Does the idea of no commission driven sales, objective advice, reduced cost and improved performance in insurance and estate planning interest you? Have you never heard of insurance advice and planning without commissions? It doesn’t surprise us if you have not, because the number of firms delivering fee-only insurance services is vanishingly small. Please take the time to read on and understand why we believe the difference is so important.
Life insurance amounts are often as much as one-third to one-half the value of estate assets. But permanent (cash value) life insurance is a mystery asset sold by some of the most talented salespersons in the world. Thompson Creek Wealth Advisors recognizes how important it is that we and our clients truly understand their life insurance policies. A lack of knowledge about high value complicated assets is not prudent. For this reason all of our Comprehensive Wealth Management clients get regular professional reviews of their life insurance policies.
Take it from those of us who have had life insurance licenses, it in no way prepares you to truly understand the many intricacies of permanent insurance policies. In order to ensure you get objective, non-commission driven advice about existing and contemplated policies we have turned to one of the handful of true life insurance experts we have been able to find in our many years in the business.
Our life insurance team is led by renowned fee-only life insurance expert Peter Katt of Katt and Company. In July 2002 Forbes named Peter Katt as one of only four "savants" in this area and The Wall Street Journal did likewise in an article July 16, 2003.
Our team receives no compensation from life insurance companies for recommending their policies. Our team is paid directly by the client, creating a fiduciary relationship that is based on trust and confidence. You can expect these advantages from working with Thompson Creek:
Please visit the fee-only case study section of this website to see examples of the tremendous value and savings turning the insurance game on its head can bring you. It will also help you understand Peter’s role in interpreting and communicating the many complex issues associated with life insurance policies and planning. Generally, Peter’s role is to fully explain the options that are appropriate so that you can make the best choices for you and your family. This approach is only possible when coupled with a high degree of experience.
We also highly suggest you take the time to read our Frequently Asked Questions below to more fully understand the difference.
FAQ’s on Life Insurance
- What kind of policies should be reviewed?
All of them. Although cash value policies are far more complicated and definitely in need of review, term insurance also should be assessed for cost, ownership and beneficiary problems and conversion to permanent insurance options.
- What are the possible problems with permanent insurance?
Permanent insurance is very complex but life insurance companies and agents direct almost all of their resources to sell new policies. Managing and detecting problems with existing policies is not something insurance companies or salespersons have much interest in. Nearly all existing permanent policies are vulnerable to a myriad of potential problems. Some of these problems are:
- Almost all universal life policies are overpriced and underfunded. Overpriced because companies have the bad habit of continually developing new versions of the policy you bought with every newer version getting better pricing leaving your policy a pricing dud. Overpricing, lower interest rates and lack of attention means most universal life policies are in danger of collapse within your life expectancy;
- Many so-called vanishing-premium policies are underfunded and in danger of collapse;
- Policy loans are almost always a bad idea because they substantially reduce a policies performance. Policy loans can often be eliminated without repaying the loan;
- Policy ownership and beneficiary designations can be inappropriate or the cause of potential problems;
- Almost all variable life policies have the wrong design because agents have consistently not allowed for the fact that equity investments can go down. In fact, the illustrations used to establish these designs are not allowed to show how investment losses can affect policy performance. Poorly designed variable life policies alternate between being overfunded or underfunded and can collapse if too much underfunding occurs;
- Almost all life insurance associated with so-called 419 plans need immediate review because most are nothing more than clever tax-avoidance schemes that will be very costly to its victims if discovered by the IRS;
- Split-dollar life insurance is almost always a sales gimmick that has few benefits when all of the factors are considered. In addition, ongoing actions by the IRS make split dollar even less attractive. All split-dollar plans should be reviewed; and
- Pension owned life insurance isn't the great tax deal that salespersons claim. Most pension life insurance is a four-of-one-half-dozen-of-another proposition. Whether the potential benefits are more worthy than the potential problems needs to be assessed with individual clients making their own decisions on continuing it.
- Isn't the agent that sold the policy professional?
Yes life insurance agents are professional sales people. Whether they have the skills, incentives and approach to be more than that has to be taken on a case by case basis, but it is not the norm. As former license holders we can assure you that the vast majority of agent training is devoted to selling skills. It is due to our frustration with the traditional model that we have sought out Peter’s help to supplement our planning skills with his expertise on insurance design, eliminating commissions and other sales costs where possible, and adding his experience to our insurance planning team. Agents learn and master the rhetoric of life insurance but generally don't understand the complexities that would get in the way of selling policies. In fact, there is a name for agents that conscientiously learn and explain the complexities of permanent life insurance - they are called ex-agents. Even if they did understand the complexities there aren't any financial incentives to manage permanent life insurance. Almost all of their commissions are made when the policy is sold.
- Is only a one-time review needed?
No, life insurance should be professionally managed because permanent policies have many moving parts, clients financial and family situations can change and insurance company financial strength and pricing quality must be monitored. Once the first review is done future management can be relatively simple, but still needs to be done. How much management is needed depends on the kind of policy design.
- Isn't the insurance company on top of issues that might adversely affect my policies?
No, perversely insurance companies create extraordinarily complicated permanent policies but have inadequate systems or personnel to assist with policy management. Policy service departments are good at shuffling paperwork and sending out information that is requested, but are sometimes incapable and uninterested in providing astute reasoning about life insurance planning and policy analysis.
- Are the fees for policy reviews and ongoing management high?
Professional management of very complicated assets brings extraordinary value relative to the fee costs. However, at Thompson Creek Wealth Advisors the cost is generally part of our overall service, so no additional cost should be assumed. In unusual cases where it is expected that the complexity may result in additional fees we will discuss the matter ahead of time to insure it is in line with your desires to go forward. We expect in those instances the need would be quite compelling and result in substantial savings or avoid significant problems.
- Should new insurance purchases be done with the fee-only advisor?
Absolutely, a fiduciary advisor explains the potential advantages and disadvantages of various alternative planning and policy options. Clients then make informed choices. Implementing policy purchases is done with most of the commissions eliminated (none of which go to the advisor in any event) by creative policy structuring. Eliminating most of the commissions produce enormous savings.
- If the estate tax is permanently repealed should I cancel my life insurance?
Not necessarily, but reviews should begin taking into account the possibility of permanent repeal because if it occurs there will be an overwhelming number of requests for guidance. Get it done now.