Thanks anonymous!

those were the numbers, the CV was that close to the DB.

the DB was going up each year, but slowly.  I ruled out surrendering policy for the CV since already had enough investments and didn’t need the cash.  Biggest bang for the dollar day one was the leverage of more DB.  It would be hard for me to totally surrender a policy on someone in their upper 70’s. 

[quote=anonymous]

client was 77 had 82k CV with a DB of 87k,

These numbers don't sound kosher.  I have no idea how the CV and the DB can only be within 5K of each other on a 20 year old policy.

Modified pay WL?  It a shot in the dark as I normally don't work with this kind of product.

Joedabrkr, the reason is that if you look at the #'s, they won't work.   Don't forget that the death benefit of the WL policy will keep growing every year.  In other words, you are only increasing the DB if the person dies well before life expectancy.   Conceptually, if the numbers do work and the person has no use for the CSV, then I don't have a problem with it.

That being said, I believe that the CSV has tremendous value and should be used.   For example, if someone has a CSV of $82,000, they can look at that as conservative money which in turn will allow them to take an additional $82,000 and invest it aggressively.  Wouldn't it help Goindy's client to take the money that is in cash and invest it more aggressively since he can access the life insurance CSV?

[/quote]

I'm beginning to see your point, anon.  In a vacuum, moving the CSV to the GUL makes sense.  However, the longer he lives, the worse the strategy looks.  If the client lives another 20 years, all he needs is around 5% on his $80k to outperform the DB of the GUL.  However, if we're assuming the $80k would be invested in a retail account, we've got to take into account taxes every year.  Is he liquid enough to pay the compounding taxes?  I dunno - maybe I'm missing something as well, but in this case it doesn't seem like that bad of an idea.  Certainly, I get very skeptical anytime someone suggests 1035'ing a solid WL policy for a UL or even GUL.  However, this might be the rare exception to the rule.  Could you clarify, anon?

Here are a few things to be aware of about NMFN. First, its a good company for the most part, however, there are a few issues that must be addressed to anyone interested in joining.



1. When you first start out, you are not allowed to call yourself a financial planner or advisors, only a financial representative. The stupid thing about this is that if you work at a wirehouse where you gather assets, you can be an advisor, but at NMFN, where you are actually being involved in wealth accumulation, preservation, and distrubtion, true planning, you are only a representative.



2. You cannot get a series 7 right away which, if you have you can call yourself an advisor.   The office managing partner makes you get a series 6 first, a rule that is pretty inefficient if you ask me.



3. You have your “own business”, as its said at the firm, yet people around the office hail the managing partner (formerly general agent) as though he is their savior.



4. The head of the office is called a managing partner. To me that implies that there is a hierarchy and that there are multiple parnters in an office, and he is the administrator in the group. Additionally, managing directors oversee satalite offices. These are respectible titles in other businesses (law, accounting, consulting, ibanking) but seem to be misused marketing titles in insurance.



5. Managing partners will encourage you to be in some debt somewhere to help grow your business.



6. You know its a cult when you are told to pay your own way to go to Milwaulkee, but its a cool trip nonetheless.



Look, I worked for NMFN as an intern for a year but got hired away to go to a wirehouse. I start their September 1. They are giving me a salary that NMFN wouldn’t, plus I haven’t seen all the oddities there I noticed earlier. Finally trying to sell whole life insurance to your irresponsible friends who have no dependents and want fast cash is not very fun. Shop around.

I am sorry I forgot a few points to my post above.



#2. Even if you have a series 7, you are still not allowed to trade stocks or bonds, only mutual funds. The firm pushes Russell and American Funds, but you can trade anyone, and the BD is fairly reputable. But back to stock and bonds, those can only be traded by an investment specialist and there is only one of those in each office.



#3. Back to having your own business. If you truly had a business, you would have a book to sell when you retire. All of your accounts are given to others in the office. From what I am told, at a wirehouse, you can usually sell your book.



Frankly, if you don’t think you can make the AUM requirements at a wirehouse, go to NMFN, learn, make some money and most importantly make contacts. Nothing can replace the sales training NMFN will give you, the Granum system is pretty good if you don’t mind being as obnoxious (at times) as they tell you to be when trying to get meetings. Then a few years down the road, go to a big wirehouse, and get your clients to move their investment accounts with you.

I'm failing to understand if this is a participating WL policy how the CV can almost be the same as the death benefit at age 77.  I'm even assuming that all of the dividends have been taken in cash. 

Is it possible that the face amount of the policy and the death benefit are being confused?  At the very least, I would think that the policy has to be a MEC.

A 1035 exchange may very well make sense if the DB and the CV are close to the same number, but like I said, I don't know how this is possible.

Anonymous:



The cash value can never be equal to the death benefit cause then you have a MEC. However, It can be very close with the divedends paying into it. That is how whole life works and why people by it aside from the estate planning considerations and the fact that is protected by ERISA.

BigRed, it sounds as if you need another internship. 

Please enlighten us on ERISA and how this pertains to whole life insurance. While you are at it, please explain how a policy that probably endows at age 100 would have the death benefit and the cash value so close together at age 77. 

Also, you don't need the death benefit and the cash value to be the same to have a MEC. 

A little knowledge is a dangerous thing.

Big Red,

I don't know which office you're in but many of your points are just plain wrong. First of all, a rep can take either the 6 or 7 ( I am one of those who chose the 7). Once you have the 7 you CAN trade individual stocks or bonds (although it's not commonly done).

I’ll say it again, they were very close and it was not a MEC.  The dividends were paying in and staying in the contract.  They were pushing up the DB each quarter, but not a ton. 

You are right on one thing though, if he does live into his 90’s the WL would end up being better since the DB keeps going up.  But for the next 12 years the new policy is higher. 

Would not have surrendered policy with the taxes due on it, better option was the 1035 or keeping it to pass along tax free.  Maybe if he was younger I would think about cashing in, but not at 77, too much of a risk I think.  I’ll try to dig it up tomorrow and post it.

I’m interested in hearing the details.  Typically, if someone is reinvesting the dividends, the DB will equal the CV + the face amount of the policy.   (It won’t really equal it, but it will be in that ballpark.)  That is why I don’t understand how the CV and DB are so close together.

Finally dug it up. 

Was a John Hancock single premium adj. life ins.

2 years ago CSV was 78,670 and net DB was 82,600

Last year (1035 excahnged) CSV 81,511 and net DB 85,586

This year if still owned CSV 84,325 and DB 88,648

numbers were from original in force illustration when we first looked at it and called hancock for it.

Now as I’m writing this I forgot to look up the original face, but saw it was issued in 1993 from 1035 paperwork.  wrote numbers down to bring home. 

My guess would be an original face of 25k or so.  I see something similar to these every now and then.  Most our a bit wider, but usually about a 15k gap between CSV and DB on something over 50k in DB. This is the closest gap I’ve seen.

GoingIndy????,

Thanks for posting the information.   You do realize that this is not whole life, don't you?

yes, do realize said WL earlier.  All the ones I did last year were permanent policies though with similar numbers and I know a few were WL.  Will review those. Thanks Anonymous.