profitability. In fact, most times we see company beginning to ramp its production of new policies/premium, there will be  dip in profitability. Just like any other business, the life insurance industry has a cost associated with acquiring new business. In this case, it may cost them more to obtain a new policy than the premium the take in. But there is a silver lining... Most of that premium stays on the books in year 2 and most of the cost has gone away.  Profitability follows that path of keeping premium on the books and keeping the costs associated with premium low.        

Well, better late than never I guess.  Sunday is the new Thursday anyway…right? It would seem  that once again it pays quite well to be in the life insurance industry.  Earnings for the industry have been steadily climbing upward for the last two years. The Numbers Now, for those of you who are not yet ... Keep Reading

Today's Financial Pro Cast discusses the logistics of a one stop all knowing advisor who can handle all aspects of your financial lives. Additional Post will go live tomorrow. Today's Financial Pro Cast discusses the logistics of a one stop all knowing advisor who can handle all aspects of your financial lives. Additional Post will ... Keep Reading

Today's Financial Pro Cast discusses the logistics of a one stop all knowing advisor who can handle all aspects of your financial lives. Additional Post will go live tomorrow.

Today we discuss 2013 annuity sales results. There were a few surprises out of this data, and some interesting observations when compared to last year. Jackson National Life Takes Top Spot Jackson National Life tops the list for 2013 for total annuity sales combining both variable and fixed product lines. They did not top the list for fixed annuities, but their very impressive variable annuity sales and strong fixed sales placed the American appendage of Prudential, PLC about $5.7 billion above #2 finisher American International Group. Variable Annuity Market Shakeup While Jackson remains at the top of the list, two other common list toppers from years past, Prudential Financial and MetLife, have slid considerably down the list placing fourth and fifth respectively. And what's more notable about this shift down the list is the fact that both carriers took in about half the amount of premium dollars they did in 2012. New York Life Dominates the Fixed Annuity List Bringing in about $500 million dollars more than the second highest fixed annuity performer, New York Life placed first in sales for fixed annuities. These results are driven by New York Life's strong single premium deferred annuity and deferred income annuity products as well as their superlative financial position within the industry. Second place finisher Allianz has been a long time top performer as well and competes mostly in the indexed annuity space, a marketplace quite a bit different than New York Life's focus. Continuing the raised eyebrows the relative no-name Security Benefit Life took the number three spot (hooray for Guggenheim!)--finishing just about $6.6 million behind Allianz. You can read more details on where everyone finished at Life Health Pro.

Today we discuss 2013 annuity sales results. There were a few surprises out of this data, and some interesting observations when compared to last year. Jackson National Life Takes Top Spot Jackson National Life tops the list for 2013 for total annuity sales combining both variable and fixed product lines. They did not top the ... Keep Reading

Cash value life insurance is not really like a shirt sitting on the rack at Macy’s, but instead a stock piece of clothing at your favorite clothier. Sounds a tad strange, but here’s my point. Life insurance is a very customizable product. I can tweak a lot of aspects to life insurance (any kind really) ... Keep Reading

Cash value life insurance is not really like a shirt sitting on the rack at Macy’s, but instead a stock piece of clothing at your favorite clothier. Sounds a tad strange, but here’s my point. Life insurance is a very customizable product. I can tweak a lot of aspects to life insurance (any kind really) to make it do certain things better or worse. This is one of the many things that makes like insurance such an incredible financial tool. But many people would rather pretend that life insurance is an “off the rack” product that can only be implemented in a very narrow band of options. Nothing, thankfully, could be further from the truth. So What do You Do? I’ve never looked at what I do as a particularly complicated job. I’m an expert at designing life insurance policies. And more specifically, I’m an expert at designing cash value policies to optimize the cash value performance for accumulating wealth (spendable cash) or retirement income through a life insurance policy. There are those who would suggest that life insurance is a bad product for this purpose. They’ve never had the opportunity to truly look at what I can accomplish with the product. And my mastery of the product comes with years of picking through policy specifics and learning the intricate details of policy construction as well as regulatory guidelines that qualify life insurance as life insurance. In my eyes, this sort of preparation comes with the territory. If you want to be a master of what you do, there is no substitute for mastery knowledge of the things that are chiefly involved in what you do everyday. The Life Insurance Reserve The reserve is a quintessential element to cash value life insurance. We covered this a while ago. And the really important thing to keep in mind about the reserving process is that it’s designed accumulate a pretty impressive amount of money over time. Further, though, it can be tweaked, massaged, manipulated, etc. to further take advantage of what it’s supposed to accomplish. Put very simply, when you give a life insurer money, they take the money and seek out a certain investment return goal with that money. They don’t have the ability to discriminate against the type of money that they receive, so if you give them more money than you otherwise have to, they’ll take all of that money and place it in the same “account” seeking the same return that you’d get on the money you have to give them. However there’s a bonus. All of this extra money, is free of any excessive fees about which some people criticize life insurance. The goal then simply becomes how to minimize, as much as possible, the portion of your outlay that goes to expense riddled life insurance an maximize the amount going to extra cash that is 100% discretionary and unburdened by high fees. It’s as simple as that, totally doable, and entirely legal. But Why Doesn’t Everyone Do This? I used to think they did, or at least could. But it turns out you have to spend a little extra time developing your life insurance skills and knowledge to design life insurance this way. Further complicating the process is that fact that every life insurer does things a little differently. So it becomes tricky to know exactly how each insurer goes about allowing you to design life insurance in the way I’m suggesting. If they allow it at all…some don’t or at least they make it incredibly difficult. There’s also the compensation aspect to this. Designing policies in a way that mitigates expenses has an obvious effect on commissions that are paid to the agent (they go down a lot). I grew up in the corporate owned life insurance world so products that were designed by default to deliver higher cash while sacrificing expenses and therefore commissions were sort of an always understood design for me. Simply put, you don’t place money into a life insurance contract with the intention of accumulating cash with it, if the policy isn’t designed to minimize expenses.

We’ve long held indexed universal life insurance assumed credited interest rates at 6% across the board. And we’ve long been criticized for the practice. The problem, that others came to us with, was the fact that carriers have different cap rates, and those different cap rates do cause the overall overage credited interest rate to ... Keep Reading

We’ve long held indexed universal life insurance assumed credited interest rates at 6% across the board. And we’ve long been criticized for the practice. The problem, that others came to us with, was the fact that carriers have different cap rates, and...

Buy term and invest the difference has long been the mantra of investment salesman(women) and Primerica built an entire company around the idea. The premise behind the concept has always been that one could achieve a greater return with “investments”  vs. traditional whole life insurance and it’s cash surrender value build up. For the investment ... Keep Reading

Buy term and invest the difference has long been the mantra of investment salesman(women) and Primerica built an entire company around the idea. The premise behind the concept has always been that one could achieve a greater return with "investments"  vs. traditional whole life insurance and it’s cash surrender value build up. For the investment industry, this was a way to take premium dollars away from the life insurance industry and redirect it into investment accounts. For Primerica, this was a way to replace current life insurance contracts with term insurance juxtapose on the cost today of achieving a given death benefit. Other financial talking heads have jumped on the buy term and invest the different bandwagon, mostly because they know it draws a lot of attention from life insurance agents who want to argue the point—and few things draw more attention to you than a fight. As insurance brokers/agents, one would anticipate that we’d very much dislike the notion of buy term and invest the difference, but one would be wrong to make that assumption. What is an Investment? Here’s the definition of investment as it appears at dictionary.com. Notice the underlying theme behind all three iterations of the definition. The commitment to some “thing” under the assumption that later in the future it will be worth more than it was originally. Buy term and invest the difference is less about investing the difference in cost between whole life insurance and term insurance and more about taking that difference and buying mutual funds (mostly, maybe stocks in some cases). But mutual funds are not the only investment that exists in the world. Before we go down that road, let’s stop for a moment to talk about something else. Term Life Insurance is a more Efficient way to Buy Death Benefit The foundational claim behind A. L. Williams and later Primerica was that term life insurance was a more efficient way to purchase death benefit. And in the short term, they are correct. There’s no arguing that from year one, there is far less outlay that would be needed to achieve a given level of death benefit on any individual vs. whole life insurance (and universal life insurance). There should never be any confusion about this among our industry. From time to time we will have people ask us how they should go about getting the death benefit coverage they need while not having the premium they are placing into a contract be enough if we design it to maximize cash value. Our answer has always been the same: buy stand alone term insurance. We’re not all that interested in ruining a perfectly good life insurance contract, designed to optimize cash value, because someone wanted/needed more death benefit for a period of years while they were working or whatever other obligation existed that forced them to need the additional protection. And making this suggestion does not nullify the fact that whole life insurance and universal life insurance can be phenomenal savings plans. We could even argue…investments (see the definition above, it fits). In fact, I’d argue that it’s the confusion many agents like to make about this, that leaves a lot of consumers in a really bad situation, with a sub-optimal product for both cash value accumulation and death benefit goals. One Product will not Cure all your Woes As much as we might want to try and convince ourselves otherwise, the life insurance industry has yet to manufacture a product that fixes all of our problems better than any other product. Instead, most problems require a focus on (and therefore purchase of) more than one product. So if you’ve discovered that cash value life insurance is a wonderful tool for wealth accumulation, retirement income, education funding, etc. we’d strongly argue that you purchase your product with the intention to maximize that feature. Trying to wrap everything up into one product will do you no favors,