What Whole Life Insurance Does That No Other Asset Can | with Vince D’Addona

Speaker 0 | 00:00.152

The interview you're about to see is with a legend in the life insurance space, Vince Sedona, who's been in the industry for over 40 years. He's worked with some of the wealthiest clients, trained some of the top advisors, and even got a personal shout out from the man himself, Arnel Sanash, in his book, Becoming Your Own Banker. What you're about to hear may completely reframe how you think about life insurance, financial planning, and how the top 1% make their wealth decisions. Let's dive in. Vince, you just got off stage, literally like two minutes ago. I dragged you in before you caught catch your flight to another conference.

Speaker 1 | 00:32.276

Glad to be here. I'm glad to talk to you now.

Speaker 0 | 00:34.397

And so you are a legend in the life insurance space. And so I would be remiss if I didn't just ask you, if you take a step back on all of, all of the years in the life insurance business, helping wealthy people, when it comes to estate planning, insurance investing, how would you give me like just some wisdom, sage wisdom on what you've learned and if you had to do it all over again. How would you do anything different? I mean, I'm just letting you, I want you to riff on the state of life insurance right now.

Speaker 1 | 01:05.028

Okay. Well, in order to do that, I have to go back the clock, right? So in 1979, for those of you who are old enough to remember, the stock market finished in 1979 where it started in 1972. So I got out of school and I wanted to be a stockbroker and nobody was hiring. Nope, like nobody. And I actually finally got an interview with a company called Beige Halsey Stewart Shields, which became Prue Beige, which became Prudential Securities, up on Fordham Road in the Bronx. And the guy said, yeah, you're a fantastic interview. And I can't send you for an interview. I said, I don't, I'm confused. I thought this was an interview. He goes, oh, no, no, no, no. We're just like doing a pre-interview. We have to send you downtown and I can't send you downtown. I go, why? He says, because you don't have sales experience. You know, you just got out of college. I said, look, I read Joseph Heller, Catch-22. I know if I don't have sales experience, I can't get a sales job. And if I don't have a sales job, I can't get sales experience. So what am I supposed to do? He goes, oh, no, no, you could sell insurance or cars, something like that. And through a weird set of circumstances, somebody had talked to me about the insurance business like the week before. Little did I know that they would have hired anybody who could fog a mirror, right?

Speaker 0 | 02:15.857

Back in the day, even.

Speaker 1 | 02:16.622

Back in the day. Oh, it's always been like that. So I ended up in the insurance business. And what I discovered was it was an infinitely... diverse business, there's so many different aspects to it. You could be in the business market, the pension market, the estate planning market, the kitchen table sales, like you do all this stuff. And I gravitate, because I have a biochem degree, I gravitate towards the more technical ends of the business, which included the pension business. So in the 80s, I had with a partner that I had at the time, we ended up doing a lot of pension business. And then the 86 Tax Act just destroyed the pension business. Now, I was selling life insurance and pensions to solve estate tax problems because the Unified Credit was $192,800, meaning if you had $200,000, you paid an estate tax.

Speaker 0 | 03:07.179

Oh, my goodness. Yeah,

Speaker 1 | 03:07.983

like crazy times, right? And now with this new bill, it could be $15 million, just to know. But to find a millionaire was challenging. Like in those days, a millionaire was somebody who had a million dollars of assets. Today, it's somebody who makes a million dollars a year, right? In 10 years, we'll probably be making a million dollars a month for all I know, right? So what happened was when that tax act came and destroyed the business, all my friends were in the pension business disappeared because they didn't have a purpose for the life insurance other than to increase the deduction in the pension plans. But I was okay. I was fine. And we also had the advent of survivorship life insurance, which we were having trouble competing with because the Canadian companies had like... premiums that were half of US company. It was like crazy. I was getting burned out. And in 93, I was introduced to the LEAP system, which taught me that permanent life insurance is an awesome thing to have in the presence of other assets. And you had to have it in order to be successful in the long run. Along the way there, I also met Nelson Nash. I'm actually in the acknowledgements in his Infinite Banking book. I try to wheedle my way into a lot of different things. I learned that that's the most powerful thing you could do. And I swore to be out of the estate planning business, but just like Michael Corleone in Godfather 3, I tried to get out and they dragged me back in. So I was teaching LEAP technology in the face of estate planning issues. Okay. And I was doing that for LEAP systems. And I did that throughout, you know, in different ways, I was using all that technology to help clients. but through all of that truthfully caleb you know people have an aversion There's like a whole cottage industry of people who slam the whole life insurance business. In the early days, in the 70s, there was a woman named Benita Van Caspel who said whole life people were crooks, but universal life was going to be so much better because it was fully disclosed. But she was like 99.9% wrong about the way that all behaved because interest rates were 15% and then they crashed, right? And the products all crashed. It was just awful so so there's this oh there's always this nagging problem that existed today. It's Dave Ramsey and a few others who opine about stuff they know nothing about. So when you have a lot of experience and you interact with the consuming public, you start to start thinking about like, what's the issue here? And a few years back, I came to an interesting conclusion. I actually used this on a case. I did it like live in the moment, but it worked and I used it periodically. So I met a young dentist. All my business is joint business with other advisors and ended up with this young dentist who had gotten out of school, joined his dad's practice, was making $350,000 out of the gate, which is unheard of. He wanted to be in the real estate stuff. He really needed permanent insurance for all the things that were coming up in life. And we got to a certain place and he says, I'm just going to buy a term. And I'm thinking, looking at this kid who's probably what, 30, making an unbelievable amount of money. should be buying permanent insurance. And I said to him, I said, do you know anything about where you sit on the pecking order of income in the United States? He goes, what do you mean? I said, well, do you think you're a top 10% earner? You think you're a top 2% earner? You're a top one? Like, what do you think you are? And he said, well, I don't know. I said, well, I'm going to tell you, you are actually literally a top in your age cohort more than top 1%. But looking at the average, you're about 1%. At the time, it was roughly 1%. It actually spiked recently because of the inflation, but it was like 450 for years, and then it went up. So he says, well, I didn't know that. I said, but I have a graph I'm going to show you of household income. I have it on my computer. I use it periodically. And it shows that most of America, like 98% is below 2% and it's all heaped around what I would call mediocrity, which is at the time was a mean income of $47,000, $50,000. But I'm talking about like the pig in the python, like the huge amount of people was in that cohort and then it tails off. So it's a fat tail, like top 1% could be somebody making $50 million a year, but it starts at around 400. I didn't know that. I said, so let me ask you a quick question. If I were marketing a product to the consuming public, would I be marketing it to the top 1% or the bottom 98%? That's good.

Speaker 0 | 08:06.529

That's a great question.

Speaker 1 | 08:07.583

What do you think? He says, well, the volume is obviously in the pig in the Python. I said, right. I said, so everything that you read and hear about is about term insurance. And it's all about that. Pig in the Python, all that humped up cohort around the mean, which is like $47,000, $50,000. That's why I never thought of that. I said, and let me ask you a question. What do you think is the number one thing that term insurance is solving for that cohort? He said, well, family income. I said, you're 100% right. So for most of those people, let's make the argument that at 65, when their earned income ceases. They don't need life insurance anymore to replace their earned income for the family. But that makes sense. Now, you and I know that that's not true even for earned income, but he goes, oh, that makes sense. I said, well, do you know what the top 1% does or why they need life insurance different than the general consuming public? And he said, well, no. I said, well, first of all, the first job is it still has to replace family income. Right. But we know that has a finite life that's somewhere between now and age 65. Let's call it that. I said, but his dad was the dentist. I said, did your dad finance all the equipment in the operatoriums? Does he like all the chairs and all that? Does he find? He says, oh, it's all new stuff. Yeah, it's all financed. I said, so do you think in the next five or 10 years, you're going to have to replace that equipment and probably with debt too? And he goes, yeah. I said, so successful people. Use debt to acquire capital assets or income producing assets because we could argue that the chair in your operatorium is producing revenue. You could probably do it inside of a. you know, a Chippendale chair or something like that, but it ain't going to work, right? I mean, you can't lean them back. You think you have neck and back problems now. It's way worse. He goes, okay, I got that. So I said, you're always going to have debt. So what life insurance can do for people with means is it handles debt. It's not going to be credit card debt, but it's going to be debt for capital assets, which immediately increases the return of everything. I said, what about... Are you ever going to be in partnership with anybody? He goes, well, I'm not partners with my dad yet, but eventually I will be. So don't you think that would make sense throughout the rest of your life to be able to buy and sell the business? And we use life insurance. He goes, I never thought of that. I said, well, it's a second reason. I said, how about because you're going to be fairly successful. God, you're already making 350 and you're like 30 years old. I said, do you ever hear a thing called estate taxes? Now he's in New York, so there's an estate tax over 5 million, right? He goes, well, no. I said, well, that's when the government comes and takes a percentage of your wealth over a certain dollar amount. And you're going to end up getting creamed. And life insurance is used by wealthy people, successful people who pay the estate tax. He goes, oh, I never thought of that. I said, and you know what the most amazing thing is? It's the one, it's the last, I mean, there were a couple of others, but you know,

Speaker 0 | 11:24.946

You just pounded him with different things.

Speaker 1 | 11:26.507

I did though, from the perspective of, if he's a top 1% person, he has no connection to what happens for a top 1% person. Because everybody I know in my career, who's a top, my clients who are top 1% or more, they all started in that hump, right? So they didn't like, they weren't, my clients are not inheritors. They weren't born into. high income, high wealth. They created that over time. And so everybody drags the baggage that they learned when they were in that median hump. And unless somebody is willing to stick their neck out as I was for this kid, and I could say he's a kid, right now I'm 68 years old. So everybody's like a kid to me at this point. But it... unless there was somebody who was willing to stick their neck out and actually describe the value and majesty of purchasing permanent life insurance somewhere along the way without making the client wrong about his beliefs. Because there's nothing wrong with term insurance, but it has a job. It doesn't do 10 jobs. Actually, I even think I threw in sequence of return risk and buffering. Who knows this stuff? I said, well, a top 1% advisor working with a top 1% client will know this.

Speaker 0 | 12:49.842

Yeah.

Speaker 1 | 12:50.726

Right? And I ended up doing permanent life insurance. He got the message. But in order to do that, I had to make it okay that his judgment was fine and there was something else to know.

Speaker 0 | 13:03.495

Yeah. When you learned about life insurance for the first time, you said it was kind of like the black sheep still is to this day kind of deal. What was the epiphany for you that you're like? oh, there's something here. Was it that that you just articulated or was it the- No.

Speaker 1 | 13:17.606

No. In the way back, I mostly did permanent insurance inside of split-funded pension plans. Okay. And I did term insurance outside of that.

Speaker 0 | 13:24.434

Okay.

Speaker 1 | 13:25.129

Right? It wasn't really until 1993 when I did LEAP where I realized that everybody needs to have this in their life. It changes everything going forward.

Speaker 0 | 13:35.263

Okay. So talk to me about that. In 1993, three years before I was born, you're learning this. And you're talking about life insurance being a part of everyone's financial life. That's a big statement. Yeah,

Speaker 1 | 13:47.043

it's like a V8 moment. You go, boom, like this.

Speaker 0 | 13:48.745

Explain to me that, though. There's a lot of people listening on this that will be like, life insurance is a scam and all. Can you articulate it in such a way that people will get it? Can you pass on that epiphany or aha to the audience?

Speaker 1 | 14:01.350

It's hard to do that because I think everybody has it in different ways. What's crystal clear is that life insurance is a complicated product. and it does a few things better than any other tool that an advisor has in their toolkit. I could buy a mutual fund and die the next day and my family has the deposit I made into the mutual fund. I can become disabled and nobody's putting money in my mutual fund, whereas I have waiver premium on my life insurance under certain ages. What product is guaranteed to go up every year without fail. What product that goes up is guaranteed not to go down regardless of market circumstances? What product has the kicker of a death benefit that you can't outlive? I mean, these are all things like... We would, in the 80s, we were using this as a way to enhance. I knew that permanent insurance was an important thing. It was much easier to tolerate when the premium was deductible inside of a pension plan. However, when you really get that it's just a cool asset to own and it makes all your other assets better, then it doesn't matter whether the premium was deductible.

Speaker 0 | 15:18.058

And you got that right in 1993.

Speaker 1 | 15:19.480

1993, I got kicked in the head. It was like, why didn't I learn this sooner?

Speaker 0 | 15:25.099

Okay. So now you said that Nelson Nash acknowledged you in his book.

Speaker 1 | 15:29.358

Yeah. Well, because once I was in the world of people that were doing what I would call macro life insurance planning, then a whole bunch of people came out of the woodwork and says, now that you've seen this, you should see this other thing, right? Now I've made everything mine, like the way I think through how dealing with clients, but the fundamental principles are there, like levering a life insurance, like I own a FinTech company. My fintech company was created by levering my life insurance. I didn't have to liquidate an IRA triggering tax. I didn't have to take my mutual fund portfolio and trigger capital gain. I didn't have to lever my house with interest rates that were not going to be in my control like a home equity line. I was able to, with a guaranteed interest rate, tap into my life insurance. So I still had life insurance cash values that were going up and I was able to use the money secondarily. Now, I don't promote that as a thing to do. But there are a lot of people that are probably listening to this podcast who have circumstances where they need capital for something. Right. And then they have to make the hard choice of where they're going to tap into that capital. As a matter of fact, I heard last year somebody said there's a 2 in 20 rule. I have to find evidence for this, but it makes total sense that over a 20-year period, there will be two circumstances where you will need capital in order to do something. And if you don't have it. Yeah. That opportunity is gone.

Speaker 0 | 16:54.917

It's gone. When did you meet R. Nelson Nash?

Speaker 1 | 16:59.603

I probably met him in 95. Okay. And then I was part of a very small study group that we met in Birmingham, Alabama. There you go.

Speaker 0 | 17:09.368

And was he a producer at the time?

Speaker 1 | 17:11.338

No, he was just teaching. Teaching? Teaching.

Speaker 0 | 17:13.556

What is your thoughts on the infinite banking concept? Because it is used a lot. It's marketed a lot. And I would imagine someone in your shoes. May like some concepts, but really don't like how things are being pushed. And I'm just curious how your thoughts on the whole

Speaker 1 | 17:28.631

IBC. That's a great question. So the principles to it in IBC are fine. Being able to use cash value is fine. What a lot of practitioners do, though, is they sacrifice death benefit for cash accumulation. So if you've got nothing going on in your life and this is your only cash accumulation tool, it's probably not terrible. But if you've got a lot going on and you... And you need that death benefit for all those other purposes that I described a few moments ago. You can't be jamming every last dollar into a life insurance contract. It's just not. Is it seductive? Absolute. Is it compelling? Absolutely. Is it the right thing for all of America? Not even close.

Speaker 0 | 18:11.990

Not even close. You mentioned how having access to capital, that 2 in 20 rule. But do you like the idea of people funding life insurance too? actively use throughout their life, like to buy cars and do things? What are your thoughts on that?

Speaker 1 | 18:25.608

Not particularly. Our fintech company called Currents helps people accumulate massive amounts of free cash flow to create wealth down the road. It does it automatically. It does it without being intrusive, without budgeting. It's kind of amazing. If you are living in a world where you have ever increasing free cash flow to deploy, you don't have to worry about stuff like that. It's just you have optionality. Yeah. I think what, again, is it a compelling and seductive pitch to buy your cars with your life insurance contract? Yes. But I've also seen where people don't pay back their loans and they've created a massive, massive problem.

Speaker 0 | 19:05.006

And we have people with the greatest intentions that have outstanding loans. Things go south and now they're taking their safest asset and making it less safe. And that's a shame. With the time that we have left, I have two. case study questions for you. Let's say someone is, what they want to do is they want to maximize their retirement income. So they want to invest, save in such a way that they can optimize their retirement income. How, if you were sitting across the table from somebody who genuinely will listen to whatever you say and do it.

Speaker 1 | 19:33.926

Meaning like everybody?

Speaker 0 | 19:34.926

Yeah, that's what I've heard. I've heard that you-

Speaker 1 | 19:37.645

I'm pretty good at people.

Speaker 0 | 19:38.506

When you present, people listen, which is like crazy. That's a whole nother podcast that we could do. But what would you- What's the framework of how you're helping them with the outcome of maximizing at a certain date retirement income?

Speaker 1 | 19:53.600

Super question. So what people have to realize that return is not that important. It's just not. You know, if you have a saving, if you're putting away money, this is how people get into trouble, right? They're putting away money and they're getting 5% on their money, let's say. I don't care if it's pre or post tax. And they realize they're losing ground. They're going to listen to every stupid idea on the planet to try to get 9% of their money, which nobody gets, right? So they'll... destroy the liquidity they'll take massive risks that they fully don't understand so they're running around chasing return and for the most part since we're not starting with an initial large balance and it's happening over time the differential at the end is not that big what makes the difference and this is what we teach clients except for the very highest 12 clients that i have but for regular folks it's like if you can corral cash flow and help them accumulate an ever increasing stream of cash flow to be deployed into any return, you are way, and it's easy to prove, like it's, this is not like rocket science, just math. People will be, first of all, amazed and they want that, right? And then if you're, as an advisor, responsible for getting that cash flow husbanded and getting them into position to make choices, they make choices faster because that money is not competing with consumption.

Speaker 0 | 21:13.244

That's right. Hey, it's Caleb Williams here.

Speaker 2 | 21:14.878

I'm just interrupting this video quickly to invite you to check out our Andesit 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 the right fit for me? Does this Andesit make sense? Does this actually help me be more efficient? We've put together a 10-minute documentary-style video that I think does a really, really good job giving the history, why the Andesit, different setups and designs that we use. And then we have an Andesit 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 andasset.com slash vault. Learn more.

Speaker 1 | 21:53.761

I'm like an ABC guy, always be closing. So I'm like, I'm like, in a way I'm kind of selling currents because I think it's amazing.

Speaker 0 | 21:59.504

We'll have a link. We'll have a link down below where you can learn more about currents, especially if you're an advisor, a link where you can learn more.

Speaker 1 | 22:05.629

Yeah. So, and it would, it would sound totally self-serving. I said, this is like a miracle happening for people. But our clients are, well, we call the strategists, the advisor strategists and the client's members. Our members after a year are saving an average of 23% of after-tax cashflow. That's over and above their 401ks. If you are saving at that rate-

Speaker 0 | 22:31.269

You're going to win.

Speaker 1 | 22:32.097

You have no choice but to win unless you go on TikTok and find an investment strategy that nobody should ever- do. And you push that money across that line. There are people who win in Vegas, like I live in Las Vegas now. So you can go into a casino and somebody's always winning on a slot machine and they put sound on it. So that way you go, oh, that could be me too.

Speaker 0 | 22:55.327

That is a great analogy because everyone wants to focus on that. And that's the same example of people on social media talking about their sexy investments. And it's like, that's the slot machine example.

Speaker 1 | 23:04.937

And meanwhile, the likelihood is you end up like the person who's got the oxygen tank. with the tube under their nose, sitting at the slot machine, wondering when they're going to hit because somebody else did five slot machines away.

Speaker 0 | 23:15.575

From an asset allocation standpoint for the person that wants to maximize retirement income, what would you suggest to them? Not giving investment advice, but what would you suggest that they look into?

Speaker 1 | 23:24.883

I think, well, the only financial product that you are not guaranteed of getting tomorrow is life insurance. So I would try to acquire as much life insurance as you can. For our purposes, it's human life value. which is if you were a machine in the basement cranking up dollar bills, what would you insure the machine for? You would put that in place, whether it's term or permanent insurance, because you have the rest of your life to accumulate money elsewhere. But you may not be able to acquire that life insurance. If I told you in the last five years, the situations that I've been in where at the beginning of the year, when I talked to somebody, they were fine and able to get life insurance. by the time they made the decision to pay for it, they were uninsurable or badly rated, you would be shocked.

Speaker 0 | 24:09.958

We had a client that we insured and they had brain cancer this year. And it's just wild. I'm young, so I only have a few examples like that in our book of business, but I tell you the conviction skyrockets when that happens. Vince, last question, because you got a plane to catch. An entrepreneur that's passionate about investing in themselves, they believe, yeah, my human life value is here, but I want to reinvest. I want to create more cash flow. And they're looking at other businesses. Do you think that life insurance could be like the place to start? Do you endorse the infinite banking concept at the foundation to then invest in businesses? Is there any difference between an entrepreneur and someone who's like... saving and investing for the retirement?

Speaker 1 | 24:53.572

Opportunity knocks for everyone. You just have to be in a position to hear the knock, right? So there are people whose bent is entrepreneurship. They still need to hold cash or capital in order to be able to do the things they want to do. Like my real estate clientele, the wealthy folks, they have a barbell strategy where they have liquidity on one side and their real estate deals on the other. And they take the real estate and they... add more to the pile i take the pilot at the real but he had nothing in between right no mutual funds no hedge fund like none of that because their business is that real estate but in order to do that successfully they need the capital and caleb um you know there's a lot of people out there who say and there's one guy particularly who i won't mention who's written a ton of books on not putting money down in real estate like it's a guaranteed win for people very compelling, very seductive. And I think in the 80s, I might've tried that. But you have one vacancy, you're done. And when I was on stage before, I shared a situation where I knew a bunch of people in my business, the financial service business, primarily life insurance, who decided there was something else out there. They took their clients, put them in real estate, they put themselves in, thinking they had a no risk proposition and they all went BK. All of them.

Speaker 0 | 26:15.382

Vince, thank you. We will include your show, any other links that you want. down below, including Currents. Thank you for being here. Thank you for supporting this.

Speaker 1 | 26:21.805

Thank you for the opportunity. I appreciate it.

Speaker 0 | 26:23.230

Thank you for being on the show as well.

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