Blog #143: Premium Financing Opportunities In The Small Case Market

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Bob Ritter's blog #143 premium-financing-opportunities-in-the-small-case-market

In Blog #139: Finding Clients For Large Case Premium Financing… Just Got Easier, we offered suggestions and resources on how to find and close wealthy clients that qualify for these cases.  Typically, clients must have a net worth of at least $5 million as well as substantial liquidity.  And, make no mistake; if you’re not going after this market, you’re really missing out on an incredible opportunity.  Go back and read Blog #139 to see how we can help you get into this market now!

That said, there are millions of individuals and businesses that could benefit from a premium financed contract; yet, they do not meet the minimum net worth and liquidity requirements.  Generally, this would include individuals with net worth in the $500,000 to $5 million range as well as companies that want to use premium financing as a discriminatory, fringe benefit for a group of senior executives.

To address this market, Northstar Brokerage has introduced their new small case platform.  As you recall, Northstar is the same premium finance organization that brought you the “No Split Platform” where on the traditional premium finance cases, they can help with the case design and arrange financing without taking a split of your commission. 1

Now, Northstar’s small case platform is somewhat different than their regular premium finance program.  For example, they do require a split on the case of 15%.  And, there are some other special rules.  That said, it could give you a very powerful tool for individual and corporate clients that are comfortable using leverage on their policies.

Scheduled Webinar

For more details about this program, there will be LIVE one-hour Webinar on Wednesday, September 14th at 11 AM (Eastern).  This Webinar is entitled “Premium Financing For The Small Case Market”, and it’s FREE.  Simply click here to register.  You’ll receive all of the following details:

  • How to offer premium financing to individuals with net worth substantially below $5 million
  • How to offer groups of executives premium financed contracts as part of their incentive based, non-qualified compensation plans
  • What requirements you will have with this new small case platform
  • How small case premium financing differs from the traditional market
  • The best way to prospect for clients who would benefit from the small case program
  • Up to the minute updates on which carriers and lenders will be participating in this new program

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1 Note:  The Zero Split Platform is not available with cases submitted to Allianz.  With these cases, a 10% split of the case is required.

More About Kim Coulter

Ken Buckley imageKim Coulter grew up in Lubbock, Texas… is a former College Golfer and very proud Texas Tech Alum.  He began his career just over 35 years ago in the Life Insurance and Financial Services industries with The Equitable in Lubbock, Texas.  During his career Kim has earned the Top National Achievement Awards from multiple insurance companies by offering Advanced Market Solutions and Product Expertise to Individuals & Business Owners.  In 1987 he accepted a Management position with one of the Top E.F. Hutton Life offices nationally in Dallas, Texas where he began assisting Advisors all over America in Advanced Markets and specifically Premium Finance. In 1997 he founded Northstar Brokerage where today he serves as President and C.E.O… which has become one of the nation’s foremost authorities on Premium Finance.

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Licensing InsMark Systems

To license any of the InsMark software products, visit our Product Center online at or contact Julie Nayeri at Julien@insmark.com or 888-InsMark (467-6275).  Institutional inquiries should be directed to David Grant, Senior Vice President - Sales, at dag@insmark.com or (925) 543-0513.

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created the Referral Resources listed below to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice.  All are IMOs and InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software.  They will utilize your choice of insurance company, and they do not require a commission split.

Mention my name when you talk to our Referral Resources as they have promised to take special care of my readers.  My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

Save time and get results with any InsMark illustration!

Testimonials

“Thanks to InsMark, we recently set business goals in our firm that I basically thought were ridiculously unachievable - until now.”
Brian Langford, InsMark Platinum Power Producer®, Plano, TX

“InsMark is the Picasso of the financial services world - their marketing savvy never fails to amaze me.”
Doug Peete, Past President, Top of the Table, InsMark Silver Power Producer®, Overland Park, KS

“I really thought I knew all the sales techniques that affect my business, but I do now, thanks to InsMark.”
Sam Keck, MBA, CLU, CFP, LUTCF, InsMark Platinum Power Producer®, Financial Planner, Denver, CO

“InsMark is an absolutely mind blowing experience.”
Larry Gustafson, InsMark Platinum Power Producer®, Denver, CO

 

Important Note:  The information in this Blog is for educational purposes only.  In all cases, the approval of a client’s legal and tax advisers must be secured regarding the implementation or modification of any planning technique as well as the applicability and consequences of new cases, rulings, or legislation upon existing or impending plans.

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More Recent Blogs:

Blog #142: Increased Taxes Are Coming

Blog #141: Strategic Philanthropy

Blog #140: Zero Taxes for Social Security - InsMark Style

Blog #139: Finding Clients For Large Case Premium Financing… JUST GOT EASIER

Blog #138: The Quickest Way To Learn InsMark

 

3 Reasons Why It’s Profitable For You To Share These
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Professional Study Groups (i.e. “LinkedIn”)

 

Robert B. Ritter, Jr. Blog Archive

 

Blog #139: Finding Clients For Large Case Premium Financing… JUST GOT EASIER

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Getting Started with InsMark Training Video

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There’s really not much debate that the single most lucrative market for life insurance agents today is to sell large, premium financed life insurance policies to wealthy individuals.  Policies with death benefits from $10 million to $25 million are typical, and commissions can easily exceed $1 million.

Also, for those clients that have a certain financial and psychological profile (enough liquidity and a willingness to use leverage), the premium finance contract is an incredible tool that cannot be duplicated any other way… with any other financial product or instrument.

So, why aren’t more producers flourishing in this market?  Could it be that there are very few potential clients that are wealthy enough to afford this product?  The short answer is no.  There are more than 1 million U.S. households with a net worth of $8 million or more (as determined by the Federal Reserve’s “Survey of Consumer Finance” in 2013), and every one of these clients is a reasonably good prospect for premium financed life insurance.

So, maybe the problem is that most wealthy clients have already purchased these premium financed policies.  While we don’t have exact statistics on that, it’s pretty safe to assume that there are less than 500 deals completed each year.  Even if we go back 10 years, that’s still only a maximum of 5,000 policies sold (again out of a total pool of well over 1 million potential clients).

Instead, there are two main reasons why more life insurance producers are not selling these policies.  First, it’s hard to get access to wealthy clients on a credible basis.  Second, if you do get in front of these types of clients, there will be an army of advisors that will be either trying to kill your proposal or offer a different plan that suits their financial interests rather than yours. And, make no mistake.  These large case premium financed plans are complicated to explain, defend and service (and that just makes everything harder).

For the vast majority of producers (those that are not doing large case premium financing full-time), the solution to these two problems is to partner with someone that can share with you a proven lead generation system for these types of wealthy clients.  And, ideally, this partner would also be willing to present the concepts to these clients (and more importantly, to their skeptical, cranky, competitive advisors).  And, finally, this partner would also have years of experience in forging the proper case design as well as have the ability to introduce numerous clients and third party, advisory firms willing to provide testimony about their positive experience implementing the premium financed life insurance plan.

InsMark is proud to announce that Ken Buckley and his team at The Buckley Group are willing to be that partner for you.  It’s really very simple.  If you are already closing 3 or 4 of these large policies a year on your own, then you probably don’t need any help.  If you’re not, then you’re not in this market today, and you therefore have everything to gain from Buckley’s offer and nothing to lose.

Scheduled Webinar

For more details about this program, there will be a LIVE one-hour Webinar on Wednesday, July 13th at 11 AM (Eastern).  This Webinar is entitled “Finding Clients For Large Case Premium Financing… JUST GOT EASIER”, and it’s FREE.  Simply click here to register.  You’ll receive all of the following details:

  • How to approach other advisory firms in your area that have clients who desperately need large case premium finance life insurance policies;
  • Strategies for how to all but guarantee that these advisors will attend your online or in-person events;
  • Once these events are scheduled with your local advisors, how The Buckley Group will handle the event presentations and related materials;
  • Learn the best methods of following up with your advisors after the meetings to maximize the number of new client referrals;
  • Why working with The Buckley Group on these very specialized, large cases will result in far more commissions to you (with less work, less risk and less money spent) than doing all this alone.

We’re thrilled to offer Buckley’s program to you and believe it can be a major profit generator for you in the months and years to come.

More About Ken Buckley

Ken Buckley imageKen started The Buckley Group 34 years ago.  He is recognized as one of the top experts in the area of premium financed life insurance for the estate planning market and is a member of MDRT’s Top Of The Table.  In 2000, Ken decided to forgo all other aspects of his agency and focus exclusively on the premium financing market (typically working with CPAs, law firms and other advisory firms to help their clients reduce their net estate shrinkage to less than 5%).

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Licensing InsMark Systems

To license any of the InsMark software products, visit our Product Center online at or contact Julie Nayeri at Julien@insmark.com or 888-InsMark (467-6275).  Institutional inquiries should be directed to David Grant, Senior Vice President – Sales, at dag@insmark.com or (925) 543-0513.

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created the Referral Resources listed below to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice.  All are IMOs and InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software.  They will utilize your choice of insurance company, and they do not require a commission split.

Mention my name when you talk to our Referral Resources as they have promised to take special care of my readers.  My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

Save time and get results with any InsMark illustration!

Testimonials

“Thanks to InsMark, we recently set business goals in our firm that I basically thought were ridiculously unachievable – until now.”
Brian Langford, InsMark Platinum Power Producer®, Plano, TX

“InsMark has created without question the best suite of software for our industry that has ever existed.  I personally have been using their software for almost 30 years, and it changed my career.  This unique and user friendly software will add many thousands to your income for as long as you’re in business.  InsMark makes me look good, and it will you as well.”
Simon Singer, CFP®, CAP®, RFC®, Past President International Forum, InsMark Platinum Power Producer®, Encino, CA

“InsMark is the Picasso of the financial services world — their marketing savvy never fails to amaze me.”
Doug Peete, Past President, Top of the Table, InsMark Silver Power Producer®, Overland Park, KS

“I really thought I knew all the sales techniques that affect my business, but I do now, thanks to InsMark.”
Sam Keck, MBA, CLU, CFP, LUTCF, InsMark Platinum Power Producer®, Financial Planner, Denver, CO

“InsMark is an absolutely mind blowing experience.”
Larry Gustafson, InsMark Platinum Power Producer®, Denver, CO

 

Important Note:  The information in this Blog is for educational purposes only.  In all cases, the approval of a client’s legal and tax advisers must be secured regarding the implementation or modification of any planning technique as well as the applicability and consequences of new cases, rulings, or legislation upon existing or impending plans.

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More Recent Blogs:

Blog #138: The Quickest Way To Learn InsMark

Blog #137: More On “The Best Policy for My Client”

Blog #136: Taking Care of a Rainmaker

Blog #135: Merging College and Retirement Planning

Blog #134: Best Strategy for an IRA (Part 2 of 2)

 

3 Reasons Why It’s Profitable For You To Share These
Blog Posts With Your Business Associates and
Professional Study Groups (i.e. “LinkedIn”)

 

Robert B. Ritter, Jr. Blog Archive

 

Blog #128: Leveraged Executive Bonus Plan with
Bank-Funding of the Income Tax (Part 2 of 3)

(Updated March 7, 2016)

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(Presentations in this blog were created using the InsMark Illustration System.)

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Editor’s Note:  Blog #128 (Part 2) may be easier to follow if you take the time to review Blog #127 ( Part 1) assuming you haven’t already done so.

Continuing our study of the Leveraged Executive Bonus Plan for Alex Demas as described in Blog #127, let’s next examine a feature that can be added to it that could guarantee Alex’s continuing employment for at least the next 10 years.

In Blog #127 we discussed that Hawthorne Construction, Inc., decided that part of a new benefit plan for Alex will include a Leveraged Executive Bonus Plan funded with $2,875,000 of indexed universal life (IUL).  The policy is max-funded with five level premiums of $100,000 paid for with deductible bonuses by the company paid to Alex.  Alex will offset the resulting income tax liability on each bonus by way of a bank loan secured against the IUL.

This is an impressive executive benefit!  No out-of-pocket cost for Alex coupled with $4.8 million in after tax retirement cash flow, all provided by Hawthorne Construction for an after tax cost of $65,000 a year for five years.

Click here to review Alex’s Leveraged Executive Bonus Plan from the InsMark Premium Financing System.  (Pages 8 and 9 show the Summary numbers.)  We used the Income Tax Financing module in the InsMark Premium Financing System to prepare the illustration.

Controlled Executive Bonus

If a Controlled Executive Bonus feature is added to Alex’s benefit plan, it means he would be required to repay all (or, perhaps, only part of) the bonuses if he were to voluntarily terminate employment within a certain number of years.  It could also be based on a certain event like reaching retirement or achieving a specific company goal.

With this feature, Hawthorne Construction can select a certain percentage payback of the bonus (e.g., 100% in all 10 years) or schedule a variable percentage payback, e.g., 100% during year 1, declining by 10% a year over the next 9 years.

Below is an example of a Controlled Bonus repayment schedule for Alex using “voluntary termination prior to 11 years” as the duration in which a 100% repayment is required.  Please understand that Column (3) is an example of only one of many possible repayment schedules.

Possible Repayment Schedule

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**Negatives in Column (6) are in excess of policy cash values.  The financial gain in Alex’s favor between the 10th and 11th year is in excess of $500,000 ($212,270 + $305,472), a powerful incentive to remain employed.

The typical Controlled Bonus Plan agreement provides that the repayment obligation is waived at the executive’s death if it occurs during years of a repayment obligation.

The repayment obligation could be extended longer than 10 years — perhaps until retirement.  Instead of that, I suggest it would be much more productive for Hawthorne Construction to launch a similar plan for Alex when he is age 50 assuming the firm remains anxious to retain him.

Click here for a review of the details of the bonus repayment feature from the InsMark Illustration System.

Note:  The Controlled Executive Bonus repayment feature is not currently available in the Income Tax Financing module in the InsMark Premium Financing System.  It is available in the Executive Bonus Plan and Executive Security Plan modules in the InsMark Illustration System — and that is the source I used for the screen shot above and the link in the prior paragraph.  We will be adding this feature to the Income Tax Financing module in the InsMark Premium Financing System in the near future.

Suppose Alex elects not to participate.  In this case, the company will have discovered that he may be considering alternative employment and is not interested in a benefit plan with such a short-term contingent liability.  Clearly, Alex’s decision not to participate would uncover valuable business information that might otherwise be difficult to determine, and this could allow the firm to plan accordingly.

Alternative Benefit Plans

In many ways, a Controlled Bonus is superior to loan-based split dollar and salary continuation (COLI) plans:

blog-128-img-3-Alternative-Benefit-Plans-Table-Controlled-Bonus-is-superior-to-loan-based-split-dollar

1 to employer   2 to executive   3to executive’s family   4 typically at retirement

Since the loss of equity split dollar in 2003, Executive Bonus Plans have become one of the premier go-to executive fringe benefits.  Using a bank to finance the executive’s income tax on bonus plans takes them to a new and better level.  Adding the Controlled Bonus features adds a new dimension to retention of important non-owner executives and minority shareholders.

Sarbanes-Oxley eliminates the use of Loan-Based Split Dollar for executives of public corporations; however, this does not apply to loans made by an executive where no corporate liability exists for the loan.  The Leveraged Executive Bonus Plan featured in this three-pronged Blog series should be usable by any private or public business entity.

Licensing InsMark Systems

To license the InsMark Illustration System, visit us online or contact Julie Nayeri at julien@insmark.com or 888-InsMark (467-6275).  Institutional inquiries should be directed to David Grant, Senior Vice President – Sales, at dag@insmark.com or (925) 543-0513.

 

InsMark’s Digital Workbook Files

If you would like some help creating customized versions of the presentations in this Blog for your clients, watch the video below on how to download and use InsMark’s Digital Workbook Files.

New Zip File Downloaders
Watch the video.

Digital Workbook Files For This Blog

Blog128.zip

Download all workbook files for all blogs

Experienced Zip File Downloaders Download the zip file, open it, and double click the Workbook file name to open it in your InsMark System.

Note:  If you are viewing this on a cell phone or tablet, the downloaded Workbook file won’t launch in your InsMark System.  Please forward the Workbook where you can launch it on your PC where your InsMark System(s) are installed.

 

After you open the workbook in your system, the prompts to use for the Controlled Bonus are on this section of the Plan Details tab shown below:

blog-128-img-2-the-prompts-for-the-controlled-bonus-are-in-the-plan-details-tab-insmark-illustration-system

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created the Referral Resources listed below to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice.  All are IMOs and InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software.  They will utilize your choice of insurance company, and they do not require a commission split.

Mention my name when you talk to our Referral Resources as they have promised to take special care of my readers.  My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

Save time and get results with any InsMark illustration!

Testimonials

“Standard bank financing illustrations produce much in the way of great data, but it takes the InsMark Premium Financing System to really present compelling numbers; however, the integration of that data into InsMark’s comparative modules like Various Financial Alternatives and Wealthy and Wise is really what makes premium financing sizzle.”
Chris Jacob, CFP, SFI-Cadeau, St. Louis, MO, InsMark Platinum Power Producer®

“As with all of the InsMark software, InsMark’s Premium Financing System has proven to be an indispensable addition to my ability to show my clients the advantages in using bank loans to solve their financial needs.  Because of this, I was able to close three large financed cases easier and faster than ever before.  As always, InsMark has delivered again.  I encourage all who use bank financing as a solution to their clients’ needs to purchase this system.  The cost of the system is not an expense, but rather an investment in your business.”
William Moates, Jr., Trilennium Financial Alliance LLC, Fort Smith, AR, InsMark Platinum Power Producer®

“InsMark has created without question the best suite of software for our industry that has ever existed.  I personally have been using their software for almost 30 years, and it changed my career.  This unique and user friendly software will add many thousands to your income for as long as you’re in business.  InsMark makes me look good, and it will you as well.”
Simon Singer, CFP®, CAP®, RFC®, International Forum Member, InsMark Platinum Power Producer®, Encino, CA

 

Important Note #1:  The hypothetical life insurance illustrations associated with this Blog assumes the nonguaranteed values shown continue in all years.  This is not likely, and actual results may be more or less favorable.  Actual illustrations are not valid unless accompanied by a basic illustration from the issuing life insurance company.

Important Note #2:  Many of you are rightly concerned about the potential tax bomb in life insurance that can accidentally be triggered by a careless policyowner.  Click here to read Blog #51: Avoiding the Tax Bomb in Life Insurance.

Important Note #3:  The information in this Blog is for educational purposes only.  In all cases, the approval of a client’s legal and tax advisers must be secured regarding the implementation or modification of any planning technique as well as the applicability and consequences of new cases, rulings, or legislation upon existing or impending plans.

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More Recent Blogs:

Blog #127: Leveraged Executive Bonus Plan with
Bank-Funding of the Income Tax (Part 1 of 3)

Blog #126: The Leverage of Bank-Funded Estate Liquidity

Blog #125: Web Supported Resources for You

Blog #124: More on the Siren Song of “Buy Term and Invest the Difference”

Blog #123: The Siren Song of “Buy Term and Invest the Difference”

 

3 Reasons Why It’s Profitable For You To Share These
Blog Posts With Your Business Associates and
Professional Study Groups (i.e. “LinkedIn”)

 

Robert B. Ritter, Jr. Blog Archive