In episode 59, we're not directly discussing the finer points of cash value life insurance. Just thought I'd get that out of the way in the spirit of full disclosure.
No, we're adding another episode to our Soapbox Series. It actually comes on the heels of a private discussion Brandon and I were having about using leverage to “juice” your returns.
Every now and then, one of us will stumble upon a blog post, magazine article, or something of that sort that makes our skin crawl a little bit. To us, “financial advice” that seeks to demonstrate the merits of using leverage aka “other people's money” (OPM) is pretty high on the list of things that sound like a good idea but rarely work in practice.
On the other hand, the carnage left behind in failed experiments using leverage is a much longer list.
Yes, we understand the math.
Yes, we know it should work.
Yes, your logic is almost perfect.
Except it seems there's most often an “x” factor. Some variable that flies in from parts unknown that ruins your perfectly balanced equation.
Take a look at the picture toward the beginning of this post, it is the perfect example…it looked good in the picture, I had all the right instructions, so what went wrong?
Well, I was way out of my depth. I discounted the fact that the person who constructed and baked this cake likely has years of experience. They certainly gave me clear instructions but there are probably hundreds of little things that they just do without thinking based on their past experience. These little adjustments weren't intentionally omitted.
However, those little adjustments when compounded make the difference between the picture on the top and what my result would be if I attempted this cake (the one on the bottom). Glorious success or complete failure.
To hear more specifics of our discussion, listen to the full episode.
Typically when someone says, “we've decided to go in a different direction” I get the image of sitting in the conference room of my very first job post-college. The conference room was affectionately known as the “fish bowl” because it was all glass and all of your co-workers could gawk at you being admonished by the boss. It always felt more like a terrarium with a heat lamp to me.
Great memories…[side note] I think my first trip to the bowl was for taking too much time talking with customers. You know, you gotta talk to at least 50 people a day or you're not getting the job done (sarcasm light is glowing).
At any rate, these sort of meetings often end with bewilderment.
Now, imagine that you've bought a life insurance policy from a company that decides they don't wanna be in the business anymore, they sell the business to another company (you've never heard of) and then proceed to under-deliver on your questions (i.e. servicing your policy).
Unfortunately, this sort of thing happens in our industry.
But what does it mean for you? Well, that's kinda hard to say with certainty, however we are happy to share our experience with you in today's episode.
Do you have any experience that you'd like to share? Reach out and let us know.
The debate between life insurance company structure rages on into the 21st century. It's not as big a headline as it once was in the industry.
So, does that mean that we've decided that it really doesn't matter? Obviously, there are real structural differences in the the capital structure and there are perceived differences in the culture of the two types of life insurance company, but are there any real, practical differences? Read More…
After taking another week off from recording a podcast we're back and we're taking another slight detour from diving into the minutiae of life insurance. Not to worry, today's episode is related to life insurance but the relationship is tangential.
Something we've seen repeatedly over the last several years is a notion that taking baby steps with your finances and in particular your saving habits is something to be praised. Now, we're always in favor of consuming less and saving more. So don't get any ideas that we're knocking a philosophy that seeks to improve financial behavior.
Our problem isn't with the philosophy of consuming less. Read More…
Today's episode is not one of our episodes where you're going to get a bit-by-bit breakdown of a life insurance policy or concept totally dedicated to life insurance.
No, today we get into a discussion that keeps popping up and that is one of designing the financial planning process to work as a more systematic process. The idea being that most people prefer to check off a few boxes, select from multiple choice responses and voila have a “to do” list of financial related items spit out the other side.
A picture of the Mechanical Turk comes to mind. It's a wonderful idea and not 100% flawed thinking but the practical application leaves much to be desired.
Obviously, we have much more to say about it…listen the full episode to hear more.
Sorry to disappoint you–we don't have any free beer or life insurance. But we do have our first podcast of the new year and it's a good one.
Something we don't often discuss oddly enough in our podcast that discusses life insurance…the death benefit. Typically, the death benefit is a secondary and necessary component of what we're talking about with our clients. But lately, we've been rethinking some of that.
Turns out that the death benefit is actually a pretty good deal and adds to the overall utility of the product as it relates to being a solution to fill multiple gaps.
Listen to find out where we're coming from.
Something we hear and/or read repeatedly is that a life insurance contract is simply too complicated for any mere mortal to understand. The complexity is just too great. How could ever understand what you're actually buying?
We don't disagree that if you were to sit down and ready your policy from cover to cover it would prove to be a bit confusing. However, is it any more confusing than a mutual fund prospectus? Or complete financial reports for a publicly traded company?
We think not.
If you understand the basics, have a properly designed policy and an adept agent to help you navigate it, a cash value life insurance policy will be the most simple part of your savings strategy and it's likely to be one of the most stable.
Last week we discussed how sequence of returns affects wealth accumulation. It was the first time we discussed the notion of sequence of returns risk in the light of accumulation rather than spend down (i.e. when one uses assets to generate income). There was a subtle, but important point Read More…
We’ve discussed “Sequence of Returns Risk” numerous times in the past, but most of those discussions focused on how this phenomenon affects your assets in a draw down period (i.e. a time when you are spending the money you saved to cover expenses and/or generate income).
Today we want to talk about sequence of returns in a slightly different light and note a problem it poses for all savers while they are attempting to accumulate more value in their portfolios. Read More…
The Pennsylvania Mutual Life Insurance Company announced its plans to pay participating policy holders a total of $58 million in dividends for 2017. This represents an increase over last year of Read More…