Did He Just Beat @LIFE180 $25k IUL Challenge?

Speaker A: Challenge requirements need full original illustration and deliberate to prove legitimacy and design expectations need. Current enforced illustration policy must be 10 plus years older and out of the surrender period. Current enforced illustration must have the natural exceed original illustration. It's that simple. Let me know if you have any more clarifying questions. Come to find out after a bit of dialogue back and forth that he was looking for a much, much more narrow focus. Their response back to me was effectively, oh, I know we said this, maybe it was misstated. Thus your challenge submission does not qualify. But the policy outperformed the original as sold by a, uh, measure of cash value within the contract. Thus is it have more cash value at this vantage point than it did originally? The answer to that was yes.

Speaker B: I think unfortunately, it goes to show, like, you really have to be clear with your language.

Speaker A: In my mind, I agree with his beliefs. I was attacking his challenge. If you are going to say that a product in force for 10 years or greater simply cannot perform greater than has sold, you are not attacking the sort of genesis of the sale. You're attacking the ability for the product. Product to function.

Speaker B: Jonathan Bell, welcome to the show.

Speaker A: Thank you very much for having me, Caleb. A pleasure to be on here. Uh, I'm a fan of the work and of the platform, so, uh, it's lovely to be here.

Speaker B: You know, I am starting to become a fan of your processes. We got to chat before we hit record and it's. You are a purist, um, in this space and you have a true love for insurance products and helping people and I'm hoping that you can unpack a little bit of that. But just to set the stage, you reached out because I had Chris, ah, who now has changed his name to Revan with Life180. And he has this, um, IUL challenge that he's been speaking for multiple years on. And the premise of it is, hey, if you can show me an iul, I'm speaking my speech. We will go through the legalese after the fact. But if you can show me an IUL that has performed or outperformed 10 years, um, you know, from what it looked like, what it was proposed and then what it, what it actually ended up as, I'll give you, I think it was $10,000. Um, apparently someone put in more money, I believe, but I don't know, let's just say it's $10,000. And you know, one of his claim to fames is like, nobody has been able to, you know, beat the challenge. And on, um, a recent conversation that I've had with him. He actually mentioned um, you. Not by name, but he said hey, actually somebody um, you know, technically beat the challenge. But in the fine print it was, you know, it didn't, it didn't officially make the fine print because of how things needed to be like projected and all which I felt like a little bit like. Oh, like I don't know if that, like that's, that's a little bit like a. Was that ahead of time or was that uh, added after the fact? You can give your, your thoughts on that. So I didn't think much of it. You reached out to me on LinkedIn and I was like, you know what? I committed to having a platform for conversations. It's really, really important to me that um, we can have an open dialogue. And my hope is because of the open dialogue people will be better and doesn't matter about what it looks like for me or my friends or other people. I want to create content that um, rises the tide. And so with that, that's why we're talking and I think uh, you will give more of the context there. And I, and I think through that we can talk about even your philosophy around IUL whole life, maybe some vul if you want to get into that and uh, some of your frameworks on how you help people with insurance. So how's that for the intro?

Speaker A: I think very accurate and um, encompassing. You know, my intention in reaching out to you was never to be antagonistic or anything like that or to attack Chris, uh, and his platform. I want to make clear up front I have nothing personally or even really professionally against Chris and what he does or anything like that. Um, but as a sort of voracious consumer myself of insurance related ah, education, you know, I have been following Chris and also obviously following you in some of the conversations and videos posted for a number of years. Saw his uh, you know, his challenge that he had put uh, out there for a number of years and having been in the space for quite a while and seeing lots of policies via review, via analysis that we do internally at my organization, et cetera, I kind of felt very confident that I had seen uh, and or was in position to share uh, information that was consistent with the way that he had presented the illustrations and the policies to fulfill the challenge, uh, which has, I think the language of it uh, has probably varied throughout the years in which he shared things on various different platforms. But generally speaking to your point, has been consistent of out of surrender. So 10 years or greater the as sold, uh, basically the in Force exceeding the as sold with, uh, basically that it. Right. And a couple of other kind of minutiae in terms of the language, but not an enormous amount of extensive criteria beyond that. The origin story of this was that when I sort of identified this illustration and this policy that I was going to put forth to Chris, I reached out to Chris and confirmed to him via, uh, written communication what the criteria was of this challenge. He confirmed using the same bullet point and language that he has shared on your platform as well as on Life180. And so I thought to myself, okay, well then I'm going to be in position to share this illustration.

Speaker B: Can you go through what he said in writing if you have it pulled up of like what the bullet points were?

Speaker A: Yeah. I inquired with Chris, uh, and basically said, what are the criteria? Can you restate it for me? And he said, challenge requirements need full original illustration and delivery to prove legitimacy and design slash expectations need. Current in force illustration policy must be 10 plus years older and out of surrender period. Current in force illustration must either match or exceed original illustration. It's that simple. Let me know if you have any more clarifying questions. So that's the original onset of him in my mind, stating, oh, this is exactly the criteria that he's looking for. Uh, come to find out after a bit of dialogue back and forth after I had submitted over the enforce, uh, and the as, uh, sold illustration with information redacted, et cetera, that he was looking for a much, much more narrow focus, uh, surrounding the illustration and also kind of the, you know, the original as sold, uh, not what he was looking for in the way that I think that he wanted to put forth this challenge and, you know, invite people to go and test the mettle of what uh, he was looking for.

Speaker B: So that's a lot of words. Uh, let's zoom in. So you got the email from him and you were like, oh, I have a policy that's going to win this challenge, which we'll dive into a little bit more because I want to understand like how that was designed and all. But that's, that's maybe for part two in this conversation. Then you submitted it and then, then did you feel like they added more things or like, what, what. Because it, because you have in writing what, what the initial stuff was like. Is it like, how did that go? Did you get on a call with, with, uh, Chris or did you. Was it all via email? Like, how did it unfold from there?

Speaker A: It's all been via email. Um, and, uh, you know, I Can't confirm and I'm not aware of if they did or did not change the terms and conditions after. You know, it certainly seemed that they did. Uh, but I'm not in a position to know for sure, 100% certainty. And so I don't want to make a, you know, sort of speculation of an accusation that may or may not be correct. Um, you know, their response back to me was effectively, oh, I know we said this, maybe it was misstated, but in reality there's been a terms and conditions this entire time through our website. Here's a link to it. Thus, your challenge submission does not qualify.

Speaker B: And what was in the terms and conditions that made what you originally submitted not to qualify? What was the difference between what you gave them and what was in their terms and conditions?

Speaker A: So there's ambiguity in that also. But I mean, I'll highlight just the most basic one. The design that I put forth was a 1035 only design with no further funding and the product type offered through this specific carrier very much designed to maximize death benefit with a very secondary emphasis on any sort of cash value accumulation. This is not a accumulation focused design. When I say that I mean this is not buying the minimum or anything close to the minimum amount of death benefit, thus looking to minimize charges, maximize cash value growth. Lots of different carriers that are in the IUL space offer both accumulation and protection oriented products. As you can probably infer from the title, they do different things in the way that they're constructed in terms of charges, in terms of emphasis of accumulation of cash value. This was not an accumulation design or product. This was a protection design and product. It was also, like I said, A 1035, only without future funding. But beyond that, in my mind there was nothing else that would sort of deviate away from the spirit of, again, the original language that Chris put forth, which again didn't allude to any of that being criteria or not simply alluded to outperformance, uh, 10 plus years in force, et cetera.

Speaker B: Okay, so you had a, was a 1035, meaning that there was someone that had an existing policy, they transferred it to this policy which is more than 10 years old. And the, the illustration was there cash accumulation. It wasn't a, it wasn't a guaranteed universal life. It was there. It was actually, ah, an iul.

Speaker A: Yes, that's correct. Not with a, with a guarantee, but not a fully guaranteed product.

Speaker B: Okay, so uh, with a guaranteed, not fully guaranteed, which is, I would imagine most Iuls fit into that bucket. And the purpose of of the sale, which I think is important for us to talk about, is wasn't for accumulation and income. Ah, it was probably for estate purposes. You can unpack that. But the reality is they still had an illustration and the cash value, um, exceeded, I would imagine what the. The original 10 year illustration. I would imagine that the death benefit probably exceeded as well. You can unpack that. And, and so did I, did I. Am I tracking so far?

Speaker A: Yeah, this was not an option to death benefit. So the death benefit has remained consistent from policy inception, you know, now 12 years ago to today. There's been no change there. But the policy outperformed the original as sold by a, uh, decent measure of, you know, cash value within the contract, which would be, you know, without any further funding, all things being equal, the way that we would mark change, you know, 12 years later of original as sold versus the in force. Right. Has the policy credited a greater crediting rate, uh, than is originally modeled and thus is it have more cash value at this vantage point, uh, than it did originally? The answer to that was yes.

Speaker B: Okay. So I would, I would be curious to hear people's feedback in the comments. Like, what do you, what do you think of this? Um, I, I, uh, I'm just, I'm doing this in real time because we didn't, we didn't talk about this before popping on about the details. Um, I think, yeah, I mean, I think it's, it's pretty black and white in one instance. I think to, to play the devil's advocate, because that's always what I try to do is, um, that, that IUL and I, this is what I think we can talk more about is it's sold in a lot of different ways. And I think Chris, I think he said this publicly, that he's actually sold iul, which kind of surprised me when he said I was like, man, that doesn't, that doesn't go on brand. But I, you know, you know, and so I think he's sold at least one iul, um, maybe more. And I also think that when it comes to estate planning, when it comes to the flex, like, I know a lot of family offices and like, people that are very wealthy, they tend to like Iuls because of some of the flexibility that, that it provides. And so on one hand you have an IUL that can be positioned a lot of different ways. And I would probably imagine, I want, I would love for you to unpack it, that the IUL was positioned pretty conservatively, which is probably the right way to go about it. Which isn't that amazing? Like, shouldn't everyone kind of position it to, to be conservative and then not have to apologize? So that's great. And I think, uh, for better or worse, I'm, I'm not trying to defend anyone. I'm just trying to, since he's not here, is on the, on the flip side. I think what Chris, uh, slash Revan was probably thinking when he originally started this challenge is people that were really selling this from the cash value, the accumulation, the distribution, the. This is going to be a sexy investment. Um, and, and so I can, I can see, see. Clear with your language. And, um, and yeah, I, I, I would have wished that there may have even been a video that could have been done, that there could have been at least a. Hey, you got me with the fine print. Now I'm going to update the challenge, but I will give the benefit of the doubt that it was in the fine print. I don't have any way to confirm or deny that. Um, so I don't know if you have anything more to add, um, to that. I just think it's, I think it's interesting. And then my next question after we talk about that is how you did design this. Because while there were a lot of people in the whole life space and IUL space that, you know, wanted to do the challenge, I think most people quote unquote, failed. And I think it's important to understand, like, why you think there was a big difference over ten years, um, and why the policy that you had actually outperformed. I think there's a lesson in that that can be learned as well.

Speaker A: Yeah. Um, I want to separate two different things because I think what you, the question that you asked sort of illuminates a good point. Right. There is a big difference in my mind in the way that Chris sort of framed this between product choice and suitability and function. Right. I think what Chris would disagree very strongly with is the positioning from a function, or I should say from a product suitability standpoint of the use of index universal life for these kind of overfunded accumulation designs to yield distributions. Right. Um, and in that respect, I think I largely agree with him. You know, I don't, I'm not an IUL quote unquote purist in the sense that I don't think it's the greatest singular product that's out there. I think really presenting it in a truthful sort of structure, Half truths or misnomers about how products are going to perform in a wide variety of different Interest rate environments, crediting assumptions, et cetera, and then fall back on, um, I don't know, incorrect language or assumptions that were made at the onset as being some sort of, um, fail safe. And so I strongly agree with Chris in that index. Universal Life is very much largely Ms. Sold, uh, particularly in terms of these accumulation kind of designs. Um, oftentimes they're shown in the most aggressive way possible. The loan assumptions are the most aggressive way possible, is they're basically just taking, you know, paper positive arbitrage. Some of the stress testing, which is really, you know, the answer, I think, to the second question that you asked. Um, but in my mind, his biggest disparity was this difference between, hey, I don't think that the product is suited for this versus this is how the product is not going to function. In my mind, I agree with his beliefs about largely the suitability. I was attacking his challenge regarding function, which is to say if you're going to say that a product in force for 10 years or greater simply cannot perform greater than as sold, you are not attacking the sort of genesis of the sale of the reason why this particular client bought permanent life insurance or didn't. You're attacking the ability for the product to function and to outperform the original assumption in whatever crediting rate, you know, environment has existed in that time period. So in my mind there's a big disparity between the way that he presents kind of his criticisms in lots of different things regarding the suitability and the way that the challenge really honed in on the function of the product, how it does or doesn't work in different crediting, you know, sort of scenarios.

Speaker B: Yep, I think that's, I think that's well said.

Speaker A: The second thing that you asked, uh, regarding kind of the way that this particular policy, uh, was sold, you know, when we meet with clients and they're having existing permanent life insurance, oftentimes there's a discrepancy between the original reason why they bought the policy and what their needs are currently. Um, you know, when people buy, you know, variable universal life policies or whole life policies in their 20s or 30s, sometimes it may be that they got great insurance advice, sometimes it may be a product that was sort of hawked to them and they were in a position to sort of purchase it at the time. But in their 50s or 60s, the need for permanent life insurance may take a very different form. There may be very little desire, if any, at that point to derive any degree of distributions from that policy, but rather leaving it as a Legacy asset either within a trust or within their taxable estate for an intended beneficiary. Uh, this particular design was exactly that. A client who had bought a whole life policy in his 30s. The policy had performed fine through uh, 20 years plus basically of um, being in force. But he simply didn't need the cash value within the contract anymore to support any sort of retirement distributions. He was just looking for as much death benefit as he could get at life expectancy with reasonable assumptions of guarantees. Now what we maybe uh, say do different but I think insurance professionals, particularly those that are selling indexed universal life or variable universal life or any current assumption universal life product is we stress tested and we run reduced crediting rates and we don't model the maximum crediting rate possible, uh, but rather uh, number significantly less than that, usually between 100 to 150 basis points less than that will very often do modeling that mixes in 0% years every number of years, whether it's 5 or 7 or 10. Just to see how the policy will perform in those kind of scenarios and have that discussion with the client surrounding. Look, crediting is not linear. Uh, the same way that in whole life policies the dividend at whatever it is stated when you purchase the policy is very unlikely to be simply linear at that rate in perpetuity. There's fluctuation to these things and so we should try to account for in the way that we present good and bad alternatives. The wrinkle in this. Challenge. Before 2015, before Ag49 was introduced, there was really no guidelines for insurance carriers to have maximum illustrative rates within the IUL world. And so what you had uh, is carriers having the ability to illustrate at 9, 10, 11% crediting rates which have not come to fruition. Well that was not the case with this policy. It was illustrated at a much more conservative crediting rate from assumption from the onset, not at the maximum amount. Loud at the time. But I would just offer in kind of disagreement. Um, you know, it's not a bad thing to be sort of realistically selling permanent life insurance in terms of expectation to your clients. Nor do I think that sort of that should be a punishment in the inability to fulfill the challenge.

Speaker B: Uh, is that part of the fine print now that it has to be credited at the highest at the company?

Speaker A: Yes, the language in it specifically, and I'll read off from you based on the terms and conditions reflect the maximum available index crediting. Are invalidated if they were not run at whatever the maximum rate was for these carriers and the maximum Rate for some of these carriers was very, very large, either single digit or low double digit numbers, uh, in a kind of, I don't know, pithy back and forth between Chris and his uh, business partner. And I, I kind of said to him as a retort, I would love if you could show me, you know, 10 plus years ago, show me a whole life with current dividend assumptions that has outperformed. Right? Because as we know in declining interest rate environments, not even talking about the IUL world, but in the whole life sort of dividend rates from carriers, if those decline as well, it's going to be very hard to outperform the original as sold illustration. Imagine me saying to you, Caleb, hey, show me a whole life that was sold in 1983 with 18% dividend assumptions versus today. Oh, you can't uh, outperform, uh, it, that's a reflection of the product as a whole. I would never take that vantage point because I think it's a disingenuous way to argue. And I largely think the same in terms of how Chris has kind of argued this particular point, uh, with his IUL challenge.

Speaker B: Yeah, I appreciate, appreciate that point. And yeah, I think there's, I would like to now talk about maybe the difference between whole life and iul. And I'll say this, and this is probably where Chris and I tend to agree is I don't look at insurance as an investment. I see it really in two paths. It's like you can do like the protection, estate planning, legacy path where you're really focusing on initial and long term death benefit. And I think if there's points to be made that if that's the thing that you care a lot about, whole life may or most likely won't be the most efficient way to go about that. Um, it may. Iuls, uh, in such a way, even guaranteed universal life policies in such a way that might get a better outcome if that's all you care about versus, you know, the second point is insurance is not an investment. And I think you probably would even agree with this that while there's people on both sides selling Whole Life and IUL that will talk about insurance maybe as like the sexy investment, yada yada yada. It's a lot easier to say that if you in the IUL space because there's just more attractive language, there's a cooler story of upside, no downside. You can, you know, you know, talk about options and how you're working with a company that's, you know, gets, gets options at a Good rate all those, all those things. And then you can even potentially show arbitrage between you're the loan and what it's crediting. And you can create a picture where someone would say oh my goodness, like I'm not going to invest money, I'm just going to put all my money into insurance. You can for sure do that on the whole life side. It's just a lot less attractive. That's, I don't, I don't think that's a controversial statement. And so you have these two elements of legacy and protection and accumulation and like using your policy and, and a lot of times what I would say majority of people that get themselves in trouble are in bucket number. I don't see a ton of people getting themselves in trouble that are just talking about protection and legacy because it's like it's, it's again it's, it's a, it's. If you have that conversation up front, you're the default. Bestman alternative. And do you think IUL should and can be sold as accumulation? Should, should people be looking at income over 30 years out? Should people be aggressively borrowing against their IUL just like maybe they, they would do whole life like. I'm just curious your take on this because I, I find that we just get to know your stances and your, your maybe um, not agenda, but you're maybe leaning towards how you view life insurance as an asset class. Most people have no idea where to start or how to really evaluate whole life insurance. That's why we've built the vault. It's all of our best life insurance resources and educational tools all in one place, all for free. We have calculators, handbooks, crash course, deep dive videos on numbers. If you want to learn more, click the link in the description or tag comment below to unlock the vault. All right, back to the video.

Speaker A: Yeah. The first thing that I would say is from a foundational standpoint, I believe that you should buy life insurance as death benefit as life insurance. And maybe that just inherently skews me in the spectrum that you sort of described much, much more towards protection oriented life insurance. If it does, I think that that's a good thing. I would never sort of run away from that assertion as kind of the framework with which I see uh, permanent life insurance. Um, I obviously recognize that different people have differing objectives in terms of the use of permanent life insurance. And so I'm not one to sort of denigrate uh, the use of permanent life insurance, whether it's whole life or index universal Life or variable universal life for sort of accumulation purposes. I just think, you know, we know in the way that products are constructed, in the way that the charges exist, that if you compare some of these things to taxable investments, if you compare them to you know, non qualified, uh, you know, assets, you know, if you're looking at them purely from a performance side by side standpoint, comparing what's the biggest number at the end of the day, oftentimes permanent life insurance is not going to be the quote unquote winner there. You've done a good job in various I think videos basically making the case that the internal rate of return in terms of the cash on cash return within permanent life insurance and specifically whole life, when you um, are making the point, is sometimes not a full picture of the sort of true reflection of the value. And I agree with that aspect. But I think so many consumers, especially when it comes to the miss selling of index universal life, to your point, fall into this trap of believing that it's going to be this Swiss army knife that can do everything. And realistically there are limitations to the way that insurance products and contracts are going to perform depending on how the distributions are taking, depending on the crediting environment at the time, depending on the objectives of the client. So I think starting off with a framework of just, you know, if you're buying life insurance, you should have a death benefit need to address, I think is a good initial step. Some of the also maybe our disparity in the way that we see it is we don't tend to work with a lot of uh, small business owners, a lot of real estate professionals as much that I think are really looking for an emphasis on liquidity in terms of their next business opportunity, their next real estate opportunity, repay the loan, the sort of conventional uh, application of um, the infinite banking concept. Uh, most of the people that we get introduced to either have sort of a pure insurance need for a uh, finite period of time, whether income replacement or debt or whatever sort of thing where you know, term life insurance is oftentimes just a great option for them and fulfills the objective, or they have a much longer term death benefit oriented need and they have the desire to pass on assets to generation two, generation three, charity, et cetera. And so that's where kind of a protection oriented focus really comes into play. Um, the one thing I would say, you know, I don't think that insurance is an investment save for securities, registered products that exist in the marketplace, that being variable universal life and private placement life insurance. I think we would be doing a disservice to the public education if we didn't say that those are very much investments. Uh, there is risk of loss in those, there's risk of loss in an index universal life also. Uh, and that's I think the biggest advantage and argument of a whole life over an iul. If you're looking for kind of similar objectives, but if you're looking for kind of growth and depreciation, if you're looking for an investment within the chassis, uh, of a life insurance contract, that's where clients that we have or people probably should be looking to gravitate towards the variable space, knowing that there are absolutely investment risks and timing risks and all sorts of different risks that exist within the selection of those products that may be inconsistent with what their objectives are. I think that's where working with good professionals and having well thought out and educational conversations, you know, emboldens good, good, uh, client outcomes.

Speaker B: If you had to compare IUL versus whole life, when would you do an IUL for a client and when would you do an a whole life and then when would you do a V V. Um, based on. If they come to you and say, Jonathan, here's my situation, I want life insurance kind of point me in the right direction.

Speaker A: Yeah. In, in my mind the best use of whole life is sort of safety and stability. Right. We want to kind of reduce the amount of ongoing upkeep, moving parts associated with it. We want to know that there is a steady stream of appreciation in terms of the dividend option being selected. Let's assume paid up additions for the sake of this conversation. And the goal is really, I know I have a certain death benefit need that is permanent, but I want to have slow incremental growth on both the cash value as well as the net death benefit over a long period of time where it's not going to be subject to, you know, changes in cost of insurance, changes in crediting rates, changes in caps, changing in participation rates or spreads or any of the other minutiae that exists within index universal life specifically. Now is there a trade off for that? Yeah, I mean the, the required premium in order to fulfill the guarantee with these whole lives will be higher. And so I think when we're looking to um, have your kind of lowest cost permanent solution really for estate and wealth transfer, for permanent death benefit, uh, to go to next generation or to beneficiaries, um, a guaranteed index universal life is going to be many measures in terms of a percentage of premium savings versus a whole life. But you're obviously receiving uh, a certain amount of risk associated with the performance of the policy for that trade off. For clients that are premium sensitive and are looking to say basically the internal rate of return on death benefit at life expectancy, we want to be the highest possible on a post tax basis. If you look at the numbers side by side, whole life versus index universal life for the same premium outlay, it will almost always be indexed universal life. And I'm saying here, fully guaranteed indexed universal life. That is to say an extended no lapse guarantee that you can elect with the carrier to make it. So if they pay their premium on time in full, they will have the guaranteed death benefit for the rest of their life, which are the predetermined period.

Speaker B: Yeah, it almost acts as a uh, guaranteed universal life policy which is essentially you don't get any cash value, but as long as you make your end of the bargain, there's a, there's a death benefit that the insurance company's on the hook to pay. The difference is, I would imagine that this would be a little bit more expensive than a Gul, but you do have, even though you're not selling it on the cash value basis, the cash value gives you more optionality and potentially will make it a better deal than a Gul because if it, if the cash value grows at an average rate, um, you have that, whereas a Gul you don't. So am I tracking on the right like someone. You could design an IUL to act very similar to a Gul, but it could even outperform that and give you cash value even though that's not a main selling point. Cash value. No one's going to complain to have cash value. And it's always something that you can utilize as in your balance sheet.

Speaker A: Yeah, I mean we discussed before we started, you know, product innovation and development and pricing is not a stagnant thing in the insurance world as you've witnessed in your time in this business. And I have as well. I mean you can only look at the number of carriers offering Gul 10, 15 years ago versus today. Most insurance carriers in the brokerage distribution model have lifted guls from their shelf entirely. In part because I think there's been a gravitation in these protection oriented designs towards something with cash value. Because as innovation continues in the future, as new actuarial assumptions come into play and there are maybe pricing updates, having a degree of cash value within permanent life insurance is a good thing to have in terms of future flexibility. Uh, the way that we look at an investment portfolio where we would not let it sit stagnant for 20 or 30 years without monitoring it and making sure that there are changes consistent with our objectives at the time and dynamically through our lives. I think exists in the exact same way that we look at insurance portfolios, right? I mean, needs change, products change, innovations happen in the business. We should have a degree of flexibility associated with the kind of modeling and kind of recommendations that we make if there are future, uh, advantages for people to capitalize on. And so that is why to your point, you know, if the premium difference between a conventional Gul with no cash value versus a guaranteed index universal life is 3%, 4%, 5%, for example, I think it's worth it to a lot of clients to pay that difference, but have a degree of future flexibility that they may or may not want to exercise. It's a little bit more, um, I won't say complex, but of an interesting thought experiment and conversation in the variable world because a lot of the future value within the irrevocable life insurance trust or within the policy itself in terms of future death benefit is governed by what the actual rate of return does within the contract over time. Uh, we would offer in terms of, when we look at long term insurance planning, if you look at compound annual growth rates over the last, uh, hundred years of American history and you take 25 or 30 or 40 year blocks, it's very, very rare for there to be any sort of, uh, assumptions in the equity market. For example, let's just take the S&P 500 for example. At less than 10% over 30 or 40 year periods now, there's certainly no indication that that's going to continue in the future, right? Past performance does not predict future results. But I do think for people who have a long term outlook on permanent life insurance in terms of leaving the most net death benefit to their intended beneficiaries over time, even at fairly conservative rates of return assumptions within variable universal life, you tend to have much larger death benefit outcomes at life expectancy, thus higher internal rate of return, thus much higher tax adjusted rate of return as well. Particularly for individuals who are, uh, in high tax brackets in high tax states, think New York and California for example, where they may be touching 50% tax rates, especially as high income earners having a huge amount of appreciation within variable universal life insurance is extremely tax advantage in those scenarios, albeit they're taking on, you know, decidedly more risk than they would in a whole life or even in an iul.

Speaker B: Jonathan, I appreciate you breaking that Down. My next question is around retirement distribution. If you're listening, I use the uh, quotation marks for. I notice that you're, you talk a lot about the IRR and death benefit. And you're even saying, hey, if, you know, if you do a vul, well there's a world that you could get an even better outcome, but obviously you're taking on more risk. I think that's important to know. Do you sell life insurance or do you sell IUL or VUL from a cash accumulation and distribution? Or is that one of those things that you just take a hard stance, not doing? I'm just curious your thoughts on that. Like do you have clients that are getting an IUL or vulnerability? Yeah, they're like, Jonathan, we appreciate the death benefit, but what we really want is a, is a tax, uh, income advantage tax tax stream in, in the future. Like what's your thoughts on, on that?

Speaker A: Simple answer, no, but more to elaborate on that. You know, very often the clients that we're working with have ample streams of retirement income, whether from qualified money or pensions or other forms. And so do I ever think that life insurance distribution should be kind of in the primary forms in which people take distribution income in retirement, no ancillary, tertiary, et cetera. Sure it can round out other things that people are doing, but we are never going. And I'll give an example in the index universal life world, the sort of minimum, non mec death benefit, maximum accumulation design, oftentimes buys, if well structured, very, very little death benefit. We're always starting off with clients with establishing a death benefit need. And so we're never going to go and say if this person has a million dollar need, but they have X amount of funding capacity, we're going to buy $100,000 worth of death benefit, fill the rest. Instead, I think we start off with this proposition of if this person has a million dollar need, let's go and get them a million dollars and talk about what funding of that looks like if they want to overfund it or minimally fund it. Uh, that's where I think the debate and the conversation and the modeling really comes into play. I think the showing of linear streams of distributions, particularly when you're showing 100% participating loans for people, is setting people up for failure, for unrealistic expectations of what that looks like in the future. And I know that I'll get some pushback from people in the sort of IUL purist design world. Uh, we have almost always shown entirely withdrawal to basis first, then loans And I understand mechanically the sort of disruption of the overall accumulated value in terms of crediting positive, that is when you take a withdrawal rather than just loans in perpetuity. But I think if we're just really looking for the best client outcomes in terms of taking distributions in the future, reducing the policy's basis, withdrawing that money that's already been put in in terms of premium and not incurring a loan before you effectively need to incur a loan, I think, uh, is a good measure of sort of conservatism to guard against our worst impulses of showing these unrealistic loan expectations and of clients to look at this asset as, oh, it's going to do everything I want it to do, it's going to get me all the death benefit I want, it's going to shoot out all this tax, uh, free income in the form of loans, et cetera. That really just in my mind can be solved by a more conservative approach and a better emphasis on client education of the function of the product.

Speaker B: Yep. I think you should never apologize for being too more conservative. It's just, it's people that, um, heavily lean on a tactic to sell someone something, but then it's never a great feeling every year trying to then justify maybe why you aggressively sold something. It's always, it's always better if you're very upfront and even selling a more conservative, less sexy picture. And then it's just like, okay, you get the fundamentals now. 20 years from now we can have the conversation about withdrawing, blah, blah, blah. But I want to make sure on the front end that we're being conservative. A couple of quick questions before we land the plane. Um, you mentioned whole life being a more expensive way to lock in death benefit. Um, I think that's really well said. My question to you is IUL and variable universal life, you do take on not just risk as it relates to, um, insurance company cap rates and all, but when it comes to the death benefit, do you feel like there's any potential areas that the insurance company could change the rules or make it less attractive or the way that you're selling it, you're essentially selling the death benefit as guaranteed as whole life, assuming that the companies exist. So, like, in other words, is there any reason why someone would opt for whole life, uh, knowing that the guarantees are more solid? Or are you selling VUL and IUL in such a way that even if the cash value is zero, the death benefit is still going to be more attractive than the whole life counterpart?

Speaker A: Yeah, no, it's an excellent question. Um, with variable universal life, the pricing delta between whole life and that is still exists. But I think if the policy did not perform from an underlying asset allocation standpoint, you would absolutely have better net outcomes in whole life than you would in a vul. You can imagine a scenario in which a fully guaranteed variable policy simply underperforms drastically in terms of rate of return assumptions over a long period of time and then having the consistent and albeit dividends are non guaranteed of course in participating whole life. But I feel good about the track record of dividend paying companies overall and withstanding a wide variety of economic conditions, continuing to pay a dividend, albeit with some variation in the dividend. If that doesn't come to fruition in the markets, uh, of whatever the chosen asset allocation is within a vul, you'll see better performance in whole life. I think why I, and maybe it's that I'm a market purist or however you want to phrase it. When you do look at long, long investment time horizons, I tend to think the risk curve really is much, much more attractive and lends itself towards looking at variable universal life favorably in those scenarios. If you are looking at a death benefit in a 5 or 10 year or 15 year time horizon, I think the same way that you're ideally investing for the long term with understanding of risk associated with that, you wouldn't be going and looking at uh, an asset allocation within a variable universal life to get you that guaranteed death benefit, um, in that timeframe. Although I will say that setting a legacy sort of floor in terms of death benefit via extended, uh, no lapse guarantees within variable universal life also is absolutely something that we do on an ongoing basis. Uh, the original question that you asked though, there are current assumption ULS, current assumption IULs and VULs out there in the marketplace that don't have full extended, no lapse guarantee durations, right? They have no lapse guarantee durations to, let's call it, quote unquote Life expectancy, late 80s, early 90s. Is there the possibility that somebody has significant longevity risk and outlives that policy and the policy underperformed? It exists for sure. And I'm not one to downplay that risk that exists. My hope is that like I said, the same way that we monitor policies on an ongoing basis, we're going to continue to monitor the asset on an ongoing basis with an existing relationship with a client. And so the hope is always that it's not a stagnant plan put in place once and never revisited the Hope is that even if it doesn't lead to any future business, any addition of additional coverage or another sale or anything like that, we continue to do policy review year after year after year to have the best outcomes possible for clients in an ever changing crediting weight variable, et cetera environment. It's our job as insurance professionals and as financial professionals to have educated conversations with clients as conditions change, make modifications if needed, or stay the course if needed as well.

Speaker B: I think that's well said. I believe you watched my episode one with Tom Gober who's known for going undercover and really holding a, uh, companies on what they're, you know, what they're stating and I was amazed. There was actually a whole life insurance carrier that he somewhat called out that I think is going to make breaking news when that drops. But there are a lot of IUL carriers that he just said they're fine, but they're like they got to, you got to be a lot more careful. And so my, my mindset just goes like we can, this is a part two conversation. But it just goes to okay. I, I don't actually. I think the markets are efficient and I trust, trust me, I do. I think the next 30, 40, 50 years, I bet on the, on, on America and the market. The question I have is when we include insurance companies, it's only as good as their abilities to stay in business and all. And the same thing with the whole life carriers, they're just, you know, they're sometimes built maybe a little bit more conservatively, more sexy. Could that be a benefit? Who knows? I think we're, we're big picture speculating and my also I just go back to your clients and people that work with people like you. All of them are going to be fine because you're monitoring if a company is not, if you're not loving it. There's ways out. Even what you were saying earlier on this, this policy that you did was a 1035. Like there's options. I think that's really fair to say. There's a lot of people though that are selling whole life and a lot of people that are selling IUL that aren't going to be in the space, aren't monitoring it, are miss selling it. I think that's probably, especially for someone who's dedicated their life like you to do this. Well, that's, that's got to be frustrating. And you're probably in the same boat where you're just like, I, I wish that that wouldn't be the case because there's almost nothing good that comes out of a potential MLM company that's pitching to their friends and family about IUL mainly. So I think that that's a, uh, that's more of an observation. Anything you want to say before I ask you the last question?

Speaker A: I was just going to say to that point, it's where I agree with Chris Kirkpatrick, uh, very strongly there. You know, there is horrific practices that exist on an ongoing basis that I see predominantly in social media, uh, in the selling of permanent life insurance and IUL specifically today, whole life. It exists also, but to your point of sort of showing it in a, you know, a sexy, dramatic way, it exists much more in the IUL world that I find reprehensible. It makes me, uh, ashamed in many respects to be in the same space in the same business as people. Um, and some of it is at the carrier level that it gets started in these conversations and some of it is improper training in some of these organizations and in misrepresentation of product function, et cetera. I think it's bad for the industry as a whole. And it's where I've consumed Chris's content throughout the years and largely agreed. And he has obviously a lot of learned experience with his life of working with a carrier, you know, that he felt a certain way about it and, and I'm not one to go and dispel the way that he feels based on his, his learned experience to that. In fact, I largely agree with it. I worry less, I guess, about carrier insolvency as a whole. You know, just, it's good to work with highly rated carriers and you know, certainly that have good, strong financials. That's not always, you know, to the conversation that you had with uh, uh, Tom Gober's name, right? You know, the be all and the end all. At the end of the day, there's a lot of obfuscation and sort of uh, duplicitousness that insurance carriers can have even in the publicly stated financials. Um, but I largely am bullish on the long term ability for insurance carriers in the US market to make good on the contracts that they issue. Uh, you know, even in 2008, right, when you have enormous companies having really significant threats to their ability to stay in business. And there was obviously lots of consolidation, lots of smaller and medium sized insurance companies that left the marketplace, what did we see? They sold their blocks of business to larger insurance companies who absorbed it and continued to service the policies. I tend to look at, uh, the Phoenix Life Situation ongoing notwithstanding the ability for uh, claims to be paid. Insurance contracts in the United States is a virtually bulletproof and without sort of reproach. And so um, but I do think to the sort of point of is it potential in uh, the IUL world for a bit more uh, chicanery and problems than in for example Whole Life or vul, right where you know, with variable Universal Life they are not segregated. They're segregated, I should say. They're not part of the general account portfolio of these different um, insurance companies. They are segregated. There's a bit of insulation and a gift of protection I think, uh, associated with the buying of those products versus general account portfolio products like Index Universal Life, like ul, where if the carrier itself comes under threat because of their own, uh, mismanagement or extension of risk in an unsavory manner, does it affect policyholders? Yeah, it absolutely could.

Speaker B: Last question. Um, if someone wanted to buy life insurance for accumulation the cash, the cash value, whether they wanted to borrow against it or that they wanted to use it as like a bond alternative, maybe they want to use it as a way to enhance other assets, but they're really leaning on the permanent cash value backed by the guaranteed death benefit is um, where, where's your. If someone came to you and that's like they wanted a better bond slash, they wanted to use infinite banking, would you lean towards Whole Life or would it still be a. Like how would you approach that conversation? I, I understand that most people coming to you that's, it's more of a death benefit conversation and a lot of them don't actually aren't looking for liquidity. I'm just curious, what is your take, knowing what you know about insurance products and where you would lean?

Speaker A: I recognize, I think the presence of Whole Life as, you know, this sort of better bond. Um, but I think for most people, and I mean some of it will, would just be age and time horizon dependent. Right. I think if somebody is your age or my age and they're looking to buy an asset for the long term to have those kind of characteristics, I don't fundamentally like the directional lack of control of whole life. What I mean by that is of course, you know, whether a mutual company or whether a stock company, you're at the whim of the board of directors or whomever making a decision about the, you know, declared dividend rate in the direction of the underlying, uh, investments of the general account portfolio, which as we know are largely held in high grade bonds for every insurance carrier that exists in the US Marketplace. Um, I favor, I think in that kind of scenario for somebody with a long enough time horizon for this accumulation focus, variable universal life. In part because I think you can have whatever asset allocation offered by the insurance carrier in terms of the sub accounts within the contract. And so if you are young in your life and you're willing to take on a significant amount of equity risk, you can be 100% equities within the contract, knowing that you have a 30, 40, whatever year time horizon to go and see appreciation of the asset, utilize the money, et cetera, knowing of course that there will be massive fluctuation if you're 100% equities, uh, that exist naturally in the kind of asset class. But you can also de risk a variable universal life in a way that you can't advance the risk within a whole life. I can't say in a whole life contract I want to take on more equity risk. I am at the.

Speaker B: Yeah, but you could borrow against, you could borrow against the contract and take as much risk as you want.

Speaker A: Very true, very true. But only within the constraints of the actual contract. If I'm trying to sort of just see the accumulated value, um, you know, I can have whatever underlying asset allocation mix effectively that's offered within the vul, you know, commensurate with whatever my risk tolerance is. And that can change very easily and evolve throughout year over year over year, depending on market conditions, depending on my feelings towards how much risk I want to take or don't take. Um, whereas I think you have that extra step that you sort of highlighted in the whole life, albeit your ability to do and take money. The question then becomes if you take the money out of the whole life, where are you putting it back into in terms of a vehicle that maybe is as tax advantaged as within life insurance? Right. When you work with particularly very high income earners, the more money that is inside of the vehicle itself, it does not have to be extracted from and put into another possibly tax inefficient vehicle. The more you are having tax efficient growth over long periods of time, I think the better the sort of net outcome is if somebody does want to take a loan over, uh, the long term. But that's just I think where I kind of see it.

Speaker B: Jonathan, I appreciate, I appreciate your time and we might have to have you back on. I look forward to hearing uh, the comments and um, appreciate the work that you do.

Speaker A: Wonderful to be on. I really appreciate your time. The platform that you put forth and, and look uh, forward to having another future conversation. Soon. Forward to having another future conversation.

Speaker B: Thank you so much for listening to the Better wealth podcast. It would mean the world to me if you could hit subscribe, leave a review and share this with the people that you know and love.