Gopala Alampur 24 The right woy to do it insurance companies... have what they call a cash surrender Value ANS! , Now, there’s the key! is the ri stude for selling life insurance. is the right attitude for selling ® teat life insurance”. This is where you become Mr. Feldmay life insurance in the form of financial advice. Not as the a but a part of it. ‘e something written by the man who helped me with Here is what I think Ttis where you stop You will be selling form of financial advice, To start this discussion ll us this book. Here are his words: ‘There was a cartoon circulating on the internet a while ago that showed how 2 man discouraged anyone talking to him while he was seated in an airplane, He wore a T-shirt that proclaimed Let’s Talk About Jesus. Tt could have said life insurance. Like most people, I would have easily been discouraged. Yet here I am not only writing about it, but paying big bucks every year to buy it for my grandchildren. I don’t have any insurance for myself. ‘What happened? Gopala happened, several years ago. I was vice-president of a small publishing company that planned to produce his book about how to get wealthy with complete security and by legally beating the taxman through life insurance. We agreed that I would help write the book. That, of course, meant learning something about the subject and his take on it. My old self would look at that as a fatal mistake. Unfortunately, he started to make sense, at least to me, and I was sucked in, despite the fact that he didn't try to sell me anything, At the time I had one grandchild. No big deal. Suddenly I had four! Bigger deal, but I’m still not complaining. (Hey kids, four is ENOUGH!) Before I start outlining what hooked me, which will tell you a lot about that first book and Gopala’s attitude to insurance, I need to admit that I have made enough financial mistakes to be labelled a money dummy. That could disqualify me from earning any respect from you about what I plan to say. But here's the big but: What he says is directed to other money dummies too, plus the savvy ones. ‘That includes many financial experts ae agree with me, even some who say they had never thought cof what pala outlines, ‘Whatis important to me is that Gopala makes so much sense to me that what he says seems simple. That simple attitude, that zeroing in on what s best for the client in simple terms and then looking for the best answes is |Gopal’s basic approach. Fortunately for him, he’ also a good salesperson andosganized. ‘What he says in his former book, A Fortune For Your Future, presents an approach to becoming wealthy, one that financial experts praise, that forms the basis of his advice on how to run a successful insurance office. Here’s the approach: Almost all of us are born healthy with a long life expectation. As a baby we are a good bet for an insurance company. The number crunchers will sell you a monthly premium at a bargain. Or course, you didn’t take advantage when you were that age, but suppose your parents or grandparents did. At today’s rates, a newborn can get a $250,000 whole life insurance policy (a form of permanent life insurance) for about $2,000 a year. But over the years the benefit of a whole life policy increases. It’s like investing in stocks that always go up in value. For example, if you are a non smoker at age 18, the premiums decrease and the death benefit at age 65 has hit about $3 million. If you get to 100, the benefit is close to $8 million. So what’s the big deal? You could be a smart investor and always see the value of your stocks rise. ‘There are three big deals, First, remember, you are a money dummy and. may lose your shirt, or the baby will, if you are in charge. And if you are a money dummy you probably don't want to spend all the time necessary to un-dummy yourself. Or course, you can get a financial adviser, who may or may not point out the second big deal, the important one: whatever you earn through an insurance company, the death benefit is tax free. But your baby can make use of that money before he or she dies. I'll soon explain how. Third: Your money is safe from creditors, lawsuits or anything else, except you. You cannot find that one-two-three punch anywhere else, unless you go into something like drug running and when you get caught put the blame on the baby. To explain more I’ll quote a small section from the previous book, written several years ago, which used Leslie as the baby. The only comment to add here is that by the time Leslie reaches your age the monthly cost of the premium will seem to be peanuts: Let’s say you buy a $250,000 life insurance policy with a monthly $100 premium for Leslie, When Leslie is 65 there will be a death benefit, let’s say, of about $2 million. a That’s the amount payable to the beneficiary on Leslie’s death. But insurance companies also have what they call a cash surrender value. Now, there's the key! That's the pivotal benefit of insurance that produces such wealth. ae Cash surrender value for $2 million would be about $1 million. That means you can just take out that much cash, grab all that filthy lucre and6 Gopala Alampur fit. from the death bene! have it — et take that money, pay the taxes (since it isn't a death ae ‘ad run. But it would be wiser not to do so. ee ‘an take the bank’s money and run, stead, Leslie ¢: eb ) ; Tiere how that works. Let’ just say Leslie has a cash surrender value of 0. 15008 » will lend Leslie up to 99 percent of that amount. That is jus lion. ‘ oY nik will want interest, of course. But Leslie, in effect, is not going to pay it. And Leslie is not going to pay off the principal either. The bank won't complain. Leslie really can take the bank’s money and run, Best of all, there will be no income tax to pay on the money because there is no tax on loans! How can Leslie do all that? Remember that death benefit, about $2 million? Take $1 million away from that, and then take away the interest owed for a year (let’s says $60,000 atahigh 6 percent a year for $1 million borrowed) and you still have about 1 million bucks left. If Leslie agrees to let the bank have first crack at the death benefit, the bank will wait until his or her death for interest payments. There’s no doubt the bank will get its money, no matter how long Leslie lives. Meanwhile, that $1 million is still growing. So will the paltry $100 a month that Leslie keeps adding. That means the cash surrender value will increase each year as the death benefit increases. Leslie can keep taking out the bank’s money and just spend, spend, spend, without fear of losing wealth and, just as important, dignity. He or she can die broke - and wealthy because there’s lots left over to leave for the kids, even if Leslie chooses the most lavish seniors home. And throughout those years Leslie could have been paying for the same insurance policy for his or her grandchildren. ‘The only thing Leslie needs to avoid is borrowing more money than the value of the assets in the policy. And it’s always wise to leave a good-sized cushion for unexpected events, ville ss only one way you can make surprising use ofa life insurance ie au enough for me. It seemed to me the best gift I could give the month awe W95 fo ensure that if they, or someone else, kept paying matter we hee comfort in their old age would be guaranteed n° about that eke” decided to spend their life doing. I wish I had know en my own children were born,Thinking like Mr. Feldman 27 Time for changes How long will agencies be willing to spend those huge amounts of money to train an agent who will disappear quickly if he’s good? My attitude to selling life insurance, an attitude of being a financial adviser instead of an insurance salesperson, is not as rare as I may have made it sound. Which can be a problem — a big problem that at the moment is making a basic change in the insurance business. It’s not only the “deadbeats” who leave the company they started with. Some of the best and brightest will leave, not usually after one year, but as soon as they've figured out how best to sell insurance. And that is a bigger problem than failures. Insurance companies always find new recruits, but the good ones often end up in brokerage firms, which sell insurance for any company. The loss for the first company is obvious. Why does that happen? There is more than one reason. Most insurance policies are the same, but each company does not have every policy, all have different rules, different wrinkles, different favourites. ‘The good adviser sometimes can't do the best for a client if his or her company doesn't have a suitable policy, or has rules that can’t be bent. But other companies may have suitable policies. If you are a captive agent you are not permitted to sell for another company. There are devious ways around that, but if you run across the problem often, the easiest way to solve it, of course, is to work for a brokerage. Unfortunately, for the wandering adviser, that may not be enough to meet all needs. Brokerages usually deal with less than half a dozen insurance carriers and there is no guarantee one will have the perfect product. Ina brokerage, there is no loyalty to a single company. In an agency there is a natural desire to see improvements in “your” company and cooperation among agents, which is also missing in a brokerage. Add all that to the loss of the best agents, and you have a continually deteriorating situation. How long will agencies be willing to spend those huge amounts of money to train an agent who will disappear quickly if he’s good? If 95 percent of agents are eventually gone, that’s a lot of money thrown away compared to money used properly. Would that good money be only 5 percent of what's spent? That doesn't seem to make good business sense. ‘We now also have offers to the public to buy insurance through the internet and from banks. Can a person not trained in financial matters really make the right choice that way? Even many financial advisers don't fully understand what insurance can do. It takes insurance agents many years to learn enough about the business to help buyers28 Gopala Alampur properly. There are many aspects and applications of insurance I still don’t fully understand. How can the general population evaluate their situations to find proper policies? Perhaps a change could be made on how agents are trained to pass information on to the general public. Perhaps there could be courses in universities or business schools about insurance as a form of financial planning. How can insurance companies do a better job of informing the public about the great value of permanent insurance? How can we incorporate the best of both the brokerage and agency systems?