Spilling the beans on the myth that financial advisors only sell whole life policies because they receive large commissions

One of the most commonly parroted myths is that financial advisors only sell whole life policies because they receive large commissions for doing so.

As I’ve often explained, when a Bank On Yourself Authorized Advisor helps design and implement a Bank On Yourself-type policy for a client, their commission is slashed by 50-70%.  (And, yes, that’s one reason most financial advisors won’t tell you about this, or will try to steer you to another more profitable product.)

But if you’ve been wondering exactly how much commission a Bank On Yourself Authorized Advisor makes on one of these policies, you needn’t wait any longer!

I just recorded a short Podcast spilling the beans on this.

You can learn the surprising truth by clicking on the play arrow below, or you can download the recording as an mp3 and listen to it on your own player or iPod now at:

Often, the accusation that agents and advisors only sell these policies for the high commissions comes from investment advisors and money managers who want you to invest in the stock market, instead.

When you listen to this Podcast, you’re going to be shocked to discover that the advisor who manages your money in the stock market is making at least ten times more than the Bank On Yourself advisor, if the same amount of money is contributed each year!

Maybe that’s the kind of thing Mark Twain had in mind when he said…

A lie can circle the globe in the time it takes truth to put on its shoes”

In this Podcast, I also touch on:

• Why the cash value in a Bank On Yourself-designed policy grows up to 40 times faster than the policies Suze Orman, Dave Ramsey and others talk about
• Why the death benefit in these policies keeps growing and the company does NOT “confiscate” your savings when you die (blasting yet another oft-repeated myth about this)

So check it out right now by downloading the recording or listening to it here:

Have you had enough of the roller-coaster stock market?

Today a lot of people were breathing a sigh of relief that the year-to-date loss in the Dow was just erased.

But the unpleasant reality is that the S&P 500 is STILL almost 11% BELOW where it was 12 years ago today.  And inflation during those 12 years has taken another 34.5% bite out of your nest-egg!

The housing market continues to worsen, consumer confidence dropped to a two-year low this week, and the Fed is now threatening to do more of the same thing that got us into this mess in the first place.

All of which means stocks are now as vulnerable as toy balloons in a room full of razor blades!

Meanwhile, hundreds of thousands of Americans are bypassing banks and Wall Street altogether, and growing their nest eggs by a guaranteed and predictable amount every single year using the Bank On Yourself method.

They haven’t lost a penny during the last 12 years.  In fact, they’ve never had a losing year for the past 160 years!

Nobody is going to twist your arm, and you won’t even be asked to buy anything at your first meeting with your Authorized Advisor.

But at least you’ll know whether Bank On Yourself makes sense for you and your family. So please request your free Analysis today.

The reality is that the typical mutual fund investor has actually been losing 1 percent per year over the last 20 years, after adjusting for inflation.”

The statistic comes from the respected research firm, Dalbar, Inc., in its 15th annual study of mutual fund investor behavior. The study measures the returns investors actually get, not the returns they wished they got.

According to Lou Harvey, the president of Dalbar, the study once again revealed that

“investor returns lag what performance reports and prospectuses would lead one to believe is achievable. While those returns are theoretically achievable, the reality is that investors are not rational, and make buy and sell decisions at the worst possible moments.”

Let me paint a picture of how this happens: Lets say you do what the author (who calls himself “David K.”) of the rather nasty blog comment suggests and buy “simple index funds” and hold them for twenty years.

Now, it should be noted that “David K.” did not suggest he had actually managed to follow his own recommendation, nor did he offer any brokerage account statements that show he had the wisdom and patience to hold onto an index fund for 20 years. (I, on the other hand, do show my own Bank On Yourself policy statements as proof.)

That’s not the point, but let’s say you did buy an index fund 20 years ago. When the dotcom stocks were flying high a decade ago, most investors jumped on that bandwagon. Index funds that tracked the overall market were no longer in fashion. Investors loaded up on tech stocks and mutual funds, ultimately suffering deep losses when the internet bubble burst.

Afraid of losing even more, many investors sold off their internet stocks. This is in spite of their “resolve” not to try to time the market. Many were also too scared to get back into the market, until they had already missed the big upswing, which wasn’t even in tech stocks.

Pamphlet from the Dutch tulipomania, printed in 1637

This is the kind of pattern human beings have followed for all of eternity

A few years ago, it was real estate. In the 1600′s in Europe, it was tulip bulbs, of all things.

Since the current bear market started, most of the otherwise intelligent people I know sold off their stocks and mutual funds. It has nothing to do with intelligence. We humans are motivated by fear and greed, which is why you will find very few people who actually did hold on for two decades to an index fund that tracks the overall market.

So, is it just us “regular” folks who do this?

Nope! 80% of all mutual funds underperform the overall market (source: The Motley Fool), and 80% of all investment advisory services underperform the overall market (source: The Hulbert Financial Digest).

So the scenario that David K. paints that could have given investors a 6% return over the last 20 years happened for only a small percentage of people.

If even most experts can’t do it successfully consistently, it’s not a science – it’s a crapshoot.

David K. also conveniently ignores the fees charged by mutual funds and the wealth-killing management fees you get charged in 401(k) plans, etc. (60 Minutes recently did an expose on this.)

The reality is that if you’re in a higher tax bracket, you’d need to get a 7-8% return before taxes to equal the net return you could get in a Bank On Yourself policy. (Under current tax law, you can take retirement income from a Bank On Yourself policy with little or no taxes due.)

And when you Bank On Yourself, you can do that with no luck, skill or guesswork required, and you can do it without the stress and the nail-biting ups and downs of stocks, real estate and other investments.

David K. insists “you simply are not going to get big returns without considerable risk.” Like most Americans, David has been brainwashed (especially by Wall Street) into believing we must accept risk and volatility to grow a sizable nest-egg.

It’s a lie!

To respond to David’s comment that if he were in Suze Orman’s shoes and had 25 million dollars, he “wouldn’t mess around with the stock market either” – this was in response to an earlier blog post where there was a link to the New York Times interview where Suze said she only invests 4% of her liquid assets in the stock market because “if I lose a million dollars, I don’t personally care.”

I will say again that I believe financial gurus like Suze, Dave Ramsey and others have some very good advice and have helped many people turn around their financial lives.

But I’ve got news for David K. – Suze Orman did not make her fortune by taking the risks in the stock market she urges the rest of us to take. She made her money through endorsements, TV appearances and book and other product sales.

Would you eat in a restaurant where the chef eats their own cooking and then throws it up?

If not, maybe you should think twice about following advice that the advice-giver can’t stomach themselves.

Stay tuned, because I will soon be revealing the details of a shocking new report on the long-term results people have been getting when they invest in the stock market.

One of my most influential mentors (Dan Kennedy) says,

If you don’t offend somebody by noon each day, you’re not doing much.”

So I want to thank Danny Snyder, whose post to this blog you’ll find below (exactly as he submitted it), for confirming that I am indeed doing something:

First of all using the words “money on steroids” immediatly puts you in the liar and non-trustworthy catagory. If you put in $5314.44 and your cash value is $2937.18 you need some ritilin, you are A.D.D. Dave Ramsey (who is in a catagory way above the likes of you and Suze Boreman) knows of what he speaks. Millions of people have changed their lives due to Dave’s advice. You need to tread very lighlty, if you want to succeed and prove yourself. Think… before you tear down people you do not know. I do actually Bank on Myself.

Your a scam!

Danny Snyder

On this website, I have stated that I agree with many of the basic principles taught by the financial “gurus” like Dave Ramsey and Suze Orman.  And I know they have helped turn around the financial lives of many.

However, there are two critical areas we differ on…

1.  That you must risk your money in the stock market to grow a substantial nest-egg

2.  That any kind of whole life insurance should be avoided

Dave and Suze (and many others) insist that investing in mutual funds is the road to wealth.  Suze insists in her latest book that “only stocks offer the potential for inflation-beating gains over the long term.”  However, research shows that’s actually the road to financial insecurity.

The reality is that the typical equity mutual fund investor managed a 3.83% annual return for the past 20 years, outpacing inflation by only about 1% per year!” ¹

Suze neglects to mention that investing this way also has the potential to dash your dreams of retirement and financial security, as so many Americans have discovered.  Suze wants you to do what she says, not what she herself does.  She has admitted to the New York Times (and elsewhere), that she only has 4 percent of her $25 million of liquid assets in the stock market, because, “If I lose a million dollars in the stock market, I don’t personally care.”

Dave and Suze – and most other “experts” – insist whole life is a horrible product.  But what fries me is that, when asked about Bank On Yourself-type policies, most of them typically dismiss it with some variation of, “Oh, that’s just another way for life insurance agents to try to put a sexy wrapper around something that’s a waste of your money,” without even taking the time to learn the facts.

Anyone who takes two minutes to look at the policy statement examples on my post challenging Dave and Suze to a debate will realize that Bank On Yourself policies are a totally different animal from the kind they know about.

I supposed it’s not really their fault that they don’t know how a Bank On Yourself policy works or how it’s different from the ones they know about.  Out of more than 1,500 life insurance companies, only a handful even offer a product that meets all the requirements and has all the features needed to maximize the power of the Bank On Yourself concept.

As a result, this type of specially-designed type of dividend-paying whole life policy isn’t even covered in the training programs advisors are required to take to get licensed.

Also, advisors who design and implement Bank On Yourself-type policies have their commission slashed by 50-70% to do so.  Many aren’t willing to do that.  Which is another reason most financial advisors won’t tell you about this, or will try to steer you to another more profitable product.

But don’t you think these experts should get the facts before pronouncing judgment?

Regarding Danny’s comment above that I need some “ritilin” if I paid $5,314 into one policy in the first year and only had $2,937 of cash value at the end of the year:  You missed the point.

I showed that statement to demonstrate that Dave, Suze, et al., are talking about a totally different policy from a Bank On Yourself plan.  They talk about whole life policies that have no cash value at all in the first few years.  But due to little-known riders that are added onto the policy, a Bank On Yourself policy has cash value in the first year (and even in the first month), and can have up to 40 times more cash value you can use, especially in the early years of the plan.

And, as I noted, no – you don’t get back every penny of premium in the first year, because there are no magic pills, folks.  There’s a cost for all the benefits, advantages and guarantees you get with a Bank On Yourself plan (including the fact that the company will pay out the full death benefit of the policy, even if the policy owner dies after making only one premium payment).

Think of it as a start-up phase.  It’s a one-time requirement that pays a lifetime of benefits.

And I wonder why Danny ignored the other (older) policy statement that shows how much one of my policies went up during the same period that the S&P 500 plunged by 40%?

All my principal and all my previous gains were locked in!

The plan grew by a guaranteed amount plus I received a dividend.  Just as has happened every year for more than 160 years.  More than 400,000 Americans already use Bank On Yourself for true financial peace of mind. And famous people including Walt Disney and J.C. Penney have used this method, too.

The fact of the matter is that if it weren’t for Bank On Yourself, we’d be in he same boat as most Americans, wondering if we’d ever be able to retire, and what we’d have to give up in order to do that.

As the philosopher Arthur Schopenhauer noted,

All truth goes through three stages:  It is ridiculed; then it is radically opposed; and only much later will it be accepted as self-evident.”

To find out how adding Bank On Yourself to your financial plan can help you reach your goals and dreams, and for a referral to a Bank On Yourself Authorized Advisor (a life insurance agent with advanced training in this concept) who knows how to structure your policy correctly and can show you how to use it to become your own source of financing for all your major purchases, while growing a nest-egg you can predict and count on, request your free Analysis today.

1. DALBAR’s 2011 Quantitative Analysis of Investor’s Behavior