If you are an “independent” advisor, the chances are high that when you sell a fixed insurance or annuity product, you do so through an IMO (Independent Marketing Organization).

                IMOs were formed years ago to educate advisors so insurance companies didn’t have to. Today, very little education takes place and IMOs are simply ways to pool agent’s business in an attempt to get larger payouts for agents and the IMOs.

                What many readers don’t know is that I actually work with an IMO and have worked with a few IMOs going back over seven years.

                Why do I work with an IMO? Because many advisors like to use me for case design and many more want to get access to my unique marketing tools (click on the following link to learn about my marketing tools: http://strategicmp.net/i-want-my-marketing-tools-now ).

                Instead of charging advisors hourly for my advice and instead of doing “joint casework,” I get paid by the IMO I work with when advisors I recruit put business through the IMO. I like this model because it doesn’t take money out of an agent’s pocket.

                But I hate IMOs (title of this newsletter). Yes, I do hate most IMOs. The question is why?

                Last week I was forwarded an IUL illustration that so upset me that I decided to create this newsletter. As you see at the top of this newsletter, I recently did a webinar on a new IUL product that’s just hitting the market. From those types of newsletters, agents will forward me illustrations they’ve received from the IMO they work with. Agent asks me to compare illustrations from the IMO they work with to the new IUL or to any other product i think is best for their clients.

                IUL for retirement for a 70-year old?

                An agent recently forwarded me the following illustration. Here are specifications:

                -Age 70 preferred health
-$25,000 a year for 10 years
-7.1% crediting rate
-Borrowing from age 81-120
-Of course the company of choice is one of my least favorite (MN Life).

The agent was given two illustrations; one where you borrow from the policy in year two to pay income taxes and one not. The illustration where you yank money out in year two to pay income taxes is particularly abusive.

Amount of borrowing?

$20,459 a year (normal illustration)

$26,585 a year (borrowing in year two to pay income taxes)

                The borrowing in year two to pay the taxes is very dangerous. The marketer at the IMO is trying to pump up the numbers by borrowing in year two to pay the income taxes. Because the default illustration has a positive loan arbitrage, that benefit starts in year two vs. year 11 when the insured would be borrowing for retirement cash flow.

Early variable loans can be catastrophic if the market goes flat. The policy instead of crediting 7.1% as budgeted will credit zero. That means there will be a negative loan arbitrage in flat or negative years.

                Tax-Deferred 401(k)/Profit Sharing Plan?

                A 70-year old (or a 65, or usually a 60-year old) would be better off or much better off using a tax-deferred 401(k)/profit sharing plan. I don’t have room in this newsletter for the numbers but if you’d like to see them click here.

                Caution from the IMO?

                I asked the agent if the IMO warned him that selling an IUL to a 70-year old might be dangerous. I asked if he was warned about the dangers of early variable loans in IUL policies (like I see quite often with the biggest scam in the industry-IRA rescue (see www.stopirarescue.com for my consumer protection website)).

                The answer to both questions was NO! The IMO marketer at the IMO did NOT say anything cautionary about this sale. This is truly outrageous and unfortunately it’s more the rule than the exception.

                Is Your IMO Any Good?

                The bottom line is I know just about every IMO in the industry. How many do I trust? Let me just state that I currently work with only one IMO. Keep in mind I have IMOs asking me all the time to refer agents to them.

                If you wonder if your IMO is any good, just forward me the illustrations you receive and I’ll be able to tell you almost instantly if it the illustration was designed correctly and if they are recommending a “good” policy.