There’s always some carrier culpability in bad recommendations from advisers, who shop manufacturers not for client centric contracts but for high compensation. The temptation is just too great for producers to sell high compensation products, who are financially needy or just plain greedy.
At the bottom of every poor recommendation by an adviser or agent lies the overwhelming need for personal revenue. This is really evident in income life insurance sales using participating whole life and indexed universal life. Every creditable producer designs their income chassis with the lowest death benefit cost under TAMRA to limit the expense charges against the earnings of the policy.
But the chronic use of “target” premium in an income scenario is so prevalent that there’s only one inescapable conclusion you can come to: the design was based on producer compensation. Never mind that the cost of insurance is 3 to 4 times the required amount eroding cash value accumulations and consequently reducing income. The proposal never displays zero crediting in any year when negative indexed performance occurs. Why? Because the policy must perform at its optimum return to overcome the exorbitant cost of insurance, so the proposal only demonstrates the best scenario, which has never existed in the last 50 years. Best practices and a tender conscience should inherently outlaw these types of income illustrations, which are no more than vapor on paper.
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