The BIG Problem with Whole Life Insurance! | IBC Global

All right, 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, 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, are 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 four 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 four 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, what 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 gonna 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 in 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 two 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 three 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 three options with two different companies, which at a minimum is six 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 three options with two companies equals a lot of work, one from the agent's 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, right? 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 wanna 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 one. 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 first 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 two choices. One, I can show options, which if I'm still showing three options with two 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 one to creating it and then two to actually taking the time to explain it to the client, creating it in an organized manner so they fully understand it in the same manner I do. Or am I gonna be lazy and just tell them, well, you should really go with this direction, the other one will 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 this saying, 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 gonna 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 gonna 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 two qualities, one, 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 second, they've got to be willing. So to provide some more information on these two, when I say knowledgeable, how to design the policy, the initial design, how do I set it up? How do I mech 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 one, 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 PUA's 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 two 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'll 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 would 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-deliver 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, 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 why 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 would, and 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. Well, I understand it from a business perspective. But if your client wants something and you don't give it to them, one of two things are going to happen. One, they're going to go find it from someone else. Or two, 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, 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 three to five years and then increase your prices by 15%. And I heard that, I'm like, you know, that actually 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 up front with whole life insurance sales. There's residual trails there as well, but the bulk is up front. So many times we see someone, once they get that initial sale, it's like, eh, whatever. 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, right? So our company is about 40 employees. What I do with the majority of all the revenue that comes in is constantly reinvest it 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, could be an indicator that they need help. I've been there before, like you got to go all in 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. Remember those times when I was a young, nerdy insurance guy, 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 one option 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, 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. That's 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 PUA's, 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 just 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 is 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 that is less than half the value. So hopefully this one helped to recap what is the big issue with the whole life insurance is 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 lack of transparency. People are interested in maximum cash value. They're not shown those policies. They're shown something else. Hope this helps. If you enjoyed it, please hit the like button. Subscribe for more and I'll talk to you soon. Thanks so much.