From Jaymz on Variable Universal Life insurance (VUL):

"Oh yeah and idiots that think "no load funds" are the way to go, think about it real hard. The company charging the least amonut [sic] to manage your money is the best right. hahahahaha. If you were good at doing something would you charge the cheapest price? Hell no. Simply put the better portfolio managers are going to charge more, BECAUSE THEY GET HIGHER RETURNS, SO THE FEE IS WORTH IT BECAUSE YOUR NET GAIN IS HIGHER. No load funds typically track what the major indices do so they are easy to manage hence cheap. You get what you pay for."

From Lazyboy on World Financial Group (WFG), a company that sells VUL through a multi-level marketing program:

"You konw guys out there i’m a lazy boy as my name but i make around 100k a year can you do that? by just open your month and talk so you do ,cause you guy can do alot of reseach of a company why don’t you reseaching yourself to see you can find out thing you really are.
But anyway i know you can not do it because you guy are american not america
let me remind you guy what Obama said last year , what he did last year and what he promis last year now more than a year ready he still to trying to looking anther ex. to said why he can not done it .
Let me tell why, because me same as AMERICA PRESIDENT OF UNITED STATE only konw how to talk but DONT KNOW HOW TO WORK are you agree!"

I’m not making these up. They came from salespeople pushing VUL and from salespeople recruiting downlines for pushing VUL. There are several more like these in the WFG post.

I don’t know if I should laugh or cry. Obviously shenanigans like this are happening every day. People are sold a bill of goods because they don’t know better and because the salespeople are skillful. Now, should we protect people from such mishaps? If yes, how?

I touched upon this subject a little bit in a previous post Read the Contract and Protect the Consumer. I said there should be an independent body that puts a score on service contracts and that companies should be required to display such scores. I’ve seen letter grades in big bold letters in restaurant windows. Obviously it can be done.

There was a proposal in congress to create a consumer financial protection agency. I have not followed the politics closely but last I heard it was either dying or being watered down. Even at its full scale, I think the proposed agency only puts out more required disclosures and maybe enforces a minimal standard.

I don’t think disclosure-based consumer protection is working, as evidenced by the sales of inappropriate products to consumers who can’t tell a good product from a bad one. Your thoughts?

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He was approached by a friend of a friend who works for WFG. WFG is World Financial Group. It’s a financial services marketing company owned by Dutch insurance company Aegon. WFG operates under a multi-level marketing (MLM) scheme. Instead of selling household products like Amway distributors do, WFG salespeople sell financial products.

WFG’s products of choice include variable universal life insurance (VUL), variable annuities (VA), and equity index annuity (EIA). Many of these products come from Western Reserve Life (WRL), WFG’s sister company also owned by Aegon.

WFG’s salespeople are officially independent contractors of WFG. The MLM scheme makes WFG different from other companies like Ameriprise which also push variable universal life insurance products. In addition to selling the expensive products to a prospect, the WFG salesperson also recruits the prospect as a "downline."

Unlike other companies which usually go after the wealthy, WFG specializes in selling to the middle class. Because of the MLM structure,  the middle class prospects are more inclined to become a downline than the wealthy.

It turned out that my coworker was already sold a variable universal life policy and a variable annuity several years ago. Because the funds in the sub-accounts did very poorly, and because index funds are receiving good press coverage, the "advisor" wanted him to switch to a new VUL policy with index funds in the sub-accounts. Switching, of course generates a new commission to the "advisor." The "advisor" also wanted to sell him an equity index annuity and recruit him as a downline.

My previous post $10,000 Lesson On Variable Universal Life (VUL) received some good comments. All the comments against VUL came from policy owners who were suckered into VUL. All the comments for VUL came from insurance agents who sell VUL. The insurance agents all argue that VUL policies are good for some people. I’m sure. Those some people are like needles in a haystack, when the entire haystack is sold VUL policies.

My co-worker contributes to our 401k plan only to the match. He does not contribute to an IRA. There’s no way he can benefit from a VUL or a variable annuity. I told my co-worker "run, do not walk" way from this "advisor."

Becoming a WFG salesperson is a fast way to lose your friends.

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