Are These Marketing Pieces Really Telling the Whole Story?
When carriers distribute competitor literature showing how their product performs better than other carriers be sure to understand the full story before deciding which carrier is the best design strategy for your client and their goals.
As an example, when United of Omaha recently provided a competitor piece for PRODUCERS ONLY titled “IUL and its Competitors”, I became concerned with the numbers in red because we promote and pride ourselves on the extensive due diligence process we undergo of carrier choices before we include them in our client’s design work. We want to be as confident as possible we are offering companies and products whom have a history of treating all their customers fairly while still being competitive within the market.
When researching the results presented on this competitor piece I found that there are some missing details in the story….
1) The products being compared are accumulation products – we at BDLife212° take this to mean the products are designed to provide the greatest accumulation values to offer future tax-free distributions, right?
2) When we equalize target premiums between a couple of the carriers being compared and solve for the maximum distributions while keeping the same death benefit values at age 120, why are we able to receive more income from the carrier highlighted in red?
3) We then dug a little deeper and when comparing loan charges and credits between a carrier in black with a carrier in red, we found the carrier in red offered a much lower net loan charge resulting in a greater tax-free distribution to the client. This is an important factor to consider if your client’s objective is to access that accumulation at some future time for tax-free income.
4) We suggest when comparing products against each other to not only focus on the charges but to also consider the following features:
a. Policy Design Goal?
Death benefit, guarantees, accumulation for tax free income, surrender charges and rider features. All these could cause the product to perform differently depending on the goal being achieved.
b. Target Premium: The target premium can have a significant impact upon of comparative performance.
Equalizing the target premium will provide a clearer view and impact of cost of insurance charges, policy features, interest rates, and other charges and credits
c. Consider all the charges and credits in the policy and determine which ones are most important to the design goal; i.e. some policies are priced with front end load, others with higher mortality charges. The amount and timing of charges impact performance,
Policies with greater surrender charges may create challenges when considering flexibility in the product.
Policies with greater loan expenses may create lower distributions than carriers with higher loan expenses
Carriers that have a track record of changing their cap rates and participation rates more frequently and only on existing policies versus new policies might be an important concern to the performance of your client’s policy and your integrity.
Carriers with a proven track record of success being in a particular product line of business might be an important feature you will want to consider when deciding on a product and carrier for your clients.
At BDLife212° we focus on the goals of your client. We design strategies that match your client’s goals using competitive products offering a competitive price and proven results that align with your client’s goals. Competitive studies are helpful but no substitute for the experience and knowledge of knowing which product and carrier offers the best design to meet your client’s goals.
This article was written by Tammie Smith and is for discussion purposes only and should not be considered legal or tax advice. Every individual financial situation is different, no decision should be made from this information without individualized professional assistance.
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