Alright today we are going to discuss a topic
that may cut a little close to the bone for some
this is a very sensitive subject
when it comes to whole life insurance.
I'm specifically going to discuss
the big problem
when it comes to whole life insurance
specifically with individuals
who are interested in whole life insurance
for the cash value
that's why they are taking out a policy
on themselves
or someone else
they are interested in the cash value.
So the major problem that exists
in the life insurance industry
when it comes to whole life insurance
this is where we see all of this negativity
all of this noise around everything
around whole life insurance
it lies not with the company
the policy design
though all of those things do play a role
it is ultimately with the agent
or salesperson that you are working with.
Now this video is not meant to be
a direct attack toward any individual
company
agency
nothing like that
it is purely based on experience.
So I'll start off with a story
we get calls and emails from individuals
all the time
who own whole life insurance policies
or considering
whole life insurance policies
and they're interested
purely in the cash value
like that is their main focus
that's why they want a policy
and that's all our company does
teach individuals how to set up policies
for maximum cash value
and then set it up for them
if you decide to work with us.
But recently
or I say we get calls and emails all the time
we do but recently just yesterday actually
from the day I'm shooting this video
I received an email from an individual
who has owned a whole life insurance policy
for a long time
and he sent me a note
and he said Steve
I've been watching your content for a while
you talk about the 4
major mutual companies
properly designed policies
I personally have a policy
with one of the top companies out there
and it has performed horribly
I'm very disappointed with it
you talk about Steve
that you have the actual
proof of performance
the data that the top 4 companies
and properly designed policies
have always delivered
strong actual returns on cash value
to their policyholders
and we do have the data
dating back from 1975
all the way up until 2021.
But what he had on hand
he took out of policy years ago
and based on what he was sold
the illustration he received
he's actually measured
the actual performance
year over year
meaning the company
and his agent told him
you will have this much cash value
and then when he gets a statement each year
he tracks it with that actual illustration
and things aren't matching up.
Now we're going to come back
to that story at the end of this video
so I can show you
exactly what he went through
but the big big problem there
that point of internal frustration
is he bought a policy and was told
expectations were set
you are going to have a ton of cash value
that's why he bought the policy
he was interested
in the long-term growth of the policy
and it didn't pan out
it didn't deliver.
Now someone's paid
a ton of money into a policy
for a long period of time
and they think Dave Ramsey
all these other financial advisors are correct
whole life insurance
is the worst area to put money
because I have living proof of it
but then Steve
you say you've got living proof
that it works
and we do
all of our clients have access to that as well.
I'll add this
when you look at banks
corporations
and wealthy individuals
they have been using
cash value life insurance forever
and they purchase these products
they put a ton of money into them
with the primary objective
of maximizing the cash value
and when I reference
we have the proof
a lot of that proof and lies
with actual corporations
I've mentioned before
that our largest client is a bank
with bank-owned life insurance
they open those products
for the cash value benefit
like that's what they're doing
so it does work there
but then why is it not the same?
Why is the same not true of individuals?
Why is it so different?
Major point
major issue in the industry
when it comes to whole life insurance
because you've got 2 sides here
here's the big problem in my opinion
listen to the consumer.
If you're an agent
you have knowledge
on how policies can be designed
for high cash value
upfront
long term
all of that good stuff
listen to what your consumer wants.
Our company again
focuses on policies designed
for maximum cash value
that's our specialty
that's all we do
so we often hear from individuals
that they took out
a whole life insurance policy
where they're interested
in maximum cash value
they're working with an agent
or have one already
they say hey here's what I want
and they're getting something else
the agent is not listening to them
this is the most important thing
and this happens in all industries
when it comes to sales by the way.
I'll give you an example
an individual wants to work with us
they are just learning
about whole life insurance policies
designed for maximum cash value
they want to see
3 different funding options
show me what it looks like
if I put in $10,000 per year
$30,000 per year
and $50,000 per year
until I'm 65.
So he wants to see those 3 options
with 2 different companies
which at a minimum
is 6 different illustrations
which what's going to go through
the agent's head
is okay first that's quite a bit of work
where I've got to run the different scenarios
I've got to be educated
on the different companies
different products
and then also I've got to present that
in a simplified fashion
so the client actually understands it
because if you've ever seen
a life insurance illustration
one can be overwhelming enough
it can.
So 3 options
with 2 companies
equals a lot of work
(1) from the agent side on the back end
but then also presenting it effectively
so the agent is left with a choice
option A
put the time in
develop your skills
show the options
that the client wants to see
or (B) be lazy
and I'll give you an example of being lazy
so often I see this way too much
is a potential client
or existing client
asks to see options
and they're just told no
you can't do that
the agent tries to talk their way out of it.
I'll give you an example
we frequently talk about policy design
and splits
what does that mean
with the whole life insurance policy
in case you're new to this video.
So for example
if you're a client
and you want to see what a policy looks like
if you pay in $10,000 per year
and you can design it with a 10/90 split
or a 40/60 split
maybe you hear mixed opinions out there
and you say okay
what's the difference between these two?
$10,000
a 10/90 split
would mean 10%
$1,000 would go toward the premium piece
premium dollars
don't show up in cash value
the other $9,000 would be plowed
in the cash value
so you'd have a very cash-rich policy
from day 1.
Whereas that 40/60 split
would result in 40%
or $4,000 of the $10,000
going toward base premium
that does not show up in cash value
in the 1st year
so I've got about $6,000 in cash
right off the bat
because $6,000 went toward cash.
My point there
that's a relatively complicated topic
but often individuals will ask to see both
so as the agent I have 2 choices
(1) I can show options
which if I'm still showing 3 options
with 2 companies
a 10/90 and a 40/60
all of a sudden that's 12 illustrations.
Am I as the agent
going to put the time in
(1) to creating it
and then (2) to actually
taking the time to explain it to the client
making it or creating it
in an organized manner
so they fully understand it
in the same manner I do?
Or am I going to be lazy
and just tell them, oh well you know
you should really go with this direction
the other one will MEC
or make up some excuse
so I don't have to put the time in
this is such a problem in the industry
causes a ton of frustration
and people don't see the options
you got to show someone the options
if they want to see the options.
Take the same
if you ask for a steak
and I bring you out a fish
and say hey I know you asked
for the medium-rare filet mignon
but I'm going to bring you the salmon instead
because it's got great health benefits
and I think it's the best option for you.
What are you going to say?
Get lost
like I ordered the steak
give me the steak
give me what I want
we need to listen to the consumer
this is the key.
So here's a big thing
with agents in the business
because this is the big problem
in the life insurance industry
specifically with whole life insurance
where the frustration comes about
is people want policies
for maximum cash value
they don't get them
and it's often because
the agent does not show it to them.
Agents must have these 2 qualities
(1) they must know
how to set up policies
they must be knowledgeable enough
different companies
different products
that's a bit of a learning curve
and then (2) they've got to be willing
so to provide some more
information on these 2
when I say knowledgeable
how to design the policy
the initial design?
How do I set it up?
How do I MEC test it?
What's the difference between
different companies?
For example MassMutual
one of the major mutual companies
a lot of people like them
they're a great company
if someone says hey I like the idea
of a cash-rich policy from day 1
that 10/90 split
and I like the ability
to fund it for a long period of time
but a drawback to MassMutual
is they're not super flexible.
Whereas a Guardian on the other hand
is a company that allows me to commit
just to a minimum premium
and dump extra funds into PUAs
at my discretion
but if I really want a maximum
cash value policy
their sweet spot in my opinion
is funding a policy for 10 years or less.
There's 2 technical details
and we've got videos
that really walk through all those details
but my point is as the agent
we have to have the knowledge
on the initial design
and then also trends
seeing things
not just hearing it.
When I was new in the industry
what would often happen
is I would see different illustrations
different examples
and I would question my manager
or senior agent about it
and I was just told
you don't want to design policies that way
you want to go with a policy
that has a higher base premium
because it will produce
greater long-term performance
you get stronger dividends there
and your clients will have a lot more money
and by the way
you get a higher commission too.
And I just look at it all the time and say okay
but I'm not seeing that anywhere
like it doesn't actually make sense
I hear it from you guys
but I need to see it.
What I have seen
is policies with high base premiums
typically under-delivered
to the greatest degree over the long haul
and policies with minimum premiums
which is by the way
what corporations and the wealthy do
deliver the strongest actual results over time
so that's what we've seen
not just what we've heard.
As an agent it's so important to do that
so many people
will take a seasoned agent
someone who's been in the business
maybe for 10, 20, or 30 years
and say hey they've got to know
what they're doing
they have to have seen it
they've been in the business for so long.
Maybe
but do the work for yourself
have you seen it?
That's the question there
not just heard it.
And then willing
we've got time
put the time in
put the work in.
Compensation
so I have that under willing
is if you're going to design a policy
again for maximum cash value
for your consumer
so the consumer says I'm interested
in a maximum cash value policy
this is why I'm opening
a whole life insurance policy
if you're going to do it that way
that will every single time
minimize your compensation
especially upfront.
What we've heard sometimes
and some people just
outright express this
which I appreciate
instead of playing games
and beating around the bush
is why on earth
this is not our practice
why on earth would I as an agent
take more time to explain
this policy design to someone
with this low premium
because it makes it a bit more complex
that gives them more cash value yes
but it takes a lot more time on my end
for less compensation?
Like I'm not doing that
we hear that sometimes
like oh well I understand it
from a business perspective
but if your client wants something
and you don't give it to them
1 of 2 things are going to happen
(1) they're going to go find it
from someone else
or (2) they are going
to buy the policy from you
believing that you're doing
what's in their best interest
but then they find out after the fact
then I can't sleep at night
like no
don't do that kind of stuff to people.
So that's what I mean with compensation
and then service
this one's huge
there's a VC saying
venture capital saying
I actually heard this from Kevin O'Leary
aka Mr. Wonderful
that if you want to purchase a company
or if you want to improve a company
get them to the top
buy a company
that's on the bottom of the food chain
in a certain industry
and then invest in one thing
in their customer service
make their customer service
top-notch
better than the number one player
in the space
do that for 3 to 5 years
and then increase your prices by 15%.
And I heard that
I'm like you know that actually
a 100% makes sense
because service is key
it's non-existent today
the problem in the life insurance industry
is often
when you look at commissions
the bulk of it is upfront
with whole life insurance sales
there's residual trails there as well
but the bulk is upfront
where so many times we see someone
once they get that initial sale
it's like yeah whatever
like they don't take the phone calls
they don't have that same urgency
and desire to service the individual
that they did when they were first
interested in a policy.
You got to fix that problem
and if you are trying
to grow your practice very large
and you think you can do it on your own
as a solo individual
or with one other partner
so so difficult to do that
the only reason
our company IBC Global
has been able to scale over time
is we've got a big team
so our company is about 40 employees
what I do with the majority
of all the revenue that comes in
is constantly reinvested
back into our business
we've got a case management department
case design department
client relations department
several
about 10 in-house agents
that work with each department
media department
I can go on and on
operations
but it is all centered around servicing
those we work with
this way this is always number one
and then you've got customer satisfaction
and then you can continue to grow
and scale over time.
But if you're on your own as an agent
or if you're working with an agent
who's on his or her own
and you feel like the service is lacking
they could have the best intentions in the world
it could be an indicator that they need help
I've been there before
like you gotta go all in some respects.
To close up
it is about what the consumer wants
let me say it again
it's about what your consumer wants
what does your client want
not what the agent wants
not what the agent wants to sell them
or what they think is best for them.
I remember there's times
when I was a young nerdy insurance guy
I kind of still am
but there would often be times
people would want to see numbers
and I would just go all out
showing them
or putting together
a number of different scenarios
because they asked for it
they wanted to see it
and what happens a lot in the industry
is when someone does that
you'll have the senior manager
agent come in and say
no no that's too much
don't show them that
what are you nuts?
We're going to show them 1 options
because this is what I've done in the past
and this is how it works.
Again
you ask me to see a number of options
you want the steak
and I say no no
I know what you want
you want the fish.
No, you want the filet mignon
I'm going to give you the filet mignon
at the best possible price
with the highest quality
and value as well
it's what the consumer wants
not what the agent wants.
Let me wrap up with that story
a bit of some technical pieces here
so the individual that had emailed
about his policy that he had
was several years old
he had the original illustration
tracking the performance year over year
that was a policy
with a very very high base premium
and the issue when it comes to
whole life insurance
this is a huge issue
I've seen this occur
almost every single time
is when it comes to the base premium
on a whole life insurance policy
and how companies
actually credit a dividend
to the base premium piece
not so much the PUA Rider
but to the base premium piece
that can be adjusted
and it almost always is adjusted.
We've got videos on that
on our YouTube channel
we've got one video
type in our search bar
how dividends really work
and you'll see exactly
what I'm talking about
it's a very thorough video
but we go through it
with an actual policy
that was issued in 2007
what was projected
and then what actually happened
we looked at the dividend rate
but then the actual dividend payout.
But that's what happens
and then when policies
have low base premiums
and the majority of money
going toward PUAs
which is like what these guys do
that's where we see the policies
deliver strong actual results
every single policy we've put in place
every single one
with the major mutuals
when it has had a low base premium
has delivered
strong internal rates of return
often north of 4%
when that's not the case
we don't see that
would I like that to happen?
Absolutely
but we don't see it
like at the end of the day
we've got to have the actual proof there.
What happened with this individual
that it was projected to do 5%
and thus far it's delivered about 2%
but you don't need to
be a math whiz there
to figure out that is less
than half the value.
So hopefully this one helped to recap
what is the big issue
with the whole life insurance industry
or whole life insurance in general
typically the agent or the salesperson
which sometimes isn't unintentional
it's not ill-intended every single time
but a lack of transparency
people are interested
in maximum cash value
life insurance policies
and they're not shown those policies
they're shown something else.
I hope this helps
if you enjoyed it
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and I'll talk to you soon.
Thanks so much.
Hey guys Steve Parisi here
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