I can't believe it. I just can't believe it. Not long ago some research I was asked to do for a client resulted in really great news for her and myself, but also very disappointing news that made this client feel she had been fooled.
Unfortunately, I see this a lot. A client believes they are getting one thing and is then sold something different. This client had signed up for a 'Bank On Yourself' plan created by someone who had no clue how to properly build a dividend paying whole life plan that can be used like a bank. Or perhaps worse, this agent knew how to build it correctly and chose not to act in the best interest of the client because the commission would be bigger. I hate when people parade themselves around as experts, but really only build plans to line their pockets.
Sadly, I have run across this scenario of improper plan building more times than I care to admit. In fact, this blatant deception caused me to make a major shift in my career. Before writing my books and telling my story, I used to be a national sales trainer in the life insurance business. I educated agents on how to properly build and educate clients on the many living benefits of properly designed life insurance, i.e., legally avoid taxes, never lose money, grow every year, be your own source of financing and leveraged tax-free death benefit upon death. I also trained agents on how to communicate professionally over the phone since this is how I primarily interact with my clients and people that reach out to me from all over the country. I loved what I did, but hate what I saw from other agents.
After training agents for nearly two years, I noticed two major issues that really rubbed me the wrong way. The first was how little my colleagues knew about the living benefits of life insurance and how to help their clients use this program to their advantage. The second was after training agents for many, many months, they would go back to building these plans the traditional way.
The traditional way buys a lot of death benefit, takes upwards of 12-15 years to break even, doesn't provide the high level of banking access or higher stream of income to live on during retirement and (drum roll please) pays a much bigger commission to the agent. In fact, the way I build plans drops commission by 70-80%. This is good for the client, but gives a major payday haircut for the agent. Since most clients don't know the difference, they assume the agent is doing what is best for them, when in fact, many agents do what is best for the themselves.
In the case of this client and the other 3 policies owned on her children, she got an agent that did what was best for himself and told her she had one of the plans she had spent 6 months educating herself on. Having built a relationship with me and after reading my book, she asked me to see if she had the plan she thought she had or if she had been fooled.
I share this background and behavioral insight, not to make me look good because my plans will speak for themselves, but rather to pull back the curtain on my colleagues that selfishly go for the higher money in exchange for an inferior plan. I'll show you what I showed this client on just two of her 4 plans. We eventually redid all her plans the correct way because it would result in more money.
I had known this client for over 2 years. We had a great working relationship. One day, she asked me if I knew anything about 'bank on yourself' plans. I told her I did and that if built correctly, can be an excellent tool. I told her how I had owned a plan for over a decade. I then told her about a client that had been ripped off. She said that was the reason she approached me. She felt she should have significantly more money by now if the plan had been structured correctly.
I then offered to run an apples to apples comparison to see how my plan with the same age, health, money and time would look by age 70 as the plan she already owned. I was shocked by what my research produced. I re-ran the numbers twice to make sure I had not missed something. My numbers were significantly higher. As I dug into her plan, it became obvious she was sold a traditional plan like the ones bad mouthed on the internet and not a plan built in the clients best interest. I was tasked with breaking the bad news, but also showing her how I could help her.
First her traditional plan:
A is the client at age 70
B is how much cash value they have
C is ongoing payments
The picture above is what I call a 'traditional plan'. A plan built this way is inferior and will result in significantly less money for the client. The line marked with an A shows this clients plan at age 70. By this age, her money should have an account value of $713,874 which I've circled and marked with a B.
To the uneducated client, this looked like a significant amount of tax-free money accumulated by the time she reached retirement. The client also has $1,662,661 in death benefit coverage at this time if something were to happen. Lastly, I've put a box and a C to show this client's plan requires she must put money into the plan until age 120. I will tell you this to be fair, she could call and request not to place more money down the road but it will drop her death benefit and slow her growth as the plan was built to place money until age 120. Back peddling on her plan will only worsen the results but it can be done.
I will now show you the plan I would have built on this client. Once you have her current plan as context, you will see the superiority of my plan leap off the page. Again, I share this to make a point that who you choose as a mentor matters. Also, you may own a plan like this and need to have it redone.
My Plan on the client:
A is the client at age 70
B is how much cash value they have
C is ongoing payments
Right away you should notice her plan with me has $1.1 million. My plan with the same amount of time, same amount of money and same product, results in $398,032 more. This is a huge difference in outcome considering all other data points are the same.
Now for a stupid question - at age 70, would you rather have $713,874 or $1,111,906? Without sitting next to you, I already know the answer. However, this woman did not know she could do this much better until she was shown the proper way to build a contract.
As shown by the box and the letter C, my plan requires NO additional money after age 70. It is paid up. You are done. No paying in until age 120. Trust me, when you hit retirement age, you want your bills to go down. Also, my plan has $2,052,448 in death benefit that continues to increase each and every year while her traditional plan only had $1,662,661.
Sadly, I found similar results in the other 3 plans she owned. In total, by moving to a superior plan, she will put over $2 million MORE of tax-free money back into her family's hands. She was disappointed in the news about her previous agent, but thrilled to transitioned over to the better plan. I help my clients avoid losing out of hundreds of thousands of dollars when they need it most at retirement or death by building plans in the best interest of the client.
Without being too detailed, I'll just show the plan difference on her youngest son. The increase in money he will have at age 70 was too large not to share. These plans are excellent on children and grandchildren that have time to let uninterrupted compound interest go to work for them.
Traditional plan on child:
By age 70 her son would have $732,754 and still be required to place additional money in the plan until age 120. With my plan, he should have an account value of $1,447,399 by age 70 and have the policy all paid up. Plus he'll have nearly double the death benefit. My plan resulted in $714,645 more!
A is the client son at age 70
B is how much cash value the son will have
C is ongoing payments
My plan on the son:
I've got to tell you, showing someone how to add that much more money to their future bottom line feels really good. Knowing my clients family will be able to use this money over their life times makes me feel even better. Imagine if every generation did this and passed the proceeds of their life's work on tax-free to the next generation how much stronger families could be. Remove the money worries, remove the taxes, remove the lost interest and depreciation from major purchases. This knowledge has been life changing for my clients and my own family.
Financial education in America is pitiful. You either self educate or find a trusted mentor. I have a business degree from the David Eccles School of Business at the University of Utah and they don't teach this stuff. I graduated high school from one of the best schools in Utah, and they never taught this stuff. I'm planning to get my financial management certificate from Cornell University and they don't teach this in the course work. From elementary to Ivy League schools, they don't teach this stuff!
We've relied too long on the blind to lead the blind. For government and employers to take care of us. For Wall Street and Banks to educate us. They don't want you educated. They want you paying them to depend on them. If they educate you, they will create a competitor and lose a client. It's up to you to educate yourself and the next generation on sound financial principles.
Helping this family improve their financial situation will give them a major difference in retirement. Or at least this is what the client told me when I showed her the numbers. I couldn't agree more with her.