If the advisor is not proficient. In this episode, I'm going to address the question
"What is the downside of IUL?" Get ready. You're going to be blown away with what I'm going to
share with you because a lot of people don't think about this. So, my name is Doug Andrew.
And I've helped a lot of clients optimize their financial assets, minimize taxes, and get ready
for retirement using one of my favorite vehicles indexed universal life. And so, I help them
structure correctly, fund it properly and tweak it. And make sure it's flexible so that it can
perform as a superior capital accumulation tool and retirement income tool so that over a 30 or
40 year period, if they earn 11% average, they're netting 10. If they earn 8, they're netting seven
that every million dollars that they accumulate can generate 80 to 100 thousand a year of tax-free
income for as long as they live if they live to be 120. Now, there's a lot of advisors out there
that don't even understand how to do that. They go, I've never seen an insurance policy do that
well then they haven't seen one structured correctly or funded properly. So, many times,
people will say, "Well, this sounds too good to be true. This indexed universal life,
it accumulates your money tax-free. You can access your money tax-free. When you die, it blossoms
and transfers income tax-free. And you claim you've been earning rates of return averaging
6, 8 and even 10 percent? Some years you've earned as high as 25 and even 55 percent?" I go, "Yup."
Well, I've never seen that. Well, it doesn't mean it doesn't exist. When I hear advisors say,
"Well, I've never seen one do that." I usually go, "Okay, just because you've never seen one,
you don't think it exists. Have you ever seen your brain? How do you know that exists?" Okay? That's
pretty stupid reasoning in my opinion. But then people say, "Well, what's the downside?" It sounds
too good to be true. Well, I'm going to share with you the downside of indexed universal life
right now. So, I've already sort of mentioned some of the downsides. If it is not structured
properly, you wouldn't believe how many people that have come to me who showed me their universal
life policy (maybe it was an index universal life) and they sort of admit they say, "You know, Doug?
I don't know what's wrong with my policy here. Because I heard you on the radio 7 years ago, 10
years ago, 20 years ago." And you just got on the radio and said, "Well, the last 7 years by using
indexing and rebalancing, you should have averaged about 10%". Many people did. In other words,
your money should have doubled in the last 7.2 years. If you had a half a million of cash value
7 years ago, you should have a million now. And they show me theirs. And they only have 250,000
for the 500,000 they had 7 years earlier. They go, "What's wrong?" I just, "I know what's happened."
It takes me about 30 seconds. Maybe a minute at the longest and I look at this and I go,
"Who structured this?" And they said, "Well, our nephew". "My brother-in-law",
"a friend", "They had a license". I go, "That was an expensive relationship."
They didn't structure this correctly. They didn't know what they were doing.
Yeah. Just because you have an insurance license doesn't mean you know what you're doing. Sometimes
advisors come on CNBC and they'll say, "Trust me. Life insurance is not a good place to put money.
I know because I have an insurance license." That's like saying, "Well, I'm a good marriage
counselor because I got a marriage license 30 years ago." That doesn't make you a good marriage
counselor because you got a marriage license. So, I look at it and I go, "I feel so bad. They
didn't know what they were doing." So, if the insurance policy is not structured correctly,
you could be earning 11 and only net 4 or 5. See, the ones that I structure, if you earn 11,
you'll net 10 probably within 10 years. But if you are earning 10%, you might only be netting 3 or 4
because the cost of insurance is way higher than it needs to be. You had way more life insurance
in the contract than you needed to under the tax citations Tefra and Defra. So, that's the
number 1 reason. It's not structured correctly. So, it can't perform. That was an expensive
policy or relationship when their half a million could have been worth a million instead they
lost half of that half million. They're down to 250,000. Don't let that happen. The second reason,
if it's not funded properly. So, let me share with you what I mean by that. See, if you design
a max-funded index universal life to accommodate let's say, 50,000 a year or 100,000 a year.
See, when you design it that way, what you want to do is make sure the policy can accommodate
let's say 100,000 a year for 5 years. That's $500,000. That is what is referred to as the
guideline single premium. You wanna squeeze down the death benefit as tight as you can get it. The
older you are the less insurance that's required. For a 60-year-old, that's only a million 250,000.
So, you put in 500,000 and that 500,000 ends up becoming part of the million 250 death benefit
if it's structured correctly. But when you fund it properly that money goes in
and immediately reduces the cost because if you structure it correctly and you fund it properly
then every time you add money that qualifies as part of the death benefit
and the cost of insurance goes down as you get older. If things come up in life and you had
money earmarked to go in but you have a setback you get laid off or whatever, I always had annual
reviews so that we could adjust it. See, I make sure the IUL is flexible. I have a beatitude
it says, "Blessed are the flexible for they shall not be bent out of shape", okay?
You have to have flexibility. If you were to take off from your city's international airport and go
around planet earth 26,000 miles and you were 1 degree off course and you never corrected that,
you would be thousands of miles from where you took off from if you didn't correct that 1 degree.
So, folks, you don't want to do that. You want to have annual reviews and adjust.
You can lower the death benefit. You can make up for the money but you have to fund it properly
in order for it to do what you illustrated it could do. So, that's the second reason,
if it's not funded properly. What's the third reason? Well, if you choose the wrong company. So,
how do you determine which companies to choose? There are several hundred life insurance companies
that offer index universal life. Frankly, I would not put my money in but maybe a half a dozen.
I'm very, very picky. I want to put my money in companies that are not stingy,
that don't keep all the money in their coffers and talk that they're big and strong but they're very
stingy with the rates of return. So, I want to put my money in companies that have indexed universal
life that know how to structure it properly that benefit me, the policyholder, not benefit them to
build up their coffers, okay? And so, there's very few companies that I will put my money in. Maybe
only a half a dozen or so out of several hundred. So, you want to choose the right company and
you want to choose those that have high ratings. There are all kinds of reading agencies like S&P,
Fitch, Moody's, Weiss. And so, I usually use a Comdex score. And I like to put my money in
companies that are rated 90 or higher. Meaning 90% of insurance companies are not rated as high
as the ones I like to put my money into. And so, I like to put it into highly-rated companies and
those that aren't stingy. But then those companies offer off times multiple products for several
reasons. So, the next big reason is you want to choose the right product with the right company.
So, let me explain that. An insurance company will have several universal life products usually that
are structured based upon your objectives. If your objective is to have the least amount of insurance
that you can get away with under the IRS rules and put in the most money as fast as they allow,
you want to use the product that's going to be designed for accumulation
and tax-free income. If you're going to start taking income in 5 years, you don't want a product
that doesn't give you the best benefits until 10, 15, or 20 years down the road.
So, you want to choose the right product. A lot of agents, they don't know that. They
choose the product where they're going to make the most compensation. That's pretty sad. So,
you want to choose the right product. Now, there's many times people have come to me
and they said, "I chose the companies that I found out you put your money into, Doug.
I even chose the right product. But it's still not performing." You know why? It's the most important
reason why indexed universal life doesn't perform the way it could. It's because the advisor
was not proficient. They didn't stick around. They didn't have annual reviews. They didn't
know what they were doing. You could have the right company. You could have the right product.
And if it's not designed correctly or you don't meet annually and make sure you tweak it,
you could be earning 10 or 11 but only netting 3, 4, or 5 percent. That's sad. I want to earn 10 and
net 8. I want to earn 11 and net 10. Some years, I want to earn 25 and that 24. In order to do that,
you have to continually tweak it. That's why many times I audit people's insurance policies
to make sure it is structured correctly, funded properly and the agent is proficient. To make
sure that you are optimizing what you have. If it's too late or you can't, you can do a 1035
exchange to a different company with a different product and you can do that totally tax-free.
It may behoove you to do that. But this is why it's very important. But the number one reason
why universal life sometimes does not perform as well as it could is because the advisor
is not proficient. I love pointing people to the right advisors who I know
are proficient. They have to pass a proficiency exam. It's 130 questions. Do you know that most
insurance agents in America wouldn't even score 30% on that exam? Yep, it's a pretty tough exam.
So, if you want to learn more, I'll show you how you can study and probably
know more about how to create an index universal life than most insurance agents understand. So,
I want to empower you where you can learn about this. I'm going to gift you a free copy of my
most recent best-selling book The Laser Fund. It's actually 2 books in 1. You can go to LASERfund.com
and you contribute a nominal amount towards the shipping and handling. And I'll cover the rest
of that expense and I'll pay for the book. Here's what I want you to do. Study this book which is
actually 2 books in 1. This one has all the charts and graphs and explanations. 14 chapters. This one
when you flip it over contains all the stories that illustrate how this works like a financial
swiss army knife for all kinds of financial goals. But I'm referring right now in this episode to
this chapter. Where on page 195 is a laser ready test. So, I purposely put in here with my 2 sons
who are co-authors 14 questions that you ought to ask a financial advisor, an insurance agent.
Now, these questions are such that if they're proficient, when you ask them these 14 questions,
they should be able to answer them off the cuff instantly without thinking about it. If they go,
"I don't know but I'll find out", if they hesitate. If you can tell, they're making
up an answer. That is a danger signal. So, I've given you 14 questions to ask an insurance agent.
If they don't know the answers off the cuff, that's a red flag. You want to make sure they
know the answers to those. And if you know the answers by studying the book,
you'll know more than most insurance agents do about how to be proficient in creating an
indexed universal life policy that will perform as a superior vehicle for your financial goals. So,
claim your free copy. Go to laserfund.com and begin to study and learn. There's other options
there to listen and learn and watch and learn. I want to empower you for a brighter future.