World Financial Group - Why the FFIUL--WFG’s Flagship Policy--is a *Disaster*

25 of 251 World Financial Group reviews

Please see attached the chart page from a Transamerica Financial Foundation Indexed Universal Life (FFIUL) policy. A California WFG agent sold this policy to a client earlier this year. Transamerica buries this very important chart deep down in its policy paperwork.

This chart's numbers are Cost of Insurance (COI) charges. Carriers also call them Mortality Charges. For Universal Life (UL) policies--like the FFIUL--COI charges are a constant--and constantly growing--part of your monthly premium.

At first these COIs look small and harmless. But when you add in their multipliers, they swell to enormous charges that threaten to destroy your policy. **If you live to your 80s and older, you can pay much more than your Death Benefit. How can that possibly make any sense for a policyholder to pay?!

Let’s do an example together. You are a healthy non-smoking 35 year old male who buys this policy. You choose a $500,000 death benefit.

Look in the second column on the left, titled “MALE MONTHLY COST OF INSURANCE PER $1,000.” Trace down that column to age 35. You see “0.09333.” This means that, at age 35, you pay $0.09333--a little over 9 pennies--per $1,000 of Death Benefit per month.

“Gee, only 9 cents. Sounds low right?” Not so fast! First you need to multiply $0.09333 by 500. Why? Because you pay 9 cents just for each $1,000 of death benefit. Remember, you bought $500,000 of total Death Benefit. Thus you have to multiply $0.09333 by 500. That gives you a COI charge of $0.09333 by 500 = $46.67 per month. Then you have to multiply that by 12 to get your yearly COI charge. In this case $46.67 x 12 = $559.98 per year.

See how it works? To calculate how much COI you have to pay each year, you have to multiply that year’s monthly COI charge by *6,000.* That’s 500 (for your total Death Benefit) x 12 (months in a year). 500 x 12 equals 6,000.

Now all you have to do is go down the column and multiplying each year’s COI by 6,000. That’s

Age 35: $0.09333 x 6000 = $559.98

Age 36: $0.09750 x 6000 = $585.00

Age 37: $0.10333 x 6000 = $619.98

….

Age 85: $9.98583 x 6000 = **$59,914.98**

WHOA! What just happened there?! At age 85, you pay almost $60,000/year? Almost *$5,000 per month?* Indeed that's -over- $5,000/month when you add in all premium fees.

I’m afraid it’s true! In your twilight years, your FFIUL becomes enormously expensive. So expensive, you are most likely forced to drop it and lose everything you put into it.

Let’s make the math super easy. Let’s say you’ll die at age 85. All you need do is add up the COI charges from ages 35 to 85. Then multiply that by 6,000. It comes to $1.023815 x 6,000 = $614,289. Over $100k more than your Death Benefit.

If you live to 90, it’s worse--MUCH worse. You pay $1,018,374. That’s over a -million dollars-. Twice as much as your Death Benefit.

Wait. You pay over a million dollars for a $500k policy?? Again, how can that possibly make any sense for a policyholder to pay?

Using this simple math I showed you here, please ask your WFG agent how the FFIUL can possibly make sense for anyone who expects to live even a reasonably long life. Please don’t let your WFG agent pass off your question with a vague claim that “your money will grow to cover this.” Please make your agent -prove- to you that your money's growth will cover these enormous late-life charges. Insist he use a hand-held calculator --NOT Transamerica’s Illustration software that can hide numbers and other data from you. Also very important: Ask your agent to do the math at 5% average annual Rate of Return which is close to the long-term stock index rates of Return. That’s very important. You don’t want your WFG agent to use the fantasy 8% and higher Rates of Return that less scrupulous agencies typically use.

It’s almost certain your WFG agent will be at a total loss to defend the FFIUL by the numbers. In his May 25th 2016 review, author William3 lays out a compelling argument for why you'll wish to avoid this policy. It’s titled “World Financial Group - Plan to live a long life? Will your FFIUL--WFG’s “top” product--FAIL and leave you with NOTHING? I show you the MATH." If you bought the FFIUL, I urge you to follow the procedure that William3 spells out for you there. Do this before you meet with your WFG agent so you are fully prepared. Knowledge is power.

WFG agents, if you see any problems with the reasoning and math I present here, please let us hear from you. Thank you.

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EndMLMAbuse

Dec 02 #1248813 San Jose, California, United States

California Anonymous, thanks for your comments. Most of all, thanks you don't deny that Transamerica's FFIUL charges ruinous sky-high late-life Cost of Insurance (COI) charges. COI charges that greatly help make this WFG flagship product a truly terrible deal for ANY customer. All people should *avoid Transamerica's FFIUL like the plague.*
Anonymous, please allow me to correct your mistakes and to clarify misleading statements. You say: "...it is required by law that an insurance company charges the cost of insurance for it to have special tax treatments, according to IRS tax code 7702..." This is incorrect. First, there's no such thing as "IRS tax code." What you refer to is 26 U.S. Code §7702 which defines what is a life insurance contract. Second, you won't find anywhere in §7702 a requirement that says the insurance company must charge the cost of insurance "...for it to have special tax treatments..." Indeed, §7702 mainly stresses that the calcs for Guideline Single Premium must use *reasonable* COI charges (aka Mortality charges)--e.g. here in §7702 (c) (3) (B) (ii):
"...do not exceed the mortality charges specified in the prevailing commissioners’ standard tables (as defined in section 807(d)(5)) as of the time the contract is issued..."
Anonymous, you can read all of this for yourself here:
www dot law dot cornell dot du/uscode/text/26/7702
Anonymous, you mention the California Department of Insurance (CDI). I speak with the lovely folks at CDI
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3 0 Reply
Anonymous

Dec 01 #1248632

I believe you're misunderstanding the idea of cost of insurance.
The cost of insurance is a standardized calculation regulated by the Department of Insurance (or in California we call it the CDI) and EVERY company has it. As a matter of fact, it is required by law that an insurance company charges the cost of insurance for it to have special tax treatments, according to IRS tax code 7702.
Now the question is how these charges are developed. If you look closely at the end of the chart, at age 120, the charge per $1,000 Face Amount per month is 83.33333, which is exactly 500,000/6,000. The logic is very simple -- In the beginning of each year, you put down the cost of insurance as the wager to bet with the insurance company. If you pass away that year, the insurance company pays you $500K, otherwise they walk away with the wager. At age 120, insurance companies are required by law to set the mortality rate at 1.00, which means death is guaranteed. The same logic is then used to develop all COI charge in earlier ages.
Keep in mind that this is an insurance policy -- which means it's not free! There is no free lunch! Take auto insurance for example, the annual premium for a full coverage insurance with minimum deductibles for a $30,000 car is usually around $2,000. That means after 15 years of keeping the insurance with no accidents and no claims, you have paid the same amount for buying another car!
Does this mean we should never buy auto insurance?
Of
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1 4 Reply
Anonymous

Nov 19 #1243002 Ottawa, Ontario, Canada

I think you're misreading the cost of insurance column. It simply states an individual's cost at a given age entry point, so younger buyers have a lower coi than do older buyers. The coi does not increase annually for policy holders as they age. It's similar to buying term insurance, it costs less when you buy it at a younger age than if you buy it when you're older.
Also you say that the real long term gain for the s&p is around 5%. I googled "s&p 500 returns for last 20 years" and the result I got from ycharts says 11.62%. https://ycharts.com/indicators/sandp_500_total_return_annual
I've also seen results saying 9.3%. I don't think it's a straight forward calculation. Just my 2c.

0 0 Reply
EndMLMAbuse

Nov 24 #1245327 San Jose, California, United States

Hi Ottawa, thanks for your comments. About COI charges, you make the same costly mistake MOST folks do. The truth is, your FFIUL's COI definitely *do* reset year after year, usually higher, no matter when you bought your policy. Any FFIUL policyholder who wants to verify this can call 800-PYRAMID (797-2643) and ask for Transamerica’s Inforce Policy Service. Have your full name and your policy number ready to give to the rep.
Ottawa, about what you say on the S&P 500 return: "..."s&p 500 returns for last 20 years" and the result I got from ycharts says 11.62%..." Ottawa, this is irrelevant. Many people expect to hold the FFIUL for 50, 60, 70 years and longer. 20 years is a much too short period of time from which to make any realistic estimates on the true long term rate of return of the S&P 500. It's best to look at the Rate of Return over the longest period you can, in this case 140 years:
www dot businessinsider dot com/the-charts-wall-street-doesnt-want-you-to-see-2011-10
which gives you you 5.75% "average" rate of return over that period.
Ottawa, you can also check here:
www dot moneychimp dot com/features/market_cagr dot htm Also Ottawa, you cite "11.62%." as the return over that 20-year period. That's very misleading. Go to the calculator below "CAGR of the Stock Market." If you run it just as an "average" of the yearly returns you get 10.71%, not far below that 11.62% you cite. BUT, if you look at the relevant measure, Compound Annual Growth Rate
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3 1 Reply
Anonymous

Nov 14 #1240316 San Ramon, California, United States

I am buying a policy from FFIUL with the 5 year payment option. From the illustration, I can see that the cash surrender value will be the same as my policy value after 15 years, which means I can take all the money out without any charge if I see anything goes wrong, such as huge increase in the COI in your example. This looks to me that I won't have any risk if my policy can last for 15 years. Please advise if I have missed anything?

0 0 Reply
EndMLMAbuse

Nov 15 #1241134 San Jose, California, United States

San Ramon, thanks for your very good question. That approach gives at least four problems--one often fatal. First problem, if you are like most people, you won't closely track your FFIUL, so ever-increasing COI charges can quietly chew up its cash value until Transamerica blindsides you with a cash demand. Before you know, you have no more cash value. Second problem, you pay enormous expenses for your policy, often a third or more of your premium. Third problem--the often fatal one--your COIs *will* skyrocket to very high levels as you get into your 70s and older--this is just actuarial reality. With the FFIUL and other Universal Life policies, your COI charge resets at least every year, so the longer you live the more likely you will lose your FFIUL and all the money you paid in to it. The last problem, if your surrender your policy you will have to pay taxes--possibly income taxes--on your proceeds. Instead, you could have invested that money in an ultra-low load S&P 500 like Vanguard's VOO tucked inside a Roth IRA where it grows tax-free. Hope this helps.

4 1 Reply
William3

Nov 03 #1235631 Berkeley, California, United States

John, you're very welcome, and always will be. To be clear, WFG agents push their downlines most of all to RECRUIT. No-one but corporate has the numbers, but from what I've seen, most agents sell FFIULs to people they also intend to recruit, and recruit people who bought FFIULs. The two go closely together, just about hand-in-hand. Even if an agent begins to have his doubts about the FFIUL, he doesn't want to give it up during the commission chargeback period which lasts a year or more because then he'd upset his upline who sold it to him. But truly most of the agents are as clueless as the people they flog these things to. They really don't know how the FFIUL works. Transamerica bought the FFIUL from Western Reserve Life only two years ago, so we have practically no history with it either, but the numbers and the fantasy-high illustrated Rates of Return spell disaster. It'll take a decade or so for the FFIULs to start blowing up big-time. By that time, the upline/agents who sold them will be long gone.

6 1 Reply
Mr valle

Nov 08 #1237991 Pasadena, California, United States

I was *** enough to get recruited with out doing my research.. I bought an ffiul ... I cancelled is amazing the ignorance of this WFG groups people don't know anything about being a financial advisor!!! This is wrong !!! Till I read I realize this people are wrong they don't help families... they rip them off for profit

5 1 Reply
Anonymous

Nov 02 #1235345 Los Angeles, California, United States

Wanted to share this headline and story to add to the conversation:
"Transamerica sued for cost increases on universal life insurance contracts"
Mar 23, 2016
http://www.investmentnews.com/article/20160323/FREE/160329968/transamerica-sued-for-cost-increases-on-universal-life-insurance
Apparently they increased some monthly COI by 38%

6 0 Reply
William3

Nov 04 #1236476 Berkeley, California, United States

Yup. And it's just the very beginning of the grand theft of client money. Retail Universal Life policies--especially very poorly illustrated ones like Transamerica's FFIUL--will prove to be the greatest fraud ever that the life insurance wrought on its customers. It'll absolutely ROIL the industry. It'll force Congress to federalize industry regulation and/or to drop policy tax shelters. The life insurance industry will have no-one to blame but themselves for all its self-inflicted damage.

7 1 Reply
Anonymous

Oct 29 #1233723 Boston, Massachusetts, United States

Would there be any benefit of getting an ffiul at a reasonably young age? Say 19 instead of 35 years old.

8 0 Reply
EndMLMAbuse

Oct 30 #1233962 San Jose, California, United States

Hi Boston. Thank you for your good question. The answer's an emphatic NO. Transamerica's FFIUL is a terrible deal for the policy buyer at any age. Even if his parents buy it for him when he's a newborn baby.
If an 18 year old man buys a $500k policy and lives to "pay off" his policy at age 95, he'll have paid $277,500 in premiums for his $500k death benefit.
Instead, if he'd invested that money in a very safe and very low load tax-sheltered ETF--much safer and higher yielding that the FFIUL--he'll have made *millions of dollars* over that same 77 year period.
Boston, let's recap. Over 77 years, you make only $222.5k in the "black box" FFIUL. You make *millions of dollars* in the much safer ETF.
The decision is easy: AVOID the FFIUL.
The FFIUL is very bad for everyone except Transamerica, WFG Corp and the agents who sell this and get the commission overrides.

11 1 Reply
Anonymous

Oct 27 #1232897 Newport Beach, California, United States

Since my friend you have done quite extensive research. I just want to ask you for a simple advice. If I want a permanent life insurance for the protection of my family and at the same time take the advantage of building cash value inside my policy. Do you know or recommend anything better than Index Universal Life than can provide the benefit of Protection, Cash Value and Tax Advantages. If you know any other Kind of Life Insurance out there that can perform better than IUL let me know please. I looked into Term Life ( Which is Temporary ) , And also looked at whole life and Universal life ( Cash Value Growth is Horrible ) and also the Variable Universal life( I dont want to risk my money in market) . So my request is , am I missing any other type of Life Insurance that might be better than IUL. I do have other Investments like 401(K) and Mutual Funds , I do not want more baskets with Risk. I found out IUL can give the protection and growth at no risk. I know not every product and solution out there is best . But please Advice if there is anything better than IUL this time. If there is NONE! Why will your oppose it , if it is the best in its category ( Regardless what it costs, because nothing is Free)
Thank You

2 12 Reply
EndMLMAbuse

Oct 28 #1233274 San Jose, California, United States

Hello Newport Beach. Thank you for your question. I recap it for us here:
"...If I want a permanent life insurance [that also lets me build ] cash value inside my [tax-sheltered] policy...Do you know or recommend anything better than Index Universal Life?..."
The short answer: Nearly *all* Universal Life policies--including IULs--will LAPSE before you die. It's better to ask why you should pour many thousands of dollars into an insurance policy that you're almost *guaranteed* to lose anyway? Why spend so much if you will lose all your death benefit and your cash value?
That's really throwing your money away!
Let's look more at the myth of "permanent" life insurance. The following data comes from one of the best and most credible sources available to us: the Society of Actuarials (SOA). The SOA has supplied key expertise to insurance companies for most of America's existence.
Even the best type of Perm Life, Whole Life, has high failure rates. Whole Life guarantees your premium level and your death benefit, and it still has a 80%+ lapse rates in the 60th policy year. ULs, which are much riskier, have much higher fail rates, approaching that of Term Life. Very few Universal Life Perm Life policy holders actually hold their policies until they die. Lapse rates for Term Life policies are 94%, and 93% for Universal Life policies (by the 60th policy year). You can expect the fail rates to be much higher--nearly 100%--for Transmerica's FFIUL, WFG's main product.
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16 0 Reply
William3

Oct 29 #1233646 Berkeley, California, United States

Newport Beach Anon. Where's your evidence that the IUL isn't a disaster? What's its actual track record? Give us links please. Links to actual credible impartial sources. Thank you.

15 0 Reply
john43

Oct 29 #1233701

Hi William...I see a couple of I supect wfg agents doing us some reverse psychology again...you know i'm just a client but I will defend it with not a crumb of FACTUAL EVIDENCE...Thanks for doing great work providing facts of how wfg and the iul's are disastrous to anybody buying it! It's funny how they think a client would think this way..lol.

14 0 Reply
William3

Oct 30 #1233982 Berkeley, California, United States

Hi John, great to hear from you. Thank you mon vieux for your very kind and supportive words. I'm very happy to be able do what I can here.
About WFG agents, I can't stop shaking my head about them and their sad and sorry see-through ploys. These subhuman viruses ride the night express from Clueless City to the shabbiest suburbs of *** itself. Getting totally blotto in the Hi-Belief bar car along the way.

12 0
William3

Aug 12 #1198180 Berkeley, California, United States

Yeah. Don't think we'll hear from "Glendale" anon anymore about actual FFIUL math. He'll just slink back later under another guise. What a waste of a life.

28 0 Reply
Anonymous

Aug 10 #1197471 Glendale, California, United States

The math you did ain't right. You used the most expensive years of coverage as an example for all the years. You seem to be the dishonest one.

3 36 Reply

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