There are two financial institutions next to each other on main street of your home town. Each of the financial advisors have known you for some time and know you to be a person of sound character. They know you would do all in your power to fulfill the agreements you would make with them and so they are eager to business with you.
Conversation with first financial advisor:
Investor: I am now 25 years old and just starting out on my venture through life and I want to make sure my financial planning is built on a sound foundation. My goal is to have $1,000,000 of discretionary income when I reach age 65, and I would like your financial institution be the one to guide me. If I put $500 in your institution today will you guarantee that somewhere before I reach age 65 I will have my $1,000,000 goal?
Advisor: I would love to be able to guarantee that for you but I CAN’T.
Investor: Well, if I put $500 in my account each month and become disabled, will you complete the balance of my payments so I will still reach my goal?
Advisor: I would love to be able to do that but I CAN’T.
Investor: If I become unemployed and need to borrow from you, will you allow me to borrow against the cash reserves in my account knowing I am unemployed?
Advisor: I would love to do that but that would be a real stretch of our institution’s policy.
Investor: I know 40 years is a long time to guarantee anything but will you guarantee me a rate of return which will never go down?
Advisor: I would love to but I CAN’T.
Investor: What if your financial institution made returns that are greater than the amount guaranteed, will you share those with me?
Advisor: Since I CAN’T even guarantee any base amount, it is HIGHLY UNLIKELY.
Investor: You know if I am allowed sufficient time I will achieve my goal, but If I were to die within say 45 days of my making my initial deposit would you pay my deceased wife the $1,000,000 you know I would have accumulated if I had the time to do so?
Advisor: You know I would love to do that but I CAN’T.
Investor: Then what can you do for me to achieve my goal?
Advisor: We can provide you a place where every month we will charge you a fee for putting your money with us and may even need to charge you a service fee on those funds once you reach a certain amount. We will make sure you have access to any of our tellers who have access to your personal financial records who can look up your balances and refer you to a bank officer if you need any additional help. LOVE TO HAVE YOUR BUSINESS!!!
Conversation with second financial advisor:
Investor leaves the bank and walks down the street to the second financial institution. A little reluctant to ask about the advisor’s involvement, he begins.
I am now 25 years old and just starting out on my venture through life. I want to make sure my financial planning is built on a sound foundation. My goal is to have $1,000,000 of discretionary income when I reach age 65, and I would like your financial institution to guide me. If I put $500 in your institution today, will you guarantee that somewhere before age 65 I will have my $1,000,000 goal?
Advisor: ABSOLUTELY! For a 25-year-old male, financial projections indicate around $403 at 7% will accumulate to $1,000,000. So $500 would give you a buffer to cover the mortality charges and administrative charges by our institution. This $500 would be a level payment and would never have to be raised. Your discipline now will bear dividends later.
Investor: Well what if I put $500 in my account and become disabled, will you complete the balance of my payments so I will still reach my goal?
Advisor: ABSOLUTELY!! Our institution offers with our retirement plans a provision called waiver of premium which in the event you become disabled for six months or longer, the company will continue to pay for your policy as if you were paying for it. They guarantee by contract the guaranteed cash values in your policy will still be intact for you.
Investor: If I become unemployed and need to borrow against my account will you let me borrow against the cash reserves even though I am unemployed?
Advisor: ABSOLUTELY! In fact you may borrow against the cash reserves anytime for any reason once the account has been mature enough to start showing cash values. You may borrow up to 94% of those reserve. This is part of the financial institution’s settlement provisions guaranteed in the contract. Payment would not have to be paid back until death and then would be deducted from the death benefit provision.
Investor: I know 40 years is a long time to guarantee anything, but will you guarantee me a rate of return which will never go down?
Advisor: ABSOLUTELY! By written contract, you can see every year’s guaranteed cash value, so no guess work along the way.
Investor: What if your financial institution makes returns greater than those guaranteed? Will you share those with me?
Advisor: ABSOLUTELY!! This would be paid as excess earnings or dividends. These amounts will fluctuate with economic climate so are not guaranteed.
Investor: You know if I have sufficient time I would have completed my goal, but what if say within 45 days of making my initial deposit I were to die, would you complete my plan and provide my wife with $1,000,000 to complete my dream?
Advisor: ABSOLUTELY!! There would be a short period of time when we do our underwriting that a temporary coverage receipt would show a limited amount to be paid; but as soon as underwriting is completed, the full amount of your dream would be paid. Not only would we complete it, we would do so income tax free.
Investor: What else would you do for me in exchange for my deposit?
Advisor: We would provide a personal service agent assigned by the company to handle your account; legal disbursement of your funds outside of a will or public probate proceedings; a depository for your funds left to your beneficiary; and the full financial assets of the company to cover your deposits.
Two institutions. First advisor–your local banker. Second advisor–your local life insurance representative. You may want to check each of them out and see what is available for your financial planning and future.