SEP 30, 2015 | BY VAN MUELLER
Insurance agents and financial professionals ask me one important question almost every day: “Am I hurting my clients by being too conservative? Should I be more aggressive with their retirement money?”
If you listen to the media and Wall Street, you might be led to believe that the answer to that question is “yes.” But if you understand the math, you will come to realize that the answer is absolutely “no.” You are providing solid foundations for American retirements.
Allow me share the math with you. I will give you three examples that I hope will assure you that you are doing the right thing for your clients.
On July 31, 2013, the Dow Jones Industrial Average closed at 15,499.54. On September 4, 2015, the Dow closed at 16,102.38. That is a 3.9 percent increase in 25 months, or a less than 1.95 percent return for those two years.
It was not that long ago that the Dow traded at a high of 18,351.40. Everyone claims they will know when to get out, but I do not know anyone who actually got out of the market at the top. It only took a few weeks for the market to lose more than 2000 points. Does it seem like the market will increase steadily in the years ahead or could the growth be more turbulent?
Meanwhile, could anything in the fixed interest insurance product marketplace have equaled or exceeded that return? Of course! Almost everything we sell did better, and without any of the volatility.
But remember, we are always told to buy and hold; and to never try to time the market. So let’s try a longer time frame.
On October 1, 2007, the Dow Jones Industrial Average was 14,087.55. On September 4, 2015, the Dow closed at 16,102.38. That is a 14.30 percent increase in eight years, yielding only a 1.79 percent annual return.
Again, there were many annuity and even life insurance products that would have provided better returns, and without the volatility. Plus, because I had leverage and access to the values in the insurance products, I could have used them to actually take advantage of the volatility without putting my client’s money in jeopardy.
On December 1, 1999 — the month before the Y2K threat — the Dow Jones Industrial Average was 11,497.12. On September 4, 2015, the Dow closed at 16,102.38. That is a 40.05 percent gain in sixteen years, translating to a 2.58 percent annually.
I have life insurance and annuities which would have easily have surpassed all those results.
Many will claim that I did not include dividends in my analysis. But even at two percent dividends, which they did not pay, the markets would have had difficulty exceeding insurance product returns. Furthermore, using leverage, access to cash values, and guarantees of no losses, I could have provided even better results.
You should never mess around with anyone’s retirement by trying to guess what the markets will do! Especially because you simply do not have to: Over time you will be able to deliver comparative results without the volatility. You must show your prospects and clients that you can provide more certain streams of income than they can receive from any other source.
You should never have any doubt about the guarantees you provide. You can provide safety and security in an uncertain time. What a great time to sell our products!