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Inappropriate Whole Life Policy of the Week

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  • jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8137
    Joined: 01/09/2016

    I cannot get over the weird relationship physicians seem to have with their financial advisors insurance salespeople, as if the ins guy has some stranglehold over their thought processes. It sounds almost like they are trying to break out of a cult and don’t have the power to keep from getting sucked back in.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #206526 Reply
    SerrateAndDominate SerrateAndDominate 
    Participant
    Status: Physician
    Posts: 487
    Joined: 02/01/2018

    I cannot get over the weird relationship physicians seem to have with their financial advisors insurance salespeople, as if the ins guy has some stranglehold over their thought processes. It sounds almost like they are trying to break out of a cult and don’t have the power to keep from getting sucked back in.

    Click to expand…

    Yeah, it’s a weird hyper-loyality thing. I think many factors are at play. Some people may know the salesperson beforehand and trust him/her blindly. My boss had whole life policies for both him and his wife which amounted to about $2k per month. He kept saying “oh so and so is a nice guy”, to which I replied “well, you’re nicer because you put his kid through college very quickly”. Another thing is people just don’t take a few minutes to see if they’re getting fleeced or not

    Earn everything.

    #206535 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4448
    Joined: 01/08/2016

    This week’s edition, $24K a year into whole life and no Roth IRAs.

    My husband and I have really been diving into your book mainly based off our financial advisor getting us both started on a whole life insurance. We were always questioning it since it’s close to $1000 a month combined. Mine is 440 and his is 500. We are young professionals: husband is a dentist and I’m a dental hygienist both 5 years out of school. We want to cancel in but know it will be a battle with our financial advisor. Are there some key points we could bring to him as to why placing that money elsewhere per month would be better for us. I’m doing a Roth 401k that is matched at work and my husband is doing a match 401k at his work. Neither of these are reaching there Full contribution amount per year. Every time we bring it up our financial advisor says we will be pulling from it eventually to live off of in retirement and eventually it will begin to pay the premiums on itself but that feels like a millions years to us at this point!!!

    Click to expand…

    so many problems going over their heads….

    #206539 Reply
    Liked by Craigy
    Hank Hank 
    Moderator
    Status: Attorney
    Posts: 1405
    Joined: 03/27/2017

    If your brother in law or that nice guy from church keeps golfing and fishing with you after you drop the whole life policy, then he was your (misguided) friend.  If he drops you after you drop the policy, then you were dealing with a salesweasel.

    #206545 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8137
    Joined: 01/09/2016

    If your brother in law or that nice guy from church keeps golfing and fishing with you after you drop the whole life policy, then he was your friend.  If he drops you after you drop the policy, then you were dealing with a salesweasel.

    Click to expand…

    Great litmus test!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #206547 Reply
    Liked by Vagabond MD
    Craigy Craigy 
    Participant
    Status: Spouse
    Posts: 2059
    Joined: 09/16/2016

    I cannot get over the weird relationship physicians seem to have with their financial advisors insurance salespeople, as if the ins guy has some stranglehold over their thought processes. It sounds almost like they are trying to break out of a cult and don’t have the power to keep from getting sucked back in.

    Click to expand…

    If they follow the northwestern playbook, they quickly try to establish themselves as your best friend to whom you reveal your entire financial picture, intimate personal and family details, life and career goals.  They were likely introduced through a friend or colleague.  You quickly become very vulnerable and connected.  You’ve already decided to open up, possibly over the course of a couple meetings, and their pitch is all about you, helping you protect your family, your income, etc. etc.  If it’s skillful it feels much less like a sales pitch and actually like someone truly helping you out, particularly if you are starting with a near-zero baseline of financial sophistication.

    It’s all classic salesmanship.

    LEVEL 1 WCI FORUM MEMBER.

    #206555 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4546
    Joined: 05/13/2011

    A double dose this weekend, from a doc three years into a policy who started feeling funny when the agent tried to sell him policies on all his other family members too:

    At the end of residency we were hooked up with a financial planning
    firm that only works with physicians. I knew NOTHING about finances
    and figured it was worth whatever I was paying to not worry about it
    (and I had NO IDEA what I was paying). I signed up for a 20-year Whole
    Life CV Insurance plan in 2016 with 12k annual premium. Of course I
    thought this looked awesome when they showed me all the fancy
    projections. Honestly, I would still be working with them now until
    they really pressed their luck and tried to get me to sign up for
    similar policies for my wife and all 3 children last year. It was at
    this time that something didn't feel right and I finally started to
    educate myself. After just a couple hours of reading I realized how
    stupid I must look. We quickly ended our relationship and I
    transferred everything to Fidelity with plans to take total control.
    I'm still learning (with your help) and I am still in the process of
    figuring out what to do with some of these funds as my education
    really expands into the investing world.
    
    My question essentially is what to do with this CVLI policy. I have
    paid 38k to date and if I were to surrender today I would receive 17k
    which after tax would probably be closer to 12-13k. I still have 17
    more years to pay on this. Do I just cut my loses and take a 25k loss?

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #206556 Reply
    Liked by Craigy
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4546
    Joined: 05/13/2011

    This one from the FB Group. It almost makes me cry:

    Had a question regarding whole life insurance. I know WCI generally recommends No, but i wanted some constructive advice on my situation.

    Backgound: Come from a low-income family (parents were refugees and came to the US in their early 30s with literally nothing) so they financial planning skills were quite poor.

    I have 3 brothers and both my parents. My mom bought all four of us a 100k whole life insurance policy (including hersefl too) that SHE has been paying for about 7 years (she makes about 45k/year and 60% of her monthly income goes towards life insurance). All of my brothers work full time and still live with my parents so thats how we can pay the bills. My dad has a 45k whole life (he only paid for a few years, then became disabled so he makes no payments through the waiver). My dad has $0 savings, no retirement accounts, and nothing to pass onto us when he passes (he is just on disability and SSI benefits). So thats why my mom bought these policies–to have something passed down to us. My mom had 130k in 401k, but after the financial crisis she lost ~90k so she has a hard time trusting it (she really doesn’t understand it all well, infact i manged her vanguard account as a high school student). I plan on buying a 500k term life insurance.

     

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #211209 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8137
    Joined: 01/09/2016

    This one from the FB Group. It almost makes me cry:

    Had a question regarding whole life insurance. I know WCI generally recommends No, but i wanted some constructive advice on my situation.

    Backgound: Come from a low-income family (parents were refugees and came to the US in their early 30s with literally nothing) so they financial planning skills were quite poor.

    I have 3 brothers and both my parents. My mom bought all four of us a 100k whole life insurance policy (including hersefl too) that SHE has been paying for about 7 years (she makes about 45k/year and 60% of her monthly income goes towards life insurance). All of my brothers work full time and still live with my parents so thats how we can pay the bills. My dad has a 45k whole life (he only paid for a few years, then became disabled so he makes no payments through the waiver). My dad has $0 savings, no retirement accounts, and nothing to pass onto us when he passes (he is just on disability and SSI benefits). So thats why my mom bought these policies–to have something passed down to us. My mom had 130k in 401k, but after the financial crisis she lost ~90k so she has a hard time trusting it (she really doesn’t understand it all well, infact i manged her vanguard account as a high school student). I plan on buying a 500k term life insurance.

    Click to expand…

    Me, too.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #211232 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 517
    Joined: 06/12/2017
    I have 3 brothers and both my parents. My mom bought all four of us a 100k whole life insurance policy (including hersefl too) that SHE has been paying for about 7 years (she makes about 45k/year and 60% of her monthly income goes towards life insurance). All of my brothers work full time and still live with my parents so thats how we can pay the bills. My dad has a 45k whole life (he only paid for a few years, then became disabled so he makes no payments through the waiver). My dad has $0 savings, no retirement accounts, and nothing to pass onto us when he passes (he is just on disability and SSI benefits). So thats why my mom bought these policies–to have something passed down to us. My mom had 130k in 401k, but after the financial crisis she lost ~90k so she has a hard time trusting it (she really doesn’t understand it all well, infact i manged her vanguard account as a high school student).

    Click to expand…

    I think I just threw up in my mouth, a little! This kind of BS is why my industry has such a horrible reputation. I hope there’s a special level in hell for advisors and insurance agents who do this type of stuff.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #211233 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4546
    Joined: 05/13/2011

    This one by email- selling WL to a dental student (via his parents):

    I am halfway through dental school. My parents opened up
    a whole life insurance policy for me a couple of years ago. They are
    still paying into it instead of me right now, since I am in school
    full time and unemployed. 
    The Net Death Benefit is only $51,477, the Net Cash Value is only
    $1,312.71, and the annualized premium is $600.12. I was wondering what
    you would recommend I do with this since I have only had it for a
    short time, and since my wife and I are both in school full time right
    now, we are in the lowest tax bracket.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #214176 Reply
    Avatar ITEngineer 
    Participant
    Status: Other Professional
    Posts: 319
    Joined: 05/09/2017
    They are still paying into it instead of me right now

    Click to expand…

    Isn’t this one easy? Just tell them you will never take over the payments (unless I miss-understand what is going on here) and they can decide whether to continue to pay or cut their losses.

    I remember having a similar conversation with my parents when I was 22’ish and out of college. I told them I was not going to take over payments of the Whole Life policy that their FA had sold them when I was a small child. They stopped paying as well and cashed it out. If only they had never purchased it…..

    #214244 Reply
    Liked by Hank
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4546
    Joined: 05/13/2011

    From a FB Group, the usual story of being sold a whole life policy while carrying 5.5% student loans:

    Whole term life insurance questions (and please, don’t crucify me, I am learning…):

    I am paying over $7000 a year into a whole life policy, currently has about $25,000 cash value, with a payout of around $500,000.
    I am thinking about cashing this out and using this to pay off some of my remaining school loans ($65,000 at 5.5%)
    I also have term life insurance in place that will pay about $750,000.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #217636 Reply
    Liked by Peds
    Avatar uteomfs 
    Participant
    Status: Dentist
    Posts: 14
    Joined: 05/30/2019

    Perhaps there is noting I am more ashamed of myself for doing than buying 1M WLI Policies on both my wife and I. Thankfully found this site early and “only” paid 1 year premiums. DONT DO IT!

    #218106 Reply
    Liked by Peds
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4546
    Joined: 05/13/2011

    Not a WL policy (this one is an IUL) but it’s the same story different verse. $97K paid in over 8 years. $21K value. Pretty crummy return and that’s during a bull market.

    I am pathologist, 43 years old.

    In 2011, a slick salesman got me to swallow the bait of an IUL from AXA, ATHENA INDEXED UL, SERIES 151 .

    Here are the details…
    Premium: $1,000.00 per month
    Total Payments so far: $97,000.00
    Policy Account Value: $49,659.67
    Surrender Charge: $28,020.24
    Loan Balance: $0.00
    Accrued Loan Interest: $0.00
    Net Cash Surrender Value: $21,639.43
    Death Benefit: $2,000,000.00
    Loan Interest Rate: 3.0%
    Available Loan: $21,639.43
    Maximum Loan: $21,639.43
    Disability Premium Waiver
    Living Benefit Rider

    To be honest, I don’t really know what exactly all these numbers and verbiage mean, but I have a feeling that I have been totally screwed over. I understand that I have to take the blame, I did not do my homework. It just sounded like a good product.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #220780 Reply

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