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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76396  
Subject: Re: Hi gang... wow!!! Date: 9/18/2013 1:47 PM
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Hi Ray,

Dave seems to wave away. It's right there out in plain sight explicitly stated in every IUL I've seen.
"Cap is subject to change at our sole discretion. Changes to the cap are not tied to the performance of the underlying index and may be based on interest rates, market volatility, and other factors."


I don't waive it away... we've addressed it before. It's a valid concern, but not a random risk without a degree of control.

Caps are not wantonly changed at the whim of a greedy management... not when a company is at the pinnacle of the competitive melee. Further, properly designed contracts (designed for performance and liquidity protection) give a contract owner options to roll out of, or liquidate entirely, the contract with no penalties.

Choosing the most stable, established and competitive firms, who offer the flexibility to structure the contract for defense of liquidity and maximum financial performance, contains and dramatically reduces any risks of disparate cap reductions that don't reflect the overall markets.

Otherwise, when the industry across the board, regardless of competition, adjust caps downwards... the risk-weighted options elsewhere are also performing worse. And the opposite... when risk-weighted investment options begin to rise in returns, the insurance trading desks have larger yield providing larger budgets to buy more upside returns... and if they try to pocket the yield instead, they lose their general account balance as cash flees to either other competitors, or other securities.

IOW, they key is;
1. Choose the 8,000 pound competitive gorillas to ride,
2. Design your contract for performance, and ease of exit,

Dave Donhoff
Leverage Planner
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