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 Posted: Wed Jul 21, 2010 7:54 pm Post subject: |
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| Quote: | | Really? If that's true, then a VA/VLI/VUL transaction with that customer is UNSUITABLE and could cause the Registered Rep to lose his/her securities licenses, and the member firm to be sanctioned for failure to supervise. |
It is really not possible for the person who wants to purchase a life insurance product to go through all the details provided in the application form and most of the time they just keep the trust on the agent itself about the features of the product.
I was describing customer's approach in that regard.There are plenty of customers who do all the research b4 purchasing the insurance policy.But if you compare this in terms of % with common guys who just buy their insurance policy on someone's recommendation, it will be very less may be not more than 10-15 %.
So there won't be any instance for cancellation of license of agent/firm just because I trusted the agent for the time being and there is no proof in writing whatsoever.
| Quote: | | I'm not here to convince you, but I am here to educate you. You have to convince yourself. As the proverb states, "You can lead a horse to water |
We are all here to debate on the topic in a positive manner so that we can share our thoughts/ideas related to insurance.No one is horse and no one is horse-rider either.It is just a plain sharing of thoughts among professionals.
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DIMG786
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| Posted: Wed Jul 21, 2010 11:35 pm Post subject: |
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| Quote: | | So there won't be any instance for cancellation of license of agent/firm just because I trusted the agent for the time being and there is no proof in writing whatsoever. |
Tell that to the RRs who have been barred from the industry for violating a customer's trust.
| Quote: | | It is really not possible for the person who wants to purchase a life insurance product to go through all the details provided in the application form and most of the time they just keep the trust on the agent itself about the features of the product. |
Are you speaking as an agent or a client? I cannot tell. Are there persons who sign blank forms and let agents fill out applications? It's been known to happen. There are plenty of persons who have been encouraged to do so, only later to come to their senses -- usually after it's too late. But if you're speaking as an agent, it is your public responsibility to disclose -- not just the positive features of the contract, but the negatives as well.
The FINRA Rules on marketing and suitability and supervision are in place in an attempt to prevent all that. The variable products we are discussing are too complex for most clients to fully appreciate. They make decisions to move forward because agents run slick hypotheticals touting the INVESTMENT side of the contract, and those same agent perhaps are either failing to disclose the insurance aspect of the contract or downplaying it in a manner that places the emphasis on the INVESTMENT component, which is clearly a marketing violation.
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MaxHerr
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| Posted: Thu Jul 22, 2010 3:38 pm Post subject: |
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| Quote: | | Are you speaking as an agent or a client? |
Although I am an agent currently but I said that from the point of view of a customer,as that of I am a customer.
| Quote: | | Are there persons who sign blank forms and let agents fill out applications? |
Yes,There are plenty of them.Even some guys do ask so many questions personally to the agent but never bother to go through 'official application form' just because they assume that I have asked plenty of questions to the agent so whatever he has told must be true.
But it is the moral integrity of the agent to explain to customer WYSIWYG.Rather a step further I will say that it should be 'What I Say Is What You Get'(WISIWYG).Then surely agent (or RR) will be acting in the benefit of the customer,responsible for the customer delight.
| Quote: | | The variable products we are discussing are too complex for most clients to fully appreciate |
Its True.I agree with the statement.
| Quote: | | The FINRA Rules on marketing and suitability and supervision are in place in an attempt to prevent all that. |
Truly an insurance product should be marketed as an insurance product first and if there is any investment component attached with it then it can be mentioned.
But Most of the agents (or RR) put more emphasis on the investment part because they are doubtful about sale of the product only on the basis of insurance talk.
DIMG |
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DIMG786
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| Posted: Thu Jul 22, 2010 5:20 pm Post subject: |
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| Quote: | | Any communication discussing the tax-deferral benefits of variable life insurance should not obscure or diminish the importance of the life insurance features of the product. Any variable life insurance communication that overemphasizes the investment aspects of the policy or potential performance of the subaccounts may be misleading. |
(emphasis added)
The statement above comes near the end of NASD Notice To Members 00-44.
| Quote: | | But Most of the agents (or RR) put more emphasis on the investment part because they are doubtful about sale of the product only on the basis of insurance talk. |
If that's true, it is a clear conflict with the NASD/FINRA Rules regarding suitability and marketing of variable insurance products. And guess what? If it can't be sold to the client on the basis of its being an insurance product, IT IS NOT SUPPOSED TO BE SOLD TO THE CLIENT. If that matter comes before FINRA, the RR is going to be hammered for making an "unsuitable recommendation" and could lose his/her license temporarily or even permanently.
| Quote: | | Even some guys do ask so many questions personally to the agent but never bother to go through 'official application form' just because they assume that I have asked plenty of questions to the agent so whatever he has told must be true. |
Ethics, morals, and integrity aside, conduct like this is not in the best interest of one's clients. When a client signs an application, they are acknowledging that everything in the application is true and complete to the best of their knowledge. If the agent inadvertently misrepresents a material fact, it could cost the client the loss of his/her coverage, and expose the agent to an E&O claim.
Similar actions on the part of agents have cost insurance companies millions of dollars in regulatory fines and other sanctions. It is not a "best practice" and I personally do not know any agents who conduct their business in this manner. I have worked for an agency that was involved in obtaining insurance for corporate executives, and we would send applications through the mail, but we never had clients sign blank forms, fill them out in absentia, and submit them to the insurers without the client's prior approval.
| Quote: | | I will say that it should be 'What I Say Is What You Get' (WISIWYG).Then surely agent (or RR) will be acting in the benefit of the customer,responsible for the customer delight. |
You don't really mean that, do you? The client gets what the CONTRACT states, not what the Agent says. To lead a customer to believe that the words of an Agent that are in conflict with the contract (that's never happened before?  ) have greater importance than those of the contract is a serious flaw.
And I want to return to this comment:
| Quote: | | It is really not possible for the person who wants to purchase a life insurance product to go through all the details provided in the application form and most of the time they just keep the trust on the agent itself about the features of the product. |
I don't subscribe to any philosophy such as that, and neither do any of the agents I know personally. In my mind, this is an agent's cop-out. It's about the same as saying to the client, "Look, Mr. Client, this is a very complicated product, so rather than explain how it works, and what you need to do to maintain it, just trust me when I say it's a great product and the right thing for you. So just sign here and make out your check."
I would not want as a client the person who accepted that kind of proposition. Because it's eventually going to come back to bite me in the butt. Look though some of the threads on this site where people complaint about what they believe the agent did to them or a relative. Maybe true, maybe not, but in our industry, as a licensed person, we sort of have to accept that when a complaint comes in, we are guilty until proven innocent.
Because we're supposed to know better, and conduct ourselves on a higher plane!
[FINRA just announced that regulatory actions against RRs are now going to be made public information for TEN YEARS into the past. Whether positively or negatively adjudicated.]
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MaxHerr
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| Posted: Fri Jul 23, 2010 2:30 am Post subject: |
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| Quote: | | and I personally do not know any agents who conduct their business in this manner |
I am not proposing that agents are doing their business in this manner.Rather plenty of RR's and some agents are in this process which have hardly any knowledge of insurance and haven't got proper training of insurance concepts/products.
Whether you agree or not there are plenty of guys who have partial knowledge (not even basic knowledge about product) about the insurance and they are selling.I was pointing that issue.
| Quote: | | You don't really mean that, do you? The client gets what the CONTRACT states, not what the Agent says. |
Agree. But when it comes to choose one suitable product from bouquet of products one need guidance from the insurance agent.Most of the time agent market that product where he is having good commission.So while in the process of marketing the product he may get the sale just because he has said in this VA product last year our company has performed xyz% and we will continue to do hopefully.
So here I come to the point....Agent disclose most of the points from the official agreement to the customer but not all the clauses. (even neglecting one clause can give a big toll on the customer's product performance).
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I don't subscribe to any philosophy such as that, and neither do any of the agents I know personally. In my mind, this is an agent's cop-out |
If client insist me to tell the product features,surely I will narrate the whole story about the product which is available in official application form but if he/she says that I have gone through your product information either through internet/friend I wont say there is any point describing the features again.
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DIMG786
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| Posted: Sat Jul 24, 2010 6:35 pm Post subject: |
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DIMG . . .
Obviously, my attitude toward the conduct of one's business is very different than yours. But I have to ask, are you even located in the US? Everything in your post above leads me to believe you are outside the country. You seem to ignore everything that is unlawful by making excuses for why it's OK not to conduct one's business ethically and according to state and federal laws. Much of what your responses include that agents do are clear violations of securities or insurance law.
Examples include:
| Quote: | | plenty of RR's and some agents are in this process which have hardly any knowledge of insurance and haven't got proper training of insurance concepts/products. |
| Quote: | | there are plenty of guys who have partial knowledge (not even basic knowledge about product) about the insurance and they are selling |
Licensing in these two areas is supposed to be evidence of knowledge. A licensed rep/agent who acts without proper training is still subject to civil and/or criminal prosecution for his/her misdeeds -- ignorance is not an excuse or justification.
| Quote: | | Most of the time agent market that product where he is having good commission |
If found to be true, the agent/rep will lose their licensing! This is NEVER supposed to be the reason a client obtains any product.
| Quote: | | Agent disclose most of the points from the official agreement to the customer but not all the clauses. |
It is an ethical responsibility and a legal imperative that an agent disclose the "material disadvantages" of any product to a customer prior to the customer's final acceptance of a product (and it is best done prior to even taking the application). Failure to disclose could be construed as (1) concealment or (2) material misrepresentation (in context with the disclosures that were made. Regardless, when discovered, such violations (normally ascribed to the applicant for insurance) give the "injured party" (the one to whom disclosure was due) the right to rescind the contract.
| Quote: | | If client insist me to tell the product features,surely I will narrate the whole story about the product which is available in official application form but if he/she says that I have gone through your product information either through internet/friend I wont say there is any point describing the features again. |
I'm sorry, but I regard this final statement as a TOTAL ABDICATION of the agent's responsibility! If this is true about the conduct of your business, then I would not be surprised to see you held responsible for the harm done to a client who "said" they got their information from a "friend" and you didn't think it was important enough to go over the information as an agent.
It's kind of like some TV commercials that state, "Friends don't let friends drive drunk." Agents are not supposed to let clients make decisions based on what their friends think they know.
You might some day be approached by a person who says something like, "My friend has a $1-million life insurance policy, and he said I should, too." And so you just take an application for a $1-million policy. A couple of years later, the customer dies, the company pays $1-million, and the wife sues you because he should have had a $10-million policy.
You respond, "Well, he told me he got all of his information from his friend. That's what he wanted." She asks, "Did you ever try to figure out how much coverage he really needed?" You answer, "No, I gave him what his friend told him to get."
Your position is indefensible. If this transaction happened unassisted on some Internet insurance website, it might be forgiven. But when done face to face with an agent, we're supposed to determine what the client's true need is. If the client says, "Well, I can see why you think I need $10-million, but I only want $1-million," that's an entirely different matter. We can't force a person to apply for any special amount of coverage.
Believe me, I am not trying to cast aspersions on you. However, you seem to be very cavalier in your attitude about what is important for a client to know. You rely heavily on the client's ability to obtain "information" from the Internet or their friends. I see it very differently. Although the Internet has the ability to inform, often the information is errant. We see examples of it right here in this forum.
But our client's are relying on OUR KNOWLEDGE to guide them. I never do anything for someone based on what I may have done for one of their friends, or what their friend tells them they should do. Each client is unique, each situation is unique, and we have to determine what product(s) are unique to meeting the needs of or providing a solution to the client for their situation.
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MaxHerr
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| Posted: Mon Oct 18, 2010 4:38 pm Post subject: index universal life insurance |
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I met with a financial planner from david White assoc. who recommended a Index Universal Life policy as an investment for retirement. It has a minimum of 2% and caps at 12%. The policy is for 825k and he recommends contributing $ 700 per month, based on my financial situation. The Planner is selling the policy for Ameritas Investment Corp. Has anyone heard of them before and are they a strong company that I should go with?
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| Posted: Mon Oct 18, 2010 9:50 pm Post subject: |
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| Quote: | | I met with a financial planner . . . who recommended a Index Universal Life policy as an investment for retirement. |
You can certainly use the accumulated cash value in a life insurance policy to supplement your income in retirement, but life insurance itself is not an "investment", and should not be marketed as such. It was the conduct of life agents representing indexed annuities as investments that caused the SEC to adopt its ill-fated Rule 151a. IULs and IAs are both insurance products first. That their interest crediting mechanism is related to a specific "index" (usually associated with stocks/equities), is just a way to limit the insurance company's discretion in setting the rate. A limit of 12% on the up side is not bad, but there are other companies that are beginning to advertise no interest rate caps. You also fail to indicate what the "participation rate" is.
You state the monthly premium is $700. Without knowing your age, there is no way to begin to determine whether that amount is low or not. It is based on an illustration that depends on both your age and a "straight line" rate of interest crediting, which is usually not a realistic number, but without knowing what that rate is, no one can tell you if $700 is a reasonable monthly payment or not.
Are you participating in an employer-sponsored retirement plan, such as a 401(k) or 403(b)? Are you maximizing your contribution to that plan? Will paying $700 for life insurance interfere with your ability to continue making any contribution to your employer's plan?
Finally, if your agent is a Registered Representative with Ameritas, why is he not offering you a Variable Universal Life policy? You would give up the downside protection when it comes to market risk, but you would not be subject to participation rate or rate cap limitations either. Has he talked with you about fully funding a Roth IRA?
Too many unanswered questions. [/quote]
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MaxHerr
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| Posted: Wed Oct 20, 2010 6:20 pm Post subject: |
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| Quote: | | It was the conduct of life agents representing indexed annuities as investments that caused the SEC to adopt its ill-fated Rule 151a. IULs and IAs are both insurance products first. |
They aren't insurance products first. They are insurance products 1st, 2nd, and 3rd. They are only insurance products which is why the SEC completely overstepped their bounds. I think more than unscrupulous life agents, there were probably broker/dealers who were behind the push for 151a since they were losing revenue to these products.
| Quote: | | Finally, if your agent is a Registered Representative with Ameritas, why is he not offering you a Variable Universal Life policy? You would give up the downside protection when it comes to market risk, but you would not be subject to participation rate or rate cap limitations either. |
Why would an agent want someone to take investment risk in their life insurance? The alternative to IUL is UL. It is not VUL. IUL is not an investment product and it should not be compared to a product that is considered an investment product.
I don't like IUL, but I do like correct information.
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akrvmdi
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| Posted: Thu Oct 21, 2010 8:45 am Post subject: |
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| Quote: | | They aren't insurance products first. They are insurance products 1st, 2nd, and 3rd. |
THANK YOU!! No argument from me at all on that statement. Unfortunately, when I've made similar statements in the past, it's like drawing flies to honey, and all the "life insurance is an investment" proponents flock to the fray. Not wanting to start another "thread war", I was sort of "hedging" my bets, so to speak, and you called me out on it -- appropriately enough -- and I accept the chastisement.
| Quote: | | there were probably broker/dealers who were behind the push for 151a since they were losing revenue to these products. |
And I think that's a reasonable assessment, too (the B/Ds mildly protested the requirement to "supervise" the sale of those products, and some of them forbade their RRs from marketing them as a result). But I am completely baffled as to why the SEC, when drafting Rule 151A, completely overlooked IUL, and instead focused only on EIAs. It made absolutely no sense.
I don't much like IUL either, although I understand its appeal in a turbulent stock market environment as we've seen over the past 10 years (hence the rise in popularity of the Indexed products). But if a person is looking for "stock market returns" connected with the cash accumulation in a life insurance product, why not consider the "benefits" of a VUL compared to IUL? Why settle for 70%-80% of the upside, or a 12% rate cap? It sometimes doesn't come up for discussion because the agent is not securities licensed (taking a broad shot at the "WFG" folks).
| Quote: | | Why would an agent want someone to take investment risk in their life insurance? The alternative to IUL is UL. |
UL or VUL are both alternatives to IUL, but that aside, your question is the same question I ask clients who have poorly performing VUL policies when I run across them. Life insurance is supposed to provide a death benefit to those who are left behind. If a person wants to seek market-based returns, it can be achieved at less cost outside a life insurance policy (although it does expose the client to the possibility of current taxation [unless inside a retirement vehicle], compared to the tax-deferred status of cash value life insurance products . . . which tends to be the "selling point" behind IUL and VUL, not to mention UL, although all are commonly misrepresented as "tax-free" this and that).
Obviously, in a VUL policy, the client truly needs to understand the disadvantage of the downside risk (and all the internal expenses) far more than the upside appeal. That's really the only point I was trying to make (and, looking back, I didn't really do a decent job of it at all) -- personally, I'm not much of a fan of UL or VUL unless it's heavily funded from Day 1 -- which is not something the average Joe is willing to do (let alone is financially capable of doing).
Depending on his age, the OPs $700 per month would likely only be about 1/3 - 1/2 of the actual funding he would need to make a VUL policy of the stated amount reasonably viable over the long haul. That and constant monitoring of cash value (at least monthly) with an understanding of the possibility of having to dump more cash into the product at any moment (but most likely at some point in the future rather than in the near term).
And that's more than most persons looking at life insurance are prepared to do. Which is what makes VUL unsuitable for many persons.
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MaxHerr
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| Posted: Thu Oct 21, 2010 9:43 am Post subject: |
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Great post, Max. I find VUL almost always unsuitable. This is true even if it is funded properly and the client completely understands it. Conceptually, it's fine. It just isn't in practice. The reason is that the insurance costs are high and the investment costs are high. Would we ever have a client make a straight investment with a 5% load and no break points? If a product has a 1% M&E, it is the equivalent of adding 1% to the expense ratios of the funds. Why would one pay M&E when they are already paying high insurance costs?
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fjakruvm
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| Posted: Thu Oct 21, 2010 8:37 pm Post subject: |
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And now we have all those Ser 7 brokers lining up behind their Ser 65s to stop earning commissions and start charging 1% AUM fees. If I buy $100,000 of A shares in a mutual fund, I might pay a 4.5% load, and I'm done. But if I give my $100,000 to the "fee only" adviser, it costs me $1,000 per year, if the invested money earns a just a 1.1% ROR to stay even. But if the account value declines, I still pay a 1% fee every year, albeit on a declining value, but I'm still losing a real 1% on top of my unrealized losses.
I have never seen any real economy for the "small" investor in a fee-based system (Merrill Lynch once used to define them as having less than $1,000,000 in investable assets). But now some insurance companies are beginning to belly up to the bar with fee-based, no commission life and annuity products . . . ever looking for the cash flow.
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MaxHerr
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| Posted: Mon Oct 25, 2010 2:24 pm Post subject: nesbitt insurance scam |
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If he is good like he keep blogging here?
Google nesbitt insurance scam for the guy that preach of being so smart.He is just another insurance agent who push toward himself.
"California licensed Fire & Casualty Broker-Agent and Life & Health Agent. CA Insurance License #0596197"
Check this link and you will find on your own.
American Income Life - Concord, CA
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anonymous007
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| Posted: Wed Dec 08, 2010 11:52 am Post subject: EIUL the way to go!!! |
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look if anyone is looking for answers as far as EIUL products are good or not please give me a call and I can set up an appt. with you and explain to you how it works or you are welcomed to come to a seminar, beleive me EIUL is the best way to go to gurantee your money (principle) if you invest most of your money in your 401k; your money is very likely not to be their. Why not invest into something were you can get a 2.5 - 12 rate of return........and never loose on your money even when the market goes down!!!! 240-593-6332..I live in the Rockville area.kent
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kentD
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| Posted: Wed Dec 08, 2010 12:20 pm Post subject: |
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| Quote: | | beleive me EIUL is the best way to go to gurantee your money (principle) if you invest most of your money in your 401k; your money is very likely not to be their. Why not invest into something were you can get a 2.5 - 12 rate of return........and never loose on your money even when the market goes down!!!! |
Sounds EXACTLY like a World Financial Group script. Give up your 401(k) plan for EIUL. Sure, that's the ticket.
(And never trust anyone who does not know the difference between principal and principle, and makes as many spelling errors as this poster does.)
Hope your E&O policy remains paid up, KentD, and that you have a limit of liability of about $20,000,000. to cover the losses your EIUL clients suffers in their 401(k) plans based on your shoddy advice.
A word to the wise, unwise, or unsure:
LIFE INSURANCE IS NOT A RETIREMENT PLAN!! Do not listen to anyone who tells you differently. Do not stop contributing to an employer-sponsored QUALIFIED PLAN in favor of a NON-QUALIFIED LIFE INSURANCE POLICY.
Just because someone tells you, "You can put any amount of money in our EIUL (or VUL) policy, but you are limited in the amount of money you can put in a retirement plan," doesn't mean you should do that. If you are not contributing the MAXIMUM permitted by law or your plan, what difference does it make how much you can pay to an insurance company for something that IS NOT A RETIREMENT PLAN? Only when you have maximized your retirement plan contributions might you want to look for another tax-advantaged savings vehicle.
| Quote: | | Why not invest into something were you can get a 2.5 - 12 rate of return |
LIFE INSURANCE IS NOT AN INVESTMENT!! If you want to "invest" money, talk to someone with a FINRA registration, not to someone like KentD who is only a life insurance agent and cannot help you INVEST one dime.
Stay away from people like KentD. They are more concerned about a commission today than your future.
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MaxHerr
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