Whole life insurance as an investment vehicle

In the fall of the year 2005 and when the real estate market was going crazy and all kinds of real estate investors were giving speeches and masquerading as advisors, I attended a local seminar about real estate investing.

I already had my rural land property/investment business model developed and most of my current advisors in place. A mortgage broker was speaking about loans for real estate.

These so called mortgage financial advisors were recommending people take interest only loans to fund their real estate purchases because the rates were low and it cash flows easily. There are many problems with this dumb advice.

Here are some:

• Debt at some point has to be paid back. Anybody who has done any investing and used debt with real estate, stocks, or a business knows this. Delaying indefinitely paying off a debt is foolish.
• Even if an interest only loan for any type of investment cash flows today, it might not tomorrow, next month, or next year. The investment might quit paying. For example:
• The tenant lost his/her job. The property flip did not work as the foundation crack was not discovered during the euphoria when the property was bought. Funds (from more debt) were needed to fix the crack when an engineer who looked at the property to buy it discovered it.

I recently started seeing a financial advisor at First Command I met through a mutual family friend. The advisor is obviously very knowledgeable about retirement and investing, but I can't help but think the funds they are suggesting I invest in are more for their profit than my well-being.

They suggested a couple of accounts through Fidelity Advisor that have large percentages to invest in (some of the percentage goes to the advisor). The funds have a good history, but I can't tell if it's a smart move for me or if they are just trying to profit. Additionally, the advisor suggested a whole-life insurance plan.

They explained how they profit from it (basically, the cash value goes to them the first 2 years), but it still seems like a good plan to me.

A recent series of encounters with a "financial planner" would be funny if it wasn't so predictable. I have a reasonably healthy amount of money in the care of the investment department of a regional bank. The new "financial planner" at the bank apparently noticed this money, and started to send me emails pitching me on---wait for it--single-premium life insurance. His idea was that I could use the money to "build a family legacy that will last for generations" Barf.

It would be funny if it wasn't so predictable. I had to meet with him about changing some investments within my SEP/IRA. In the meantime, he was helping me set up a Donor Advised Fund. This is a fairly labor-intensive process, with no immediate benefit to him or his bank, and he was taking care of every step of it for me. If the process of setting up the Donor Advised Fund had involved him wiping my backside, he would have done it with smile, while asking me whether I preferred Charmin or AngelSoft.

Two days ago, we met at my office. After we did the necessary stuff for my SEP/IRA, he turned to the life insurance pitch. I cut him off and said, "If this is about life insurance, I'm not doing it." At that point, he left my office. Yesterday morning, bright and early, I got a email from him giving the contact information of various people who I needed to talk with to finish setting up the Donor Advised Trust, along with his sincere best wishes that I could successfully complete the task on my own.

As long as he saw me as a live prospect for high-commission financial products with high internal costs, he was willing to wait on me hand and foot. Once the prospect of selling me life insurance was over, I was "dead to him." Again, it would be funny if it weren't so predictable. Something to keep in mind concerning the priorities of "financial planners." (Hint: It 's not you.)