[There is a hard truth for advisors of high-net-worth (HNW) family and business wealth that they have to face. True comprehensive wealth management in this space requires a very broad, encompassing set of strategic financial solutions to properly handle complex wealth issues. That may mean challenging attitudes or embedded biases that advisors may have about tools such as insurance and annuities. There is a vast territory here representing many levels and avenues of risk management and financial engineering tools. It should be acknowledged that deep inside this landscape there is a realm of products and applications that exist specifically for advanced planning and HNW solutions. A rethinking of this arena is also warranted because there have also been many evolutionary changes in product development, in structure, pricing, applications and especially in a better client and advisor experience of these tools.
Private placement life insurance (PPLI) is one such resident of the realm that has laser-focused benefits for complex HNW family wealth planning needs and offers the ability to allocate a much wider range of investments in a tax-efficient manner. To gain a better understanding of the unique place PPLI occupies in the financial planning process, we talked to Institute members Tommy Mayes, President, and Alan Jahde, co-founder and CEO of Investors Preferred Life Insurance Company (IPL)—a specialized insurance company providing bespoke solutions for sophisticated investors. This may be a particularly good time in the evolution of the financial services profession to re-examine specialized tools and approaches for HNW family wealth as lack of awareness or understanding have no place in standing in the way of targeted solutions.]
Bill Hortz: What are some of the unique flexibilities that PPLI offers advisors that can provide major competitive advantages and superior customer experiences?
Alan Jahde: PPLI is not an off-the-shelf packaged product with a limited, pre-selected menu of standard, traditional investments. While the design has to follow guidelines around what was filed with the state insurance commissioners, the vehicle itself is incredibly flexible allowing for individual case design and advisors can also manage the assets around specific client needs, goals and preferences. There are a lot of things that advisors can actively do to customize and personalize the solution – both the contract and investment account - around family and business wealth issues. It is this process, involved with the individualized case design, which positions the advisor as a specialized financial solutions provider versus a financial product salesman.
Tommy Mayes: Historically the primary challenge for PPLI with clients was the limited investment solution set. Today, through separate account investment management, not only can you design a policy to match the client’s needs, practically the entire investment universe is available for allocations. Moreover, as Alan alluded, advisors can be retained as the investment advisor for the assets assuming they meet IPL’s requirements as an advisor.
Hortz: What do you see as the best way to deploy PPLI into high net worth family wealth?
Jahde: The applications for HNW families are too numerous to elaborate here since PPLI can cover many different estate, charitable, investment and business needs. We should do another article just on the topic of how best to apply PPLI as a financial planning tool with case studies. But, suffice it to say that over my 30+ year trust and estate attorney experience, I have utilized the strategy in many ways to significantly enhance a family wealth management plan. Each case is designed to solve specific objectives for the client to improve their wealth planning profile. The key message here is the flexibility of the tool that allows for the strategy to be bespoke and always client specific.
Hortz: What kinds of questions or issues are involved at the beginning of this process? What initially happens when an advisor brings a case to your firm?
Mayes: We work with advisors by consulting on how to best structure each individual contract to the client’s particular needs and goals. We help review and determine issues such as ownership, design, pricing, funding flexibility: Who is the insured? Who gets the payout? Who owns it? Trust? Kids? Insured? Do you want to fund now or stretch out? Build in deposit rights so bulk of funding done when client sells their business in 5 years? We have a strong support process for advisors from how best to frame PPLI in their discussions with their clients to advanced product/case design for its best application to the family’s wealth management needs.
Hortz: Why has PPLI not been more broadly embraced by advisors?