July 20, 2017

IPB 075: Stay for the 401k?

In episode 75, our discussion revolves around a suggestion that comes from this article over at Fox Business. In particular, the article points out that many larger and well-known employers are aggressively raising their matching contributions for their employees in the company 401k plan.

The article goes on to suggest that companies believe this is an effective means of retaining talent and helping workers accumulate enough money to retire–making way for younger employees.

We think that all sounds great. More money from the company you work for toward your retirement is generally a good thing.

But…do people really stay with a company because of the matching contribution in the 401k? Not likely.

We've both been in the business of talking personal finances with people for a number of years and never heard anyone mention their sweet 401k as a reason they stayed at a job. The best retention tool seems to be actually paying people more.

 

July 6, 2017

IPB 074: Whole Life Insurance Litigation

 

Recent settlements have been reached between policyholders and a couple of mutual life insurance companies. Turns out an obscure bit of insurance regulation from 100 years ago might get you an extra $22 that you weren't expecting.

We've been asked a few times about these lawsuits over dividend underpayment, so we'd share our perspective on the issue in episode 74.

June 29, 2017

IPB 073: Don’t Worry About the Economy…We Got This

 

Recent comments from Fed Chairman, Janet Yellen, indicate that she thinks we'll never see another financial crisis like we saw in 2008. She's probably right but is that really a profound observation?

June 22, 2017

IPB 072: How Do You Define “Best Interest”?

 

Well, the day of reckoning has come and gone. The new Department of Labor's new Fiduciary Rule is largely in effect across the financial services industry.

Discussion over the rule and its implications have been debated over the last couple of years with a fair degree of intensity. Still it seems that the smoke screen has worked.

The new rule expands the definition of a fiduciary as it relates to giving investment advice regarding retirement accounts.

We're not trying to explain the rule in today's episode…as far as I can tell from attending several informational webinars/meetings regarding the implications of the rule there's no agreement or real understanding of what it means for advisers.

Big surprise, right?

We aren't all that concerned with procedural issues (disclosures, paperwork etc.) as much as we're concerned about how this new rule warps the definition of “best interest” and what it really means to act in the capacity of a fiduciary.

Our issue isn't really about a rule change, that's just what's visible. What's more troubling is that policymakers are attempting to fix a perceived problem that they don't really understand. A new rule will not fix the problem.

According to information published by the Insurance Research Council, almost 13% of all automobile accidents in the U.S. are caused by people who have no insurance. Yet, it's illegal to drive without insurance in almost every state.

I got some breaking news for you…some people do bad things and writing new rules won't change it.

The new rule implies that what's in your client's best interest has an absolute right or wrong. And before you think it…yes, fraud is always wrong.

But…what's in my clients best interest is highly subjective and that has not changed–rule or no rule.

June 8, 2017

IPB 071: Nationwide Sued for Increasing Cost of Insurance

How premiums flow with universal life insurance

 

Are increasing COI charges really a problem with universal life insurance? Or could it be that competence in understanding policy design (from the outset) and management is actually more important?

Today we're discussing an ongoing lawsuit between a family and Nationwide regarding a couple of variable universal life policies that are owned by an ILIT (irrevocable life insurance trust).

June 1, 2017

IPB 070: Question and Answer-Round 2

Episode 70 marks only our second FAQ episode since we started the Insurance Pro Blog Podcast. But it proves that we do indeed love the questions that we get from our audience, so keep'em coming our way. We'll do our best to get to them in our upcoming Q&A episodes.

We were planning to answer three questions today. Alas, our attempts at brevity fell short and so we only answered two questions.

Here's what we tackled in episode 70:

1. Is the waiver of premium rider worth the cost and what does it really do for you if you become disabled?

and

2. How do you distinguish a “good advisor” from all the rest? The financial services industry views an advisor/agent/producer as top notch if they generate more revenue than everyone else. But…is that the metric you (the client) should be using?

And seriously, keep the questions coming our way, we may address your questions in a future broadcast or mash them up with other questions if we believe it provides a better context for understanding.

May 18, 2017

IPB 069: Look Harder Before You LEAP

 

Today's episode revolves around a discussion of the LEAP system and how it contributed to the revocation of an insurance agent's license.

An agent in Ohio had his insurance license revoked after using the LEAP system to sell life insurance as an investment. Now, this happened back in April 2016, so I wouldn't consider it breaking news, however, it's still a discussion worth having.

At the core of our episode…is LEAP the real problem (as depicted) or did the agent lose his license because the policies he sold were structured incorrectly?

The headlines and structure of the case documents themselves would lead you to believe that LEAP is the core of the problem but we're not so sure about that. You have to read between the lines on this one and look harder at the actual numbers revealed in the case to reverse engineer what REALLY happened.

Download the document from the Ohio Department of Insurance

Please note: This episode is not intended to disparage the use of LEAP or any other methodology for selling life insurance. We believe the actual problem in this case is that the former agent represented the life insurance as functioning one way and delivered something completely different.

In fact, if you want to better understand how this sort of thing actually happens, I encourage you to read a piece we published several years ago, The Third Dimension of Cash Value Life Insurance. It will shed some light on how this sort of thing happens.

May 11, 2017

IPB 068: Unsinkable Whole Life Insurance

 

We often hear stories of sorrow regarding evil life insurance companies.

Stories that depict how a person paid thousands of dollars in premium only to have the insurance company steal all their cash and cancel their coverage.

But does it really happen that way?

Anything is possible I suppose, however, when we took a look at a couple of whole life insurance policies that have not been paid as planned over the years we discovered something a bit different.

Turns out that participating whole life is indeed a special product that can “limp” along for years while the client pays a fraction of what was the initial planned premium.

Hmmm…that doesn't align with the stories of woe we see the media reporting, in fact, its pretty amazing.

But how and why does it work that way?

Listen to find out.

 

 

May 4, 2017

IPB 067: Should You Use Life Insurance to Diversify Your Retirement Income?

 

How could life insurance fit into your overall retirement income plan? That's what episode 67 is all about. For most people going forward, relying on pensions to form a stable foundation for their retirement will not be an option.

That means that most will be faced with two income sources:

  1. Social Security
  2. Income generated from investment portfolio (stocks, bonds, mutual funds, ETFs, real estate etc.)

Some have suggested that if you just follow the 4% rule everything will work out fine. We believe that's way oversimplified and fails to take into account the substantial risk posed by having significant drawdowns in your portfolio during the early years of your retirement.

Why not be a bit more selective in how you choose to take income and perhaps consider using cash value life insurance as a foundational component of the strategy?

April 27, 2017

IPB 066: Life Insurance Design Q&A

 

It's been a while since we've done any sort of FAQ episode. So, today we remedy that with three of the most commonly asked questions we get about life insurance policy design when seeking cash accumulation as your primary goal.

We answer the following questions:

  1. What is the 7 pay test and is it okay to fund my policy right up to the limit?
  2. If my policy illustration shows that my policy becomes a MEC in 52 years (for example) should I be worried when I'm only planning to fund it for 15 years?
  3. What's the worse case scenario if for some unknown reason I can't pay my premium in any given year? Does this ruin everything?
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