An Interesting comparison of Financial Advisors and their views. We tend to only hear one side of things, as some of our most prominent ‘advisors’ (Prominent being defined as: on TV the most) tend to be pretty closed minded. Let me first state that I am definitely not against Term Insurance. I personally own AND recommend Term Insurance to many of my clients. It has it’s place. My view on Permanent Insurance is much the same, I own and recommend it, and know that it definitely has it’s place.
Here is a Video from Dave Ramsey on Permanent Life Insurance.
CNBC Financial- Joe Heider/ Adam Sherman
Permanent Life Insurance as an Investment
Most Importantly- Comment back with your view. As everyone knows, it’s not what is said by the advisors, it’s what is heard by the people.
I’ll be following up this post with part two soon. I’ll go into a little more detail on who is benefiting from the term and mutual fund duo, as well as who buys Whole Life Insurance by the boat load. You’ll be surprised to see who, especially as you may have borrowed from them, written checks from them, or go to them to access your savings account.
2 Responses to “Trusted Financial Advisors- Part 1”
Trackbacks/Pingbacks
- Insurance 4 You.org - NBC News- Investing in Life Insurance- Invest in the Investment with Liquidity, Security, and RoR... I found your entry interesting thus ...
Since you invited comments
As a former advisor who did sell permanent insurance on occasion, I tend to think the product is over used by those advisors who sell it.
I’m also concerned by the term “asset class” for an insurance product.
I’m not going to say there isn’t a place for it but I do think it’s used more often than it really should be. It is a very expensive product that most folks can and should do without until they have exhausted other less expensive protection and investment options.
This is speaking mostly of VULs.
*This response is mainly with Whole Life products and Indexed Universal Life Products in mind*
I think any time a product is ‘sold’ we have an issue. My goal is never to have a client make a purchase out of ignorance. I can understand the concern of asset class being applied to an insurance product; I have terms that are applied to other financial products that cause me great concern as well! I won’t list them right now, or I won’t have much of a part two for my next blog, but I will go through and define a good asset/investment. The way I define a good investment is with three qualifying factors: Liquidity, Security, and Rate of Return. When I put up a solid Indexed Universal or Whole life through a mutual company against those requirements, it definitely meets the criteria. Liquidity is obvious, security is excellent as both of those policy structures have guaranteed floors(meaning you can’t earn less than 0-4%). Compared to a negative 20+% return many people saw over the last 10-14 years, 4% seems pretty solid. (Very few policies did just the 4% BTW). Now, onto VUL’s (Variable Universal Life)
Variable products (VUL’s) have their place, but unfortunately I do see those ‘sold’ more than I see them ‘bought’. They fluctuate directly with the stock market, and rarely have any kind of a guaranteed floor. This is speaking on variable annuities and life policies. I personally have seen projected to create a retirement nest egg in a quicker than other products IF the market does what we hope. I have a lot of faith in a lot of things, but with your retirement nest egg, I prefer careful planning to faith.
I hope that made a distinction between Variable Products compared to other Indexed Products- An interesting look back, is looking at an Indexed Annuity over the last 10 years. These Annuities have a guaranteed floor of 2-7% and they have a cap (maximum amount earned) of 10-18%. Some years you look over and your friends are in their valleys losing 20%, while you earned 2%. Next year, they earn 40% and you only earn 14%. Look at a ten year look back of an Index Annuity tied to S & P verses the S & P itself. The fact that- when the market earns, you go up, and when it loses, you stay steady- so your graph simply moves over and up, never down- is great. Indexed annuities are another great tool when looking for safety. For that matter, compare an Indexed Annuity to a CD? CD’s offer no more safety, similar liquidity (3-10 years with early withdrawal penalties), but the rate of return on a guaranteed annuity FAR out performs the Certificate of Disappointment. While a guaranteed product may limit the spikes you see in return, it can definitely soften the blow of the market’s downturn. That’s why it’s recommended as that 5-10% of your portfolio, especially as you age and start shifting to safer investments.
Hope that makes everything as clear as posible!