Category: Prosperity Economics

We Caught “The Whole Truth” on VIDEO!

whole-truth-logo-squareOn February 10, 2016, we put on a special full-day event in Birmingham, AL for advisors and their guests, “The Whole Truth About Money.” Over several hours, we analyzed popular financial vehicles with Truth Concepts software to show some of the myths and misinformation which common in “typical” financial advice.

These presentations were the most comprehensive “client presentations” ever given by Todd Langford, in which he used practically every single TC calculator!

We covered a LOT of ground because we weren’t stopping to show and discuss how to USE the calculators – our focus instead was on the MESSAGE we want clients to hear.

Some of the topics Todd covered –

  • The TRUTH about how banks really make money (and how we can, too);
  • The TRUTH about paying cash for cars and other major purchases;
  • The TRUTH about mortgages and why a 30-year mortgage can cost LESS;
  • The TRUTH about how qualified plans can drain your nest egg – whether you are an employee or a business owner;
  • The TRUTH about whole life rates of return, and why the critics are wrong;
  • The TRUTH about how much college REALLY costs once you factor in opportunity costs;
  • The TRUTH about Dave Ramsey’s misinformation – with mathematical proof!

We had the event filmed, and then we edited together both video of Todd and “screenplay” footage from Kim’s calculators.

At first, we only allowed those who attended The Whole Truth About Money access to the videos. But now, the Whole Truth Videos have been released for all.

===>> Get The Whole Truth Videos Here.

And from now until Wednesday, June 22, we are running two tremendous specials:

  1. Instead of the regular price of $497 right now you can get instant access to the videos for only $397!
  2. Even better… you can get the videos for FREE when you register for The Summit for Prosperity Economics Advisors!

Kim and I are both the hosts as well as featured speakers at The Summit, which happens July 20-23, 2016 at Deer Valley Resort, near Salt Lake City, Utah. This is THE event that you don’t want to miss, if you are a “whole life friendly” advisor committed to helping their clients get out of the box that the big banks and Wall Street firms have built for American investors.

Whether you can come to Summit or whether are you reading this in time to take advantage of the $100 special, we hope that you’ll put The Whole Truth Videos to use, helping to bust the myths of typical financial advice!

Use them to practice your own client presentations, or you can even show them directly to your clients! They come with is a 7-day money-back guarantee, we are confident that you will love the content and the quality of these videos, and will want to keep your lifetime access to them.

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The Truth About Whole Life Insurance Rates of Return

“Is Whole Life Insurance a Good Investment?”


Percent Symbols - Best Percentage Growth or Interest RatePerhaps no question has generated as much controversy on financial blogs and forums as this one.

“Typical” advisors and the media-hyped financial gurus say, “Stay away from whole life insurance!”

Meanwhile, many passionate agents and advisors try in vain to correct the misconceptions, sometimes stating their own misconceptions, or irritating others who believe their unbridled enthusiasm is motivated only by commissions.

Indeed, The White Coat Investor website’s most popular post on whole life insurance (written by a self-appointed, unlicensed financial “expert” who is actually a full-time physician) has generated over 800 comments from both fans and foes of whole life. The posts begins with a warning that the comments may take “over 4 hours to read.”

But what is the TRUTH about life insurance returns?

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Kim Butler on Prosperity Economics and Truth Concepts

PEM-YouTube-profile-whiteTop Producing Advisor and Todd’s Truth Training partner (and wife) Kim Butler recently sat down to discuss Prosperity Economics in this series of five short videos.

Hosted by Steve Savant of Let’s Get Down to Business, they had some lively discussions! Steve calls Kim an “articulate contrarian” and “controversial author” and explores why Kim considers herself a “recovering Certified Financial Planner.”

What’s wrong with “typical” financial planning? As Kim explains, the many assumptions that must be made by planners and their clients can give clients with a false peace of mind. She also explains why people need to save first and not have all of their money tied up in a qualified plan:

Why Financial Planning Doesn’t Work

In the next video, Kim compares the differences between “typical” financial planning and Prosperity Economics. She also explains why it is essential to focus on cash flow more than net worth:

Is Prosperity Economics Better Than Financial Planning?

“Net worth doesn’t pay the bills, net worth doesn’t put food on the table, and net worth doesn’t take us on vacation.”

In the third video, Kim argues for a return to the “tried and true” methods of wealth-building. She explains the importance of liquidity and how “typical” strategies can compromise liquidity and a client’s control over their own money. She also discusses using books and Amazon.com as a promotional strategy in her business:

Why Busting the Financial Planning Lies is Necessary

In the next video, Kim takes Steve through the Prosperity Ladder and the 7 Principles of Prosperity. These form the foundations of Prosperity Economics”

Why the 7 Prosperity Principles May Replace Financial Planning

“This idea of locking money up in qualified plans, and prepaid mortgages and 529 plans? That doesn’t put the client in control – that puts the advisor, the financial institution and the government in control, and we don’t think that’s helpful.”

In the fifth and final video, Kim discusses how Truth Concepts Software can be used to help clients OPTIMIZE their money:

How Using Truth Concepts Supports Prosperity Economics

We hope you enjoyed the videos! Please feel free to share them with others.

If you want to know more about Prosperity Economics, see ProsperityPeaks.com, the online home of the Prosperity Economics Movement, and also TheSummit4Advisors.com, where you can optin to receive announcements about Prosperity Economics trainings and event for advisors.

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Truth Concepts on YouTube.com

Visit Truth Concepts on YouTube.com Today!New Truth Concepts Client Presentations!

We’ve been busy loading up our Truth Concepts YouTube channel  with videos for you! Now there are 15 videos featuring Todd Langford and/or Truth Concepts software.

The YouTube channel houses our Truth Concepts, Truth Concepts Academy, and Summit videos, as well as several presentation videos and  Banking for Life excerpts and outtakes with Todd Langford.

Eight of the newer videos are from a client event at a local insurance brokerage. We recorded and “screen captured” Todd’s presentations and divided it up by topic. (FYI, Todd’s presentations followed a presentation by Nelson Nash, you’ll hear him refer to Nelson who is in the audience.)

Truth Concepts: How Banks Make Money (1 of 8)

Even most bankers don’t understand this. (If a bank has a 6% spread between the savings rate and lending rate for customers, they are NOT making 6% on their money!) The reality of bank profits – especially when interest rates are low – is frankly shocking. Approximately 15 minutes.

Truth Concepts: Maximum Potential (2 of 8)

As we mentioned in an earlier email, many advisors like to use this calculator in their first meeting with a client. It outlines what a client’s full financial capability and demonstrates that if you’re saving too little, a chasing higher rate of return isn’t necessarily the answer. Approximately 10 minutes.

Truth Concepts: The True Cost of Paying Cash (3 of 8)

Todd explains opportunity costs and why they matter so much. (Not suitable viewing for Dave Ramsey fans!) Approximately 7 minutes. 

Truth Concepts: Qualified Plan (4 of 8)

Todd examines the real rate of return in a typical qualified plan. What impact does a company match, a typical fee, and taxes have on the dollars in a 401(k) or other tax-deferred retirement plan? It’s not a pleasant surprise to see how much of “our” money ends up in someone else’s pocket!  Approximately 14 minutes.

Truth Concepts: Funding Calculator (5 of 8)

Todd Langford discusses whole life cash value in the context of other savings vehicles (with some interesting commentary on the “safety” of FDIC-insured accounts) and busts the “buy term and invest the difference” myth with hard numbers and compelling logic.  Approximately 16 minutes.

Truth Concepts: Car Financing and Borrowing (6 of 8)

Todd shows the reality of “0%” vehicle financing, then compares the results of making major purchases through bank loans, cash purchases, certificates of deposit or whole life cash value. Emphasizes the advantages of having and using your own capital.  Approximately 23 minutes.

Truth Concepts: Real Estate (7 of 8)

Todd explains the advantage of participating mutual company dividends and analyzes the powerful potential of using cash value to finance other assets and sound, cash-flowing investments. See how leveraging your cash value can produce exponential benefits when combined with other strategies and investments.  Approximately 11 minutes.

Truth Concepts: Laffer Curve on Cash Flow (8 of 8)

Todd gives a contextual history of income taxes and how lower taxes can actually translates into more money for BOTH taxpayers and the government.  Approximately 5 minutes. 

Visit Truth Concepts on YouTube.com Today!

Click on links for individual videos above or view all available videos on the Truth Concepts YouTube channel at: http://www.youtube.com/user/TruthConcepts.

Can you see the potential of using Truth Concepts software to analyze various financial strategies and communicate with clients about essential financial concepts?

Join Todd in Houston for our next LIVE 3-day training for hands-on training with Truth Concepts calculators. At this writing, our next event is October 22-24, 2014 in Houston, TX. See our Truth Training page for current dates, details and registration.

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Truth Concepts is Busting the Retirement Lies!

When you think about it, isn’t the concept of retirement just ABSURD!?

BRL-REAL-coverIt’s absurd to think that making a growing segment of our population LESS productive (through forced or expected retirements), that there will somehow be more for everyone.

It’s absurd for 95% of Americans to believe they can work and save for 40 years, then expect to live off of their savings and investments – in the manner to which they’ve become accustomed – for another 20, 30, even 40 years.

We know that for most Americans, the math just doesn’t work out. They can’t save enough and earn on their investments to counteract the effects of inflation. And if their nest eggs are tucked away in qualified retirement plans where they’ll pay (likely) increasing income taxes before they can spend what they’ve saved, they’ll be in worse shape than they may realize.

As an advisor, how can we address the retirement debacle? People come looking for “help” in retiring, but do you ever feel like they’re chasing the wrong goals, or just not willing to accept inconvenient financial probabilities such as rising inflation, tax burden, and increased longevity? 

Kim D. H. Butler is a financial advisor (or “Prosperity Economics Advisor”), my wife, and an author who is equally concerned about this dilemma. And she has just released an updated and revised edition of her book, Busting the Retirement Lies, which features computations and screen shots from the Truth Concepts calculators:

  • Financial calculators
  • Cash Flow calculator
  • Future Requirements calculator
  • Life Expectancy table
  • Qualified Plan calculator (in depth analysis with screenshots and explanations)

(Hint: the book can be used as a Truth Concepts study guide or even shared with clients as a third-party confirmation of concepts you may be sharing with them.) 

Busting the Retirement Lies is much more than a book about retirement planning. It tackles what’s wrong with the concept of retirement, from both a financial and a life purpose perspective. (As Kim is fond of saying, “Who wants to be ‘taken out of service’!? Not me!”)

The book also gives several examples of role models who are doing “retirement” differently, pursuing businesses, new careers, and meaningful volunteer work beyond the age when many people have confined themselves to an easy chair. And its seven chapters give the steps to living prosperously as you age: 

  1. Getting better, not just older… to 100 years or beyond! Move past self-imposed and societal limitations of aging to live a full and healthy life. This chapter presents wise advice from active centenarians.
  2. Match your purpose with your prowess. Learn tools and resources to help you figure out your innate calling or “soul purpose.”
  3. Find work (or volunteer opportunities) you love. Don’t work a job you hate! Discover how to enjoy your work while making a contribution.
  4. Strategize how to keep doing meaningful work for a lifetime. It makes little sense to simply cease productivity because we’re 65. Instead we can do work we love throughout our lives, combined with meaningful sabbaticals, rest, and travel.
  5. Save 20 percent of your income. Most Americans are drastically under-saving, not realizing the effect that taxes and inflation will have on their spendable income!This chapter features screen shots of several Truth Concepts calculators demonstrating how people will be impacted by inflation, the difference between actual and average returns, and more.
  6. Understand the Reality of Retirement Plans. In this chapter, the Qualified Plan calculator gets a workout! As one of our first reviewers commented,

The 401(k) illustrations are a real eye-opener and make you realize how many hands are in what we think is ours.”

Qualified-Plan-calculator-BRL
Chapter 6 also gives a review of Kim’s 7 Principles of Prosperity and the CLUE concept, both which lead the reader to realize they have other investment options than just 401(k)s and IRAs.

  1. Live and Share with Passion. Whether you work, volunteer, or “retire,” focus your life on the things that make it meaningful!

I’m so fortunate to have such a talented wife who shares MY passion for telling the “whole truth” about money! And even if I wasn’t married to Kim, I’d be so proud to have my work featured in such a compelling and inspiring book.

If you’re one of our subscribers, you’ve probably received a notice to download this book at no cost on one of its Kindle free promotion days. And if you’d like to be on our list to receive occasional special announcements, new posts, Truth Concepts tips (and free books!), just enter your best email here.  

Help us Bust the Retirement Lies! 

We appreciate your sharing the book with others, and we believe it will motivate your clients to think more creatively, to save more, to consider why they shouldn’t have all of their eggs in the 401(k) basket, and to live full, prosperous, meaningful lives.

Busting the Retirement Lies is available now on Amazon in paperback and as a Kindle ebook.

 

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The Whole Truth on Equity Indexed Universal Life Part II

The Whole Truth about EIUL Part II

By Todd Langford

 

Go here for Part One of this blog post: https://truthconcepts.com/the-top-10-reasons-not-to-buy-equity-indexed-universal-life

One of the major problems with the agents and the companies that sell EIUL (Equity Indexed Universal Life, which is what it was originally called) or IUL (Indexed Universal Life, which is what the industry is now calling it to avoid SEC scrutiny) is the gross negligence in conveying the risks to the clients. All one has to do is carefully read the full insurance illustration or proposal to find these out.

The insurance companies have avoided liability by spelling out the risks in very specific, albeit, confusing and overwhelmingly lengthy language in the 20+ page illustrations. The only conclusion I’ve been able to make as to why these are so lengthy is in hopes no none actually reads them. Even those that do read them will find them hard to understand. Consequently, clients rely on the agents who either A) don’t understand it themselves or B) don’t convey the risks fully to their own clients or prospects.

GROSS RETURNS

Before we begin re-addressing the 10 points, something critical needs to be pointed out about the “earnings assumptions” in the EIUL proposal. Most of the EIUL companies use a 30 to 40 year look-back period to determine an average rate going forward. Pacific Life, the company used by the agent in this discussion, uses a 40 year look-back. That means they are including the highly positive returns in the 80’s and 90’s which skew the averages upward.

We also need to remember what “average” means when we speak of market returns.  I know of one mutual company currently illustrating whole life dividends under 7% that could illustrate over 9% if they were allowed to look back 40 years on their own actual dividend paying history as well.

The only “proof” that the EIUL contract works is based on flawed assumptions. The argument that the EIUL illustration performs better than a whole life illustration is not a solid argument because the EIUL is based on the fantasy of the average of the last 40 years in the stock market with out any down years occurring. Whole life illustrations are based on current dividends continuing without any improvement at all. Ask yourself why the EIUL illustrations don’t project current investment rates? And further more why can an agent plug in any investment rate (below a certain threshold) they want on the illustration?

While we are on the subject of returns, another gross misrepresentation of the facts exists around the guaranteed minimum investment returns. Typically, the information conveyed to the client is misleading. For example: if a 2% minimum guarantee is listed, it is spoken of as if this would be a minimum amount of growth the policy would earn per year. That is absolutely untrue. The 2% is the minimum GROSS earnings attributed to the policy but mortality charges and administration costs usually exceed that 2% resulting in a loss of cash value. Yet in the clients’ mind he gets an increase in cash value of at least 2% every year.
Now we have a brief understanding of the differences in how the illustrations GROSS returns are calculated. Yet we have not addressed the fact that the costs inside the EIUL can change drastically at the discretion of the insurance company. So even if the index ran forward at the last 40 year average rate without any fluctuation, it still doesn’t mean the internal costs would stay the same.

MORTALITY CHARGES AND ADMINISTRATIVE EXPENSES

The numbers on the EIUL illustration are not guaranteed in any way. In fact, in 2012, several EIUL companies reduced their caps (the maximum interest rate they’ll contribute to the cash value growth) by more than a full percent. And they did not ask their policy holders if that was acceptable to them before the insurance companies made the change. According to my knowledge, the insurance companies’ software doesn’t even have the ability to illustrate what would happen if the market fluctuated.

What is really unknown in this environment is how devastating the losses might be since they cannot be illustrated. Again, the illustration of an EIUL policy might look good but only a whole life illustration is based on actual current earnings AND guaranteed expenses versus the EIUL which is based on hypothetical returns which look better than current stock market returns and ESTIMATED not maximum, expenses.

Costs exist inside any life insurance policy. The challenge is in understanding these costs and whether they are guaranteed or not. Mortality charges are one piece. In EIUL, they may have a guaranteed maximum, but it is not usually illustrated. Additionally, administrative expenses exist but as with all companies will fluctuate.

The argument from the EIUL agents about the illustration looking better than a whole life illustration starts on faulty ground. EIUL should look a lot better because the whole life illustration is based on the actual current economic conditions which are some of the lowest that have been illustrated in years. EIUL is ignoring these current poor conditions and instead focusing on what the stock market did the last 30-40 years without the reality of the down years which accompanied them.

TOP TEN REASONS NOT TO BUY EIUL

(see original post and 10 points here.)

To address the specific EIUL agent rebuttals which are typed below in italics, I provide the following:

#10- Internal cost have similar guarantees to the whole life design without
dividends. IUL policies have mortality and minimum interest guarantees in
the contract.

This is a prime example of basic facts being conveyed in a misleading manner. There are guarantees in some EIUL contracts, but they are rarely illustrated on the proposal or policy illustration. A whole life illustration is based on the guaranteed (maximum) mortality charges where as an EIUL illustration is based on current mortality charges which are less than the guaranteed charges that the policy might actually experience. Additionally, a whole life illustration shows guaranteed NET cash value which is a dollar figure, not an interest rate. A guaranteed gross interest rate means nothing when mortality charges and administrative expenses aren’t guaranteed. This is a major difference and “similar” doesn’t mean “the same”.

#9- Mortality charges are guaranteed, however the insurance company uses
their current experience rates if they are more favorable to the
policyholder. Similar to how a whole life policy will pass back to the
policyholder any improvement in pricing through the dividend which is not
guaranteed.

The comment in #9 above proves my points made in #10. The word “similar” is used again, yet only exact opposites are stated in the argument in italics. Whole life illustrations are based on maximum guaranteed mortality charges with a credit back if mortality experience is better. EIUL illustrates ideal mortality charges and then takes cash value away if experience is worse. The insurance company will use current mortality charges IF these charges can support the policy AS WELL AS the company’s profitability target. Many times agents dismiss the maximum mortality charges as “not likely” since people are living longer and yet those maximum charges do occur, most often late in someone’s life when there is nothing they can do about it except drop the insurance. Exactly opposite of what should happen, insurance kept until death.

#8- Market drops don’t cause double pain. If the client is fully invested in
the index, the worst that can happen to his account in a negative year is to
stay flat, it doesn’t participate in the loss.

This comment proves my concern stated at the beginning of this article. Agents convey an idea to clients with a statement such as “you don’t participate in the loss” which is completely misleading. The earnings rate may not be negative because of a stated guaranteed floor of 0-2%, yet costs and expenses will cause the cash value to be reduced so there is a loss. Here words put forth by the agent imply that the cash value cannot go down, and yet it can even though the policy didn’t “participate in the loss”.

#7- Late premiums don’t kill guarantees. Some UL policies are designed for
minimally funded death benefit policies. In those type of policies your
premium can impact your guarantees, however in a Maximum Funded IUL policy
there is no impact to the underlying guarantees based on the timing of your
premium.

Most guaranteed UL policies have penalties for late premiums regardless of whether they receive minimum or maximum payments. Please check with your carrier to see how they handle late premium payments.

#6- Dividends from the underlying stocks don’t get credited, because the
insurance company is not investing in stocks. They are taking the annual
interest the policy would have earned in the general account and they are
using that interest income to purchase a “put and call” option on a
particular index. (ex. S&P 500). They are purchasing the put on the growth
of the index over a specific time period. This is not a negative.

Puts and calls are all expenses that lower cash value. Insurance companies have to use the additional put and call strategy to protect themselves from large stock market swings. Ask yourself why the insurance companies don’t use this strategy with their entire portfolio?

#5- Participation ratios on IUL are at 100%.

Each insurance company sets its own caps and its own participation ratio and can change them at will without checking with the policy holders.

#4- Returns are capped on IUL contracts based on what the insurance company
can purchase at any given time in the market. In the high quality Mutual
companies that offer the product, their caps range from 12% to 14%.

Each insurance company sets its own caps and can change them at will. As mentioned earlier, many companies lowered their caps in 2012. Ask your carrier what their minimum guaranteed cap is? Again, this is the minimum they would contribute to your policy cash value growth. We’ve seen them as low as 4%. Again, they may illustrate higher caps in a lower market, since there is less risk of having to actually pay it.

#3- Guarantees are calculated annually if the client invests in a one year
index. If they invest in a 2 year index, then they true up at the end of the
second year when the index comes due. In Todd’s example, he illustrates that
in year 2 and 4 the account earns a negative return. In actual practice the
account would have earned a 0% return in those years because it does not
participate in the negative numbers. There is NO negative compounding taking
place!

Remember a gross return of 0% still means negative cash value after mortality charges and administration costs are taken into consideration.

#2- Just like with a Whole Life policy all the numbers after the first
payment has been made are changed by the insurance companies actual
experience. This is not a negative if you are with a well run Mutual
Insurance Company.

With whole life because the guaranteed mortality charges are illustrated at maximum, changes in mortality expenses made annually can only reflect an increase in cash value, whereas in EIUL changes in mortality expenses made annually could cause a decrease in cash value. Again, there are many aspects the insurance company can change inside EIUL, cap rate, mortality charges, expenses, etc.

#1– The risk is not shifted to the insured, the insured is given a few more
options as to how he would like the company to credit growth to his account.
Any year the insured feels there is to much uncertainty in the market, he
can tell the insurance company to put his account in their general account
and he will know that he will earn their stated rate that year. It doesn’t
have to be all or nothing. He can actually do a blend that makes sense for
him.

Ask yourself why your death benefit isn’t guaranteed to be paid from an EIUL policy? Doesn’t that put the risk on the client’s side rather than the insurance company’s side? In whole life, there is a guaranteed death benefit that will be paid as long as premiums are paid. In EIUL, you could pay premiums and still lose your death benefit. With whole life, there is a guaranteed cash value account, which is the responsibility of the insurance company. With EIUL, there may be a guaranteed minimum GROSS earnings rate, but it means nothing if the mortality expenses and administrative costs are more than the earnings.

One of the ridiculous statements EIUL proponents make is how similar EIUL is to whole life, when in fact, they are complete opposites. If someone wants to buy, EIUL, then help them buy it with full disclosure so they completely understand it. To imply that EIUL is similar to whole life is false. If you want something like whole life, then buy whole life with all of its guarantees.

Do remember, the insurance companies do state each of these pieces of information in the full disclosures contained inside the illustrations. All one has to do is carefully read them (even though it is a major chore) to see that what I have spelled out is the whole truth. Again, I state: either agents don’t fully understand it themselves, or agents don’t fully convey the risks to their clients which leaves clients confused.

Comparing illustration to illustration is not comparing apples to apples. It is easy to make the EIUL illustration look good, the question is, will it look good for your whole life? Since there is no way to accurately illustrate the potential changes, we really don’t know. However, don’t take my word for it. Please read the illustration to get the whole truth and while reading, remember what the illustrations’ numbers are based on: a guess about the future, based upon the AVERAGE (not actual) historical returns over the last 30-40 years.

Todd Langford
January 4, 2013
Mt. Enterprise, Texas

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