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Inappropriate Whole Life Policy of the Week

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  • artemis
    replied
    I was both hoping and dreading an update to this thread.  $4k a MONTH in premiums?!  That's insane!

    At least you know from these emails that your message is getting through to a lot of people.  By warning naive people away from these policies and directing them to reputable fee-based financial advisors for their financial advice, you're doing the medical community a great service.

    Leave a comment:


  • Zaphod
    replied
    I know this is how it is, but dang these stories get me fired up.

    Leave a comment:


  • The White Coat Investor
    replied
    Here's another couple way behind on their retirement savings who were sold whole life policies on their children:
    By the way, I did further poking around, found your “Behind on Retirement” post, and especially took a look at the accounts we have been paying into for our (now) adult kids. Small cash value life insurance policies, and one ed IRA left for the last child in college still. ..And the life insurance policies for adult children seem to be inappropriate, so I am thinking of cashing those in as well

    Leave a comment:


  • The White Coat Investor
    replied
    From another reader:
    I'll give you 5 guesses to figure out which company our advisor worked
    with, but you'd only need one (Northwestern Mutual). This advisor had
    been working with a good friend & mentoring physician. That is how we
    became introduced. He got his hooks in me during MS4 year, and then
    when my spouse and I returned from residency (two doc couple)
    we both joined up. That misstep resulted in each of us being sold $2MM
    whole life policies, getting disability insurance with NM (he even
    convinced us to drop my spouse's policy with MassMutual from medical
    school/residency), and setting up Roth IRAs and 529 accounts through
    him that all had 5%+ front load fees and high ER funds. Of course, no
    other options were presented, and we assumed that this was how
    everyone operated.

    Unfortunately, the reader referred his mom to this "advisor" too:
    I was floored that she had a whole
    life policy. After digging around, I see that he sold my mom (newly
    widowed and with two grown, self-sufficient children) a whole life
    policy (100k), a 20 yr term life policy (100k), and long-term care
    insurance (all bought in 2007). Additionally, he had her open a VA in
    an Individual Retirement Annuity, two different investment accounts
    within living trusts and a Roth IRA. These retirement accounts have
    12-18 mutual funds being utilized in all of them. Every fund has a
    relatively high ER, and some look like they have back end penalties
    for withdrawal.

     

    Leave a comment:


  • The White Coat Investor
    replied
    From an advisor working with WCI readers:

     
    This is my third whole life quagmire in a month. One I am working on today has been paying $4K in monthly premiums in lieu of student loans and her company 403(b) with a match. Since it is a VUL we are considering filing a suitability charge to see if she can get some or all of her premiums back. These people would not even think to question their policies if they didn't read your blog.

    Leave a comment:


  • The White Coat Investor
    replied
    I haven't updated this in a little bit, but it's not for lack of material, just lack of time. Here's one from the forum today:
    I currently have an IUL with annual premiums of $12K. Current total premiums of $36K and a cash value of $29K. Stupid tax of $7K. Unfortunately I apparently did a 1035 exchange from a VL in the amount of $78K for a total premiums paid of $108K.

    Leave a comment:


  • Arkad
    replied
    I was no financial genius back when I started practice 20+ years ago but fortunately my senior partner gave me one piece of advice that he told me to never violate. He said never do whole life. I have probably made some mistakes over the years but I am glad I never made that one. Whenever I met with a financial person the meeting started with a warning that we would be done as soon as they brought the subject up. I couldn't believe how many still did but they were probably equally surprised when I would tell them the meeting was over when they did.

    Leave a comment:


  • The White Coat Investor
    replied





    Does everyone understand yet why this industry pisses me off so much? 
    Click to expand…


    Maybe write an article called “Whole Life: An Exit Strategy” similar to your Back Door Roth tutorial??  You could lay out steps people can follow to determine if they are indeed locked into a bad deal (probably they always are given the nature of these things but you could go through the calculations) and discuss options for correcting the situation.  One big unknown would be the lawsuit legal remedy which could be a lot of hassle but may be worth looking into.  I think part of this is the buyer’s remorse aspect–personally I could not live with myself knowing I had been suckered into a predatory deal and then allowing that to continue.  I think I would cancel it and take the loss just to be free of it.
    Click to expand...


    You mean like this one?

    https://www.whitecoatinvestor.com/how-to-dump-your-whole-life-policy/

    Leave a comment:


  • JoeCaponeCHFC
    replied
    raddoc6876, I am with you. I talk about this here and there. There are insurance agents running around the halls of every hospital, dental school, and medical school and nobody does anything about it. Residents purchase from these people because they are there and they seem "legit". Most claim to be independent when they are anything but independent. We moved 100% to the web a couple of years ago because of this.

    When we talk to people that are unwinding things they have done (purchased inappropriate whole life), we tell them to call the Program admins to tell them what happened. The programs need to know. Most of the people are running around the halls because people think they "seem nice" and nobody has asked them to leave. Maybe they also sponsor an event here and there.

    The internet and sites like this help to stop some of it but it will never go away unless the institutions institute rules like they have with medical device and drug reps. People will then get their insurance and financial products via the web where they stand a chance to "get a fair shake".

     

    Leave a comment:


  • RadDoc6876
    replied


    There are at least two companies (maybe more) that are contacting trainees through the residency/fellowship programs at this institution,
    Click to expand...




    I’ve never been one for industry-sponsored lectures at dinners relating to pharma/products/medical devices, and financial planning dinners feel like they are an extension of the same concept insofar as they are using food to get you to buy-in to using their product(s).
    Click to expand...


    Right--and why are we allowing these companies to identify names of residents/fellows so that they can conduct predatory marketing?  Is it permitted to disclose personal contact information for physicians are your institution?  Maybe alert your hospital ethics committee to this--granted it's not a patient issue but I agree it falls under the same heading as the (un)ethics of drug-company marketing and should be prohibited.

    Leave a comment:


  • RadDoc6876
    replied


    Does everyone understand yet why this industry pisses me off so much?
    Click to expand...


    Maybe write an article called "Whole Life: An Exit Strategy" similar to your Back Door Roth tutorial??  You could lay out steps people can follow to determine if they are indeed locked into a bad deal (probably they always are given the nature of these things but you could go through the calculations) and discuss options for correcting the situation.  One big unknown would be the lawsuit legal remedy which could be a lot of hassle but may be worth looking into.  I think part of this is the buyer's remorse aspect--personally I could not live with myself knowing I had been suckered into a predatory deal and then allowing that to continue.  I think I would cancel it and take the loss just to be free of it.

    Leave a comment:


  • The White Coat Investor
    replied
    This one came in by email from a doc actually trying to decide what to do with his UL policy. He'll listen to any advice you have.
    Here's my story- What should I do?

    In 1993 when I was starting private practice I was referred to a "financial guy" by some of my older colleagues.I needed Life and disability policies as well as investment advice. I was 33 years old, married with a mortgage and 3 small children.

    After several meetings, he enticed me into purchasing a Universal Life Policy for 2 million dollars from Pacific Life describing it as a retirement tool since I was maxing out my retirement.

    The discussion was that I would pay 20,000/year and eventually use it during retirement.


    After putting in about 150,000 over 10 years or so, my children were starting college and the investments which were in growth stocks had grown considerably., I stopped making payments.


    Over the last 10-15 years, the policy is in place and in fact has increased to 3 million dollars coverage.


    Despite the ongoing coverage and lack of any payment,It still has the same balance of about 150,000 dollars. The investment income still matches the policy withdrawals.


    I am now 61 and all the children are almost self sufficient. Should I reduce the coverage to allow it to last longer and leave some legacy to children and wife or take the money- ? tax implications, and run- perhaps buy a long term care policy

    Have no debt or mortgage but high overhead with a vacation home. Have 3 million in retirement despite sending 3 children to private college, 2 to medical school and one to DPT school with no loans.

    Look forward to recommendations.

    Annonymous MD

    Leave a comment:


  • JoeCaponeCHFC
    replied
    That stinks. Sounds like you tried.

    Well, some of these guys and gals walk around like they are CFA PhD financial gurus. They carry investment licenses and really just look to angle whole life. Hoping that they get themselves tripped up from selling variable annuities inappropriately just like they sell whole life.

    FINRA does care about VAs sales thankfully.

    I have found many reps on BrokerCheck that I know are whole life bleeders that have disclosures for VAs. You see settlements where some are forced to pay back 50k and more! Nuts.

    At least if people can see those disclosures they can maybe steer clear of these folks. Problem is there's just no way to know - unless people talk about their specific experiences on the web and they name names.

    Leave a comment:


  • JoeCaponeCHFC
    replied
    Always remember to check your agent's FINRA BrokerCheck page.

    https://brokercheck.finra.org/

    If the agent has investment licenses you might just find their profile on BrokerCheck and you might also find disclosures against the rep for inappropriately selling whole life insurance, annuities, and other products to clients. BrokerCheck is essentially a customer complaint service that allows people to have some recourse if something is done wrong.

    In medicine you guys have the state license board. For financial people there is FINRA.

    Such a shame that this post could probably feature 5 inappropriate WL sales per week and still have more that do not get listed. Nice job WhiteCoat!

    Buy term life and invest the difference.

    Leave a comment:


  • The White Coat Investor
    replied
    Here's another one:
    Do you have someone that you can recommend that I speak with about
    whether or not to cancel our whole life insurance policy? I was
    reluctant to purchase it when we did at the end of 2006, but my
    husband's family friend was selling it and my husband thought that it
    was a good way to diversify our investments.

    We are contributing almost $1800 a year total for two policies (a
    $100,00 policy for my husband and a $50,000 policy for me). The cash
    value currently for the two policies is $11,000. So if we cash out
    now, we are $7000 in the hole over the past 10 plus years which kills
    me. Continuing to pay into it, though, seems frustrating as well.

    Does everyone understand yet why this industry pisses me off so much? Agents and proponents come on here and talk about these optimized policies and their benefits, but when I run into docs, this is the crap they own and why. 10 years and a cumulative -30% or so return.

    Leave a comment:

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