HOWARD WIGHT S Financial Concepts Ideas That Will Help You Make A Difference Number 286 July 2007 Here s a quick overview of each page in this month s newsletter: What Is Your Market? Surgeons make more money than general practitioners. How focused are your marketing and prospecting efforts? (File: Technique Book; Overview/ MDRT Index; 3900.00) Zero Estate Tax Planning and Beyond. As your clients situations become increasingly sophisticated, are you taking the necessary steps to provide the services they will need into the foreseeable future? (File: Technique Book; Estate Planning/MDRT Index; 2500.00) How Do You Make Something Good Look Even Better? Compare it to something worse. Comparisons provide context. This applies to the next two pages in the newsletter. (File: Technique Book; Insurance Planning/ MDRT Index; 4400.00) Return-of-Premium Term Insurance. Return-of-premium term insurance is a simple concept which has gained in popularity over the past few years. Pay more and get your money back. If this appeals to you, check out the next illustration. (File: Technique Book; Insurance Planning/MDRT Index; 4400.00) Executive Bonus Plan Options. Here we compare 30-year term, return of premium term, and a blended policy. Which option do you prefer? (File: Technique Book; Executive Benefits/ MDRT Index; 4000.00) Financial Speed. This is an idea given me years ago by one of my great mentors, Jim Herrington. When you have to get to a destination in a short period of time, the risk is greatly increased. (File: Technique Book; Investment & Tax Planning/MDRT Index; 4000.00) The Planning You Do Now Here s some food for thought. You have the power to make a real difference in people s lives. Life is about helping others. It is not about you. (File: Technique Book; Overview/MDRT Index; 3900.00) 2007 Howard Wight Random Thoughts on Life. This page presents a collection of thoughts about life in general. (File Technique Book; Miscellaneous/MDRT Index; 5000.00) What s Inside the July 2007 Issue? What Is Your Market? Zero Estate Tax Planning and Beyond How Do You Make Something Good Look Even Better? Return-of-Premium Term Insurance Executive Bonus Plan Options Financial Speed The Planning You Do Now Random Thoughts on Life
What Is Your Market? It does not matter how good you are at what you do, if you don t do it very often. Unused knowledge is useless. Knowledge plus action is power. According to Australian business consultant Winston March, It s more important to be a good marketer of what you do than a good doer of what you do. In other words, marketing is more important than competence. It s sad but true. Why not combine great marketing with great expertise? The first step in marketing is deciding to whom you are going to market your products and services. My first manager told me to focus on business owners and affluent individuals. The key to effectiveness, Affluent Individuals Business Owners Professionals Executives and Managers Employees productivity, profitability, and performance is focus. Surgeons make more money than general practitioners. They are more focused. Business owners and affluent individuals have more problems, more issues, more opportunities, more concerns, and more options. They also have more money. One advisor told me his market is rich, old Lutherans. That s focus. What is your focus? What is your market? What is your area of expertise? Have you kept pace with your clients need for increasingly sophisticated planning? It s more important to be a good marketer of what you do than a good doer of what you do. Winston March
Zero Estate Tax Planning and Beyond What is your target market? Do you consistently want to work with people who are worth $10,000,000 to $100,000,000 or $1,000,000,000 or more? Or are you content to do what you have always done, which might include occasionally dabbling in planning for the super affluent? Have some of your best clients outgrown the scope of the services you provide? Why am I asking these questions? Because you owe it to yourself and your clients to decide to what extent you are going to be involved in this market. Don t be a dabbler. Decide to decide. What does that mean? Make a decision as to whether you are seriously going to make this your market or not. It s certainly not for everyone. In order to help you make that decision, I recently attended a three-day session in Salt Lake City conducted by Hank Whiffen and The Estate Advisory Group. I came away feeling that anyone contemplating working in this market should be aware of the leading-edge training, tools, and techniques they provide. The purpose of my writing this article is to recommend that you, the experienced professional planner, consider availing yourself of the training, software, and services provided by this group. Hank Whiffen has more than forty years of experience working with high net worth individuals. He is a life member of the Top of the Table. He combines the expertise of a surgeon with the bedside manner of someone who truly cares about his clients. Other organizations may provide excellent support, but they don t have Hank and the software that he has helped develop. Training and support provided by The Estate Advisory Group will help you to: Dramatically increase your number of high net worth clients Substantially increase fees for planning Increase insurance premiums and commissions Quickly differentiate yourself from the competition Avoid or win deal-killing confrontations with attorneys and accountants Identify objections and skillfully handle them with great answers Become the expert to whom attorneys and CPA s introduce their best clients Show your clients how to win the chess match with the IRS by utilizing the advanced planning tools and techniques Compare alternative tax strategies using proprietary software that will enable you to illustrate various what-if scenarios in a before and after format that will facilitate decision making Enable your clients to define, articulate, and achieve their personal, business, and philanthropic goals while minimizing the impact of income and estate taxes Show clients how they can pay zero estate taxes and do so while accomplishing an expanded array of family objectives What s the next step? Go to the website www.teag.com and sign up for an upcoming webinar or contact Hank Whiffen by calling 801-352-0883. I am totally convinced that involvement with The Estate Advisory Group will substantially enhance your ability to provide creative advice to the wealthiest individuals in the world. One sale will recapture your investment.
Q. How do you make something good look even better? A. Compare it to something worse.
Return-of-Premium Term Insurance Compared to 30-Year Term $1,000,000 (Age 35) Annual Premium Option A 30-Year Term $1,000 Option B Return-of-Premium Term $1,500 Total Premiums - 30 Years 30,000 45,000 Cash Value 0 45,000 Additional Outlay 15,000 Additional Cash Created 45,000 Annual Additional Premium 500 Rate of Return on Additional Premium 6.38% Tax-Free This shows that by paying an additional $500 per year, you can create additional cash value of $45,000. That is a 6.38% tax-free rate of return. This looks especially good until you realize that you re really only getting your money back.
Executive Bonus Plan Options $1,000,000 (Age 35) Summary at Age 65 Option A Option B Option C 30-Year Term Return-of-Premium Term Term/Cash Value Blend Annual Premium Paid by Corporation $1,000 $1,500 $5,000 Total Premiums Paid by Corporation (35 65) 30,000 45,000 150,000 Executive s Tax Cost at 35% 10,500 15,750 52,500 Cash Value at Age 65 0 45,000 337,301 Estate Value 0 0 1,000,000 Additional Annual Outlay* 3,500 Total Additional Outlay* 105,000 Additional Cash Value* 292,301 Cash Value, ROI on Additional Outlay* 5.98% Estate Value, ROI on Additional Outlay* 12.27% * Comparing Option C to Option B. These figures are based on current assumptions and are not guaranteed.
0% 3% 5% 7% 10% Financial Speed How Long Will it Take to Accumulate $1,000,000? Annual Rate of Return Annual Investment $10,000 $20,000 100 Years 47 Years 36 Years 30 Years 25 Years 50 Years 31 Years 25 Years 22 Years 18 Years These figures are purely hypothetical and are used to illustrate a concept. They are not intended to imply that any specific investment will perform in this manner. The driving distance between New York City and Washington D. C. is about 250 miles. If you could average 100 miles per hour, you could make the trip in 2½ hours. You would have to take incredible risks to do so. Averaging fifty miles per hour, you could make the trip in five hours. But is that realistic? Good planning would dictate that you give yourself plenty of time to make the trip safely. The sooner you start...the slower you can go. The later you start, the faster you will have to go, and the more risk you will have to take. It works the same way with investments. If you only give yourself a few years to reach your goal, you ll have to rely on consistently high rates of return, which is not realistic in today s unpredictable stock market. No one can predict the market with any degree of certainty. The bottom line is this: Invest as much as you can... as often as you can...starting as soon as you can. Diversify. Don t put all of your eggs in one basket. It takes a long time to accumulate $1,000,000. That s why it makes sense to have life insurance. Life insurance will enable you to maximize your retirement income and minimize the impact of income and estate taxes. Cash value life insurance provides an excellent cash cushion for you and your family to fall back on and should be an integral part of a diversified investment and insurance strategy. Life insurance helps protect against the loss of your most valuable asset...your potential earning power, which makes all of your other investments possible.
The planning you do now will have an impact on your family s financial future forever.
Random Thoughts on Life Most people spend more time planning their vacation than planning their family s financial future. What you believe works works. The client s belief in the integrity of our advice is our best possession. J.P. Morgan Life insurance is about doing the right thing. Life insurance can prevent a problem from becoming a tragedy. Small talk is the conduit through which strangers become acquaintances and acquaintances become friends. Kathleen Brehony Most people can resist virtually anything except temptation. What we like least about others is often a reflection of what we like least about ourselves. Don t talk unless you can improve on silence. Next to the dog, the wastebasket is man s best friend. B.C. Forbes While we may face unparalleled problems, we also face unprecedented possibilities. If life is a ball, why aren t we dancing? Are your goals really your own goals or are they someone else s goals for you? The ultimate master key to life, happiness, and success is to focus on first things first.
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