Simplicity San Diego Blog

All of the latest and breaking life insurance and annuity news for the independent financial professional. Includes marketing ideas, training events, industry reports, sales ideas and much more.

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Episode #286: Is Your Permanent Life Policy on Track?


 

Think about how different your first car was from the one you drive now. If you’re like most people, you start thinking about how outdated your first car was compared to what is in your driveway or the latest car on the market today. The car industry isn’t alone in all of the advances it has made.

The insurance industry has evolved also, and if you’re still driving your first policy around, you should take a deep look at what’s going on under the hood to ensure that everything is still working for you. After all, it’s much better to keep an eye on the service lights on the dash so you can make repairs rather than breaking down somewhere because you skipped some critical maintenance.

Taking your car to the mechanic for maintenance is like taking your life insurance policy to your financial advisor for assessment, and it’s important to know what exactly to look out for so you can keep an eye on the service lights of your financial vehicle. In this episode of Money Script Monday, Laurence provides four criteria to consider when evaluating the competence of your current life policy.

Resources Provided for This Episode


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Don't Buy (Or Offer) an IUL Until You Read This

Don't Buy (Or Offer) an IUL Until You Read This

In 2022, everything went wrong for investors. With inflation running at 40-year highs and the Fed raising interest rates at its fastest pace ever, the S&P 500 lost almost 20%, which was the worst performance since 2008 when it was down roughly 38%. Historically, bonds perform inversely to the stock market which helps absorb stock market losses in down years within a diversified portfolio.

However, even intermediate-term Treasury Bonds, long considered a safe haven, were down double digits at -10.6%. This was the biggest decline on record dating back to 1926. This prompted articles and debates on whether the long standing 60/40 portfolio was dead or if it is still viable.

While many investors suffered one of the worst loss years in recent memory, Indexed Universal Life sales set a new record last year in 2022 with a total of $2.7 billion in sales, up 10.9% from the previous year. The influx of sales could be attributed to many factors. For instance, investors and retirement savers may be looking for lower risk vehicles to build and distribute wealth. Or they may gravitate towards the potential tax savings IUL (Indexed Universal Life) provides on growth, access, and transfer. Maybe it’s due to the constant 24/7 marketing through social media channels. Nonetheless, IUL sales have continued their upward climb over the years and are no longer a ‘fad product’ in the life insurance marketplace.

When I obtained my life insurance license in 2006 there were mostly only off brand carriers offering IUL with the big players stating they would never get involved. Since then, most of those carriers, including just about all the big names excluding a few career shops, now offer IUL as part of their product portfolio.

So, what changed about IUL sales between the “wild, wild west” days of 2006, and where we are now?

Well, I vividly remember IUL illustrations with 10%+ illustrated rates and variable loan spreads at almost 5% with some carriers. With these assumptions you can make an inferior product not only illustrate well but look better on paper than just about any financial vehicle out there. Luckily for all parties involved, this is not the case anymore.

Since then, there have been 3 rounds of AG-49 attempting to curb illustration abuses and mischievous sales practices. But there is always room to grow, and we can still improve how we provide the proper information to the consumer so they can make an educated decision on if using an IUL to supplement retirement is beneficial for them. The purpose of this article is to examine the issues surrounding the use of an IUL as a retirement supplement, what alternatives are available, and if/when IUL should be considered.

Right Vehicle, Wrong Fit

When coaching clients and advisors, the first question I ask when considering an IUL is, “What is the life insurance need?” The industry focuses so heavily on building and accumulating cash value, while often losing sight of the fact that an IUL is a life insurance product at its core. Clients looking at an IUL policy as a retirement supplement must have some basic need for life insurance first. This could be protecting income while working, debt or mortgage protection or estate planning.

Far too many times I have seen advisors pitch IUL as an alternative to a 401k to clients who are not married, do not have kids, or do not own a home. I have also seen IUL policies put in force for clients who are severely health rated, which adds a significant amount of higher expenses to the policy and makes it much less suitable to use as a retirement supplement.

Additionally, IUL policy expenses are front loaded, making it a poor option for older clients looking for income in a handful of years or so.

Unfortunately, these advisors also fail to mention other tax-free options that may be a better fit, some of which I will expand upon later.

IUL should instead be offered to clients who are healthy, have higher income/net worth, have a need for life insurance, can fund premiums out of cash/bonds or cash flow for a minimum of 5, preferably 10, years, and have a longer time horizon.

Poor Design, Front Loaded Expenses

Assuming the client has the life insurance need, the next step is to ensure the IUL is structured correctly. Far too many times I see advisors ‘target fund’ accumulation IULs to increase their commission at the detriment of their client. You see, the front loaded “per thousand expenses” and surrender charges are based on the initial base death benefit purchased which in turn calculates the target premium (or commission). When using IUL as a retirement supplement it is imperative to structure the policy at maximum efficiency. This entails designing the IUL with the least amount of life insurance the IRS will allow, funding right up to the IRC guidelines, and managing face option switches or reductions when allowable.

Failure to do so can make the IUL one of the worst performing vehicles in a client’s retirement plan.

Designing an IUL at maximum efficiency does not give it an automatic pass as a viable option for a client to consider. Policy expenses from carrier to carrier vary wildly with some carriers offering lower expenses while others are significantly higher. To demonstrate this, I ran illustrations through two different insurance companies offering accumulation IUL with the same client inputs. For this example, I used a 45-year-old male, preferred nontobacco health, $50,000 annual premiums for 10 years, minimum increasing death benefit, switch to level in year 11 with a reduction to the minimum face amount.

  • Carrier A had cumulative expenses through age 85 of $125,028.
  • Carrier B had cumulative expenses through age 85 of $582,820, over 4x higher internal expenses for the same exact scenario.
  • While Carrier B did have other ‘features’ that Carrier A did not have, the fact remains if the underlying index does not perform as illustrated the carrier with the higher fee drag loses.

The Consolidated Appropriations Act of 2021 did provide some relief to IUL expenses by reducing the minimum IRS death benefit required per the level of premium funding. Nonetheless, IUL fees in general are front loaded with both low cost and higher cost carriers. Due to these front-loaded expenses, an IUL purchaser may not even break even on a surrender value (walk away) basis until after policy year 7 or longer, even with a maximum efficient design and lower expense IUL.

IUL Swiss Army Knife, No Alternatives Given

In addition to the IUL design itself, it is essential the IUL is built within a comprehensive, holistic financial plan, instead of looking at the IUL in a vacuum. Recently, I have watched far too many cringy IUL pitches on TikTok or YouTube. These ‘internet famous’ social media advisors seem to focus less on reliable and accurate content but more on sensationalism, views, and likes. I recently watched an advisor call an IUL policy a ‘501k’ in a blatant attempt to misrepresent the product and make it sound like a government approved retirement plan.

Wild claims I’ve seen include: IUL policies will average double-digit returns without any loss or risk, IULs are far better than your 401k, even if you’re getting a match, IULs were previously secrets that only the wealthy were able to obtain, but now available to everyday folks like you and I, IULs will easily beat the stock market in the long run, ditch the old “never put your eggs in one basket” approach and instead put all your eggs in an IUL. The list unfortunately goes on.

The commonality in all these compliance departments’ nightmare sales pitches is the sentiment that the IUL is the ‘magic pill’ that will take you from not having money to a wealthy multimillionaire retired on a yacht that is anchored on your own private island.

But an IUL is not a get-rich quick scheme and should not be portrayed as such.

Also, IUL should never be viewed as an ‘instead of’ vehicle. It should be correctly viewed as an ‘addition to’ vehicle.

Clients seeking tax diversification from taxable and tax-deferred vehicles should instead look at all the tax-free options available to them. Rather than putting all their eggs in an IUL, clients should instead consider Roth IRAs, Backdoor Roth IRAs, Roth 401ks, Roth IRA conversions, and an IUL for the right situation.

For example, if a married couple is younger than 50 and under the Roth IRA income phase out limit, they can contribute a total of $13,000 a year to Roth IRAs. Assuming both spouses also have Roth 401ks at their employers they can contribute another $45,000 between the two. That is $58,000 annually this hypothetical couple can stock away into tax-free vehicles. Additionally, they may have a down income year for any given reason, which could open the opportunity for Roth IRA conversions if they have enough cash or cash flow to pay the taxes.

For higher income or net worth clients who have maxed out the above tax-free sources, the IUL provides that ‘next best’ alternative for tax-free planning. Of course, assuming the IUL is set up with a highly rated carrier who has a strong track record of renewal rate integrity, done so for the right person, and designed correctly with a lower expense carrier.

Under Promise, Over Deliver

Lastly, something we have not yet touched is the idea to ‘under promise and over deliver.’ The current NAIC illustration model projects IUL values and loan arbitrage with constant and level returns. The reality is clients will get 0% returns in bad years, causing their cash value to go backwards if they do not pay premiums. Or they may get potentially double-digit returns in good years. And of course, everything in between.

Rather than illustrating the maximum client benefits that the insurance carrier software can provide, we instead recommend dialing down the assumptions. This could be through reducing the illustrated rate, reducing the illustrated income or a combination of the two.

While this may make your IUL illustration less competitive when compared to other advisor ran projections, remember it is NOT ABOUT THE ILLUSTRATION. Instead, it is more about creating realistic expectations with the potential to exceed them in the long run.

While we can’t guarantee performance, one thing I can guarantee is you will actually make more sales, have more satisfied clients, and get more referrals if you under promise and over deliver.

Summary

With the rockiness we have seen in the stock market, the potential for an upcoming recession, the national debt crisis, and the Tax Cuts and Jobs Act sunsetting in 2026, IUL is positioned well for a continued rise in sales. My word of caution, however, is to make sure we continue to build the IUL industry the right way. This involves using IUL the right way for the right person. That includes selecting an appropriate IUL carrier emphasizing actual client performance and policy expenses, utilizing IUL as a part of a complete and holistic financial plan involving other tax-free vehicles, and providing realistic expectations and a clear explanation of benefits.

Contact LifePro Today!

If you are looking for a partner who cares about your clients as much as you do, please reach out to LifePro Financial Services at 888-543-3776. We are a premier IMO located in San Diego, CA that has been in business since 1986 and originally founded by William Zimmerman.

Our focus is getting advisors in front of the right prospects through our proprietary digital marketing systems while offering industry best-case design and reporting, professional back-office support, and competitive compensation with incentives.

This material is intended for educational purposes only and is not intended to serve as the basis for any purchasing decision. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. The hypothetical example is shown for illustrative purposes only and is not guaranteed. The characters in this example are fictional only. Your actual experience will vary. Policy loans and withdrawals will reduce available cash values and death benefits and may cause the policy to lapse or affect any guarantees against lapse. Remember to consider your client's individual circumstances and objectives when discussing their specific situation. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Withdrawals are generally income tax-free, unless the withdrawal amount exceeds the amount of premium paid. Tax laws are subject to change. Clients should consult their tax professional. Investment advisory and financial planning services offered through LifePro Asset Management, an SEC Registered Investment Advisor. Registration does not imply a certain level of skill or training. Investments involve risk.

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Episode #285: Spender, Saver, and Wealth Creator


 

Everyone’s financial journey has to start somewhere before reaching their financial goals. While these goals vary from case to case, there are three different approaches or mindsets which a person aligns with while progressing toward that financial goal. However, people typically only consider two of the three approaches to financial planning; the spender and the saver. The overlooked approach of the wealth creator is critical to those whose financial goals involve a higher level of financial independence, freedom, and growth.

If a spender's approach to finances entails living off of credit and consistently being in debt, then the saver stays on the zero line since they save and spend the same amount for capital purchases. The spender exists in a state of debt, and the saver narrowly avoids it by breaking even. On the other hand, the wealth creator exists above zero and gradually increases away from it by strategically utilizing advantageous financial vehicles to achieve their goals.

In this episode of Money Script Monday, Sal highlights the overlooked wealth creator approach to finances that actively works towards growth accumulation rather than debt avoidance.

Resources Provided for This Episode


Want consumer-friendly videos sent to your inbox every week? Sign up to receive to receive LifePro's weekly Money Script Monday video series providing financial clarity, dispelling myths, and showing you how money works in 10 minutes (or less). Subscribe now!

Have any questions? Give us a call at 888-LIFEPRO or email us at info@lifepro.com.

Want to learn more about how we can help with your unique financial situation? Fill in your contact information below, and we'll get started right away!

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Episode #284: Is it Time to Upgrade Your Variable Annuity Policy?


 

In the world of finance, especially in light of market downturns or crashes, you may notice the phrases “flight to safety” or “flight to quality” being used more frequently. But what does it mean, and when do financial professionals advise and encourage clients to board that plane?

The “flight to safety” refers to the movement of capital from riskier investments to safer investment alternatives during times of market volatility or economic uncertainty. One method that aligns with this strategy is exchanging a variable annuity policy for a fixed indexed annuity policy to accomplish the same goal of wealth generation and lifetime income but without the risk of capital loss.

In this episode of Money Script Monday, Kyle calls attention to a tremendous opportunity for variable annuity policy owners who are looking to maximize long-term income.

Resources Provided for This Episode


Want consumer-friendly videos sent to your inbox every week? Sign up to receive to receive LifePro's weekly Money Script Monday video series providing financial clarity, dispelling myths, and showing you how money works in 10 minutes (or less). Subscribe now!

Have any questions? Give us a call at 888-LIFEPRO or email us at info@lifepro.com.

Want to learn more about how we can help with your unique financial situation? Fill in your contact information below, and we'll get started right away!

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How To Create Your Own Private Reserve Wealth Strategy

How To Create Your Own Private Reserve Wealth Strategy

Laurence Williams Highlighted in Broker World Magazine

Business owners have long been considered by most to be the lifeblood of the American economy. They are what drive our economic growth. Successful business owners really embody three traits:

  • Business owners value the importance of protecting their assets.
  • Business owners value the importance of mitigating tax exposure and paying unnecessary taxes.
  • Business owners understand and value the importance of having access and use to liquidity and capital.

The good news is, although not every one of us may be a business owner we all have access to these principles and strategies within our own portfolio to create our own private reserves of wealth. One just so happens to be properly structured cash-value life insurance.

Properly structured cash-value life insurance, when leveraged as your own private reserve strategy, can allow you the ability to make major purchases for big events in your life. It can also allow clients to have access to that cash if needed for unforeseen circumstances. Lastly, it allows clients to have access to position this as supplemental retirement income.

Now, one may ask, “What is needed for this strategy? Or is this a strategy for me?”

The first requirement is the need for life insurance. The second is that you must value the importance of financial protection. There are several benefits of owning a cash-value life insurance plan for your private reserve of wealth. The chart shows of the most common uses.

But what does it look like in action? We’re going to look at a client here by the name of Tom.

  • Tom is 35 years old.
  • He’s in great health.
  • He’s married with two young children.
  • Tom maxes out his contributions to his Roth IRA and 401(k) up to the four percent match.

Tom also understands that his 401(k) cannot be accessed until he is 59 1/2 and there could be times in his life that he may need access to capital right away. So, Tom decides to purchase a properly structured indexed universal life (IUL) policy.

A properly structured indexed universal life policy allows the contributions to grow on a tax deferred basis, while allowing clients to access that cash on a tax-free basis. If a client were to pass away prematurely, the beneficiaries will have access to the death benefit tax-free.

To view the full article, please click here: View Article in Broker World Magazine »

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Episode #283: How to Keep More Money with Live Events


 

This post is intended for financial professional use only.

In just three short years, the annuity market grew 37% and last year we set a chart-topping record of $285 billion of premium as an industry. This is great news for the industry since it’s a wonderful opportunity for advisors to grow their business and increase their income. But when it comes to hosting the events which drive that growth, are advisors actually profiting from the increase in production?

Once the various expenses involved in that production are factored in, these increases could be meaningless if the income that advisors work to produce don’t actually find their way back to them. Financial advisors know all too well that if someone is making more money, it does not necessarily mean they are able to keep those profits themselves.

In this episode of Money Script Monday, Adam provides a new framework for hosting live events that prioritizes the financial advisor so they can keep more of what they make.

Resources Provided for This Episode


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Episode #282: Accumulation vs Guaranteed Lifetime Income


 

Do you know the differences between the accumulation-focused strategy and the guaranteed lifetime income strategy? When it comes to retirement, it is common to feel overwhelmed by all of the options out there. By familiarizing yourself with the different strategies at your disposal and the outcomes of them, you can build your retirement plans to better align with your future goals.

As you consider your financial strategy for retirement, it is helpful to keep important facets of your options in mind such as the role that market conditions play in your account value, the rate of returns, the guarantees, and more depending on your unique situation and goals.

In this episode of Money Script Monday, Michael explores the growth rates, liquidity levels, and accumulation values of two common financial strategies for retirement and provides an example case to illustrate their respective outcomes.

Resources Provided for This Episode


Want consumer-friendly videos sent to your inbox every week? Sign up to receive to receive LifePro's weekly Money Script Monday video series providing financial clarity, dispelling myths, and showing you how money works in 10 minutes (or less). Subscribe now!

Have any questions? Give us a call at 888-LIFEPRO or email us at info@lifepro.com.

Want to learn more about how we can help with your unique financial situation? Fill in your contact information below, and we'll get started right away!



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Episode #281: The Truth Behind the Cost of an IUL


 

Are you looking to pay less taxes or even produce more tax-free income for your retirement? Or are you looking for a complete holistic financial plan that can create more wealth for your family in the future? Why not both?

There’s a lot of options out there and it could feel overwhelming at times trying to look around for the best long term strategies to protect and preserve you and your loved ones’ financial futures. In some instances, looking at an plans independently doesn’t do much for demonstrating how well it functions compared to other options you might be considering.

By diving into the IUL expense ratio, IUL expenses versus alternatives, and an IUL’s net rate of return all within the context of alternatives, it becomes more clear why an IUL could be your best strategy for your financial plan.

In this episode of Money Script Monday, Brian presents a case study to exemplify how an IUL could produce more returns than alternative vehicles, even with the same funding.

Resources Provided for This Episode


Want consumer-friendly videos sent to your inbox every week? Sign up to receive to receive LifePro's weekly Money Script Monday video series providing financial clarity, dispelling myths, and showing you how money works in 10 minutes (or less). Subscribe now!

Have any questions? Give us a call at 888-LIFEPRO or email us at info@lifepro.com.

Want to learn more about how we can help with your unique financial situation? Fill in your contact information below, and we'll get started right away!



Advisory Services offered through LifePro Asset Management, LLC. The information presented here is not specific to any individual's personal circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.

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Episode #280: 6 Steps to Increase Webinar and Seminar Conversions


 

This post is intended for financial professional use only.

Have you hosted, or are interested in hosting, a seminar or webinar with the goal of gaining more clients? If so, you should make sure that you familiarize yourself not just with your presentation, but all of the other parts of this process that can alter the outcome of your event.

There’s so many key parts to making sure that your webinar or seminar is effective but it can also be a lot of work. This is exactly why there are so many great automated options out there to maximize your efficiency, and why we designed our own to streamline our partners’ businesses.

In this episode of Money Script Monday, Allee draws on her knowledge from running thousands of marketing campaigns for financial advisors to highlight key ways that can help increase the success of your events.

Resources Provided for This Episode


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Episode #279: Why Insurance Companies Can Be a Safer Alternative to Banks


 

Do you ever wonder why we hear about banks failing during financial crises but rarely, if ever, do we see a headline about an insurance company failing? It’s because the assets that are in the reserves of the banking system are utilized very differently than the assets within the reserves of an insurance company. Since they function differently, they also have different safety nets and procedures in place that can affect their ability to protect consumers.

In this episode of Money Script Monday, Kevin juxtaposes banks and insurance companies to unveil the operative functions and safeties that contribute to banks being riskier than insurance companies.

Resources Provided for This Episode


Want consumer-friendly videos sent to your inbox every week? Sign up to receive to receive LifePro's weekly Money Script Monday video series providing financial clarity, dispelling myths, and showing you how money works in 10 minutes (or less). Subscribe now!

Have any questions? Give us a call at 888-LIFEPRO or email us at info@lifepro.com.

Want to learn more about how we can help with your unique financial situation? Fill in your contact information below, and we'll get started right away!



Advisory Services offered through LifePro Asset Management, LLC. The information presented here is not specific to any individual's personal circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.