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A Call to Arms!

As a cadet at West Point, I had to take a course in military history. It actually would have been a much better course had I not been totally overwhelmed with how to pass thermodynamics, electrical engineering and chemistry at the same time. It is hard to appreciate the beauty of the Sea when the boat is sinking!

The same can be said of the life insurance industry. On one hand the economy may be in a depression as a result of the COVID-19 pandemic and the ship is sinking. On the other hand, the Rich get Richer and look for new ways to preserve wealth from the erosion of taxation and you, the financial advisor and life insurance , are holding a life preserver.

The question on tax increases is not an "if" question but a "when" question. Life insurance agents already hold the key to the best tax structure - permanent life insurance. Permanent life insurance provides for the tax-free inside buildup of the cash value, tax-free withdrawals and loans during lifetime, an income tax-free death benefit and estate and generation skipping tax-free death benefit.

Life insurers have made it easier than ever to buy life insurance with non-medical limits increased to $4-6 million per insured. That means that a client can buy large amounts of life insurance without a medical exam or blood test based on medical history.

Private placement life insurance (PPLI) is an institutionally priced variable universal life insurance policy with customized investment options. With proper planning, a client can transfer or sell a low basis and tax efficient asset within a PPLI policy in order to utilize the tax advantages of life insurance. The problem heretofore has been the absence of a meaningful first year commission for the financial advisor.

The structure of the PPLI industry - domestic and offshore - has eliminated the agent compensation problem. The PPLI transaction now provides for traditional compensation on what is a large transaction. Additionally, the agent can participate without running afoul of the broker-dealer obstacles of a selling agreement and selling away from the broker dealer.

This is A Call to Arms! Every financial advisor has one or more clients that can benefit from this strategy. Every advisor has a prospect or two that they can approach for what would be a career sale. Everybody wins in this game - the client, the agent, and the life insurer.

Feel free to ask us how all of this can work for you as a financial advisor.


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