help! friend peddling WFG and VUL's

[bright eyed]

thanks lswein...

crunching numbers and concrete examples definitely help.

well, i took the plunge and sent an email, let's see how it goes, we're supposed to try to meet up tomorrow.

 

[bright eyed]

well, we had a good heart to heart today.

turns out she didn't even read the email yet, but we talked about it when i asked her if she saw it.

she has signed up for the IEUL - the one w/ the guarantee, min and max and is putting in $350 month which, for her i think is a lot of money.

she wasn't completely comfortable with it and i told her to look at what fees she is paying for it. it has $1 mill in life insurance, and she's convinced she needs whole life because "these days" everyone is dying with debt (great plan!), something her cousin has said in conversation, she could be getting $1 mill in coverage term for less than a hundred bucks a month, but she's stuck on whole.

but at least i think i put some pebbles of doubt and told her to make sure she's reading things outside of materials or classes she's taking thru their firm.

i was very frank - she again, did say she thought i would be good at it - and i told her flat out i wouldn't affiliate myself with a company with such a bad reputation - the line they give her about that is that all corporations are bad or have some bad traits - and i told her no, hers in particular is really really low (lowest) out there.

so i think the good thing is that we agreed to continue to talk and learn about this together and that our friendship was the most important thing and since we've been friends so long we can trust each other to look out for each other.

i do think her cousin has imparted a lot of risky ideas in her head, like pulling out equity to invest in the market etc etc. i just told her to take her time and that she has a huge responsibility because she is the only steady income earner in her house so she can't play risky business with her money...i guess that will be another thread someday! (hope not).

 

[audreyh1]

Wow - you are a TRUE friend!

Audrey

 

[bright eyed]

thanks audrey,

actually, my friend is one of the best friends a person can have. she would do anything to help a friend - or even a stranger out - in fact that is part of her problem! she's too trusting and doesn' t see how people can have different motivations... she has been there for me through all of life's ups and downs and that's why i'm sooo emotional and personal about all this stuff - if it were almost anyone else i wouldn't be so embroiled in it all.

at least the line of communication is open... and thanks to everyone again for their advice

 

[mickeyd]

putting in $350 month which, for her i think is a lot of money.

Wow if the cousin is getting paid @ an 80% commission rate, he will be pulling in $3360 in first year commission. Not bad for a few lies here and there.

 

[soupcxan]

Tell your friend to stop wasting her time with this nonsense...everybody knows that Wealth Lab! is the only way to get rich...and boy is it quick!

 

[bright eyed]

Wow if the cousin is getting paid @ an 80% commission rate, he will be pulling in $3360 in first year commission. Not bad for a few lies here and there.

oh, don't make me sick! she also said he has near 100% rate of signing people once he sits with them - which i couldn't believe since he is sooo classic used car sales type. guess there are too many people out there who want to believe someone can make them rich without any work on their part...except signing over that check! i guess people mistake self confidence for knowledge!

 

[mickeyd]

he has near 100% rate of signing people once he sits with them

This sounds a bit steep however, salesmen that start out with these kind of companies are required to generate as many as 100 sales leads per week and produce immediate sales results if they want to keep their job past the training period.

What better way to assure that the salesman will get an appointment and make a sale if not to the folks that he already knows such as friends and family? Generally after all of the friends and family have been fleeced made clients, the salesman finds that it is much more difficult to sell to a total stranger and he is eventually terminated for non-production however the new clients are stuck with their financial misadventure questionable investments mess.

 

[FinanceDude]

oh, don't make me sick! she also said he has near 100% rate of signing people once he sits with them - which i couldn't believe since he is sooo classic used car sales type. guess there are too many people out there who want to believe someone can make them rich without any work on their part...except signing over that check! i guess people mistake self confidence for knowledge!

And so many of these people call themselves "financial advisors"..............

 

[bssc]

guess there are too many people out there who want to believe someone can make them rich without any work on their part...except signing over that check!

I think that you hit the nail on the head. Do you think that in addition to trusting her cousin that she is a little bit greedy and wants to believe?

 

[excellent]

I really, really, really want to have the phone number of your friend. This story disgusts me. One MILLION dollars in life-insurance? Does she really have that much debt to pay off if she were to die tomorrow? At most a reasonable insurance amount would be 10 times her income. Based off of the fact that she is in this company and is not a ceo, I would guess she makes less than 100,000 dollars a year AFTER tax. Not to be rude, or mean, or anything like that, but I want to punch that guy in the face. What kind of relative would be willing to... sigh... you guys already understand the situation, but the poor friend here obviously doesn't. People like the relative infuriate me and are a prime example of how this business model encourages people to take ridiculous steps like this in their quest for money. I'm not going to jump to conclusions but I'm pretty sure that she isn't maxing out her 401k (Hopefully the 401k is diversified, you should check with her on this also) and IRA contributions, but is dumping a lot of money into this EIUL which I doubt she needs. If she got term life, 30 year, for a reasonable face amount, invested the rest into retirement, emergency, and general portfolio amounts, I am almost certain that it would yield a much happier financial future for her. How long ago did she sign up for the policy? I have tried to run the numbers, but you should look at her policy and PLEAD and BEG with her to cancel it if it's still in the grace period of 30 days or whatever, because of the fact that this is EXPENSIVE stuff, as you can clearly tell. The only way that someone would want this is if they wanted to be insured forever and protect against health problems later on in life, are making so much money that their estates would need some extra help from the insurance, and already have a sizeable amount of assets etc., because otherwise it's much too expensive of a policy. Now, maybe she DOES make enough money to fully fund everything, but from what you've said it doesn't seem like it.

The reason I am so angry is because I am an associate in World Financial Group, and I know exactly how people like that guy operate. It pisses me off. He "recruits" people, sells them on a dream of becoming huge in the financial industry, doesn't really help them, and just hopes that they buy insurance off of them so that they get the commission and can also recruit large amounts of other idiots who can't sell insurance to anyone other than their friends and family. It's simply not possible for more than 10% of people in WFG to become successful, I'd venture to say that about .5% of them have any sort of brain at all, probably even less have graduated anything other than high school to get a degree, and almost everyone is out to make quick money at the expense of people's future livelihoods. If everyone fully understood and followed the REAL mission of helping families with their finances then situations like this would simply NOT happen, but sadly instead a mentality of recruiting people who might never even get what they are doing and making money off of hapless friends and family is spread throughout the company in all of the meetings, conventions, etc.

The EIUL- Equity Index Universal Life, is a solid product from Western Reserve Life, but only when it's applicable to the client. I would need to see some more numbers but as I've said, it probably isn't for your friend.
Oh and to whoever said that it was 80% commission, it isn't, or at least to my knowledge it shouldn't be. Commission is divided into a tiered pay structure based on your current position in the company, and that position is based off of how many sales and recruits you can get in certain timeframes. It's 25/35/55/65%, with 2/3/.5/1.5 incremental percentage bonuses for various licenses and things. Anyways, I really think that you should look over her finances some more, really help her sort this out, and NOT LET HER GO FORWARD WITH THIS BEFORE SHE TRULY UNDERSTANDS WHAT SHE IS DOING. SHE CAN REALLY HURT A LOT OF PEOPLE'S FINANCES IF YOU LET HER FOLLOW IN THIS WOLF'S FOOTSTEPS. Take it from me, I just went to a WFG convention that was held in Oakland, California, in order to see more about this company. My personal goal is to field a huge number of licensed INTELLIGENT agents, instill in them MY personal values, and basically overtake any other wfg idiots in my market areas, and in this way protect families from the many predators that lurk around and prey on the innocent and financially unaware.

I have put some thought into it, and for now, the only way to beat them is to join them, hopefully if I succeed... well... at least in the areas that I have agents in people can actually get some help beyond having exhorbitantly expensive insurance in excess of what they need pushed on them. WFG and companies like it are expanding at explosive paces, and the trend seems like they will continue to grow as the average American's financial knowledge continues to decrease.

And I have to agree with the person that said that it will be years before her and her family realize the financial damage. But on the other hand, they may never realize what they potentially could have had. Add to that the fact that there are millions more out there that are going to be "helped" by "financial planners" in a similar way, and I don't think that our negative real savings rate is going to reverse itself anytime soon.

 

[excellent]

Thank you bright-eyed, this story has inspired me while at the same time pissing me off so much that I am greatly reinforced in my dream of knocking this industry's legs out from under itself.

 

[bright eyed]

hi excellent,

thanks for your passionate reply!

I'm confused, however, why you would want to work for a company with such a poor poor reputation?

From what i found, Western Reserve's fees are the HIGHEST allowable by law - so i wouldn't say it's a good policy myself, which i pointed out to my friend. I know sometimes you can feel like you can change from within, but that really seems not plausible since their whole business model is flawed. They make money off of pumping people up on hopes and dreams, collecting $ and then people burn out or teeter out because of many reasons.

She doesn't make enough to justify the policy (about $60k? gross) and upon her cousin's recommendation is only putting into her 403b up to the match...i'm not exactly sure where she is getting the $ to cover the monthly premium because she was paycheck to check before...

it sure sounds like your heart is in the right place, but i am concerned you will just feel burned yourself in a few months or years.

 

[excellent]

Western reserve isn't the only company I can offer insurance through, I think I'm just going to end up giving term to most individuals through pacific life or something. Uh... hey, where did you get the numbers for western reserve, I'd really be interested in them.

By the way I have a hunch that the way they pay for the agent's commission is a. through hidden fees. b. ridiculous insurance price, because there are, like a lot of insurance plans, a lot of hidden fees in the prospectus. Anyways yeah... your sister definitely doesn't need 1 million, she would need 600,000 at the most, that's if down the line she felt that her death would need to pay for the mortgage, her kid's education, the cars, and whatnot, well, you probably know how to calculate insurance even better than me... a lot is personal belief in how much you need though... so... well... good luck bright eyed, I really respect what you're doing as a friend.

 

[bright eyed]

i think part of it is a fundamental philosophy to personal responsibility.

her cousin is saying most people these days die w/ a huge debt (we live in CA, so all those $700k interest only mortgages come home to roost some day) so he's telling her she needs the whole life to "plan" for the future. My personal belief system says that's unfair to the economy and others so no, i'm not going to bail myself out w/ a life insurance plan (at least not plan on it now ) as well as a poor investment strategy.

she does have two young kids, so she should have at least enough to cover their needs should something happen at any time so she may need more than $600k, but she could still avoid all these probs with a good term policy.

here is link to consumer fed article on vul's http://www.consumerfed.org/releases2.cfm?filename=022403ror.txt go to the link on the guys analysis - buried on around page 6 he goes over fees...

i think the 80% is calculated on - if you take the $350 premium, over 12 months that's only $4200, the agent probably got around $3500 in the first year from signing the policy - they technically say the "commission" is payed by the company, not by the client, but whatever you say, it's getting paid somehow. part of the "logic" is that most people have a tiny percentage chance of dying in the first few years of signing the policy, so they can afford to throw the $ at the agents without as much risk...in the first year.

 

[FinanceDude]

Most if not all VUL or whole life policies are quite expensive in the first 5 years or so........as the costs of paying the agent (large) are amortized on a weighted basis in the first 5 years of the policy. If you looked at an average policy illustration, you would see that the cash value would not grow very fast, as any dividends are forfeited to pay the agent's commission.

Hopefully these are NOT being presented as an "investment"........if they are, those folks are in violation of NAIC and SEC laws, and could face severe penalties...........

 

[CybrMike]

My uncle (by marriage) is an Amway multi-millionaire. Started in 1978 (or maybe 79?). Now he is retired and lives in Maui a couple months out of the year.

I got "sucked in" to Primerica back in the late 80's................

MLM companies do a "GREAT JOB" of keeping the cult going, with tons of "rah-rah" meetings and the like............

I personally know of NOONE that has made substantial money on them........and a few who almost ruined their lives "chasing the MLM dream"...............