MPI—Indexed Universal Life Insurance Plan— Scam?

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Want.Need.Plan
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MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Want.Need.Plan »

Hi all,

So was at a fantasy football draft and someone brought up MPI Indexed Universal Life Insurance Plan and was raving about this thing... sounds like a super expensive index fund with a 10% ceilings and a 0% floor... to supercharge you earnings you borrow money to further invest... seems like a complete dumpster fire.

Thoughts?
retired@50
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by retired@50 »

Want.Need.Plan wrote: Mon Sep 07, 2020 9:00 pm Hi all,

So was at a fantasy football draft and someone brought up MPI Indexed Universal Life Insurance Plan and was raving about this thing... sounds like a super expensive index fund with a 10% ceilings and a 0% floor... to supercharge you earnings you borrow money to further invest... seems like a complete dumpster fire.

Thoughts?
Post a link to the prospectus and watch it get ripped apart.

Regards,
This is one person's opinion. Nothing more.
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arcticpineapplecorp.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by arcticpineapplecorp. »

Want.Need.Plan wrote: Mon Sep 07, 2020 9:00 pm seems like a complete dumpster fire.

Thoughts?
yep. that sounds about right.

the person raving about it is either:
1. a sucker
2. an insurance salesman for this product.

which do you suppose he was?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Jags4186
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Jags4186 »

Want.Need.Plan wrote: Mon Sep 07, 2020 9:00 pm Hi all,

So was at a fantasy football draft and someone brought up MPI Indexed Universal Life Insurance Plan and was raving about this thing... sounds like a super expensive index fund with a 10% ceilings and a 0% floor... to supercharge you earnings you borrow money to further invest... seems like a complete dumpster fire.

Thoughts?
Just a quick rundown:

Assuming you started investing in 1985 in the Vanguard SP500 fund, $10,000 turned into more than $413,000 by the end of 2019

Let's take a universal life policy with no load, no fees, and 100% participation in earnings and dividends with the constraints of +10% ceiling and 0% floor each year. $10,000 would have turned into a little over $100,000. There is no policy written with terms that favorable.

So the question is, what type of life insurance policy could you have bought for more than $313,000 in premiums/fees/foregone earnings...

Is the product a scam? If it does what it says it does, it's not a scam. There are plenty of products that aren't scams but also aren't very good products.
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Stinky
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Stinky »

Want.Need.Plan wrote: Mon Sep 07, 2020 9:00 pm
So was at a fantasy football draft and someone brought up MPI Indexed Universal Life Insurance Plan and was raving about this thing... sounds like a super expensive index fund with a 10% ceilings and a 0% floor... to supercharge you earnings you borrow money to further invest... seems like a complete dumpster fire.
I think that your "complete dumpster fire" comment pretty wells pegs it.

By the way, do you know who or what is "MPI"?
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Want.Need.Plan
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Want.Need.Plan »

arcticpineapplecorp. wrote: Mon Sep 07, 2020 9:08 pm
Want.Need.Plan wrote: Mon Sep 07, 2020 9:00 pm seems like a complete dumpster fire.

Thoughts?
yep. that sounds about right.

the person raving about it is either:
1. a sucker
2. an insurance salesman for this product.

which do you suppose he was?
Sucker who wanted to see what the finance guys in the room thought... suncorfinancial is who is pushing it... told him to back out if he could.
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Want.Need.Plan
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Want.Need.Plan »

Jags4186 wrote: Mon Sep 07, 2020 9:15 pm
Want.Need.Plan wrote: Mon Sep 07, 2020 9:00 pm Hi all,

So was at a fantasy football draft and someone brought up MPI Indexed Universal Life Insurance Plan and was raving about this thing... sounds like a super expensive index fund with a 10% ceilings and a 0% floor... to supercharge you earnings you borrow money to further invest... seems like a complete dumpster fire.

Thoughts?
Just a quick rundown:

Assuming you started investing in 1985 in the Vanguard SP500 fund, $10,000 turned into more than $413,000 by the end of 2019

Let's take a universal life policy with no load, no fees, and 100% participation in earnings and dividends with the constraints of +10% ceiling and 0% floor each year. $10,000 would have turned into a little over $100,000. There is no policy written with terms that favorable.

So the question is, what type of life insurance policy could you have bought for more than $313,000 in premiums/fees/foregone earnings...

Is the product a scam? If it does what it says it does, it's not a scam. There are plenty of products that aren't scams but also aren't very good products.
http://www.suncorfinancial.com/mpi/

Is the link... the product lost me when it starts promoting secure leverage...
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by XacTactX »

I have a relative who was working with Transamerica and selling these IUL policies for a while. I wish I could understand what the actual return is on these types of products and how attractive they are compared to buying term life and investing the difference. I went to a few meetings where they “taught” us how to hustle and have the mindset of a winner, typical George Kiyosaki type stuff. But they never mentioned a specific product or pricing.
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Stinky
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Stinky »

Want.Need.Plan wrote: Mon Sep 07, 2020 9:45 pm
http://www.suncorfinancial.com/mpi/

Is the link... the product lost me when it starts promoting secure leverage...
Yes, I wasted 5 minutes of my life clicking through on the link.

It says that the “index strategy” would have made about 7% average over the last 30 years.

Meanwhile, the S&P has returned 8% price. Plus about 2% annual dividends, so 10% in total.

$10k invested in 1990 at 7% is $76k today.

$10k invested in 1990 at 10% is $175k today.

Enough said.
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petulant
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by petulant »

Comparing these products to stocks is inappropriate and many of the posters here know it. I'm disappointed. The cash value inside these kinds of policies generally does not decrease at all. A lower return than stocks with lower volatility in returns would normally be completely acceptable since there is some possibility the Sharpe ratio is good, and the comparison to an appropriate stock/bond benchmark would not be so bad.

When I researched EIUL type strategies, I performed a backtest and found that a 0% floor 10% cap resulted in historical returns around 7% and volatility on par with a 30/70 portfolio except with the tails cut off, so to speak.

The problem with these products is not the portfolio, it's the fees, lack of choice, unavoidable cost of insurance charges, and tax/loan issues. Most people are not well served by universal life insurance since if they're smart enough to understand the money and manage the amount-at-risk, loans, etc., they're probably smart enough to manage stock-bond allocations in 401(k) plans and IRAs.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Jack FFR1846 »

petulant wrote: Tue Sep 08, 2020 7:06 am The cash value inside these kinds of policies generally does not decrease at all.
Are you sure?

The cost of insurance is not frozen. It increases as if the buyer is quoting it for the first time every year. As the buyer gets older, even paying full premium, the insurance cost eats the cash value until it goes to zero.
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Jags4186
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Jags4186 »

petulant wrote: Tue Sep 08, 2020 7:06 am Comparing these products to stocks is inappropriate and many of the posters here know it. I'm disappointed. The cash value inside these kinds of policies generally does not decrease at all. A lower return than stocks with lower volatility in returns would normally be completely acceptable since there is some possibility the Sharpe ratio is good, and the comparison to an appropriate stock/bond benchmark would not be so bad.

When I researched EIUL type strategies, I performed a backtest and found that a 0% floor 10% cap resulted in historical returns around 7% and volatility on par with a 30/70 portfolio except with the tails cut off, so to speak.

The problem with these products is not the portfolio, it's the fees, lack of choice, unavoidable cost of insurance charges, and tax/loan issues. Most people are not well served by universal life insurance since if they're smart enough to understand the money and manage the amount-at-risk, loans, etc., they're probably smart enough to manage stock-bond allocations in 401(k) plans and IRAs.
Of course, it's not a straight comparison. But the companies market them in comparison to equity returns "just a little lower return for way more safety". The issue at hand is that the long term CAGR of the market is roughly 10%-11%. The way you get those returns is by having a bunch of 20%+ years with the occasional -40% year. The downside protection of these products is more than offset by forgoing massive upside. These companies know it and that's why they offer the product.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Stinky »

petulant wrote: Tue Sep 08, 2020 7:06 am Comparing these products to stocks is inappropriate....
I agree.

But that’s the way that IUL is marketed Click through on the link - it’s all about equity returns.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by petulant »

Jack FFR1846 wrote: Tue Sep 08, 2020 7:13 am
petulant wrote: Tue Sep 08, 2020 7:06 am The cash value inside these kinds of policies generally does not decrease at all.
Are you sure?

The cost of insurance is not frozen. It increases as if the buyer is quoting it for the first time every year. As the buyer gets older, even paying full premium, the insurance cost eats the cash value until it goes to zero.
You're being pretty selective in your reading. I did list "unavoidable cost of insurance charges" on the list of problems, along with fees. The cash value in these policies doesn't lose money in the stock market, which is the point of the discussion comparing it to investments.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by petulant »

Stinky wrote: Tue Sep 08, 2020 7:55 am
petulant wrote: Tue Sep 08, 2020 7:06 am Comparing these products to stocks is inappropriate....
I agree.

But that’s the way that IUL is marketed Click through on the link - it’s all about equity returns.
Of course you and Jags4186 are correct that unscrupulous insurance agents often market these as "market profits, no market losses," which is wrong and unethical.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by bsteiner »

Stinky wrote: Mon Sep 07, 2020 9:31 pm ... do you know who or what is "MPI"?
In the trusts and estates world, MPI is Management Planning, Inc., a major appraisal firm.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Robert20 »

petulant wrote: Tue Sep 08, 2020 8:12 am
Stinky wrote: Tue Sep 08, 2020 7:55 am
petulant wrote: Tue Sep 08, 2020 7:06 am Comparing these products to stocks is inappropriate....
I agree.

But that’s the way that IUL is marketed Click through on the link - it’s all about equity returns.
Of course you and Jags4186 are correct that unscrupulous insurance agents often market these as "market profits, no market losses," which is wrong and unethical.
So Index IUL is not good?... These days, its heavily marketed a lot.. a lot.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by petulant »

Robert20 wrote: Tue Sep 08, 2020 11:31 am
petulant wrote: Tue Sep 08, 2020 8:12 am
Stinky wrote: Tue Sep 08, 2020 7:55 am
petulant wrote: Tue Sep 08, 2020 7:06 am Comparing these products to stocks is inappropriate....
I agree.

But that’s the way that IUL is marketed Click through on the link - it’s all about equity returns.
Of course you and Jags4186 are correct that unscrupulous insurance agents often market these as "market profits, no market losses," which is wrong and unethical.
So Index IUL is not good?... These days, its heavily marketed a lot.. a lot.
IUL is not a good product overall. You can find ways to use it, but generally holding anything stock-related in an insurance vehicle is a bad decision because the taxes and fees are worse there than in another type of product. Even if you consider IUL as 30% stocks and 70% bonds, having that 30% stocks in the insurance wrapper is not efficient. Further, universal life insurance policies require ongoing, savvy management to ensure the amount of insurance purchased is either minimized or otherwise in line with the policy holder's objectives.

Beyond that, using any kind of cash value life insurance is highly questionable if the investor has the opportunity to save more through retirement plans like a 401(k) or Roth IRA. These accounts are more flexible, can be transferred, can hold stocks and bonds in any combination, etc.

Generally, BH will frown on any kind of investing in any cash value life insurance. Nevertheless, there is starting to be some discussion around whole life insurance with Wade Pfau's research, but even that is highly criticized.

Bottom line, IUL is not a good product 99.9% of the time. If you've maxed out the 401(k) and Roth IRA and would hold bonds, you could start *researching* whether whole life insurance makes sense, especially if you need life insurance coverage.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Robert20 »

petulant wrote: Tue Sep 08, 2020 11:42 am
Robert20 wrote: Tue Sep 08, 2020 11:31 am
petulant wrote: Tue Sep 08, 2020 8:12 am
Stinky wrote: Tue Sep 08, 2020 7:55 am
petulant wrote: Tue Sep 08, 2020 7:06 am Comparing these products to stocks is inappropriate....
I agree.

But that’s the way that IUL is marketed Click through on the link - it’s all about equity returns.
Of course you and Jags4186 are correct that unscrupulous insurance agents often market these as "market profits, no market losses," which is wrong and unethical.
So Index IUL is not good?... These days, its heavily marketed a lot.. a lot.
IUL is not a good product overall. You can find ways to use it, but generally holding anything stock-related in an insurance vehicle is a bad decision because the taxes and fees are worse there than in another type of product. Even if you consider IUL as 30% stocks and 70% bonds, having that 30% stocks in the insurance wrapper is not efficient. Further, universal life insurance policies require ongoing, savvy management to ensure the amount of insurance purchased is either minimized or otherwise in line with the policy holder's objectives.

Beyond that, using any kind of cash value life insurance is highly questionable if the investor has the opportunity to save more through retirement plans like a 401(k) or Roth IRA. These accounts are more flexible, can be transferred, can hold stocks and bonds in any combination, etc.

Generally, BH will frown on any kind of investing in any cash value life insurance. Nevertheless, there is starting to be some discussion around whole life insurance with Wade Pfau's research, but even that is highly criticized.

Bottom line, IUL is not a good product 99.9% of the time. If you've maxed out the 401(k) and Roth IRA and would hold bonds, you could start *researching* whether whole life insurance makes sense, especially if you need life insurance coverage.
They take out 10% from premium as expense charges and there are admin fees/surrender charges for 15yrs etc.. Everything is front loaded charges..

So I am out..
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by mickeyd »

The problem with these products is not the portfolio, it's the fees
Of course it's the fees. It's always the fees(or commissions) that are well hidden from the unsuspecting insurance client. Someone has to pay for that salesman.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Stinky »

bsteiner wrote: Tue Sep 08, 2020 8:53 am
Stinky wrote: Mon Sep 07, 2020 9:31 pm ... do you know who or what is "MPI"?
In the trusts and estates world, MPI is Management Planning, Inc., a major appraisal firm.
On the link, “MPI” is always followed by a little “TM”. So somebody trademarked it.

I suspect that it stands for “Maximum Profit for the Insurer”. :moneybag
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by willthrill81 »

Those who say that there are no bad insurance products, only bad applications of them, are either not aware of indexed universal life insurance or sell the stuff.
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Re: MPI—Indexed Universal Life Insurance Plan— Scam?

Post by Rex66 »

One should focus on the mechanics of these products to determine the return. IUL is just like regular UL but instead of having the money invested 100% in the insurance company’s general account (bonds/treasuries mostly), they invest 2-4% of it in options. The return will be slightly better or slightly worse than a standard UL.
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