The Real Reason the Ultra-Rich Buy Whole Life Insurance | Kuldeep Madan & Tom Wall

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What would you say to someone worth $400 million who thinks life insurance is just an expensive, low-value product? In this interview, I sit down with Kuldeep Madan, who advises some of the world's wealthiest families in the world.

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People are so afraid of the client that's so wealthy that they treat them like something special.

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And Dr. Tom Wall, 1 of the leading voices in the whole life insurance and retirement space.

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People don't get rich by diversifying.

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In this sit down, they reveal how the ultra wealthy actually use life insurance.

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It's not about assets that they have in there. It's about the planning they're doing.

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We dig into strategies that cut potential billion dollar estate tax bills by nearly 75%.

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We have a client right now, they're worth about $400 million. So we explained if you reposition that bond portfolio into this cash value thing, well that client doesn't need to

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finance it. How life insurance can outperform bonds as a safe bucket and how premium finance could give the wealthy flexibility without draining their best assets. If you've ever wondered how the 1% really plan their legacy, you won't wanna miss this conversation. Let's dive in. Tom, Kuldeep, thank you guys both for being in Nashville, Tennessee, speaking at my event.

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You guys both just got off the stage and it was amazing. Thank you. Kuldeep, why don't you give your disclaimer?

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Got to tell everybody we don't provide any tax or legal advice. Just here to talk about life insurance.

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Just Kuldeep's just a regular old person that tends to work with some of the most rich people in the world. Is that, are we allowed to say

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that? Absolutely.

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Okay, cool.

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Compliance is a hell of a thing, but look, we're here to help people provide valuable solutions that actually make a difference and impact their lives and improve their life quality. So part of that is making a disclosure. That's more than okay by me.

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And if you want to sue us, send it to Tom. Okay. Don't sue me. Don't sue the CluDeep, but Tom's got deep pockets and he loves getting those letters. Okay.

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With all joking aside, let's get into Ultra High Net Worth. The ultra high net worth. Talk to me about what questions they're asking. It's a totally different space than, you know, the everyday person, the everyday entrepreneur, the person's making 6, 7 figures, just getting started. Talk to me about your world, because this is a world that you know very well.

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So if you just think about somebody at its early stage of their career that's trying to figure it out and then think about them 5, 10 years later and they've made it, what's the difference in that person's mentality?

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I think 1 person is trying to run and gun, they're willing to take a lot of risks. They're trying to like make moves. And then what I found is when you've already made it, you're very much trying to manage risk and not trying to take a move that you would wipe out your entire entire net worth.

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I completely agree. But I would tell you they're still taking massive risks within their business and they want to concentrate that risk within their business and they want their planning to just be buttoned up and not so scary. And they want to understand what's being done. And the problems I think most of the people in that world face is that They're not experts of this and they rely on their experts and their experts don't take the time to educate them And so they never understand and if you don't understand you're always scared and it feels like risk. Does that make sense?

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Yeah None of it's supposed to be that complicated that people are not that different. They haven't evolved as much as we're thinking I don't think the risk averse. I don't think they, I think they want to risk mitigate, but it's just fear of lack of understanding. And people are so afraid of the client that's so wealthy that they treat them like something special and they don't just bring them back down to earth and talk to them like they're 5 year olds because this is something that's so foreign to them. Planning in general is foreign to them.

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So we just treat them like regular people. It shouldn't be all that hard.

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Yeah. Tom, is there, is your message change at all if someone's worth $200 million versus if they're worth 2 million?

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Yeah, absolutely. It's all about death benefit. It's always all about death benefit, but I always find that when people are just getting started and they're building wealth, they want to think a lot about rate of return and even the income tax strategies and stuff like that along the way, which is important across the wealth spectrum. But as Kaldip was talking about, once you've made it to some degree, it's all about locking that in and protecting yourself from the IRS not taking it away because of some bad thing happening. So providing that liquidity and providing that guaranteed legacy.

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So no, I don't think overall it changes. I think the thought process of shifting risk is at its core. But I have found, I think at the higher net worth, it's less about those year-to-year rates of return and more about the guarantees and the safety that comes from it?

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Well, I think the thing to add on is that knowing there's going to be options of flexibility, right? So it's not just that I need that death benefit, but what if my goals and my objectives change over time, which every 10 years people change their mind on stuff. And now what if I want to access that cash value or I wanna look at this as a bond replacement bucket, just another alternative asset class and I'm comfortable. And at that ultra high net worth, knowing that you can change your mind and this thing is still gonna work exactly as it was supposed to from day 1, that's the thing that matters to them.

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Yeah, so talk to me about the person that's worth $200 million and wants to that is in retirement and is super analyzing life insurance and saying, this is, I can get a better rate of return in bonds or other assets and is almost not wanting to do life insurance because they see it as a lesser asset. Talk to me about the conversation that you would have, the questions that you would have, because I would imagine that this type of person should want a lot of life insurance. And the fact that they don't want any, there's a disconnect and I'm just curious like how you go about that. And I would be curious to your thoughts as well on how you'd have that conversation.

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The first thing is there's a fallacy. You said retired person worth $200 million. When you're worth $200 million, you don't retire. Your full-time job is managing your money. And it's usually with a team of people when you're looking for the next thing, you're looking to preserve what you have and then to continue to build.

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I think when you think about somebody like that and they're pushing back on buying insurance, it's usually a lack of understanding. Then once they understand the concept and if you just treat life insurance as a triple tax-free mini bonds, all of the, as Bill Bodine say, it's basically very similar as an asset class to real estate, except it's completely liquid and it doesn't have the 3 T's. There's no taxes, there's no tenants, and no toilets. That's good. Love stealing pills line on it.

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I use it all the time. Okay. Well, I get that. Now think about how these clients buy their real estate. They don't just pony up a $50 million to build a building or to buy a skyscraper or $50 billion sometimes.

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What are they doing? They're using leverage, right? Their other assets are appreciating so tremendously, they don't want to take away from that to buy the insurance. So the missing component is adding on that leverage that people use for everything else. It's financing that insurance until you get to another liquidity event and then paying it off.

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Because at some point, you're going to want that bond bucket. This is a perfect alternative to a bond bucket. But your primary need is for death benefit. You just don't want a cash flow because cash flow constraints still exist in $200 million.

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Yeah. We were having a conversation where Tom was not giving him financial advice, but giving like a 25% of your portfolio if it was in life insurance could optimize. And I don't know if that changes if someone's super high net worth. What you're saying is early on, if someone's worth a lot of money, going out of pocket to accomplish that could be really tough and they may have to liquidate other assets that are way more higher performing. And so where premium finance comes in, is they're able to check a lot of those boxes, get a better rate of return over here.

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And then when there's an exit or a day that they're no longer doing that, they can almost backfill into that strategy. Did I articulate that okay?

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Perfect. Okay. I mean, Everyone borrows money to buy a home. A home is an asset that you own and you borrow money for the short term and you pay off that loan when the time comes. I also think, I think I add to that too is, when you're talking about these cases where the premium is measured in millions per year, People view insurance as a cost.

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They think it's costing me millions a year. They see the big death benefit down the road, but it's costing me millions per year. And they need to see it. It's a performing asset. As I was saying before, this is an asset that will go up in value every year as you make these contributions into it.

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It's a premium payment. It's not a contribution to a retirement account. It's a premium payment, but because it has guaranteed cash values and non-guaranteed upside that's come since Civil War times, I think once they understand it's a performing asset that gives them a lot of options and flexibilities down the road, unlike other forms of insurance, which are pure cost and only pay off in very bad events. That's how I have found when their mindset shifts.

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Well, if you just think about that client, and now let's imagine there were 2 or 3 or $500 million. We have a client right now, they're worth about $400 million. There's $140 million of brokerage assets managed, a lot of its stocks, a lot of its bonds. And so we explained that this is, if you reposition that bond portfolio into this cash value thing, well, that client doesn't need to finance it. It's just moving assets from 1 place to another that are gonna get similar returns longterm.

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You're gonna have the initial cash value hit, but at that level, you don't need this portfolio for anything else. So just, it's a mindset shift. Yeah. It's education.

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Here's your take on the bond versus life insurance and whether do bonds play a role in someone's financial life Or if you understand life insurance and you have enough a long enough time horizon Is there is there an argument to be said that bonds? Should play a role or does life insurance when set up use properly replace that? We've helped people unlock millions of dollars in hidden value just by reviewing their old life insurance policies. Unfortunately, thousands of people do not have life insurance policies set up properly, which could be costing them a lot of money. If you have a policy, the few minutes it takes to fill out our form could be the difference between continuing to waste money or unlocking serious value.

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If you qualify, we'll review your policy 100% for free and give you the honest breakdown you deserve. Click the link in the description or take comment below to apply. Back to the video.

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Look, I gotta go right into some disclosures here. I will give you my personal opinion. And as a 36 year old, I have no bonds. I don't know any. I don't think there's any place for them in my portfolio, but I have insurance and the insurance has very low cash value upfront.

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But as I continue to fund more into my insurance, that bond like asset class starts to build and I slowly taper off risk in my investment accounts over time. And let's say I want to retire at 65 at 65, I've hit 50 50. I'm comfortable in my perfect world. You would never need to buy those bonds because you're bond risk. If I want risk, I want to take it in my equities or my private equity, my venture capital, my business, real estate, much higher performing assets.

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I'd like that bond like asset, but I'd like it where the insurance company takes all the bond risk, and they have all of those problems, and I don't have to deal with it. That's perfect to me. Now, is that how people do it? Not always, but if you can explain that to somebody, they're happy to do it. We never see somebody say no to that that makes sense to them, right?

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I'm curious about ultra high net worth ideal portfolio Like talk to me about that and and again, I I'm putting you in a lot of compliance problematic questions potentially but I would just love to know like ultra high net worth, what are they having in their portfolio that other people should be aware of?

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It's not even like, it's not about assets that they have in there, it's about the planning they're doing. They're approaching things from a much more robust planning perspective. They're taking risks, they have exposure to much more, There's a lot more alternatives out there, actual buying businesses and venture capital type stuff. That's amazing. You keep doing that, that's high risk.

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But if you want to manage overall a plan that has risk mitigation, that's the thing that matters. So they're not taking all of their assets and putting leverage on them. They have a balanced approach to how much risk we're going to take. And that risk is commensurate to war, right? So yes, I'm going to buy equities, mirror the S&P 500, do direct indexing.

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Those are just basic elements that people are doing these days. But if you look at the way they plan their assets, they're trying to remove as much out of the estate as they can upfront, whether it's gifting or doing asset sales to trusts, note sales to trust. There's just the planning elements so that they're doing, we call it the squeeze, freeze and burn, right? If I squeeze down the value of my estate, I freeze it there and lock it in perpetuity and then I burn it down by paying the income taxes personally by using the right trust structures I can and all of that great asset that they have wanna buy, whatever it is, it's outside of the estate.

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Yeah. Anything you wanna add? I have another question around case studies and like I If you're allowed to say I would love to know your largest premium that of clients that are have paid in life insurance annually but then I would also love to know like ideal case study of like this person came to me with this problem. And after working with us, we were able to produce that result. Before that though, is there anything you wanna add to what he said?

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I don't think so. I mean, diversification is a really good investment principle because it manages downside risks. So people don't get rich by diversifying. Typically these wealthy individuals got very wealthy with 1 business, 1 real estate portfolio, a couple of deals that spiraled and that's what they're focused on. So like you said, it's taking a risk off the table.

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It's mitigating those risks and letting them to continue to throw their fastball and then start to diversify into other assets that perform in different ways. So I think that's the only thing I would add to it is I don't think most wealthy people have this, you know, this sexy shiny investment that's only available to them that no 1 knows

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about.

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That's

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good. It's usually

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their business. Yeah.

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Love it. Yeah, I completely agree with that. The sexy shiny thing is the thing they've built themselves. Everything else at a certain point, it's diversified. It's, hey, my job moving forward is to manage my money and to not lose it.

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You're not going to put everything in 1 box and just take a shot for the move.

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You said on stage that you had a client say that they could earn 200% a year. And you were like, how about 6%? And the whole crowd started laughing and stuff because it was like, I can't believe that. Like, I can't believe someone said that, but that just tells you how optimistically delusional some entrepreneurs are to say 200%. Like you'd be the world's wealthiest person pretty quickly if you did that over time.

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Just because you've done it once doesn't mean it's gonna happen over and over, right? This is literally the past performance, do not indicate future, Like this doesn't, it doesn't work like that forever. You might've made a pile of money. A lot of it, it's about sustaining that wealth, living off of it. Income planning is very important for these people.

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So if you think about your question around the K, like an ideal case study or things we've done for clients, I'll go back to that $400 million client. It's worth 74 million, sorry, he's 74 years old. That was my largest premium, $8.7 million of premium. We have another 3.6-ish that we're trying to place because they still need more insurance. But when you're 74, how hard is it to get insurance?

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What is the health ramifications? And it's complicated. So they had also done no estate planning. Not a single dollar had been, there were some little trusts that they gifted cash into and they've used up their exemptions on that. And 20, 25 million of exemption means nothing when you're worth $400 million.

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So for all intents and purposes, they've done no planning. There's significant concentrated holdings of businesses they've sold. There's a very significant real estate portfolio that's going to have major multiple liquidity events. There's a very significant liquid portfolio. They're not spending any of it.

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They're still earning hand over fist. The money's coming in. So the planning we did was about, I go back to squeeze, freeze and burn. Let's figure out the right trust structures. Let's move the assets out as much as we can.

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Let's do that via combination of gifting and note sales to these trusts. These trusts are gonna pay you back some interest that'll pay you enough income in case you ever need money. There's enough money, you have enough, you're not gonna go broke here. We're not moving all of the money out. But we've taken 400 and by doing this correctly, we've brought that value down.

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And instead of letting it grow and kind of balloon out to $2 billion by the time the sky dies, we've taken the extra million 5, a billion 5 of future growth and put it outside of the estate. Wow. And now their insurance needs on a half a billion dollars that we know we're going to hit no matter what. Now the question is, well, if I can't buy enough insurance on you because you're 74 years old, well, does it matter if the liquidity comes from death benefit or cash value on your kids' policies? And the answer is no, so we get a combination of those 2 things.

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And they still don't want to pay for it right now. And the probability of both parents dying at this point is very low. Well, that's fine. So we financed those premiums. And over time, they're going to start paying that principal off by converting their bond portfolio, essentially, to make those premium payments on this thing.

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And at the end of the day, we have stopped what would have been an eventual billion dollar state tax and capped it out to hopefully $250 million. And if I'm wrong by a little bit, it's 3 or 400 million, but it's a hell of a lot less than a billion.

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So they buy you dinner every time you guys

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go off? No, they still question, do we need to buy more insurance? And I'm like, you tell me, your accountant, your attorney, your in-house legal still says you need it. Whatever you want to buy, it's up

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to you.

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What questions do you have for Cool Deep? I mean, you guys are friends. You connected me with Cool Deep. Do you have any questions that you're just dying to ask him on a recorded line?

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Oh gosh. No? Yes, yes. Come on.

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I'm okay with it. What questions

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do you have for Tom? We work very closely together.

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We do. I spend a lot of time with Tom. I think the next chapter of Tom is what I'm always curious about. I think he's growing such an amazing thing and providing so much value to so many advisors. He told me yesterday he thinks the market is capped for advisors he can help.

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And I was like, no, if you keep doing a great job, you'll convert all of the IUL believers too. Hope so. I'm curious about the next chapter of Tom Wall. Dr.

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Tom Wall. Yeah, It's fun building that out. Yeah, doctor. And do you feel like the PhD has really helped to gain credibility or like, talk to me about your next iteration about the message because you're sharing a really powerful message, but I get bored when I say the same talk twice. I'm like, you're a ticking time bomb.

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1 of these days, you're just going to lose your mind on stage and just be like, just read my book and you know, don't, you know, so like, how do you, how do you stay the course and what's the next iteration or would that be a mistake because the message is so powerful that it's like why iterate?

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I don't think there's nearly enough voices in our space helping advisors speak confidently about this stuff. So I cut my teeth and got out here by trying to make myself the smartest guy in the room around the science behind why this stuff works. And now I can prove that in my sleep and I have, and I've got the data and all the research to back it up. But it actually has evolved quite a bit. It's, it's a similar talk, but you know, every year it gets a little, it shifts a little bit more toward language and leadership and how do you coach clients through the process because that's what we do here.

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The same, I mean, the same way a medical professional, you can go on WebMD and diagnose, AI will take that away from doctors diagnosis, but it's about the leadership of people through what they need to do next. So I think in this space, as I mentioned before, it's this industry has moved away from, you know, kind of raising kids right out of college into this space. And there's this vacuum of leadership at that level, which I'm hoping to fill Just with good language, confidence, conviction, all the basics. But from someone that has the credibility to deliver it versus just someone screaming at your face.

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Last question, thoughts on AI. Thoughts on AI in our industry, in investing in general, are they going to replace advisors?

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Absolutely not. The special secret sauce of a great advisor is being able to make people get out of the emotional decision and understand what logic is. Often it's to be able to ask those very powerful questions that get people to think about the actual problems and then to educate them on what that problem is and a lack of decision-making. There's no AI tool that exists or can exist that can deal with the human emotion element yet. Now, we don't know what the future holds, but as an advisor, I think The AI tools available to us only improve our side and allow us to help more people more quickly.

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So I think we should all embrace AI and I think it's a big part of our future.

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I think why advisors get paid so much and historically have gotten paid so much is because they're having difficult conversations and doing difficult things with clients and finding those clients and taking them through a process that they may not want to go through. So I think AI is going to make things a lot more efficient. I think if you're selling commodities, which I view a lot of the investment world that way, just doing IRA rollovers, I mean AI is gonna eat you for lunch. But that aspect, but you still need an advisor layer on top of that to have the conversations around why are we doing this? What is the goal around this?

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And do you have the other things around it? And yeah, maybe AI could make some recommendations at some point, but we are so far away from that replacing that human element. I hope, you know, if we're closer then the world may be coming to an end soon.

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Guys, thank you. Tom will include a link to your mastermind in your book. And I really want to plug what you're up to and Quid Deap will talk offline about what we can include with your stuff and I'm just grateful for both of you being here thank you for your support and look forward to future years of collaborations. If you're a high-income earner or own a successful business you're already creating real value in the world. The real question is, are you keeping that money, protecting it, and growing it the way that actually supports your long-term goals?

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At Better Wealth, we help people like you better keep, protect, and grow their wealth through various tax strategies, estate planning, specially designed life insurance, retirement planning, and even a fractional family office service. If you're interested in 1 or more of the areas we can serve and want to learn more, the next step is to book a free clarity call with us. Click the link in the description or tag comment below to get started. Back to the video.

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