Neil Wilding · 25 Aug 2021 · 2 minutes

IUL

The (Surprisingly) Low-Cost IUL Policy

Author: Neil Wilding Neil Wilding
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We bet it’s the most common objection you hear: IUL is an expensive way to save.

You’ll hear it from prospects who did a Google search on saving with life insurance. Dave Ramsey has made it a hallmark of his advice. Fee-only financial advisors hold it as a holy grail.

But is it true?

At Stonewood Financial, we set out to answer the question once and for all: Is IUL an expensive way to save?

To answer that question, we first had to ask: Expensive compared to what?

Let’s look at the average fees in some common retirement savings vehicles:

  • Small Employer 401(k)1:  1.27%
  • Managed Account2:  2.04%
  • Variable Annuity3:  3.00%

We’re not here to say those numbers are expensive or a good deal. These are just the average cost of saving in our industry today.

So how does IUL compare?

It’s hard to tell. Have you ever run a cost report in an IUL illustration system? You’ll get rows and rows of tabular data… all in dollar amounts.

But the rest of the savings industry doesn’t talk about cost in dollars. Your 401(k) provider doesn’t say it charges $6,500 in fees this year; it says you’re being charged a 1.5% fee.

So StonewoodFinancial set out to transform IUL fees into a comparable metric. The result is our Cost Analysis report.

By adding up all the fees paid in a policy and relating it to the impact on cash value growth, our Cost Analysis report can help you compare – apples to apples – client costs in IUL and other vehicles.

Here are the results from a few cases Stonewood Financial members have run for clients this week:

  • 25-year old male:  0.29%
  • 38-year old female:  0.63%
  •  54-year old made:  1.06%

And finally….

  •  66-year old couple: 1.11%

Stonewood Financial’s Cost Analysis software is perhaps the most transformative analysis to hit our industry this decade. So if you’re ready to evaluate the true cost of IUL for your clients, we’re ready to help.

{% icon icon_set=”fontawesome-5.14.0″ name=”Alternate Arrow Circle Right” style=”SOLID” height=”18″ purpose=”decorative” title=”Alternate Arrow Circle Right icon” %}  Click here if you’re ready to learn more.

Neil Wilding
About the Author

Neil Wilding | COO, Stonewood Financial

Strategy expertise and training that actually moves the needle. Neil sees the big opportunities coming - and develops tools to let you take advantage of them.

Real Advisors. Real Results.

See how advisors are using Stonewood software to win larger cases and deliver better outcomes for their clients.

An advisor was working with a prospect who was a real "do-it-yourselfer" when it came to Roth conversions. The client was converting assets up their existing tax bracket – and hadn't considered any impact to IRMAA.

With Roth Done Right, the advisor was able to show an alternate pattern that sped up the conversion to 6 years. The new structure offered $30,000 savings in conversion taxes – a 20% reduction on the prospect's conversion tax bill. The report also showed hundreds of thousands of dollars in long-term tax and IRMAA savings from the converted assets – an amount the prospect hadn't been able to quantify on his own.

Outcome

A new client with $1M in new AUM, and a $1M FIA sale to fund the conversion process.

An advisor was working with a prospect who already had assets with Ken Fisher. Fisher's team presented a 5% systematic withdrawal projection, so the advisor needed a stronger way to frame the income conversation.

Using the Annuity Alpha report, the advisor showed how an annuity could deliver over 8% in annual cash flow with lifetime income, plus a long-term care doubler. The contrast was clear enough that the prospect moved forward.

Outcome

$1.5M placed and a $100K in new business revenue.

An advisor was working with a 58-year-old couple with an established, well-funded retirement income plan, leaving an additional $3M IRA to build out a legacy for the kids. The couple's existing advisor had no real additional plan for this money, other than to keep it in their managed account and grow that money as much as possible for the kids.

Using the Legacy Done Right report, the advisor showed the need for tax planning on this $3M IRA. According to the advisor, the simple analysis "opened up the wallet" to the Roth conversion story. The advisor then used the blended Roth/Life feature in the report to show a blend of Roth Conversion assets with some Life Insurance to help maximize the client’s legacy.

Outcome

$3M in motion. The advisor picked up a $1.5M FIA sale that will be converted to Roth. And the advisor also sold a 5-Pay Protection focused IUL policy at $225,000 of premium per year.

An advisor group incorporated the Total Tax Burden report into the strategy presentation for all new prospects. They ran the tax snapshot for every new client as part of their first meeting conversation, quantifying the growing tax burden of IRA money – and illustrating the kinds of tax savings possible when working with their firm.

Starting in January of 2023, this simple analysis was presented to every single prospect who walked in the door. The goal was to differentiate their practice and drive overall revenue growth through various Roth conversion strategies.

Outcome

From 2022 to 2025, new annual AUM rose from $5M to $50M. Annual FIA sales rose from $3M to $35M. And annual life premium rose from $50K to $1M.

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