Why I Don’t Like the Pac Life IUL Policy
The following is from a 2017 newsletter (Roccy DeFrancesco)
If you’ve read my newsletters or books, you know my #1 goal is making sure advisors always put their client’s best interest first.
As I’ve illustrated a number of times over the last many years, far too often advisors put their own needs ahead of the client (clients who don’t know any better).
And of course, most insurance companies and IMOs don’t help because they are not really in the business of making sure the client comes first.
What is my criteria to determine if an IUL (Indexed Universal Life) policy is any good?
1) No illustration gimmicks
2) No product design gimmicks
3) Costs that are in line with the industry
4) Fixed lending rate on participating (aka variable) loans
5) Full disclosure and transparency to agents and clients
6) Good/documented cap rate renewals
Why don’t I like the Pac Life PDX IUL policy?
It fails 1, 2, 3, 4, and 5 above.
Pac Life’s “black box”—what if I wanted to introduce you to an IUL that was the most or one of the most expensive in the industry? What if that same IUL had as part of it a non-guaranteed bonus feature that the company doesn’t explain to you or your clients how it works?
Pac life has such a black box (they call it the “performance factor”) and because of it, Pac Life fails 1), 2), 3) and 5) from the above list.
Huge Expenses—let’s look at the typical 45-year old insured who is in good health and who will pay a $15,000 premium into the policy every year until age 65. Below I will show you the total expenses charged in the policy over the first ten years and I’ll compare those to the IUL policy I recommend advisors use.
Total policy charges Pac Life $84,194
My favorite IUL $31,553
How about total charges after twenty years?
Pac Life $171,371
My favorite IUL $81,335
In short, the policy expenses in the Pac Life IUL are insane.
What’s worse is that the expenses are impossible to explain. Why? Because Pac Life says that most of the expenses are being used to fund the “performance factor” and Pac Life doesn’t explain how the numbers for the Performance Factor are calculated (hard to believe).
Then Pac Life has the nerve in a rebuttal piece they wrote to address this criticism that the insureds will just have to “trust” them. I don’t trust any company that has a black box in their policy that can’t be explained.
AG-49 illustration regulations—companies put huge bonuses into their IUL policies to get around the AG-49 IUL regulations that attempted to curb the illustration abuses that were occurring.
Pac life must have a HUGE bonus in their IUL in order for the policy to illustrate well. The problem, as I’ve stated, is that it’s NON-GUARANTEED and not explained.
Non-Fixed Variable Loans—as if it’s not bad enough to have a black box in your product that is not guaranteed and can’t be explained, Pac Life also does not have a fixed lending rate on the loans that insureds take from their IUL (fails #4 on my list above).
Dial-A-Commission
It’s hard to imagine that in today’s world an insurance company would put out a chart showing agents how to dial in their commission to any level they want it and how that will affect their client’s ability to borrow from the policy in retirement. I think they should change the name of this to the “how much do you want to screw your client” chart.
Why do agents sell the Pac Life IUL?
My educated guess is because they can dial up the commissions per the aforementioned chart and because of the tricked up nature of the non-guaranteed illustration, the agent can have high commissions and still have a decent looking illustration.
This is exactly why I wrote my book Bad Advisors How to Identify Them: How to Avoid Them. If you would like to download a copy of this book for FREE in an e-format, click on the following link:
www.advisorshare.com/bad-advisors-book
