Which Life Insurance Policy Is Best Term Whole Life IUL Review

 Term insurance is a decision that feels good at 35 and feels terrible at 55. Here's the issue, Caleb. As a financial planner, your entire job is to get 35-year-olds to make decisions that they will appreciate at 55 and 55. It only goes up in value and the long run it's going to perform kind of like a corporate bond. You can access it any way you want to and get the money immediately. And there's no mark to market on this. It can't go down, right? We get to get you. Whatever matter what the market does, it still stays the same. You don't have this flow through mechanism. I think one of the challenges that niff and n banking is they make it sound like it's this free magical money pool that comes out of nowhere. We're not arbitraging your money. You are not. This is where our industry does a crappy job. Bobby Samson, we're running it back, man. Thanks for having me. So our last interview we talked about all kinds of things and it was funny when when I when you popped on we were catching up and I was like, all right, what are we what are we talking about? And you're like, hey, I thought you had a list. You are the guy that's probably one of the most known people in our space when it comes to like product review. You even have a company like life product review and people a lot of people in our space, including us like subscribe to the research that you're doing because you just do a deep dive on all things life insurance, life insurance companies. And so what I would like to first do is like big picture if we zoom out, what are you seeing big picture in a life insurance space today? And then I think it would be great to touch on whole life term, IUL and just some of the basics of like what you're seeing some of the questions that people should be asking. There's a lot of people that watch this channel that are in our space like advisors and agents. But then there's a lot of people that watch this that are consumers that either have life insurance or are researching to buy life insurance. And so if you are a life insurance nerd or want to be a life insurance nerd, this this episode is going to be for you. Thank you again for coming back on. Yeah, my pleasure. It's a great it's a great starting question. And I actually love the way you kind of frame this up because you're right, your channel is their advisors who are you know this is what they do all day every day. And then you've got consumers. And the last time I was on you know the kind of funny story is I at the end of that at the end of the interview, which was an hour plus long. I made sort of an offhanded comment about hey you know if you're a consumer and you want to sign up for my newsletter, I don't know why you want to do that. But if you do just send me an email and as long as you can like send me your LinkedIn or something to show me that you're not in the industry, I'll send you a link you can sign up for free. And I thought no one would take me out on it. I've probably had 50 people since our conversation taking me up on it, which credit to them for getting all the way through the interview. Credit to you guys for attracting people like that to your channel and to your content who are willing who are in consumers who want to know how this stuff works to the degree that are willing to sit through that that that that hour long interview. So yeah, I think so thinking about the world, you framed it up perfectly, which is I think there are kind of two constituents going on. There's all the wonky stuff happening in our business that really people who are in the weeds every day are going to notice. Things like companies releasing new products with these illustration gimmicks, dividend scale interest rate changes that are you know 15, 20 basis points, whatever. There's a lot you know new VUL products hitting the market. There is a lot of activity there and I think we should talk about some of that. But I think the real story that I've been thinking about over the last year and I've been talking a lot more about is really back to the basics and you even use that word like going back to the core concepts that underpin why we do what we do, why this industry builds the product set of builds and how they really help people who own these contracts. Now, including me, I own a lot of life insurance, I would expect you to do too. And one of the things I've kind of realized is as my sophistication and the use of life insurance is increased. So you know, started with term way back when and now I've grown to this, I don't even have to earn anymore, I have all permanent insurance and I'm 39 years old. It's made me more passionate about other people, similar demographics to me using these products the way that I'm using them. And I'm you know, my financial advisor is an RA, he knows nothing about insurance. And he's even been like, wow, you're using this in a different way than other people do. And I kind of think I know what I'm doing. I kind of feel like the more people understand the products, the more they probably would do, you know, things that look more like what I'm doing versus what you might see on the internet or what Dave Ramsey says or buy a term and invest the difference or whatever. So I do think there's kind of this tension going on of, or not even tension, but just sort of these two conversations of, you know, they're the basics and how do we re-emphasize the basics and the dignity of the products. And also the noise on the everyday stuff of what new products are coming out, how carriers are illustrating stuff. And so your choice on it, which one do you want to go to first? Let's start with term. Let's start with term insurance. And term insurance is one of those things where it's sold, it's a true expense. It's a something that's a lot of financial gurus, a lot of financial gurus are like by term, invest a difference. When you hit a certain age, you don't need term insurance anymore. And that's this is like a common, like I would say the mainstream way to think about financial planning. And so what are your thoughts around that? Because I know that you had term in the past, you said on the podcast that you don't have any term anymore. If you had to take a step back, what is your thought process around term insurance and proper frameworks on how to think about term insurance? I've come a long way on term. And I think people give term way too much credit. So let me even take a step back and say, what is life insurance? Life insurance fundamentally is a way to levelize a non-level cost. So think about this. If you had a group of people, 100 people or whatever, the thousand people, and they said, hey, we're going to we're going to self-insure. We don't need it insurance company. We're going to self-insure. Here's how it's going to work. Person, you know, we're going to be a thousand people in this group. One person dies. We're going to pay out a hundred thousand dollars, let's say, okay? That hundred thousand dollar benefit to the family of the person who died is then shared by the people in the group. And so you get a bill at the end of the year that basically says, hey, Bill died. We paid his family this money. You have a bill to pay your part of that money. That works great when the group is small. I mean, I'm sorry, when the group is young and it's early on in the life of the contract. As that as time progresses, two things happen. Number one, more people die because you're getting older. And so every year the cost of being in the group goes up if you're one of the survivors. And so that's natural, right? As we get older, the likelihood of death is higher. And so we have this nonlinear sort of exp, a cost spread going on. And then the second thing that happens is there are fewer people to spread the cost over. And so you have these two nonlinear elements going on. So what does life insurance do? Life insurance says, wait a second. It doesn't make any sense to be in one of these groups. And these groups actually existed prior to life insurance companies existing. And the problem is they all break up. At some point, they kick the unhealthy people out, the healthy people all band to back together and they create a new group. That's not life insurance. That's a temporary, it's, that's effectively term insurance. That's temporary benefit. And then the group breaks up and the healthy people go form a new group and the unhealthy people don't have any coverage. So what's the goal of life insurance? Life insurance says, all right, we've got this mortality cost that's increasing. We're going to flatten that out. And so the way you're going to flatten it out is everyone is going to overpay early relative to their actual mortality cost so that they can underpay late. And so if the curve is upward sloping, we're basically just going to draw a line right through the middle of that curve and you're going to overpay early so that you can underpay late. And that way, everybody can stand the group at the same cost every year. And they can get the coverage that they need. And that's every single life insurance policy effectively works that way. Whole life does that leveling function over the entire, you know, till your age one, 21, right? There's no way for that policy to lapse. And so we're levelizing effectively the entire mortality slope with a whole life premium. So let's just say that costs $10,000. So your paying $10,000, let's say the mortality incidence in the first year is $10. Where does the extra money go? Well, the money goes into a reserve that earns interest so that later on when the mortality claims are higher, you have money there to pay those claims while everyone pays the level premium. Does that make sense? Yes. All right. Now, then people look at it and say, well, $10,000 is a lot of money. Oh, man, yeah, that's right. Because we're levelizing the entire mortality curve all the way out to 120. You are going to die. The question is, do you want life insurance when you die or not? And if the answer is yes, I do, then you have to levelize that cost over the entire curve. If you don't, then the cost of paying the incremental mortality cost every year is going to end up being several times which you actually get back in the death benefit. And so you have to levelize the cost in order to make this work if you're thinking long term, if you're thinking about age 90, age 95, age 100. So what happens is people say, well, whole life is very expensive. That's why I do term insurance. Okay, let's talk about term insurance. What is term insurance? Term insurance levelizes the cost of mortality, the same cost, by the way, whether it's in whole life or term, it simply levelizes that cost over a shorter period of time. And so if you think about the average, just simple math here, the average of the full slope to age 121 is obviously a lot higher than the average of the next 10 years of mortality, especially on like a 35 year old. And so if we go back to the example, if mortality cost $10 in the first year and you're a 35 years old, maybe on average over the next 20 years, it costs $300 or $400. And so then they run the comparison and you say, well, whole life costs $10,000, term insurance costs $400. Why would I not go with the cheaper product? Well, they're actually the exact same policy. They're both levelizing the cost over a specific period of time. So the reason why term insurance is cheaper is because it doesn't pay very many claims. So the value is less. So this is a perfect example of where the narrative in the popular press is whole life is expensive because of agent commissions and blah, blah, blah, blah. We'll talk about that in a minute. The real issue with whole life is that it and any permanent life insurance policy is your levelizing costs over the entire span of mortality term is just a shorter span. Term is cheaper because you are less likely to die with it. So it's not inherently better or worse than whole life. It's simply taking a temporary view of mortality, which leads to the following question, which is, okay, what is your mortality liability? And for some people they say, I don't have any need for life insurance after age 65. Okay, maybe I've met very few people at 65 who feel that way because most people at 65 have kids. They have grandkids. Maybe they work longer than they should. Maybe they still have a mortgage. People, they want to leave a legacy to their family. I mean, there's all kinds of reasons why or let's imagine another scenario. They've become uninsurable and they and they are now realizing, gosh, I really would like some life insurance to replenish, for example, all the money that I've spent on medical care. But all these things, all these reasons. So very, very few people at 65 actually wake up and say, you know, today's the day I no longer need my $5 million or $3 million term life insurance policy. I'm going to let it drop. So it's very short term thinking for a 35 year old to think, I know that in 30 years I'm not going to need life insurance. There's a whole lot of life that happens in 35 years. The problem is term insurance does not prepare you for that. Term insurance is not even that opportunity because what term insurance does is it says, okay, you're going to get coverage for 35 years. Let's say that you need it one day past the end of the term period. What happens? Well, then you pay these exorbitantly high costs. Yeah. And so the dirty little secret in our industry is that we are a little bit term insurance is a little bit like the sort of notorious printer versus ink example, right? The printer company loses money selling the printer, but they make money on the ink. So it's kind of counterintuitive thing. People think life insurance companies make money on term insurance. No, they do not. It's a lost leader. Where they make money is when people who still need coverage get to the end of the term and have to pay rates that are three, four, five, six times what they would have had to pay had they just bought permanent insurance to begin with. And those people effectively are where the carrier makes all their money. And so if you know you're not going to be that person you say, well, that sounds like a pretty good deal. You don't know if you're not going to be that person. So that's one option. So if you want to keep your term coverage, you're going to end up paying way higher rates than if you just bought permanent at the onset. The other option is to go through and say, you know what I actually do need coverage past 65. And so what then do we offer people? We offer people the ability to convert their term insurance to permanent insurance. So the solution for long term insurance needs is always permanent insurance. The out if you need to get the out at the end of a term policy is to convert two permanent insurance. So the question is, well, why didn't you buy permanent insurance to begin with? Well, because it was expensive. Well, yeah, because it covers your entire life. So let's get back to this commissions point. So the commissions point on this I think is really interesting. The commissions point is correct in that the total dollar amount of commission on term insurance is lower than on permanent insurance because the commission because the premiums are lower. So typical commission payouts such as they are 100% of premium paid. That's 100% of the term premium and 100% of the whole life premium. So the commission rate is actually usually significantly higher on term insurance in the real world than it is even on whole life. It's just that the premiums are so much cheaper. So when someone says, oh, term, terms of low commission product, no, no, no. Again, it's a low premium product. It's a low value product. And that is why it's a low commission product in terms of dollars, but it's a very high commission rate. Whole life is a high value, higher premium products. And it actually pays commissions at a lower rate than term insurance. Oh, and by the way, if you convert your term insurance to a permanent policy, guess what the agent gets a full commission on a permanent policy. And so a lot of times agents sell term so they can make two commissions rather than one commission. And because you're waiting a few years for the permanent policy to kick in, the commission on the new permanent policy for the conversion is higher than what they would have made at the beginning. And so there is this sales strategy out there saying, hey, sell term to get them in the door and then convert it later and you actually make more money down the road. So I say all this, I've been on the soapbox. Let me run out with this company and say term insurance is for a very particular fact pattern. If you are 100% confident without a doubt that you do not need life insurance beyond the end of the term period, then just pay for what you need. I would argue that effectively, nobody is 100% sure, period in the story. So you write a realize when you're doing term policy, you are taking risk, you are punting that issue down the road. You are effectively making a decision as a 35 year old that she might really regret as a 65 year old. And you're setting yourself up for that situation where you have no other options. And a lot of companies, probably don't even offer conversions on their term policies and people don't even know it. They don't even read the language in the contract. So if you're in one of those contracts, you're stuck. If you become uninsurable, you're stuck. If you don't convert within the window and you miss the window and you hold it to the end, you're stuck. So again, mental framework here, term insurance is a decision that feels good at 35 and feels terrible at 55 for a lot of people. As a financial planner, speaking of financial planners now, as a financial planner, your entire job is to get 35 year olds to make decisions that they will appreciate as 55 and 55. Is that not the entire financial planning profession in an upshel? That's really, really well said. Our job is to look back 10, 15, 20, 30, 40, 50 years and have the clients say thank you. Exactly. And in a lot of cases, you're not going to be their best right? I almost think of parenting. You want a parent well, your kid may not love you today. Yeah. But hopefully, the hope is when they're older, they'll look back and say thank you because I am a better human being because you did the right thing, not just a popular thing. That isn't even better analogy. That is the best. I mean, we both have kids now. That's the best analogy you can come up with. Because your kids are going to be mad at you actually when they're, you know, my kids are 9, 7 and 5. They're mad at me when I tell them no for something they're going to appreciate when they're 17 and 19, 20 or whatever it is. Same dynamic goes here. So the question is, okay, well, in what situation would a client be thanking an advisor? 15, 20 years from now, it's when they paid more to satisfy a long-term need. And again, I mean, it's getting 35 year olds to make decisions. There's 65 year olds cells will appreciate. That's why we use 529 plants. That's why we use supplemental retirement lands. That's why we set it side savings. And that's also why people should buy permanent insurance. Yeah, I think that's the out. That's the lot. Let me play devil's advocate here. So we're right. You're right now. You're not talking about overfunding. You're talking purely death benefit, which in the future, and we're going to talk about whole life in a second about how that can be in a retirement asset. And just like there's been a lot of research out there. So I'm excited about diving into that. We were talking about like just the death benefit standpoint. Let's say you're watching this or listening to this and you're like, okay, are you telling me that if like money is not, I don't have a ton of money watching this. You're saying that would I be better off like getting my insurance need all in like permanent life insurance and not investing? Or is there a combination where I can potentially do a combination of both? Because it's like, there's one thing to say, but it's another thing to be like, like, and again, you're not giving financial advice. Don't sue Bobby or I. But like, what is, would you say like get your insurance knocked out and do it all on the permanent side before you even look at investing? Or is there a framework of like, okay, 50, 50, invest 50, put 50 in insurance? Because is my question making sense? It's like, where is like, where do you draw the line? Because it could be, it might sound really good, but I don't think what you're saying potentially is saying, okay, don't invest at all, put all your money in like a whole life insurance base contract. You'll thank me in long run. Ironically, you may be better off 30 years from now, just based on human behavior, but I'm not saying that that's what you're saying. I would even phrase it this way. I gave the generality here. If you're choosing between investing and life insurance, don't put all your money in life insurance. Period in the story. I think what I'm saying more is the higher level point, which is recognize that buying term insurance entails risk. And so you're going to take risk on your investments. The risk here is that you actually need life insurance for a variety of reasons. You may not even know or understand right now. And that by buying term insurance, you're excluding that possibility down the road. Now here's the issue, Caleb. This is where our industry does a crappy job. Right now, the price comparison is, you know, 400 bucks for term, $10,000 for whole life. There's a huge gradient in between. And one of the things I like about universal life is that it's a flexible premium product. Theoretically, you could fund it with a term insurance premium, but actually have a permanent policy. And as you have more capacity to save, you can increase the amount of your savings. I would argue a whole life policy with a heavy term blend can kind of get you to a similar, a similar spot. That's flexibility. That's optionality. That preserves future choice. That does not require that you convert the policy. So what I'd say is don't think about whole life all base versus term. If you can't afford whole life all base or any other policy with you're really thinking long term, we're going to talk about the accumulation attributes to your point in a minute, but just for your protection. There's a whole spectrum in between. Our industry has not done a good job of providing options that really fall in between in a way that a customer would want. What a customer would want is a policy where they pay the term premium and they get coverage for that period of time. And they have the option to pay more. And as they pay more, they can basically prefund a future extension of their policy on reasonable terms. The problem with our industry is we agents want full compensation for permanent. There's kind of a permanent compensation premium amount. And then there's a term. What they should, what we should be able to do is have term premiums, the term products that pay term comp and permanent policies that pay term comp. And if the client chooses to pay more, then we pay comp on what the client pays more on because the agent's probably calling them back and saying, hey, you should put more money into this thing. Those products don't really exist. Now I'm happy to say I am the newsletter editor that you kind of know about. I also run a product development company. And one of the things we are doing is working with two insurers right now to build out products like this. So that customers can go in and say, you know what, I can't, I need protection today. I know that in the future, I'm going to be able to save more. And I want to be able to do that all on one chassis. I want an agent to be paid fairly. I want my policy charges to make sense. And that's the kind of product of customer once. And again, I think as an industry, we've done a crappy job of giving that to them. If you're really high net worth and you've got lots of discretionary savings, we've got a million products for you. Yeah. You know, if you just want the cheapest thing out there, even if it's not very valuable, like term insurance, we got a million products out there. Most people don't fall into those buckets, right? They want optionality. They want flexibility. And I think as an industry, we need to get better at giving that to them. Hey, it's Caleb Williams here. I'm just interrupting this video quickly to invite you to check out our NS at vault. You may have been there. We've actually revamping it. And if you are somebody that wants to learn more about is life insurance right fit for me? Does this end asset make sense? Like does this actually help me be more efficient? We've put together a 10 minute documentary style video. And I can test a really, really good job giving the history why the end asset, different setups and designs that we use. And then we have an end asset vault that gives like case studies, calculators, handbooks, and so much more. We are here to serve you whether it's a conversation, whether it's education or the video. So make sure to go check out and that's it.com slash bolt. Learn more. Love it. You have an open invite if you ever want to come on and share different things you've been working on. Yeah. Open door policy from a standpoint of coming on. I'm sure our audience would love that. So we're going to move on. You talked again. You had a great example of like you want to do things for the future for your clients to thank you. And so when we talk about permanent life insurance, when I think of like future, there's this word retirement thrown out. I feel like it's a bad word to use because it doesn't actually articulate what we're actually wanting in retirement. What I think most people want in quote unquote retirement is future cash flow that they don't necessarily have to work to get. And then it's also interesting to me that people say like there's two guarantees in life death and taxes. Death is for sure guaranteed. I mean taxes or I guess it's cute to say that death will happen. And so another thing that you're saying is like yeah, people might want or need a death benefit. But I'm almost thinking like if you know something is going to happen in your life and that we're almost like taking a risk off the table if you know something's going to happen in your life, you can almost reverse engineer that and be more efficient while you're alive if you know certain things are going to happen. And so I guess what I'm setting up for is we're not even going to talk about infinite banking. I know you have thoughts on that. If we have time, I can get your thoughts on like in the accumulation 20, 30, 40, 50, the idea of using your money with you borrowing against your life insurance. That's one thing we can talk about if we have time. But I'm talking about like life insurance as it acts as an asset in retirement and then how it acts as an asset when you pass away. And like why that enhances or could enhance your portfolio by having life insurance versus not? Because that's one of the things that like I think people see it as an expense. One of the things that I'm trying to do is like help people understand that like oh, this might actually be way better than a bond. And like this could be one of your favorite assets in the future. But it's like I don't think we're doing a great job as an industry articulating that. But the good news is there's a lot of people out there. They're starting to mention this more. And my hope is that it can like open people's eyes and not only can we protect you but oh, this will be a thing that you'll you'll thank us in the future because of the options it gives you. I totally agree. And that's how I use it too, by the way. So and we have done a terrible job as an industry of you know, communicating this concept. So I want to make it super, super simple. And actually I have a family member who has a very mature whole life policy and it's kind of funny to hear him talk about that policy because he is 67 now and he bought it when he was in his 30s. And the way he looks at it now is very different than the way that he did it back then. So I think of it as okay, what we have to build up value in this policy in order to support the death of it. So I think one of the other misconceptions out there is that cash value costs money. So your point is an expense. So if you want to know cash value policy, then it's cheaper than if you want a policy with cash value. And so you're kind of paying extra for the cash value. And that's not true. And so I think term insurance is part of the part of the dynamic here. When you buy a term insurance policy, you are overpaying early so you can underpay late just like we talked about. You're just doing it to a smaller degree than whole life. And so you don't build up any cash value. But there are still reserves being built up at the insurance company. And if you surrender that term policy, guess who gets to keep those reserves? The insurance company does. And so you're building up value that you're actually owed. But because it's a term policy, the insurance company takes it, and part of the reason why term insurance is cheap is because some people leave money on the table. In whole life, that can exist. In whole life, as you build up that reserve, that reserve is available to you in the form of cash value. So the question is, okay, well, what characteristics, so in other words, that cash value comes along for the ride, whether you want it to or not, it is there to fund the future death benefit. So what are the characteristics of that cash value? So let's just take it in general terms. It can never go down. So whole life cash values are guaranteed to increase every year. There's a guaranteed underlying cash value. So even if dividends are zero, the guarantees will still apply and the cash value still has to increase. And the reason why is because every whole life policy has to endow at maturity. And so you always have an increase in cash value. Any dividends that have been already received and used for paid up additions are locked in. They have their own guaranteed cash value. And so what is the characteristic of this cash value? It always goes up and never goes down. That's number one. Number two is the characteristics of cash value is that the carrier is out there investing in a diversified portfolio of assets, whether it's fixed income, structured credit, asset back securities, residential real estate, commercial real estate, private equity hedge funds, you name it. They're investing their portfolio. And in a mutual company context, which is what most whole life is, those returns are effectively owned by the policyholders. And so think of it in terms of they are investing on your behalf. You're over you're overpaying early so that you can underpay late and they are reserving that. They are investing that and you reap the benefit of that. How do you reap the benefit? Well, you get this thing called a dividend interest rate. And so you earn interest on your cash value. It's not equal to the DIR because part of that dividend interest rate is eaten up by the guarantee. But you get excess dividends that come in from the returns on this portfolio that they are investing on your behalf. So it's actually not that different than if you went out and bought a very diversified mutual fund. You own a piece of that mutual fund. That mutual fund has to distribute those earnings to you. There are certain expenses related to that fund. Same way here, there are certain expenses related to this policy. But the earnings have to flow through back to you. So we have a cash way they can never go down. We have cash increases in general based on what's going on the market for interest rates and how the investments have done. And you have a cash value that is entirely liquid. And so if the valuation of those assets changes, then your cash value does not change. And so in 2022 when interest rates went up and by his bonds went down, cash values in whole life policies still went up. So you did not have a market market. And if you wanted to go access that cash value, you can do it. You can surrender to your policy. I wouldn't recommend that. You can borrow against your policy, which is what all the IBC guys say to do on like an industrial scale. But you could just borrow against the money and collateral as money. You can actually get a bank loan against your policy. So I'm on the board for a company called Incline. And they basically, yeah, which is a very cool company. And they help to set up a ILOX. So it's kind of like a HELOC, a line of credit, secure or secured by your life insurance policy. And you can, you know, I'm coming soon, hopefully, there'll be a mobile app. We can literally say, yeah, I'd like to collateralize a hundred thousand dollars of my cash value, boom, it's in your account the next day. And it's secured by your, by your life insurance policy. You've made it liquid. So what do we have? We have an asset class that never goes down in value. Over the long run performs like a corporate bond would because you have a portfolio supporting it, built of corporate bonds and other things with some expenses, just like another, you know, any other type of a minute, that's what you may. And it's immediately liquid to you in a variety of different ways. However, you want to, and by the way, the fourth thing is you get to control your tax incidence. So if you surrender to the policy, you get hit with the ordinary income. If you collateralize your policy, whether it's through an ILOC or through a policy loan, you don't pay taxes on the gains. And so if you were to sit down the 65 year old and say, let me, let me describe to you this asset class in your portfolio as you retire. It, it only goes up in value. In the long run, it's going to perform kind of like a corporate bond. You can access it any way you want to and get the money immediately. And there's no mark to market on this. It'll never, it can't go down, right? But when I'm out of what the market does, it still stays the same. You don't have this flow through mechanism. They would go, I want that all day long. Like that is the perfect fixed income asset class because my alternatives are I either invest super short term and get, you know, in a non-inverted yield to environment very low rates that I get taxed on, or I have to invest longer and I get, I get volatility in my assets, or I have to invest down the credit spectrum and I get volatility from credit spread risk, which again with an insurance company, you're getting triple A rated credit. Yeah, this is, this is the perfect fixed income asset class for a retiree. This is exactly what they would want. And there's just one catch. And the catch is you can't buy that asset class when you're 65. You have to buy that asset class when you're 35. So it goes back to this idea of, okay, get what is a financial advisor's main job? It's getting 35 year olds to make decisions that their 65 year olds will appreciate, cells will appreciate. Whole life is a terrible one year investment. If your time horizon is one year, it is the worst possible place to put your money. I would actually argue if your time horizon is 10 years, it is a terrible, terrible decision to make. If you're a financial advisor, you're in the business of getting clients to think beyond one year, to think beyond 10 years, to think 30 years. And what we know is that at 30 years, it's a fantastic asset class to earn. And so my whole life policy, about a few years ago, is still in the red. I'm not upset about that because I don't need the money right now. I'm going to need it when I'm 65 and that's when I'm funding for, that's what I'm planning for and I'm totally okay with that. And I think I understand this stuff better than the average bear. And so if I'm okay with it, it seems like most other customers too. And last one on this, customers will say, the reason why it starts off so bad is because of commissions. Yes, that's part of it. If you have a financial advisor who's managing your bond portfolio, they're going to charge you 1% every year. So just to be clear, over the next 30 or 40 years, the commissions in a 1% asset management fee versus to keep commissions in a life insurance policy, it's not even close. The AUM is five times, three times, four times, whatever the number is of what heap comp is. Number one, number two is even without commissions, you'd still have the same effect. And the reason why is because this is not magic. The reason why carriers can offer guaranteed growth with no market volatility and total liquidity is because they have to post their capital on your behalf and you have to pay them back for the capital. So when you put $10,000 in a whole life policy, the insurance company has to post up three, four, $5,000 of capital and that's there to protect your funds. That's there to protect your investments. That's when it enables them to invest in all this great stuff that gives you the result. And so that is part of the deal. Like that is a natural fallout function. Okay, I'm sorry, that's where this is the last thing. Because this is a no risk effectively, no volatility asset. In my view, most people have a risk budget. They may not say it directly, but they have it in their head. Here's how much volatility I'm willing to pay. If you invest in fixed income and you looked at 2022, you know that part of your risk budget got eaten up by your fixed income because every single fixed income asset class fell in 2022. So there is real risk in bonds. There's actually quite a bit of risk in bonds. That's what we saw. Whole life doesn't eat up any of your risk budget. And so if it doesn't eat up any of your risk budget, then that means you can go harder into equity. So where you might as you might have done a 6040 portfolio, if part of that 40% not all of it, part of it is dedicated, the long-term portion of that is in whole life. You might be able to go 70-30, which means you get 10% more inequities, which means over the long run, you're going to do a lot better than a 6040 portfolio because you've got more equity exposure, but your total risk hasn't changed. And this is a concept called the Sharp ratio that every investment and manager tries to optimize. And effectively what you can argue is what I would argue is a whole life allows you to increase your sharp ratio. You can go more into equities. And with the same amount of risk which means over the long run, you get higher returns for the same risk budget by including whole life as a portion, not all, but a portion of your fixed income allocation that you're dedicating for the long run. And so that's the argument I, the way this all came around for me was I was talking about financial advisory, you said you should invest in bonds. And I really started to think about that and look at that. And I realized I do not want to invest in bonds. That doesn't actually give me what I want. What I want is this asset class with these characteristics. And I know what that is. That's whole life. And I'm going to want that when I'm 65. So that's what I'm going to do. I know I have to buy it at 36. Yeah. The Bobby, you do such a great job articulating these these areas. And a while ago you were talking about just if you look at life insurance at 65 and the characteristics it gives you, everyone would want want that. And I love how you didn't mention the death benefit. You didn't mention the chronic illness writers and the accelerated writer. Like there's other insurance benefits that are also attractive. But you're just looking at it from like how it functions as like if we were talking about it as a bond alternative. So love that. You also open the door for me to talk about this concept of using your money throughout your life. And I'm not sure if you if you're like if you like doing that or like I know that infinite banking. There's a lot of bad teaching out there. There's a lot of people that are focused on like hey, we're going to like pay off our mortgage and like go on vacations and buy cars. And if you've watched this channel, you know that I'm like push against that from a standpoint because I think of myself as kind of an intelligent person in a sense. And I'm like I can't figure out how that makes sense from a cashless it's like it it only makes sense as long as you make more money. Yeah. Or it's like it's it's hard for me to wrap that mind around but but I know that they've done a good job marketing and a lot of my videos I use the word infinite bank because I know that lots lots of people are searching in this. So in your turn like how do you what's your framework as it relates to to that and the the framework that I want to like explore with you is like okay if life insurance is super beneficial in the future. And in the short term it's like one of those things where it's like okay you just got to like trust me for the next 30 years. That would be that would be a pitch and you could argue that that's still a good pitch. Trust me you will thank me 30 years from now. Right. But I also think it's really cool that you can use your capital in that those 30 years and yeah it's not bullet proof it could that you could actually be worse off because you make that decisions with it. But it still gives you access and you use the word optionality which is one of my favorite words. It's like it gives you options which also needs to be factored in because there's very few assets that give you the benefits long term and give you access and give it to you very much in one bucket. So I guess I'll just turn that over to you. I know that you've been critical in the past and I want you to like articulate in the best way you can of like why you love slash hate is contemplative and infinite banking and where you see it as a green and where you see it as a caution or red. Oh Caleb dude this is one of these this is such a hot topic and it's one of those things like no matter what I say someone's gonna like take extreme clip of this and go he doesn't know what he's talking about. Yeah I'm telling you. Okay first thing I want to say is the reason why I didn't bring up protection is because we already talked about it. Yeah and and I but I really do think at 65 you and a whole way Paul you're gonna value that death benefit a lot more than when you're 35 just yeah period into story and to your point there's great acceleration options now and these products have made the death benefit more applicable for the living you know versus just the death benefit. All right let's talk about infinite banking. So so I wrote an article on this and I don't want to just share how I frame the article and basically what I said is let's actually follow the chain of infinite banking because a lot of times what happens is they go all the way to the end here's the punchline but let's actually talk about how it comes to be. So first things first is it good that we have loans policy loans available absolutely this is a great way to again collateralize your cash value in this case the insurance company is the lender you are collateralizing your cash value and you get therefore the access to the money without surrendering your policy or surrendering pieces of your policy which I think is a really valuable function. So with drawing from your whole life policy necessarily scales it down effectively collateralizing it shouldn't really do anything to your policy doesn't usually do anything to your policy. So our policy loans valuable yeah all right let's go to the next step. Can you use policy loans for all sorts of different things? Sure I think a lot of times what we talk about is taking policy loans and retirement that's what I'm planning to use my policies for and the reason why we use policy loans is because we want to avoid taxes on the gains inside of the policy. I recognize that a policy loan might cost me on a net basis 10 basis points 20 basis points 30 basis points I am totally okay with that because I'm avoiding taxes on the gains. So there's this misconception out there that if your loan rate is 8% you know I was texting with some friends recently about they're worried about taxes going up that's the guys it's way your own life insurance I'm not an agent but this is why your own life insurance and they say oh you got to read the fine print it costs money to borrow from the policies yes it does cost money the carrier books it as an asset and then they give you a credit back. So don't just look at the 8% look at the fact that they're crediting back 7.3 7.5 7.7 8% you know or 5.5 whatever it is my joke back to them is guys I write the fine print okay so I know how this works. So okay so is it okay to take policy loans for things yes can you do it for life events sure if someone had a bunch of credit card debt that I was accruing at 20% and they have a cash value in their whole life policy yeah that that you probably should take a policy loan to pay off your credit card debt because you're going to pay 5% in your policy loan which again nets out to effectively zero against 20% credit card debt the problem is most people aren't in that situation if you've built up enough value in a whole life policy you probably don't have a lot of credit card debt because the only way you build up value in a whole life policy is you pay more than you have to pay which is what whole life is you're paying more than your minimum cost so I think one of the challenges that niff and n banking is they make it sound like it's this free magical money pool that comes out of nowhere no this is your money that you're putting in you have to be able to over fund the policies and the good iBC promoters really promote that they say look this you have to build the value in order to use it and I think that's completely legitimate what then do we see in the marketplace we see people saying put 40,000 dollars in borrow 30,000 dollars out that makes zero cents in general over the long run it's going to work against you there are times where it looks like that's been beneficial but over on the long run on average again think about what the carrier is doing they're booking the asset they have an investment spread and then they credit it back to you so if their investment spread as 30 basis points you're going to pay them 30 basis points to borrow your money back that you didn't need to do because the whole plan was you putting 40 in to take 30 immediately out that makes no sense putting 40 in and waiting 10 years to take 30 out is fine all right so that's where I think the iBC people get it all torked up is they think in some way that it's better to do 40 in 30 out than to pay just 10 in and I would say no you should just pay the 10 in and have that be your net investment last year just paid cash with the 30 yeah just yeah don't like yeah you use the 30 for the cash and put the 10 in 30 years 30 years from now if we all like you would say that they would actually be better off than if they they essentially stripped 840,000 dollar policy and had no like had nothing to go for it okay okay because you're paying a net cost because at the end of the day the carrier is going to charge you a net cost and again people I think a lot of infinite banking has this theory that there's some sort of arbitrage going on here I see these crazy eminent banking graphs where I see cash value increasing in the loan stopping and they're like oh well you pay interest out of pocket well yeah but if you're paying interest out of pocket you could have invested it at the same rate or higher like the one in most cases like there's no like there may be arbitrage 35 years from now but like at the end of the day internal rate or return on whole life are three and a half four and a half percent and loan rate plus just air five and up so we're not arbitrage your money you're not you're not and the yeah so continue well no and and I think one of the other things is I hear what the IBC crowd is the policy compounds but they insinuate that the loan does not what what are you talking about the loans compound and the policy compounds into your point if if if you have an advantage there that's great if you have a disadvantage that's bad it's going to chew into your equity again I would say just put cash in the policy and then use the other cash elsewhere don't borrow from the policy like right out of the gate if five or six years you're in and you've got cash built up and you need to borrow it for whatever reason you can of course do that but recognize that there's no arbitrage to be had to your point yeah so let me again I have one other huge question that's going to be huge I know we had 10 minutes so yeah quickly so going back to the $40,000 example concept is the way that I almost explain it is there's internal and external and I feel like a lot of times in infinite banking people mash them together it's like this magical thing and I actually think you need to separate them so for example if I'm going to buy a car I need to first determine what kind of car I want to get negotiate the price and then I need to ask what's the most efficient way to purchase that right a lot of cases it's getting a bank loan and don't shoot me but that's a lot like that's honestly where I would go so it might be paying cash it might be like you look at all your options and I think the big problem is a lot of people mash it all together and then if you feel like there's this magical thing that happens because you have this insurance policy you get a better price than the car it's not that that's not the case but I will say this is this my my perspective is it it's a the external like how you use your policy in my opinion is way more important than because the internal in a lot of the policies that we use it's like your policy is going to grow regardless whether you borrow against it or not and when in 30 40 years like assuming that you've paid your policy back like it's going to do it's it's going to be the same place the question is are you using your money and are you actually bettering your financial situation a lot of people aren't they're actually it's it's enabling them to make poor decisions but there are people that are investing in assets investing in business investing in things that are actually like bettering their life and they're seeing that life insurance because of what you just said in the future it's like I instead of putting my money in a savings account life insurance I will thank myself 30 years from now yes I have a little bit less today but in 30 years from now I'm going to thank myself so I guess the and because I want to ask you one more question that again it's going to be good well use your thoughts on like what is your thoughts on if someone's like okay I see the benefits of life insurance in the future and I want to be able to maximize that but I also want to be able to invest in alternative stuff yeah is there a world where you'd be like okay if that's the case you can overfund over here and just make sure that if you're making if you're using your cash make sure that the external decision is like is in the green because that's that's in my humble opinion where a lot of people go astray is they mix it together and people just are making dumb uneducated decisions and they think they're going to be good because now they're somehow a bank which they're not yeah that's the best no I agree the best of ibc to me is the argument that you just made which is you're going to want this asset class when you're 65 in the meantime you can go invest another stuff it's a it's a it's a cost of capital situation I have no problem with that um to your point buying cars is very different than buying real estate with with life and and I and I've heard a lot of i bc people talk about investing in real estate investing in equities I don't see a fundamental problem with that as long as you realize what you're doing which is you're creating leverage you're you're still using leverage you still and if you're going to use leverage you know I'm not a big fan of personal credit for depreciating assets like cars I would not go borrow to go buy a car from my life insurance policy because it's a depreciating asset or if you're doing it you're realizing that there must be some benefit to your point of using your policy versus getting a bank loan if you get if you've got a borrow money but I think the idea of yeah borrowing from your policy and investing in other things is not a in fact I got a pitch from a couple days ago for a firm that's kind of creating a very creative way to do this and that's their whole argument is everybody wants the policy when they're older but they don't necessarily need it right now and so we're creating this program to systematically sort of borrow and invest in other stuff with a repayment schedule I again I don't have really an issue with that and I think even with incline if you get an iLock you can do the same you can do the same thing but again realizing you're you're you're you're moving those assets out and you and you need to repay it if you have no plans to repay it this is not a good treat if you have plans to repay it then it makes total sense not I totally agree we love iLock iLock so yeah it's great last last question and this might set us up for part two is there's a big big big big debate about whole life iL you're so close to getting off of this without without creating conversation okay what is i know we have less than five minutes but how would you frame that from a standpoint of like whole life versus iL there seems to be so much animosity and conflict and I just would love to hear from your standpoint who i feel like is neutral you've designed iLock products speak at companies that promote iL you also help and consult whole life and you speak at companies with whole life you own whole life i'm not sure if you own iL with with the last couple of minutes why don't you just share your thoughts and then maybe we'll set up a part two to this if there's enough demand for it so funny enough i have a v well with an indexed account and i allocate some to the indexed account in my v well so i'm actually like i'm totally Switzerland on this because i've got all all the categories covered yeah so it's actually to me the third piece of the infinite banking thing which is if you're going to borrow from a iL policy you need to realize that it's much more volatile and there's a lot more risk and i think that goes really underappreciated and so a lot of it has a lot of a fervor around this as well iL illustrates better than whole life yeah it's also a lot more volatile than whole life and if you borrow if you borrow out an iL policy your risk of laps is exponentially higher than your risk of laps in a whole life policy and so it is much riskier the question is are you being compensated for that risk or these policies going to perform better just before i got on this call i was looking at a 15-year-old iL policy i remember this policy the original illustrated rate was 8% the current illustrated rate was 4.25% so there are horror stories in iL are there horror stories in whole life yeah but they're few and far between i mean if you stick to kind of top to your whole life companies they have done well by their policyholders i in iL there has been some good performance but where caps are these days and what's going on in the options market to create this situation the last decade for iUO was perfect the next decade for iUO is going to be exceedingly difficult and i think and a lot of the promoters i've seen kind of online don't understand the challenges facing iUO and they don't understand the permanence of those challenges they might see a new business illustration that looks great they may not realize for example that that company created a brand new policy series that benefits only new policyholders and not old policyholders well guess what that's going to help you make a sale but what you care about is how your policies actually perform and there's a lot of blood on this label and iUO right now i have no problem that iUO is a product chassis but i am increasingly having problems with how companies are treating enforced policyholders for the benefit of new policyholders and you just don't see that same dynamic playing out on the mutual company whole life side of the house because they view all their policyholders as their owners i think that counts for a lot and so i don't think there should be the level of animosity at the end of the day these are two very very similar products it's really a stylized it's like it's like i mean the joke i make on this is like when it's last time you met someone who says i love tacos but i hate burritos and i'm and i'm willing to like die on the hill that i'll never eat a taco only burritos well what are you talking about your psycho if that's like your your a psycho and i mean and that's to use the analogy i mean whole life is the burrito it's the package product iUO is the taco you can open it up and see what's inside of it like this is not a question of these are two very similar products and so the fervor on both sides to me all that says to me is if you really care that much then you don't understand what's inside a taco is the same thing as what's inside the burrito you don't you don't you don't actually understand how this stuff works yeah here's what i'll say is that the the common pitch in iUO is they're not pitch in early cash value they're pitching long-term right illustrated income but it just seems like there's a lot of variables because they're they're taking today's illustration and then 20, 30 years from now 10 years from now maybe promoting income based on a lot of the assumptions and sometimes using arbitrage and that's where i just like for for me like in whole life i don't even like promoting income on whole life because it's just like let's understand the principles and know that we have curtains in the future but if you're just buying something based on an income a number i just i just that my gut says it's not gonna be a fractionable it's gonna be it's crazy to do that for whole life you would never you should never do that some of the illustrations are for it is doubly crazy to do it for a UL because to your point there are more variables at play and also i mean i helped write the illustration reg for a UL it's never it's never meant to be a projection it's meant to be a demonstration of how the policy works i am concerned i mean look anybody who sits down with any illustration and says this is what you are projected to get is asking for it because these are not projections these are illustrations this is 30 years i mean you roll your figure down and you're looking 30 40 years in the future there uh that there's a zero chance it's zero percent chance that any of these illustrations are exactly what you originally and i'm concerned because i see on social media people doing that you you're you're asking for it Bobby thank you thank you for coming on the show we'll we'll include any links including your email if you'd like us to in the description below you've been so kind to our community and i would encourage you if you are an advisor if you're an agent if you're someone that helps people like please please please join Bobby's newsletter like that would be uh it would it would be it would mean the world to me if you can support people in our industry that are moving the needle and and really keeping insurance companies people in check Bobby thank you for coming on but you look forward to future conversations