Ameriprise Rolls out an EIUL Policy

OMG–Ameriprise Just Rolled Out an EIUL Policy
Find Out If It’s Any Good

         No, H-E-L-L has not frozen over. It’s true. Ameriprise recently rolled out its own Equity Indexed Universal Life (EIUL) policy. 

         Why is this so shocking? —Ameriprise is a Broker Dealer (BD) that until the introduction of this new product has forbidden its advisors from selling anything “indexed” (Fixed Indexed Annuities (FIAs) or EIUL).

         Ameriprise used to be American Express Financial Advisors (AMEX) —Let me back up a bit; not everyone knows Ameriprise. Ameriprise used to be AMEX. For really what are scandalous reasons, AMEX, a firm that was branded very well over the last few decades, changed their name to the much less interesting and recognizable name “Ameriprise.” To learn why others think the name change was made, please click on the following link: http://www.thewpi.org/?a=PG:1457.

         Is the introduction of this product a big deal? —Yes and No.  To have a BD, that until now forbid advisors from selling any indexed product (FIA or EIUL), roll out a new EIUL is a big deal. This may foreshadow what other BDs will do in the future as they worry about losing continued market share to companies offering FIAs and EIUL policies. 

         However, companies that don’t specialize in indexed products will be fearful of mispricing them; and therefore, it is my guess that most BDs offering FIAs or EIUL products will be non-competitive for many years to come.

         Is the new Ameriprise EIUL any good?No. Not from my initial review of the policy. Let’s take a look at the key terms of the policy:

         –11% annual point-to-point cap—this is just terrible by industry standards. 

         –Default crediting rate = 7.09%—this is very low. I don’t use default rates when doing my own illustrations, but two of the policies in the Retirement Life™ platform have default rates in excess of 8.75%.  To learn about the six Retirement Life™ EIUL policies, please click here

         –NO participating loan option—there is no ability “make money on borrowed funds” in the Ameriprise product. This is one of the biggest selling points of an EIUL policy.  In most EIUL policies, owners have the option to borrow money at a particular loan rate (say a fixed rate of 5%) and let the money in their policy grow at market rates of return in an effort to earn a positive loan arbitrage that will significantly increase the amount of money that can be borrowed from the policy.

         Example illustration—let’s look at a comparison example with the new Ameriprise product and my favorite Retirement Life™ policy. Let’s take a 46-year-old male, preferred non-tobacco, who pays a $15,000 premium for 24 years and then borrows from the policy at age 67 for 24 years. I will use the default illustration numbers for both policies.

         Annual borrowing from Ameriprise policy                             = $43,468

         Annual borrowing from best Retirement Life™ policy        = $94,216       

         Which one do you think a client would like better? To ask the question is to answer it.

            Forbidden from selling anything else!—if you’ve read my book, Bad Advisors: How to Identify Them; How to Avoid Them, you know I despise BDs who tie the hands of their advisors which prevents them from giving clients the “best” advice. Ameriprise is near the top of that list. To learn about my Bad Advisor book, please click here

         The following quote from the advisor who forwarded the example illustration to me should make you sick:

“This is the proprietary EIUL that Ameriprise agents MUST use

         What do you think the chances of an Ameriprise advisor disclosing to clients that the policy is not very good as compared to many other EIUL policies the client could buy from a non-Ameriprise agent? ZERO!

         Summary—The more things change in our industry, the more they stay the same. When I heard the industry shattering news that Ameriprise was going to offer an EIUL policy, I knew it wouldn’t be very good. Now that I’ve reviewed the policy, that suspicion has been confirmed.