1 Why vs. How Whole Life Insurance

2 So, What Do You Do For a Living?You are on an airplane and the person next to you says “and what do you do?” And you say………………………………? Does your response describe what you accomplish or how you accomplish it?

3 So, What Do You Do For a Living?Business psychologists tell us that when we first meet a prospect, we have about 15 seconds to answer two key questions that the prospect is subconsciously asking: What’s in it for me? And what makes you any different?

4 Financial Architects, IncAs a result of our work, our clients: Achieve higher levels of long term wealth and money supply than they would have if they had not worked with us Accomplish the above at less risk than they are currently taking Without any sacrifice in lifestyle

5 Top 13.12% Household income AGI above $100,000This group paid 68.4% of all 1040 revenue collected in 2006.

6 Top 5% Tax returns with AGI of $166,000 in 200657% of the tax revenue that the Treasury collected from 1040’s that year came from this group! 38% of the top 5% earn between $166k and $199k! Bureau of Labor Statistics and the Bureau of the Census March 2006

7 Top 5% 81% of top 5 are in married households90% are under the age of 65 59% are between ages 35 and 54! Mean age is 49. Bulls eye! annual demographic study by the Bureau of Labor Statistics and the Bureau of the Census March 2006

8 Top 3.12% Tax returns with AGI above $200,000 in 200648% of the tax revenue that the Treasury collected from 1040’s that year came from this group!

9 Know Your Market! Why is it important to correctly identify your market? You might end up fishing in the wrong hole!

10 Certainty and UncertaintyCertain: Fixed, settled. proved to be either logically or factually correct : thoroughly confirmed Uncertain: Not fixed in time, indeterminate in number. Not assured, consistent, or dependable in action, behavior, or effect.

11 Planning around CertaintyCertain for our Ideal Clients: Death If death does not occur prematurely, then Retirement. Count on this. It will happen this way.

12 Certainty for Ideal ClientYour dollars will never be worth more You tax brackets will never be less.

13 Uncertain The vast majority of tools people have been using for the past 25+ years to deal with these two certainties! Mutual Funds dominate 401-(k) type of accounts Variable and Universal Life dominated the permanent life sales

14 Question Why would we rely on uncertain products or tools to address our certain life events? Popularity.

15 Right What is popular isn’t always right andWhat is right isn’t always popular.

16 Question Why would we rely on uncertain products or tools to address our certain life events? 2. Price. Low cost.

17 Question Of The Day Is Low Cost Always Better?

18 More Income = More Wisdom?Between 1992 and 2000 the wealthiest 20% of households drastically reduced savings. Estimates put the decline from +8.5% of disposable income in 1992 to -2.1% in the year 2000! Top 20% accounted for 46% of all expenditures in 2000. Oh, BTW: bottom 40% saving rose from 4% to 7% in same period. Gene Koretz “Economic trends” Business Week June 4, 2001

19 Personal Savings: Progress?1990 2000 2005 Personal savings in gross $ $299b $168b $-33b Savings as a % of disposable income 7.0% 2.3% -0.4% U.S. Census Bureau, Statistical Abstract of the United States: 2007 page 436

20 My Conclusion People are often times their own worst enemy!

21 “But I Have a Great Stock Portfolio“But I Have a Great Stock Portfolio!” Economic Principles, Demographics and Wishful Thinking! In the next 3000 days……………. “That leads some savvy analysts to fret that boomers retirement will be marked by widespread selling of stocks and bonds. J. Siegel, a professor at Wharton School has a model showing how boomers’ retirement could cause stock prices to fall %!” The Wall Street Journal Online January 6, 2008 “The Market Braces for the Boomers”

22 “But I am Deferring Taxes In My 401-k“But I am Deferring Taxes In My 401-k!” Economic Principles, Demographics and Wishful Thinking! In the next 3000 days……………….. “complicating the picture is the problem of how to pay for the government benefits that boomers are entitled to! The CBO projects spending (outflow) and revenue (tax inflow) may force tax increases of up to 50% by 2050” The Wall Street Journal Online January 6, 2008 “The Market Braces for the Boomers”

23 Ultimate Purpose What is the ultimate purpose for any money we save?Einstein: “If I could ask God just one thing, I would ask him what my purpose was. After I get the answer to that one question, everything else is just math!” What’s he purpose for saved money? To be spent!!!!!!!!!

24 Choice What is the ultimate goal or objective for every dollar we save? Spend it. During the accumulation years the client is pre- programmed to think about account size. How much is it? They want “more”. If they are fortunate enough to live to or beyond life expectancy, they will spend as much as 35-40% of their life as a retiree/liquidator. At this last and most critical stage of life what then becomes the primary concern regarding money?

25 11 Years, 32 points net gain or 3.3% return!Dow Jones Highs 968 842 950 1036 1051 891 881 1014 999 907 897 1000 11 Years, 32 points net gain or 3.3% return!

26 Advisor Focus & PurposeWhy is it important for you & your staff to have focus and purpose? Futile: Having no useful purpose! Life on a treadmill!

27 What Product? In the planning process our clients acquire a variety of products from us. In every single case there is one product that everyone purchases. Whole Life insurance!

28 What Is The Best? What criteria does your client use to determine the best life insurance policy to own? What criteria do you use that determines the best life insurance policy to own?

29 My Premise A financial strategy cannot be credited with achieving it’s full potential without the existence of a death benefit at mortality.

30 Need verses Want If your employer asked you how much salary you would like would you: Do a needs assessment? What if you are already a “net-saver”? Do you really “need” more? In fact, the question asked was not what you would “need” but what you would like!

31 Story Time You and spouse age 65. Great health. Still in loveSaved $1,000,000 for retirement What do you want to do with the money? Provide income For how long? Life!

32 Story Time $1,000,000 in a CD at 4% Must last for two lifetimes!So interest only and stettle on $40,000 annual

33 Story Time Next day a letter arrives Rich relativeA guaranteed promise of a $1,000,000 inheritance in the next 20 years. Does that impact how you would spend the existing $1,000,000 you saved? Of course. You would spend more! Not out of need but out of want! Metaphorically that is the role life insurance can play.

34 A Tale of 2 Retirees Client 1 has investments worth $3,000,000. He carried life insurance until he didn’t need it any longer. Since he knew that was going to happen he purchased term. Client 2 has $3,000,000 also. He wasn’t worried about whether he “needed” the life insurance or not. He simply knew he wanted it to be in force until the day he died. Since he knew that was going to happen, he purchased WL from me  What impact did the life insurance decision have on the retirement “incomes” of both retirees?

35 Why Are We Saving Money for Retirement?Retired Client 1 $3,000,000 in investments 4% return used Married What did we say about life insurance? Didn’t need! No life insurance Must preserve principal to protect his spouse. His principal becomes his life insurance! Interest only income $78,000 after tax for 20 years $3,000,000 continues Retired Client 2 $3,000,000 in investments 4% return used Married “Wants” the life insurance $3,000,000 WL (on premium offset) Worried about principal? Average of $195,984 AT for 20 years. +151% more! Initial $3,000,000 exhausted. Enjoyed! CSV of age 85? $5,566,948! Priceless!

36 Planning around CertaintyCertain for our Ideal Clients: Death If death does not occur prematurely, then Retirement. Count on this. It will happen this way.

37 Whole Life Insurance Built for the long haulBuilt to withstand uncertainty in the market and the economy If something is fantastic when you needed it the most when did you have to acquire it? Before it was needed.