I had hoped that it wouldn't die with Allan Roth's swipe at Pam Yellen, but several months passed and I began to think that Pam was going to pull a card from the old public relations bag of tricks and just ignore this until it went away. But about a month ago, Pam struck back, and came out swinging.
In a lengthy post on her blog, Pam published her response to the CBS market watch article. And not too surprisingly, there appears to be a few details Allan forgot to mention in his Market Watch article (maybe we can blame his editor).
Allan Roth described the numbers he saw in the presentations made to him by one of Pam's Bank on Yourself® certified advisors as magical. But, the hitch for Allan was the fact that in order to have more money than the original assumptions showed, he had to himself place more money into the contract.
And is this is an area where we have criticized the Bank on Yourself® and infinite banking types for a while. Simply having more money isn't all that special.
However, Pam very brilliantly points out that like all magicians, slight of hand can go a long ways. Allan Roth's comparison makes a big deal out of the do or do not scenario, and Bank on Yourself® isn't concerned with that notion.
We were actually criticized for not mentioning this in our article concerning Bank on Yourself, by a fan of camp Yellen.
Our point in that article wasn't that Pam was wrong, but merely to point out that to date, Allan had been able to define the situation given his numbers, and further to capture a long standing point I've always championed…this strategy works, but it's not going to put you in a place where you're better off by borrowing money.
In her reply, Pam discusses something I've always wondered how well she understood. She's always seemed a tad cavalier surrounding the benefits of borrowing money from a whole life policy. Her registered tag line Spend and Grow Wealthy has left me and others with the impression that she believes borrowing from a policy puts the policy owner in a better place. And a boat load of experience with lay-people who have read her book and sought us out for advice on it shows us they are under the same impression.
But Pam very explicitly acknowledges that the comparison is about financing options and that you'll always come out on top if you left the money alone. She also claims that she never stated the converse to this, but her admissions of discussing it explicitly has led to a lot of confusion among those who have read her book and then sought to put her plan into action (again, we have plenty of experience with those people to speak authoritatively on this).
There's way too much missing information for me to weigh in on the illustration that Pam and Allan are fighting over. Both have presented numbers, but if you weed through them you'll often find yourself looking for additional info that both have omitted.
So, unfortunately this debate gets lost in a lot of platitudes liberally applied on both sides. But that doesn't mean we can't take something from this.
I'm actually really happy Pam replied publicly to this. And I suppose I can understand the length of time it took. There was undoubtedly a lengthy discussion that took place in the background between both parties.
Further, I think the argument can be clearly made that having this debate can do nothing but help promote the awareness of the use of cash value life insurance as an asset. A strategy people never walk away from once they understand it.
As I've stated before, the notion of using cash value life insurance to finance purchases is not a strategy that has no drawback, but it has significantly fewer than traditional lending options. And the total cost of borrowing is significantly less than the alternatives 99% of the time. I'm thrilled that Pam brought this up and discussed it explicitly.
We've certainly had our differences, but thanks Pam, for using Bank on Yourself® to forward this discussion.
Brandon launched the Insurance Pro Blog in July of 2011 as a project to de-mystify the life insurance industry. A specialist in the design and application of life insurance cash accumulation features, Brandon is one of the foremost authorities on the subject of coordinating life insurance cash values in a financial plan.