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Dear Everyone!
I thought things would settle down since my last newsletter two weeks ago, but instead the markets have dropped like a rock.
I feel badly for those who had the bulk of their assets in the market (like their 401K plans.) For years I've preached to have no more than 25% of your retirement funds at market risk, but no one ever listens to me.
The rest should be in safe-money vehicles such as whole or universal life plans where the return might be low, but it is solid. Same for fixed annuities, as well as FIAs (see below.)
A lot of people have cashed out and are looking for a safe, solid place to put money. Well, as I've been harping on for over two years now, whole life is one of those places. It is NOT an investment plan... it is a savings vehicle.
If you want "investment" call your stock broker. If you want safe, solid, (but somewhat slow) savings, I'm your guy.
Take your choice. No wrong answer (if you don't count the last six months! :-) )
-Al
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WL = Safety
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Did you get a call from your stock broker this week? Or maybe you got a letter? I bet you did. And I'll bet he or she was just brimming with optimism. "Don't worry, don't sell, the market will come back," is probably what he or she told you.
They HAVE to tell you that. Why? Well, in the words of Napoleon Bonaparte "If an army could think... it would run away."
Your broker is terrified that if you leave the market now, you will never ever come back.
On the other hand, earlier this week a well-known TV stock-jock told viewers that if they needed their money within five years... sell now.
I think a lot of folks took his advice, for better or worse.
Whether you should buy or sell is not advice I can give you as I'm not licensed in stocks and bonds and I don't know your particular financial situation.
However, what I do see is a flight to safety.
What if I told you that you could put $100,000 into a financial product that would give you at least a 3% return but most likely closer to 5% to 7% AND that if you die, someone would collect more than twice what you put in? And what if I told you that the company selling this financial product is over a hundred years old and has never missed paying a dividend?
Would you be interested?
It seems a lot of people are... if my phone logs are correct.
The product is called SINGLE PREMIUM WHOLE LIFE. Yes, I know. You thought that whole life plans went out with the dinosaurs. Well... they didn't. Many companies continued these products along side the newer universal life products. Companies like Mutual Trust Life (MTL), Ohio National, MassMutual, New York Life, have a number of good, solid, guaranteed plans... and they have added "customization" options to make them even more attractive
I'm partial to Ohio National and MTL as they have lower expense ratios and thus, lower premiums.
So why isn't whole life more popular? It's expensive, and compared to the go-go equities markets of the past fifteen years, people believed they would do better by "buying term and investing the rest" (as I've talked about before.)
Well, guess what? Those who tried are not doing so hot "investing the rest." Actually they are getting their butt kicked! So the tried and true, simple to understand, plain old, whole life savings vehicle (notice I didn't use the word "investment") is back in vogue. It might be the vehicle that is right for you.
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151A
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There is a huge battle going on in the annuity industry the past several months. It's all about who should be allowed to sell fixed indexed annuities (FIAs.)
I've talked about FIAs before. This is where you put in some money (or a lump sum) into an annuity and the interest you get is pegged to some index, most often the S&P 500.
If the index goes up relative to the starting point, you get that as your interest rate. So if you started when the S&P is at 100 and if it goes to 107, you might get 7% (7 divided by 100). It would then "re-set" at 107. What happens if it goes back to 100. You get zero interest... but you DO NOT LOSE ANY OF YOUR ORIGINAL PRINCIPAL OR PREVIOUS EARNED INTEREST.
For the most part, I like FIAs. You "win" by locking in gains during good times and totally avoiding the bad times and losing nothing.
Good deal or bad deal? It depends on whom you talk to... it depends on the markets, etc. But that isn't the big issue now.
First you need to understand that there are many, many, many more licensed insurance people than there are licensed registered representatives. What is the difference? Insurance people like me are licensed by the state and can only sell insurance and certain annuities that do not use a sub-account of stocks, mutual funds, or bonds, like in a variable annuity. We can't sell "risk" products. Registered representatives are licensed by the SEC and FINRA (federal government) and can sell stocks, bonds, funds, etc.
OK, so what is going on? Well, plain old insurance people like me can sell FIAs. Tons of money have been leaving the big brokerages like Morgan Stanley and Merrill Lynch and are going to the insurance companies who sell these safe-money annuities.
The insurance companies have large armies of licensed agents (like me and others.) There are far fewer men and women with the federal registered rep securities license. (Why? It's a long story but bottom line getting and keeping a federal license is a pain in the butt... and rather expensive in fees. Ask your broker. He or she will tell you the whole sob story!)
So guess what! The big brokerage houses have petitioned the SEC and FINRA to pass a rule saying that only registered reps (stock brokers) should be allowed to sell these FIAs. The SEC created the proposed rule, numbered 151A (don't ask why.)
Well the insurance companies are seeing their golden goose being hijacked and they are not happy about it... and so they are engaged in a tug of war over 151A.
It's a power grab by the brokerage houses. Everyone knows that FIAs are not tied to individual stocks, bonds, or funds... and that there is no sub-account and that they are safe-money savings vehicles. But the wire houses are tired of seeing their brokers lose assets under management to the insurance houses.
I don't know when the SEC will make a final decision on this rule but if they rule against the insurance companies, you will see them use their huge lobby arm to get Congress to enact legislation.
I think the insurance companies will win this one. I hope so because I don't want to spend the time and money (it is NOT cheap) to get a securities license... and I probably wouldn't bother... which is what the insurance companies fear the most... agents will just leave that market.
If the wire houses prevail, it will be the death-knell of FIAs because there isn't a large enough registered rep sales force to make them profitable. That would be a loss to the general public as these vehicles are quite good for a lot of people.
However, I'm told that the insurance companies will come up with different products for insurance agents to sell that will comply with the SEC and it will be those that get marketed.
My bet is that the SEC will back off of this 151A rule. They have a full plate trying to regulate what they are already chartered to regulate. I think they will realize that these safe-money, no-lose (most often) plans are best left to the state insurance departments to oversee... and the states to do a good job for the most part.
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Well, that's a wrap for this issue. I hope you've found some of the info above useful and interesting. If you have questions about life or health coverage, safe-money annuities, or employer group benefits just give me a call or send email.
Sincerely,
Alan N Canton
InsuranceSolutions123 Agency
InsuranceSolutions123.com
916-962-9296
CA License # 0F31110
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Al Canton, Owner
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I'm Al Canton, owner of the Insurance Solutions Agency.
Everyone promises the best service, etc. So I won't bore you with that message.
Bottom line, I know health insurance, work-supplements, medicare, life, and annuities.
Most importantly, I'm honest. I will not put you in a product just for the money. I've been here 25 years and I've built my business reputation on integrity and honor.
It's that simple.
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