Spring is here, time to enjoy warmer days (if you're with me in the Northeast), blooming flours, and a fight between a so called financial educator who hustles a selling system to insurance agents known as Bank on Yourself and a fee based financial planner who is pretending to be a consumer/journalist. Here's the story.
So what does this all mean? Pam is being exposed for the swindler she really is? Allan is looking to knock some competing savings strategies off the table as he competes for your business? Or perhaps CBS is just doing what all good media outlets do, selling a story. Let's take a closer look at this, shall we?
Let's Begin with a little Full Disclosure
Unlike Pam or Allan I want to begin by noting where my self interests lie in all this. As the owner of an insurance agency that specializes in executive compensation planning (and extending that application to non-business individuals by using heavily over-funded cash value life insurance plans) I'm personally not hugely in love with either Pam or Allan. Though I've been known to reference the use of non-direct recognition loans in a life insurance policy, and I think Pam has done a decent job paving the way for starting the conversation, I think her approach and promises are way overstated. I also think they use a lot of risky funding strategies for a product that is supposed to be all about safety and stability (e.g. using home equity as a means to purchase life insurance).
As for Allan. He and his RIA are about as much competition to me as Pam. Pam may drive a few more people my way, but she does try to keep her hand around those whose curiosity has been piqued by her book, that's why her book and web site are peppered with direction to her “certified BOY advisers” something I am not, nor have plans to become. Allan founded and owns an RIA called Wealth Logic, and according to his web site, he doesn't do a knocking-it-out-of-the-park job making money as a fee only advisor, of course that's an extremely subjective assessment. Anyway, the point, non of us is necessarily bring this up for the good of all mankind.
My Big Gripe with Pam and Bank On Yourself
For starters you aren't guaranteed to get back every dollar. This is something I wish both Yellen and Nash be more upfront about. But, there's something that an illustration cannot show and that's the fact that loans represent income to the insurance company, and that income really can be returned through dividends and/or interest. This is the key principal behind mutuality. Still, Yellen and Nash both have a pretty fast and loose approach to discussing this subject. Does this blow all of the lost opportunity stuff asunder? No. It's still very true that dividends and/or interest are paid when a policy loan is outstanding. There is nothing else out there that can rival the return cash value life insurance has historically brought to the table and be as un-effected by taking money out. CD's loose interest (some you might have paid taxes on), Stocks and mutual funds have no real guaranteed return component and are wildly susceptible to timing of both purchase and sale/redemption, and bond's don't really liquidate whenever for any reason just because you felt like it.
Quality of Advice?
It easy to want to think that Allan was given quality advice by virtue of seeking out a Certified BOY advisor, but here's the ugly truth, Pam's vetting process is pretty lax. If you're willing to pay the monthly fee to be a certified adviser, and go through the training, you're pretty much in. Like anything else that's out there, the certified status achieves one main goal, marketing one's practice. Does anyone honestly think there is something super special going on at Camp Yellen that the rest of the industry hasn't figured out? Or that Lafayette life (the guys who once told me that after 7 years you no longer needed to worry about MEC status) has discovered some super secret design that they are hording from anyone who doesn't pay Pam and company several hundred dollars a month to be a member of her special club? Yes, that's a rhetorical question and you should be shaking your head in the “no” direction. BOY, LEAP, Circles of Welath, Living Balance Sheet, Emoney Advisors, etc. are all systems used by insurance agents to make a point, and sold by their respective companies as a way to make agents rich; for the most part it's no more successful at crafting a wealthy/successful agent than the old fashion pen and paper method but, perception is everything, so if it's a tool that works for you so be it. Could it then be said that just because Allan met with a “certified adviser” he may not have been sitting across the table from the most skilled person to ever pass the CO state insurance exam?
But then you'll point out that he reached out to Pam and Jerry Stillwell (LLIC's CEO). Do either of these people earn a living or even derive a fraction of their incomes from advising clients on insurance purchases? Didn't think so. Go to Pam's web site and read the comments on her blog, she's actually very active in responding. Whenever asked a specific question, she always defers to her advisers. Is Pam even licensed? According to her domain registry she's in New Mexico, a quick search for licensed producers with her name on the NM Insurance dept. web site comes back with nothing. She also has business activity in AZ, a search there also comes up with no Pam Yellen in the database. So it would make sense that she wouldn't answer specific questions brought to her, she legally can't do it. Regarding Stillwell, he's been an executive with Western & Southern (LLIC's parent company) and/or LLIC since 1996. Prior to that he was VP of sales at Ameritas, so never mind the exec time spent at Ameritas, the guy hasn't been in a non Home Office Position (i.e. a field agent position where he's advising clients) in the past 16 years. I recently forgot about the interest bump a certain company offers on a UL product, and I talk about this product with people almost every day.
Why did the adviser go silent after the rash of technical questions? It's a good question, and a point I'll take as evidence that Allan didn't get the sharpest knife in the drawer (and certainly not the most convicted).
Pam's Threatened Legal Action
This was certainly a weird response. Of course, we only have one side of the story from someone who writes for a major news company, and major news doesn't exactly shy away from sensationalism or embellishment of truth. Still, if he's quoting comments from written contact, he'd be in a lot of trouble if he lied about it (that would be defamation). We could come up with a bunch of theories about this one, from Pam realized who Allan Roth is and defaulted to the rule that a lot of us do, that people who work in the media are not to be trusted unless or until they've proven themselves as trust worthy conduits for which we can disseminate information (I know a fair amount of people in politics and marketing, and this as always been there approach, and advice). In any event, I would certainly identify the move as a mistake.
Allan Roth has taken a certain marketing technique a lot of financial companies teach their agents and has succeeded at running with it in a large way. Insurance and financial companies have a huge collection of compliance approved letters to use as a means to jump start a marketing campaign focused on being published in newspapers and trade journals. The fact that Allan has managed to place himself in a position where he contributes to CBS' Money Watch is certainly an accomplishment many advisers wish they could land. Kudos to him on that.
But let's not foolishly assume his intentions are quite as pure as his story alludes. He still owns an RIA based on Colorado where he needs to attract people who are looking for financial advice and seek his services. Given the current volatility of the economy in general, Pam's got a great story, and she runs a program ripe for pulling off the sort of “investigative journalism” Allan performed. Keep in mind journalists are pretty good at telling you a portion of the truth, but generally suck at telling you the whole truth, and Mr. Roth sits in a particularly opportune position for a story like this to hit the press. How convenient and coincidental he just happened to be the one who got the chance to author it?
This isn't a defense of Pam. I'm glad someone called her out on some of the areas where she tends to sensationalize. This permanent life stuff is good enough on it's own merits, it doesn't require a boost of fiction to get it off the ground, and never has. Keep in mind also that Pam doesn't make money selling insurance, she makes money selling admittance tickets to insurance agents. A common question I field from new prospects is why her book (or others speaking on related topics) aren't more consumer friendly with details. And I'm quick to point out that they are not her target audience, insurance agents are. She gets the conversation stared though, and for that I thank her. I also thank Allan, for being the breaks on her somewhat over-revved marketing.
Some may ask if I'm not a supporter why I make mention to BOY a lot. The answer…marketing. I'm aware that this stuff is out there, and I also know what the source of a lot of my search web traffic is.
Will This Go Further?
Will Pam pursue Allan in court? I seriously doubt it. I'm pretty sure she's already aware of the article. She likely found it the same way I did, through a Google Alert. Truth is, the article will be buried in a few days on the CBS web site, it doesn't have an incredible page rank on Google (I know this because I closed it and wanted to pull it back up and attempted to find it just by searching, no dice), and Pam and LLIC are probably going to take an age old marketing approach to this. Leave it alone and let it go away, and just get back to Bank on Yourself marketing.