Today we’re discussing the other “i” word–illustration. We are diving into how illustrations are manipulated to sell the sizzle and not so much about focusing on the substance.
It seems that far too many of the people working in the marketing department feel that they need to really “push the envelope” in terms of illustrating projected product performance. In other words, they like to distort reality to make their products seem a bit more attractive than they would otherwise be.
This is particularly true when it comes to variable and indexed products as it is somewhat easier to inflate things based on using unrealistic returns on the investment sub-accounts and/or indexed accounts.
We have seen illustrations that used static returns of 8-12% depending on the product and when we saw them as the “standards” of what is allowed have changed over the last few years.
There really is no academic argument as to why anything should be illustrated at rates this high, however, someone in marketing decided that it makes their product look really nice when shown these sorts of rates and that will convince people to buy.
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We’ve talked about a lot of scary financial concepts on the Insurance Pro Blog in the past and it seems as though few economic topics strike more fear in the hearts of Americans than unrelenting ‘i’ word. We are, of course, talking about inflation.
But what is this seemingly cryptic topic all about and why is it so frightening? Further, is it really the harbinger of death for our economy—or at least your personal financial life—so many others have suggested?
Today we are discussing one of our favorite financial products…the 401k. We really wish you could see the red hot glow of the sarcasm light in our studio.
If you’ve been listening to the Financial Procast for any length of time, you will surely be familiar with our disdain for the 401k. It’s not necessarily that we think the product or idea is bad, we just think there’s been way too much emphasis placed on it as a tool to solve the retirement income woes of America.
Those who think the 401k will save them from the meow mix diet during retirement are surely destined to be disappointed. We have witnessed firsthand the problems that are created by having too much of your liquid net-worth invested in qualified plans of any kind.
The Certified Financial Planner designation stands as a testament of one’s dedication to excellence and superiority in the world of financial planning. Or at least that’s what the CFP Board and the designees want you to believe. And they’ve done a good job convincing the world that CFP® holders are the wise wizards of the retail financial services industry.
Our personal experience, however, hasn’t quite match up with the marketing machine’s hype…
Bad whole life insurance, the stuff that isn’t designed the way we suggest it should be, sometimes catches fire for its so-called poor returns. Those with something to sell you that isn’t life insurance (i.e. that competes for those dollars) like to focus on fees and talk about how terrible the product is. And in recent years, historical whole life insurance cash value performance reports from places like the now defunct Blease Research were used to try and claim that returns were mediocre and illustrations always overstated the performance of the policies.
But prior to the peak in interest rates seen in the late 80’s/early 90’s whole life projections often understated the performance of the product. And when we go back beyond this point and look at a policy put in force several years prior, we see dramatically different returns. This is potentially really good news for the life insurance industry and its ability to deliver competitive returns on its products relative to the entire selection of financial products.
Well the Dow was at 17,000, but this week certainly hasn’t been very generous to American equities. Ignoring that ugly truth for a minute, we wanted to take a minute to look at last week’s awesome new highs and discuss what it really means for the real return of the stock market.
When it comes to Gen X and Retirement all is not well with the MTV Generation. But this despair doesn’t seem to be rooted in a systemic lack of effort—one of the core flaws often noted by its preceding generation—rather it originates from a demoralizing late-in-life shift in world view coupled with a struggle to gain attention among the institutions that most likely hold the answers to Gen X’s path to retirement prosperity.
Or perhaps it’s just a hold over of that 90’s Curt Cobain and Fiona Apple everything sucks and everyone is awful mentality with which a lot of them entered into adult hood augmented by their having to witness the breakdown of the US economy right before most of them truly got to ride the gravy train.
“We want to let everyone know that life insurance is like that guy on the TV selling his little oven thingy…you just set it and forget it!”
That was the utterance of a Friday morning sales meeting I once labored through when I was a relatively new agent at one of the big mutuals. The attempt was to equip the newest agents with the confidence to convince their family and friends (i.e. their project 200) that this life insurance stuff was pretty cool.
I’m the only one who was in the room who still happens to be in the business, and I’ve never channeled Ron Popeil when it came to explaining life insurance, so I’m not all that sure it was a successful tactic, but I digress.
Sadly, this also wasn’t only time I’ve witnessed this allusion in an attempt to persuade an unwitting prospect to buy life insurance.
Recent announcements have surfaced saying that both Amazon and Google are kicking around the idea to sell life insurance. Are we worried that this going to bring some stiff competition to the life insurance market? Do agents (like us) have to worry?
We think not.
They both will focus on selling term life insurance policies and previous online ventures to the life insurance market has shown that people spending small amounts of money on a policy are just fine purchasing this way.
And perhaps this is how that particular segment of the market can be best served?
In this episode of the Financial Procast we’re discussing the tendency that some people have to obsess over details of a financial product purchase that don’t really matter. At the end of the day, the only thing that matters is how much benefit you derive from the product that you purchase.
All the stuff that happens in between is semantics and a whole lotta fluff meant to confuse and distract you from focusing on the end result.
This is a problem that plagues consumers and agents in our business. In other words, it’s not just a consumer problem.
Sometimes agents get overly obsessed with details that just don’t matter and lose sight of the big picture which should always be to deliver the best end result to their client.