Audio Lag Disclaimer & Context

SPEAKER_00 0:26

Hi everyone, Colin here. Before we jump into today's episode, I wanted to just share a quick note. We had a few technical difficulties during this recording due to some audio lag that made it tough for us to have much of a back and forth conversation. So before you hear the conversation, we wanted to set the stage and give a little context. From time to time we bring on guests like our past episodes with Roger Cantu on long-term care or Margot Steinloggy on Medicare, partly because they're experts and they share our commitment to fiduciary care and a passion for education, and partly because, frankly, Taylor gets tired of talking with just me. We think these guests are tremendous resources. That said, we can't endorse any specific company or product without knowing more about your individual goals and financial situation. In this episode, we spoke with Victor Yates from Nationwide's advisory life insurance team. One area that we didn't get to explore as deeply as we'd hoped was when and why permanent life insurance might make sense. I've long been a fan of term life insurance for most people, but there are absolutely cases where permanent life insurance can play an important role in

Why Bring On Insurance Experts

SPEAKER_00 1:45

someone's broader financial or tax strategy. We'll dive into some of these in a future episode because I think Taylor has some great insights on where permanent insurance fits and why the whole term good, permanent, bad mindset isn't always right. Like most things in finance, the real answer is it's complicated. Finally, the the main reason we wanted to have uh Victor on is because he's incredibly knowledgeable about the insurance industry and landscape, and nationwide is doing some innovative things with variable universal life policies that make these policies much more flexible and affordable. Those changes might expand how permanent insurance uh can be used in financial planning in ways that many advisors may not yet know about. Um so with that, uh and a big thanks to Victor for joining us. Here's our conversation.

SPEAKER_01 2:45

Welcome back to another episode of the Make the Most of Your Money podcast. As always, Mr. Page is with me. Colin, how are you? I'm good, Taylor. How are you? I'm great, and it's because it's not just you and me today. We have a guest. I'm insulted. Well, no.

Meet Victor Yates & His Background

SPEAKER_01 3:08

We do. We do. We have a guest today. Uh I would say a friend first, uh colleague in the industry as well, Mr. Victor Yates. Victor, how are you? I'm doing great. Thanks. Good to see you again. Good to see you too. Um so, Victor, I I met Victor in February of this last year at a Financial Planning Association FPA conference. Um I guess your your role currently, you're at nationwide uh working on the variable universal life products. Um, but we've just had some awesome conversations, your wealth of knowledge. I think VUL, as they're known, is a is a largely misunderstood product and um a tool, first and foremost. And what you all are doing over there is super, super interesting. So I wanted to bring you on to talk kind of in in at three stages permanent life insurance in general, permanent life insurance, and then how VUL fits in and especially what nationwide's doing. So um, before we get into all the technical, Victor, aside from what I just said, what would you like people to know about you? Background, how you anything you want to share?

SPEAKER_02 4:12

Okay. Um yeah, I think uh, you know, the two primary things that I identify myself with first and foremost, I'm a father of daughters. I uh that's the full-time job, right? We uh I've got several of those that run around the house and sort of keep me busy. And so there's uh you know kind of a 50-50 shot at any given day that I've got uh painted toenails or fingernails or something like that. Um and it's uh what keeps you it it's kind of what keeps you young and makes you old all at the same time, but it's it's what makes life worth living. Um I'm also a Pittsburgh kid. I'm a Yinzer at heart. I lived in Arizona for uh about 15, 20 years, and we moved back a year ago this past summer, um, in large part just to be part of the community and sort of get back home. And that's uh I I joined nationwide, took the role as a part of that, um, in part to get home and in part because I saw what they were doing with I'm in the advisory channel, right? The channel that works with the investment advisors. And um, I saw what they were doing in the space, it really intrigued me. That's why I joined. But um when when we moved to Arizona um I guess 08-09, that's what got me into the industry. No, I started as a as a brand new producer. You know, I work went to work for a large mutual. Um they almost didn't hire me because it's I I'm sure a lot of people out there, you know, they um when you join, give me a list of 200 people that you know. Yeah,

The Purpose Of Life Insurance

SPEAKER_02 5:44

I I gave them a list, but mine was, you know, 2,000 miles away. They were all located in Pennsylvania. Um anyhow, uh, you just figure out a way to make it work. What appealed to me, um, honestly, kidding aside, was selfishly, it was recession proof, right? It was everybody needed it to a degree, right? Like you could talk to 99 people out of 100 because the adage of life insurance was if you love somebody or owe somebody money, right? That's kind of the fortune cookie. Um if you love somebody or owe somebody money, there's a need. Now, that doesn't mean I know how much the need is or if it's being met or the right way to meet the need. But it was that if you talk to enough people, there's generally a need, and you can figure that out. Um, and so I liked the fact that it was kind of recession proof and that there was always this market for it. Um, you know, when we moved out to Arizona, I had a one-year-old and then there was another one on the way. And so I needed something to make sure that, you know, selfishly that there was this recession-proof aspect to it. And and again, oh eight, oh nine, the real estate market, everything else. Um But the the gentleman that recruited me to the industry, and I was referred to this guy by by somebody in the family. So, you know, I sort of had this implicit um endorsement, let's call it. Um you know, he he he talked about we're there when people need us most, you know, like if if a life insurance con which is a promise to pay, a life insurance contract is a promise to pay, if if a client's calling you to get that promise, it's usually in some of their darkest days, you know, even if even if it's a long, healthy life and they go peacefully in the middle of the night, you know, which is what all of us would sign up for, um it still comes with some sadness. It's it's you know, with we're sad that they're not here anymore. And um there is some meaning to being able to be there and give comfort in that time. Um and in in you know, the the monetary aspect is one thing. It's not that you're trying to make them rich, right? It's not it's it's that you're trying to alleviate some of the pressure or some of the anxiety or some of the worry and just say, hey, look, I got this. You don't have to worry about you know, X, Y, and Z. And so um they expressed to me, and one of the things that sort of touched was, you know, you've got you know, doctors, etc. And then, you know, there's a certain level of nobility of being able to help people through this that was a level of uh it just sort of spoke, right? It would it became a little bit more of a vocation than just uh a paycheck at that point in time. So that's kind of a long answer to a short question of how we got here.

SPEAKER_01 9:00

Yeah. No, no, that's great. Um, so let's start like that. You yeah, you you laid the groundwork great for just the the importance and the uh of life

Term vs Permanent: Who Needs What

SPEAKER_01 9:10

insurance and the responsibility that agents and advisors have to make sure people have the right fit. And so we we've talked in past episodes about the role of life insurance. I think first and foremost, for the most part, is to replace an income if somebody passes away or replenish assets when somebody dies. I think the there's other use cases, but that's where that's what most people think of. Um I think the art the conversation around life insurance can largely be oversimplified to term is good, permanent is bad. And I've been a definitive permanent policies on here. We've talked about my wife that has one. Um, term insurance is you uh uh the cheapest option, you're renting a death benefit. If you don't die, it goes away, and that's not necessarily a bad thing, but permanent insurance is what it sounds like. There's a permanent death benefit that's there no matter what. And so in your eyes, when do you think a permanent death benefit? Um who like what situations would requ would call for a permanent death benefit over just a term? That's kind of that's a big question, but a lot of um depends is the answer. But I'm curious just how you think about the term term versus permanent decision. Um yeah.

SPEAKER_02 10:21

So complex complex question, complex answer, right? Um but you're right. You know, uh the the way that I always sort of explain it, I always put the word temporary in front of term, right? It helps to sort of level set. There's two categories of life insurance. You have temporary term, and then you have permanent insurance, right? Um and you you also classified it term, temporary term is renting. It's short term, and then permanent is owning, right? You can make the analogy of renting the home versus buying or you know, taking out a mortgage. Um to a degree, it I'm oversimplifying, and I'm gonna I'm gonna frame this, right? This is sort of a political answer, right? I'm gonna uh meaning I'm gonna answer it the way that there's only one, you know, the uh that there's only one answer, but to a degree, uh temporary term is a temporary solution to a permanent question. A temporary answer to a permanent question. Um meaning that we all know we have a limited number of days here. And so we all know that uh you know death is is part of what our journey includes. And so when we leave here, it's the unknown of when that happens is part of the experience, the human experience. And it's very difficult because we don't know when that is, it's very difficult to have you know all your ducks in a row exactly how you want it. And but term insurance provides just such a fantastic economical option that it that it makes sense for such a wide swath of a population. Um it's almost impossible to find something that offers such a great dollar to benefit ratio, you know? Now, in part because we want it to be this way, right? Because the benefit pays out so rarely, we want that, because we want people to live beyond that period. Um but because the bayout payout pays, I think generally speaking, only two percent of term insurance industry-wide, I think the number is about two percent of term payouts pay a death benefit. Uh 2% of excuse me, term policies pay a death benefit. As a result, they're priced relatively cheaply, inexpensively. Um, and that's fantastic

How Much Coverage: Simple Rule Of Thumb

SPEAKER_02 13:05

because that means you can get protection for your family very inexpensively. And that's important because God forbid you're one of the two percent, right? You want to be able to provide for, in my case, the you know, the girls and and my my wife. And if I didn't wake up yesterday, I want them to be able to live the life that we had imagined. Um and and in part, you know, so Taylor, do you mind if I sort of veer into how much real quick? No. Yeah, go for it. Talk about it. No rules here. That's I think this is all right, because this is a question that you get a lot, right? Um, and so keeping with the temporary term, you know, usually younger family just married, maybe having a baby or expecting a baby type conversation. And and I'm using this just as a back of a napkin conversation. Like we, you know, we happen to meet at a at a at a barbecue or a tailgate or something, and you find out that you're in the industry and somebody says, I was looking at that. How much do you think I should need? Take it for that. Uh, roughly it's 10 times income plus debt, right? That's your broad number. Then you you customize from there. And what I mean customize, take into account what you've already saved, take into account what your balance sheet looks like. Do you already have all your debt paid off? Do you already have a significant retirement savings or other assets accumulated? Is the mortgage paid off? Um, do you wish to provide for private high school? Do you wish to provide for college? Do you wish to provide for down payment on a home or for, you know, weddings and things like that? Um, do you wish to continue to provide for retirement accumulation if you aren't here? Things of that nature, right? Those are some of the questions that you get into. But seven to ten times income, I usually just quick and easy, ten times income plus debt because we've all lived through a highly inflationary period right now. And commonly when you make an acquisition, you don't revisit it for a while. So it sort of gives you a little bit of a buffer. Um temporary term. We've talked on the it's a fantastic easy acquisition. Sorry, Colin, go ahead.

SPEAKER_00 15:23

I was gonna say we we've talked on the podcast before about various methods to calculate it. And I think, yeah, your quick back of the napkin is you know, right in line with with what we've said before and and what it all kind of boils down to is you know, what what position is your family gonna be in if you weren't there anymore? You know, what what earnings have they lost earnings power have they lost? What how are their expenses going to change? So, you know, what position is your family gonna be in if you aren't there in the picture anymore? And then how much do you want to change that? Um and and you know, there are all sorts of calculators to to try to get at a you know a scientific or or uh you know a spreadsheet answer to that question. But at the end of the day, you know, people can have very you know, there they're differ certain calculators will estimate high, certain calculators will estimate low, and at the end of the day it just boils down to that that personal question for for folks to decide. But I'm I'm totally on board with your you know benchmark ten times earnings, uh especially for that younger, younger family. Trevor Burrus, Jr.

SPEAKER_02 16:30

Just as the starting point. Yeah. I mean it's it's an individual answer, but yeah.

SPEAKER_01 16:35

Of course, yeah. And I think that's great. It's funny, but we have all these methods, and a lot of times it ends up coming back to the rule of thumb, and that's why they exist in the first place. Um so uh that

Permanent Policies And Cash Value Basics

SPEAKER_01 16:44

that's establishing the death benefit need. I think um you touched on something about like term insurance. It is so economical. And that's I mean, I I there's I don't want to get too into it, but like there are absolutely sound strategies for permanent life insurance. It can increase retirement income, become a permission slip for spending. There's a lot that can go there, but I think a lot of people don't get permanent insurance because it is more expensive. What was something else we've talked about is the way to think about insurance is or the premium is a function of how likely you are to make a claim. And so if people are getting term insurance while they're working, the chance of them dying is super low, and that's how you get that 2% death pen or 2% payout number. I I you know, if you want the permanent insurance, there's a hundred percent chance you're gonna it's gonna pay out. So it's gonna cost a little bit more, and that may preclude some people from being able to afford it. But even people who can't afford it may ignore it because they're not exactly aware of some of the strategies that you can use. And I'm not gonna get into all that right now, but let's talk about permanent insurance and some of the benefits. Yes, there is the permanent death benefit and what that enables, that there will it will pay out regardless, you know, at some point when you die, which is going to happen. Um I think some of the like what people might be familiar with with permanent insurance is a lot of times there's a cash value component that can be used while they're while uh the policy holder is alive. Um, and this is where VUL really starts to separate. The the the oldest and kind of the OG of permanent insurance is whole life insurance. And um to oversimplify it, that's like if you think about where your premiums or builds a surplus and whole life insurance basically is in a bond portfolio. It's super safe, super steady, but it's a bond portfolio for a very long time. There's been some innovations to be able to get a little bit higher cash value growth over time. And this is where uh VUL comes in. And they're like, let's just talk about that. So VUL versus whole life. Explain to us the main differences that we should know. Yeah. Okay, um, you're right.

SPEAKER_02 18:52

Uh whole life is the, you know, the granddaddy of life insurance, right? When when the industry was born, it was effectively born out of whole life. Um, you know, whole life, it is uh traditionally explained as having three guarantees. You have a guaranteed death benefit, you have a guaranteed premium, that whatever age when you get the policy, whatever premium you receive, they can't increase it on you. And then it has a guaranteed cash value. Now, it's important to understand that guaranteed cash value, that

Whole Life Guarantees Explained

SPEAKER_02 19:30

is, to your point, usually tied to a fixed income type number. Whole life is uh, I'm speaking in generalities here, right? Like let's keep in mind there are industry experts out there, Bobby Sanderson being among them, et cetera, that uh can explain this a lot better than I can. But whole life is what's called a general account vehicle, meaning the insurance company puts all of the premium dollars into their general account. The insurance company is then investing that on your behalf. So we lose visibility on our premium dollars. They take our premium, they combine it with everybody else's, so we don't know whose dollars are which. They combine it into their general account, and then they are investing it. And they effectively say, don't worry about what happens. We guarantee you to have X number of dollars at every year. That's the guaranteed cash value. And so by contract, they guarantee that we will have X number of dollars at every year on the policy. Usually that's that fixed income number. It increases incrementally over time, usually smooths it somewhere around a two and a half, three, three and a half percent number. Um in addition to that, they most of the whole life carriers started as mutual companies. The ones that are most known for still writing whole life today remain mutual carriers. As a result, at the end of the year, when they look to see if they are profitable and they declare dividends, they pay those dividends back to the policy owners instead of to shareholders. When they pay the dividends, they pay those reinvested back into the policy. And so you have your guaranteed cash, and then they pay dividends in the form of additional cash. Um, depending upon environment. So a dividend is made up of the acronym dime. So it's how much money do they declare in the dividend to pool? That's the D. I is what has their investment experience been for that given year? M is what has their mortality experience been for the year? How would that match up to what their actuarial table has been? And then E is what was their operating expenses for the year. So they look and they say, okay, like that. Run it through the dime acronym, declare a dividend. Um commonly, the the the dividend um again on average will account for somewhere between 40 to 50 percent of your cash that you accumulate inside of a whole life contract. So it's significant. Um usually the general account of an insurance carrier has a correlation to like a 10-year treasury. It's not directly, but it's somewhere there. And so, you know, they like to see interest rates slightly higher than what they were for the last 20 years, you know, that a long um period of suppressed low interest rates was difficult on a general account environment. I think a four, four and a half number is kind of a sweet spot for them generally. Um but those are the three guarantees that a whole life contract offers. That's great. On the other side, universal life is sort of so that's where the whole the permanent life insurance industry started was whole life insurance. It went through a couple iterations. 70s and 80s, we started to move to a universal life contract where it was still a general account option, but now our premium got allocated directly to our account, so we had visibility on it. And instead of getting a guaranteed cash value, we got a guaranteed interest rate. Um, and then we moved

What VUL Is And How It Invests

SPEAKER_02 23:25

to the variable universal life option. Um now this is a separate account function, and so we pay a premium off of that comes you know, sales loads and charges. We're left with effectively what let's just shorthand a net premium. The net premium is able to be invested into subaccounts. Um, subaccounts are typically VITs, which are variable insurance trusts that are mutual funds designed to be inside of a uh a variable universal life contract. So they're a mutual fund-built sub-account or a VIT built to be a subaccount inside of a uh variable universal life contract. And so that allows us to invest into you know more of an equity exposure environment. There are also fixed income subaccounts, etc. But you get the idea where now we're we're getting some more broader exposure to call it an S P 500 or uh you know Russell or you know, an international or large cap. You've got all sorts of offerings. What we get is some more potential for upside in what we sacrifice is commonly some of those guarantees that we offer. Instead of um we get but we we gain some potential and we also gain some flexibility. Um and it's usually a bit of control and responsibility. And so I think m with you know, kind of raising daughters again. We've we've got one that just became a licensed driver in the household, and it's it's sort of that control and responsibility. With one comes the other. Um if you have control, you need to take responsibility. Um where many variable universal life contracts historically had gotten into trouble is people took control but not responsibility, meaning they would invest the money, do a set and forget and never pay attention. Um gentlemen, I ask you, how often do you review your con your, you know, your the investment structure? It's not something that you can invest in and ignore. It's it's a similar component. Yeah. And so variable universal life allowed, what it what it started to do was to open up the tax advantages of life insurance. So first and foremost, the death benefit, right? We're still providing. You know, sort of my my personal story again, what drew me to the industry. One of the things was if you're spiritual, James 127, you know, what we consider to be true religion is providing for widows and orphans. There's something there, I think, that speaks to a little bit of that life insurance calling, right? And so there it's always there for a death benefit. It's always there to provide for those that that need it most. And so we always have that death benefit. And we're gonna pay a premium, as you Taylor, I thought I thought you said it great, that the premium is proportionate to the to the risk of death, right? Um but what we gain and for this risk or for sorry, for the control and the responsibility is to be able to control our investments, to be able to control our returns. I think we know what subaccounts, what maybe an S P 500 subaccount can do versus a general account that's highly fixed account or you know, tenure treasuries, you know, sort of correlation driven.

SPEAKER_01 27:03

Um it's a permanent death benefit, but now like with significantly higher upside. I appreciate that you said potentially higher upside. Um what are the you know, with any upside is gonna come some downsides? So the to me, the biggest risk, um, I mean, i in a normal a normal experience a VUL is gonna do great because the investments are probably gonna do really good over the long term. But the am I right that the biggest risk would be a really bad return experience early on when the policy is just getting going? Is that the biggest risk? And if so, what happens? What are the what are you exposing yourself to as a policy holder in that case?

SPEAKER_02 27:43

So can you repeat the biggest

Sequence Risk And Early Downturns

SPEAKER_02 27:45

risk is what it buffered just a minute?

SPEAKER_01 27:47

Well, I I was thinking like, yeah, so because like i as long as the if you're having if you have a good return experience, then the the policy is going to be incredible and over the long run just be fantastic. But I think about like because there has to be enough cash value in in there to support the policy that what if there was a negative return sequence early on in the policy you you you you start paying premiums and it goes in the cash value, but then the market tanks. What happens to the policyholder in that case?

SPEAKER_02 28:15

Yeah. So you're exactly right. That's the this you've got a sequence of return risk, just like with any type of investment structure. Um, I think that's where it's important to utilize a professional such as yourself as you're evaluating these contracts. Um, I wouldn't advocate for somebody to go in from, you know, don't listen to me and then decide to go pick one out, right? Utilize a professional and somebody that is fluent in these to be able to assist you with that uh first and foremost. Um, but because and the reason I mentioned that is because there is sequence of, there's always return risk. Anytime that you're dealing with investing, there, those disclosures, everything else that you see, apply. Sequence of return, meaning I have a negative return early on is more painful than having a negative return later on. That can have an impact. Generally, a lot of contracts, what you'll find is they have at least a short-term guarantee to insulate the policy owner from that. And what I mean is that for a five or a 10-year period, as long as you pay the premium, you're guaranteed the death benefit. So it acts, think of it like it's a term for the first 10 years. I pay a premium, there's a death benefit. I pay a premium, there's a death benefit, irregardless of market performance. So you you you generally want to find something like that. So you don't have pure equity risk out the gate, right? Because I am buying this with the intention of having some death benefit, some other protection, not purely equity or you know, investment performance. Um, it's it's twofold. It's not purely one thing. And so there is that risk, but there are ways to mitigate that immediate exposure. Um, but to your point, over time, as we make payments, we make a payment, some deduction comes out, we hopefully experience positive gain, which accumulates the cash inside of the contract. Those that cash The additional premiums and the growth would outpace the ongoing deductions.

Short-Term Guarantees That Buffer Risk

SPEAKER_02 30:30

And that allows us to maintain uh, you know, health and growth inside of the contract.

SPEAKER_01 30:36

Yeah. And that that's that's exactly what I was trying to identify there, because I think a lot of people just on the surface would say, well, I get the upside, but the policy could crash and burn in a few years, but you're saying there's actually you can build things into the contract to get you to kind of guarantee it in a sense those five to ten years. I think that's that's huge. Um because um yeah, I mean, that that's that's to me like the number one rebuttal to a VUL. Like that's answering it right there. Um by saying, you know, the you can keep the policy alive. If you do have that terrible return sequence, um it stays alive. Um what is nationwide doing differently compared? Like how it like what what does nationwide do to differentiate itself in the VUL space? What do you like about the the tools the tools and products you all offer compared to the rest of the space?

SPEAKER_02 31:27

So let me um I joined about uh a year and a half ago, and I'm in the advisory division, so I'm gonna speak specifically to that. I know we have some fantastic traditional uh product, I'm just not fluent in those. And so the division that I'm in, we have um it's called Nationwide Advisory VUL or N-A-V-U-L. And it's an advisory fee-based contract. And so what makes it a little unique is that it is fee-based. And so it's it's effectively institutionally priced and surrender-free and asset-based. What this means, um, if if you're listening as an advisor, uh, we've built it for the investment advisor model, um, meaning uh don't have to be registered, don't have to be licensed, it's an assets under management play that allows for liquid you managing the contracts as assets under management and uh being the investment advisor and offering 140 subaccounts. So it's uh much more sort of a traditional investing account with the benefits of death benefit and uh life insurance taxation. For the clients, it kind of opens up a different perspective. Um, it being fee-based, what we've done is sort of restructured the format of a traditional contract. Um a traditional permanent life insurance contract, I think part of the resistance, Taylor, that that um you know, that you and I have talked about in the past, right, to permanent insurance. One of I think generally many people have acknowledged the benefits of life insurance. Um it it life insurance has perhaps, if not the most, some of the most tax advantages of any investment vehicle offered. You have tax-deferred accumulation, you have tax advantaged access to the funds, meaning I can, you know, the IRS allows us to withdraw

Nationwide’s Advisory VUL Model

SPEAKER_02 33:34

first in, first out, meaning I can withdraw my premium without tax. So I get back what I put in tax-free, so surrender-free withdrawals, and then I can use policy loans. So I can make tax-free withdrawals from the contract as long as I play by the rules. I have so tax-free, uh, tax-deferred accumulation, tax-free access. I have tax-deferred accumulation or sorry, uh, distributions if from a critical illness, chronic illness, or terminal illness use. I have uh probate free and estate tax-free death benefit, it's commonly creditor protected in many uh many estates. And so it's got a lot of provisions that allow for what it can do. All of that's great, and I think we've acknowledged that, but a lot of people have looked at it and said, okay, that's great. But it also has some limitations. And some of those limitations were it was heavily front-end loaded. It kind of felt like entering into a mortgage for a lot of people. Meaning, you know, when you when you when you enter into a traditional 30-year mortgage, the uh the first couple of checks that you write, you know, maybe for the first couple years, most of your payment goes to interest, not to the principal, right? You don't feel like you're paying down the mortgage whatsoever. Yeah. It felt very much like the same thing in permanent insurance. Meaning you would write premium, and it wasn't uncommon for it to be, you know, five, seven, nine years before you had as much in the contract as what you've even paid in. Like it it took, it could take, you know, seven, nine years before you even got to a break-even point. And then there was also something called surrender period. And this was necessary because you know, the insurance company is typically taking on a huge balance sheet liability. Like if you're you're taking out a million-dollar policy, maybe you're paying $10,000 a year. And I'm not minimizing $10,000 in premium, right? That could be significant for a family.

SPEAKER_03 35:49

Yeah.

SPEAKER_02 35:50

But if you're paying $10,000 a year in premium, the insurance company, if you pass away, the insurance company is going to pay a million dollars. Well, the insurance company's got a $990,000 liability. So they've got a significant balance sheet issue. And so one of the ways that they have to manage that is with the surrender period. And so even if it took us seven to nine years to meet this equilibrium in what we've paid in, we might have 10 or 15 years until it's all fully liquid for us. And so in that traditional environment, those restrictions or those drawbacks were enough resistance as we had talked about in the past. What we what we've done at Nationwide Advisory in this advisory uh fee-based contract is to sort of reposition the contract and said, well, what if we what if we re-engineered it? And instead of doing that, what if we tried to design a permanent contract uh that set aside or mitigated many of the objections that were um common to permanent life insurance? And so we have stripped out many of uh the fees associated with it and reduced the charges that are the net result is that it is uh very uh low cost and extremely tax efficient. And it's it's very liquid. There are no surrender charges. And so for um the younger, uh, you know, mid-professional, let's call it, so like yourself, right? Growing family but mid-career solid income, where there's a need for death benefit, but there's also a need for, you know, uh looking for permanent ongoing uh perhaps savings accumulation and permanent death benefit planning. It allows for a better dollar to benefit purchase. And to do so with an almost immediate break-even

Tax Advantages And Liquidity Changes

SPEAKER_02 38:05

point. If if we were to to to do something on an accumulation play and we put in you know the ten thousand dollars, we could be at ten thousand dollars in cash based upon market return. All those disclaimers, Taylor, that you know, we normally talk through. Yep. Yep. Um, we could we could be fully liquid with that break-even point within a number quick number of years, one, two, three years, right? Yeah. And so it opens up some potential of sort of a term plus option for for the younger, you know, professional clients, right? And and what that does is a few things. It's um when you compare it straight up to uh to a traditional, well, I'll just speak to uh to nationwide's because those are the ones that I know best, right? If you were to quote, say, nationwide's 20-year term and our NAVUL, just our you know, our pure protection premium, the cost of the insurance to keep the death benefit in play, there's maybe a um a six, eight, ten percent difference in premium. NAVUL is maybe, let's call it 10% higher, just for round number's sake. Okay. Slightly more expensive, but not obscene. But if you think about it, for that 10%, I have the option of this now. I have an account that offers 140 subaccounts that I can invest tax-deferred dollars into. And I also have the option to be able to continue to fund this and immediately extend this contract for as long as I need it. I don't run into a shelf life of 20 years. And to me, there's value to that. I I only half joke that if you would have asked me, you know, 20 years ago, would I have gone Pittsburgh, Arizona, Pittsburgh, would I be in life insurance? And would I have, you know, four daughters instead of one, I would have said, no, heck no, and please God, no, right? Like there's there's just so little ways to know how life is gonna play out.

SPEAKER_01 40:25

Yeah, yeah.

SPEAKER_02 40:27

Um, you know, I'm gonna, I just I think that the only thing that life does is throw us beautiful curveballs, and it it just doesn't go according to plan. And the only solution to uncertainties, the only solution to uncertainty is to have options. And I think for 6% or 8% or 10%, whatever, a relatively small number. I mean, if you're paying $1,000 a year, you're talking $100, high end. It gives you an option that says if you max out your 401k, here's a bucket that's never going to be taxed again. And by the way, if you need insurance, if you happen to need some insurance, uh, you know, in year 21, it's sitting right here for you. Doesn't matter what your insurability is. Um, and and you know, I think part of the just, you know, quick squirrel, you know, side note here. I think we all, when we talked like that, we all think that we wake up in year 20, and that's when we realize something happens. But that's not it. What happens is like yesterday I took off of work because my wife and I had a doctor's appointment, and it was one of those that we were going to get a test. And it was, I wasn't sure how the test was going to come back. And if it didn't go right, I didn't want to have to go back to work.

Cost Comparison: Term Versus NAVUL

SPEAKER_02 41:55

Thankfully, it it was okay. But it's days like that that you get news that that's what changes the next, you know, the what's in front of you. And so you get one of those. It doesn't matter whether it happens at year one or year 20, but that's what changes. And so for me, that's worth six, eight, ten percent. And so I think that's part of what it speaks to. And Taylor, I know we we know each other, so I know I'm preaching to the choir here, right?

SPEAKER_01 42:32

I I think I mean we could go super deep and nerd out on a lot of these things, but I just think what why I'm so intrigued by what nationwide's doing. If you think about the biggest rebuttals to permanent and VUL, permit insurance and VUL. Commissions is one people talk about. Well, with these contracts, there are commissions. It can be fee-based when treated just like your investment account. Um, you may not like the low upside of a permanent policy. Well, you can have market upside. You may not like the risk of what if the market tanks early on and the policy lapses. Well, there's those protections you talked about to extend that. It's pretty intriguing. And so this is obviously not a blanket recommendation. I think it I just want to open some people's eyes to like, did you know this is out there? Because it's most people, oh, term is good, perm is bad in the conversation. There's some very, very intriguing things. And I think the nationwide product is a fantastic place to start. To that point, if people do want to learn more, um, you know, you obviously Colin and I, you could talk to, but maybe they don't know, like, where can people find these? There's other app are the can they go direct to nationwide? I know you've worked with some people one-on-one. If they want to learn more, where could they go?

SPEAKER_02 43:42

Um, yeah, so I think starting with you and Colin uh would be the first place I'd say. Um obviously give you a call. You're a great resource for uh a conversation. We work and distribute through you know financial professionals all across the country. The website would be nationwideadvisory.com. Um then it's again nationwide advisory V U L or Variable Universal Life is the solution that we've been talking through today. Happy to answer any questions. But uh yeah, that's I do. I think it's I when I'm talking about it, I say it's one of the first of its kind. Um you you don't run into a whole lot of conversations of other people doing something like this. Most of the time when I'm having a dialogue with somebody, they the response is usually I didn't know something like this existed.

SPEAKER_01 44:38

And so Yeah, that that's how I was.

SPEAKER_02 44:40

I appreciate the opportunity to be able to spread the word.

unknown 44:43

Yeah.

SPEAKER_01 44:43

Yeah. Well, and and and one other thing that I don't think we have time to get into, but that we have also talked about if you have an existing permanent policy, some phenomenal options to exchange that into one of these. And that that's yeah, that's an episode on its own as well. But that's if you say, Oh, I've already got one, darn, I wish I would have done this instead, not too late. Yeah. I think it's also worth the lag there.

SPEAKER_00 45:09

I was also worth emphasizing, like these, these contracts can be complicated and they're not all you know, they're really not all created equal. And and and so it really helps to have an advisor that that can look at them and understand the mechanics of them. I mean, they're just just to get on the soapbox for a minute, I mean, there's all sorts of uh you know, hucksters online and and in on social media or whatever, pitching insurance products that that you know that are blending with investment um like returns or

Options, Uncertainty, And Flexibility

SPEAKER_00 45:44

or promising certain, you know, I mean you've you we've all seen it, you know, um you know promising things that that these that policies, uh certain permanent policies or IULs can do for you. And um, I mean, I think it's important to just acknowledge that like what we're doing here is blending an investment vehicle with with an insurance vehicle. Um you don't magically get you know something that produces returns that that outpace you know every other expectation for for what markets normally return. And so, you know, just as a as a caveat, I think you know it's worth mentioning that that these products, because they're complicated, they can be misrepresented and um and so it's important to like to go into it with with an understanding for for how these things actually work and what the consequences and assumptions that they're built on, um, you know, to understand what they actually do. Yes, sir.

SPEAKER_01 46:46

Well, Victor, this has been very enlightening. Um thank you for coming on and sharing more about your experience, permanent life insurance VULs nationwide. Um yes, like Colin said, there's I I I think just in general, anybody who has a problem with permanent life insurance was probably had it described incorrectly. Like they just do what they do and there's upsides and there's trade-offs to all of this. The nationwide VUL is not the perfect policy that's going to solve every problem in the world. I just think it's definitely um a different take on the permanent space that is could be intriguing and worth a look for some people. So thank you for your time. Thanks for coming on, and uh we appreciate it.

SPEAKER_02 47:24

Any last words? I really appreciate the conversation. Good to talk to you as always, and wish you continued success. Thank you so much.

SPEAKER_00 47:33

Of course, Victor, we we appreciate it. Yeah, thanks for thanks for coming on the episode. See you next time. All right, see you next time. Thank you.