Index universal life: managing client expectationsBlog added by Katherine Vessenes on February 14, 2013
Katherine Vessenes

Katherine Vessenes

Chanhassen, MN

Joined: August 21, 2010

My Company

Vestment Advisors

It is critical to manage client's expectations with indexed universal life (IUL), particularly since the product is so complex.

One of the ways we handle these issues is to tell clients up front: One, these are complex products, and two, they must be managed like any other investment.

We won't take on a client unless they agree to meet with us at least annually. Most of our clients have between three and six meetings up front to get their business set up. After that, we usually meet quarterly.

I have a lengthy checklist of IUL disclosure items that we use. We go through at least part of the checklist in every meeting, particularly review meetings. So by the end of the first year, the client has heard the same disclosures between three and six times. We also send the disclosures out again in follow up notes.

I think the major problem with ULs of the 1980s (and I am one of the few advisors around who actually remember those days) was two-fold: They were sold incorrectly and agents didn't manage the client's expectations. No one wants surprises in this business. I still have a UL from the 80s — and am glad that I do — but I knew what I was getting into.

We manage clients expectations by telling them over and over what is guaranteed and what is just an estimate. Then, we like to do the expected rates of returns at the 100 percentile, explaining this is not a guarantee of the future, but it is statistically likely.

I don't want my clients surprised, so we make sure we always cover both the upsides and the downsides of any investments.
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