As you may know, I have spent the better part of a decade pushing the insurance industry forward, from product innovation to strategic applications, and the digital transformation that’s just on the horizon. I’ve operated mostly in the high-net-worth space and have been a part of more deals than I care to remember. I’ve seen clients’ lives changed with the planning that we’ve done and I couldn’t be prouder of the advisors that I’ve worked with. With all of that said… I need to get this off of my chest. Way Way WAY too many people are being sold whole life policies based on benefits… that don’t apply to them.
Whole life insurance can be an unbelievable tool to grow wealth, provide control and flexibility in retirement, and keep the government’s hands out of the pockets of your loved ones and heirs, but man oh man have I seen it pushed to so many people who don’t need it and, in my opinion, it’s materially hurt the image of the industry. Maybe rightfully so.
Why would you say that, Graham? Whole Life is the panacea of our financial reality. How could it not be right for everyone? Do you want them to give their hard-earned investment dollars to the banks and the government? Of course I don’t. The reality though is that the true benefits of whole life are for those in the top tax brackets: individuals making 200k+ a year or business owners that are making more money than they can spend inside their businesses.
Whole life is sold primarily these days on the tax-advantaged investment component. The issue I have is that the vast majority of people targeted for these sales have ample existing tax-advantaged vehicles and they aren’t in a space where their tax rate has become a problem yet.
How do we justify selling a middle class family a large whole life policy when they haven’t maxed out their RRSP or more importantly their TFSA? How can we look ourselves in the mirror selling a policy that’s designed to just break even in 15 years, and has next to no flexibility in what they can put into it on a year over year basis?
Wouldn’t that middle class family be better served with a term or min funded UL policy that keeps their cash flow up, so that they can utilize the tools already at their disposal to their fullest?
Don’t get it twisted though. Whole life, when properly designed and in the proper circumstances might be the greatest tool for growing and using wealth that exists in our country. I just want to see the end of it being peddled to every Tom, Dick, and Harriet out there.
The clients we claim to serve and the industry we profess to love would both be better off if literacy on how these strategies worked was available to all, but that they were implemented with those that are a true fit.
Until next time…
Graham