I wanted to take a moment this week to temper things a bit and remind everyone that the Insurance Pro Blog is not an appendage of the Bank on Yourself or Be Your Own Banker folks. We aren't affiliated and our name nor the Salus Agency (the agency that I own) will show up in any request more information query from Yellen's or Nash's web site. Though we could be described as people with similar focuses, I happen to be a practitioner, while the other two consider themselves merely educators who sell a sales system to insurance agents. On top of this, I don't believe that stocks and mutual funds have no place in your financial lives, I just believe the amount of these products that is necessary to lead a happy, financially healthy life, is grossly overstated. In the mix of a portfolio, permanent life insurance represents a conservative asset allocation. However, it's a truly conservative asset, not a pseudo conservative asset like real-estate or muni-bonds. Most American's would be just fine using a much higher conservative mixed portfolio than most financial “experts” and FINRA suggest is appropriate. This is especially true if you take one's entire portfolio into consideration. With most Americans holding most of their wealth in their home, it makes sense that they hold more assets that are more predictable and reliable. And if you don't think real-estate is risky, I beg you to consider the pricing process for real estate, and the serious lack of liquidity that exists in real estate holdings. However, I don't want to make this about portfolio modeling, as that's way too complicated a topic that is more appropriately addressed on an individual basis.
Just as I despise those who vehemently badmouth permanent life insurance, I also despise those who think permanent life insurance is the answer to everything. That may become a lost message around here from time to time, as we're focused primarily on how adding life insurance to your situation can significantly improve your financial situation. This is a very fundamental notion. It's sometimes necessary to rough up the idea of stocks a bit since we on the life insurance side need to do a lot of work to remove the indoctrination that the securities industry has worked so hard to establish.
New agents are taught to find the premium dollars. This is a process of going through a thorough analysis with a prospective client and understand where there money is going every month, and then develop a strategy for moving money from one place into life insurance. Investment professionals are taught to do the same thing. Because these products are “sold and not bought” as the saying goes, this is a crucial step since people don't generally go looking for it. I think this is by and large faulty theory, since I've found boat loads of people who were looking for life insurance, they just didn't know to whom they should turn.
Still insurance agents and investment professionals are taught early on that they need to find the money to put into their insurance product or into their investment plan, so they often do this at the expense of the alternative. It's dumb, a sign of a serious lack of expertise, but since most are in this business to sell, and not really to advise, it's understandable.
The take away here is one of the explanatory factors behind the behavior. Agents and investment types aren't advocating strongly for or against one or the other because they find one or the other a problem, but rather because they tend to be weak, and are more focused on the sale (and paying their mortgage) than they are on doing the right thing. This is an extremely difficult business to flourish in and do the right thing, and this is why there is so much fraud and litigation. I openly admit all the time that I had a unique financial situation that allowed me to not worry quite so much about paying the bills while I got things up and running, and I enjoy a healthy business model that doesn't require an overly aggressive approach to closing the deal (i.e. I have time to really think things through).
What I'm going to say about this point, it probably a little less straight forward than you would have assumed. One of the key pieces to persona success of the Salus Agency and other agents I've met over the years, is an ability to specialize in a few aspects of the industry (for us it's permanent life insurance and disability insurance) and become a resource to others when it comes to addressing this topic. Lots of agents want to go it alone and try to take on all of the aspects of your financial life, huge mistake in my opinion.
We've been contacted quite regularly from other professionals looking for more information about the topics we discuss here, and we're happy to work with others to help their clients. On the flip side, we constantly refer out business that wonders into a realm that is beyond what I'm personally comfortable handling (just had a complicated REIT situation come to me last week, and though I'm 95% sure I knew how to deal with it, I sent it to someone else who deals with that sort of thing much more regularly than I do, once it's all hammered out, we'll talk more about this stuff).
The issue is, since lots of agents don't do this (in part because they are lazy, or because they are afraid/insecure and can't stand the thought of someone else's speaking with their clients about topics closely related to all this), we get a lot of fighting over who has the best idea. I don't want to be my client's only advisor. I know what I know and I know it well, but I don't know everything, to think so is a sign of foolishness. At the same time, I freely admit there are things I'm not the most well versed person in the room about. This doesn't mean I'm going to bad mouth it and tell someone there is absolutely no reason they shouldn't have it. I'll make clear where my preferences sit, but unlike a lot of the investment hawks who couldn't speak for much longer than 30 seconds if you asked them to tell you everything they know about permanent life insurance, I'm not about to assume it's bad because I don't personally deal with it/understand it fully.
With the Holiday coming up, the summation of this post is simply that no one product will be your golden chariot to the world of good and plenty. My approach to all of this is to look at it from different perspectives and possibly come up with a petter plan to get you to to a better place. And I'm very thankful that I have the ability to think like I do, and I've run into many clients who appear to appreciate this as well.
Ultimately, keeping an open mind will get you extremely far in life. Never follow the zealots blindly. Keep in mind that everyone, including the Insurance Pro Blog, is only part of your overall life, and no one piece should ever be allowed to rule over all the others.
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.