Almost every one has visions of getting rich. People with money to invest, estate and financial planning professionals, and many an insurance company wanting their assets to grow faster than all competing investment insurance companies do. It does not take a genius to make the analysis that it does not take much for something to go wrong. History used to repeat itself, but in today's global economy history, investment and asset values can quickly revolve.
PREDICTIONS SHOULD BE LEFT TO FORTUNE TELLERS For well over 100 years, and increasingly in the last 25, investment and life insurance companies have attempts to develop irresistible products to people that had money to invest or save for their retirement. The fortune tellers were the estate and financial pros who used past historical investment gain figures as predictions for the future. Clients were told that history does not lie, and that in the long-range the amounts their money would increase were as good as gold.
THE RULE OF 72 BITES BACK This financial calculator that anyone could memorize in their head as illustrates as the golden rule of truth. After all, logically the figures produced were accurate, as long as the interest rate was not inflated. In fact, it could have been considered a King Kong sized eraser of United States Treasury Savings Bonds, and Band Certificates of Deposits.
Let say that the estate planner's financial product showed a current or a past overall historical illustration of 8% interest and the prospective client currently had money averaging a 4% return. The Rule of 72 tells you to give an interest rate and divide it into 72, and that is how many years it will take your money to double. On a $50,000 amount at 8% it would equal $100,000 in 9 years, $200,000 in 18 years, $400,000 after 27 years, and a whopping increase to then $800,000 at 36 years,. The client's current investment of $50,000 at 4% becomes $100,000 after 18 years, and then doubles again to result in $200,000 at the 36-year mark. The investment analysis shows a projection increase of $600,000 extra starting with the same initial amount.
A flood of new estate planning professionals and financial pros entered the arena with such an easy marketing concept proven by past history to work. Investment insurance companies could rapidly increase their own assets by coming out with an array of products with returns linked to equities, indexed annuities, or any fluctuating rate of return indicator. Using the rule of 72, the Mutual Fund market exploded with people investing for the future. While the commissions and fees paid to estate and financial planning professionals were at a low rate, the high amount of investment capital obtained by eager clients outweighed all this.
THEN THE FINANCIAL CEILING CRUMBLED Financial and Life Insurance Companies were predicting returns that they could not live up too. Some with 10 year guarantees that will haunt them for another decade. To have the highest amount of financial assets, it meant selling more of these products than the competitors. As life insurance company rating lists often considered financial assets as a prime consideration, the world economic downfall hit most of these largest companies the hardest. Some with a greater diversity, like MetLife, have a better chance at a quicker recovery.
Many estate planning professionals, have almost been forced to hide in the sand. If client's assets dropped from a $1,000,000 to maybe $500,000, some explanation is due. The rule of 72 worked in a fast reversal showing how fast a sudden plunge could cut their liquid estate assets in half. Now it you take a sunny outlook, take reading on the rule of 72. Assuming a good return of 6% average, it would take 12 years of not spending any of that $500,000 to get back to the original $1,000.000 mark. Plus so many people from lower middle class with 401k's to wealthy with indexed products will not get any net gain, despite inflation and gains, during this twelve year time period.
FINAL MARKETING ANALYSIS For professional insurance agents a great opportunity lies ahead. It is the perfect time to have prospects stop thinking about greed and covering the emotional need of asset protection loopholes first. After all, as many agents are now seeing, you are an insurance asset protector first, and an investment analyst second. Agents well diversified in their product selling are not feeling all the economic impact from their clients. Estate "professionals" are having a hard time justifying the word professional or investment specialist.
[expert=Donald_Yerke]
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