Many of the financial advisors I speak with dislike life insurance. Not that they advise clients not to buy it. Adults with dependents need it. Every financial advisor knows that. Yet they don't like anything about the way the industry operates, specifically the high costs, lack of disclosure and use of policy illustrations that illustrate anything but the policy. Finally, these advisors argue: Life insurance is never an investment, yet it is frequently marketed as if it is. I agree with all of these points.

But a recent conversation with Richard M. Weber, MBA, CLU and founder of the Ethical Edge, an insurance consulting firm in Pleasant Hill, Calif., persuaded me that life insurance might be an asset class useful in portfolio design for some clients. Surely I've heard the argument before and ignored it. So why listen to Weber? Because he is one of a growing group of analysts and consultants willing to work hard to acquire a knowledge of insurance that he can sell for a fee, in his case, $350 an hour. As financial planners did some 20 years ago in their own industry, a handful of life insurance fiduciaries like Weber have broken the old formula of the insurance industry: insurer plus agent first, customer last.

First there was James H. Hunt, an actuary and former insurance commissioner of Vermont, who provided objective policy evaluations for consumers from Concord, N.H. I associated Hunt with the consumer first movement heralded by people like Ralph Nader. Then came Glenn Daily, a fee-only insurance consultant in New York, and Peter Katt, who was doing the same thing in Mattawan, Mich. To me, these contrarians never amounted to a market force. They helped as many customers as they could, but their ranks never seemed to grow. That has changed. Now I see them as a force the insurance industry must reckon with, just as the mutual fund industry was forced to deal with objective advice from Morningstar in the 1980s.

Weber is certainly no insurance apologist. He agrees costs are high and disclosure is low. He also agrees that insurance is not an investment. However, he does believe that life insurance can be an uncorrelated asset class. And if a client buys life insurance, it must be managed like any other asset class, he says.

He makes this point in his paper, "Life Insurance as an Asset Class: A Value Added Component of an Asset Allocation."  This lengthy document (106 pages) is worth reading, particularly for advisors who lack confidence in their understanding of life insurance but would like to educate themselves. Weber discusses the basic questions: How much life insurance do I need? What should it cost? What are the options? Why are policy illustrations of so little use? He concludes that if a client needs life insurance for 30 years or less, he should buy term. But if life insurance is a lifetime need, the client should buy permanent insurance, manage it and make it part of his investment portfolio.

Here is the case Weber makes for life insurance as an asset class:

The death benefit is paid on the event of the policyholder's death rather than because of a market event.

The living benefits, or cash value, take on the asset class attributes of the policy itself.

A permanent life policy offers unique characteristics that make it uncorrelated with nearly every other asset class: The proceeds are free of income tax, cash value builds up tax-deferred, proceeds can be shielded from creditors, the policyholder can draw on cash value, and the life insurance allows him to turn periodic premium payments into a capital sum.

Of course, the life insurance marketplace is more complicated than ever, with myriad products and new uses for them-to provide living benefits, for example. Weber makes some sense of this confusion. Assuming that a client has a lifetime need for insurance, Weber says the best values with the least market risk are the universal life with a no-lapse guarantee and participating whole life insurance. For clients with a limited budget for premiums and no need for living benefits, the universal life with a no-lapse guarantee is the best choice. Participating whole life best suits clients who need a death benefit that increases over time and who might also need substantial living benefits. Variable products provide considerable upside potential for cash value but require higher risk tolerance and more investment sophistication. Has an agent ever explained the differences so concisely? If so, did anyone believe him?

Those clients who hire investment managers typically hold large amounts of life insurance "funded with capital rather than budgeted income," Weber says. Choosing the correct investment to use for premium payment is an asset allocation decision.

Finally, he argues, permanent life insurance within a portfolio of equity and fixed investments can produce a return that is just as favorable, and with less risk, than the same portfolio without life insurance. And incorporating permanent life insurance into a client's portfolio can provide both greater legacy value and greater living value than a portfolio without life insurance.

Weber compares a portfolio with municipal bonds as part of the fixed-income portion to one where the income from the muni bonds is used to buy a life insurance policy. Weber assumes in these cases that the insurance is a lifetime need for the client, who is keeping it until he dies.

For example, Weber cites a 45-year-old in good health, in a high-income tax bracket and with an investment portfolio that contains $500,000 of municipal bonds as part of the fixed-income component. Weber assumes there is a 4% yield on the muni bonds, (I know we could quibble) which would produce non-taxable cash flow of $20,000. The investor could use that money to pay the premium on a permanent life policy rather than reinvest it in the bond portfolio. The all-bond portfolio would produce slightly more asset value than the "bond plus policy cash value" portfolio for the first 19 years. But then the latter portfolio moves ahead. And the bond-plus-death-benefit option, when compared with bonds only, is considerably greater in all years.

But why do I consider Weber's analysis noteworthy when the same argument has been made before? Because Weber doesn't load the deck. Life insurance agents have been trained to believe that the answer to all life's financial questions is to buy life insurance. Use it for college funding, retirement, buying a house, whatever. I've talked with too many people who have been tricked into buying a policy even though they didn't understand that they were buying insurance. I remember one retiree, the former chief financial officer of a large company, who contacted me when I was writing a column for The New York Times. The product he'd bought to help fund his grandchildren's education was called "The Money Tree," but it wasn't producing any money. We discovered it was life insurance, which he did not need, and which was not an appropriate vehicle for his goal.
Weber is an objective judge with a background in the insurance industry. He had reservations about how insurance was sold, so he moved over to the other side-to consulting, where he offered second opinions on insurance policies for family offices and served as an expert witness. He does not sell insurance. "We will not, cannot and won't sell insurance," Weber says. He says he won't even let an agent buy him a cup of coffee.

I think Weber's paper makes a contribution to what is becoming a small, but objective, discussion on the value of life insurance. The voices in this corner of the industry are growing in importance. In addition to Hunt and Katt and Daily, there is David Barkhausen, a consultant in Lake Bluff, Ill. And Scott Witt, in Milwaukee, a former pricing actuary who now works as a fee-only consultant, building custom policies for each client. And there are life insurance agents, too, who break the mold, people like Chuck Hinners in Middleton, Wis., and Brian Fechtel in Port Chester, N.Y., who believe that the customer comes first.

Of course, I don't pretend to know all the people in the industry who serve the client first rather than first serving themselves and their companies. Nor could I tell consumers where to find them any more than I could identify all the "honest" financial advisors. But the good news is that these voices are growing louder and more numerous. In the past, I held out little hope that the insurance industry, which I've covered for 30 years, would produce enough smart, courageous people who would go against the industry's model to develop a model for clients instead. The people who choose this path must be willing to sing for their supper rather than just sit back and collect commissions. Financial advisors have paved the way. Now the insurance industry is producing its own "expert witnesses," who tell the truth and work for the consumer. This is a movement I'd like to keep up with. New information is welcome.