Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:11] Speaker B: Welcome to wealth on Main street, where conversations about growing your wealth are fun and entertaining. Wealth isn't just about money. It's the skills and the knowledge that we develop to pass on to future generations. Tune in each week to to grow your mindset and your net worth at the same time.
Should I be concerned about this thing called universal life or an indexed universal life policy, also known as IULs? Well, our guest today has been featured in major media outlets like the Wall Street Journal and USA Today. Robert Rickard is a very experienced litigator. Currently he has a focus on these complex IUL and Universal Life cases, doing policy policy litigation with hundreds of clients that he's helped so far. We're going to talk about that. His expertise also covers medical malpractice, nursing home abuse, and investment fraud. He's a well sought after expert in these areas. He's a frequent speaker at many legal seminars and on things like investment losses and legal ethics. So we're very excited to have Robert with us today on the wealth on Main street podcast.
[00:01:20] Speaker A: Yeah, thanks for having me, Richard. I really appreciate it.
[00:01:23] Speaker B: Now we kind of got connected somewhat at random, I guess, more so that I was seeking out you in that an article came across my desk about a recent case that you had won in regards to an IUL settlement. And it was on, I believe it was the insurance journal or a publication of that nature. And I thought, wow, this is really fascinating. There's someone who's actively, you know, going after some of these, I'll call them poor sales practices and maybe we can dive into that a little bit. And I was just totally fascinated by the circumstance. And so I reached out to your law firm and lo and behold, we were able to get connected.
Tremendously excited to have you on a program today. Now, obviously being in Canada, our program does service though, folks, of course, south of the border where we're North American as far as who we like to help and we do have an American arm to our company as well. So the type of work that you're doing is very relevant to us and very relevant to our audience.
[00:02:18] Speaker A: Yeah, sure. Thanks for. And I appreciate you having me on. It seems like I'm talking about this more and more and more. I've been litigating IUL cases. I got my first one in 2018 and it's really sort of taken off over the last six years, you know, for a variety of reasons. I think so much of this was sold and I think there were so many pushes by various sales forces across the country starting really, in 2015 and 2016, that you're now seeing these products matriculate into where you've had premiums paid. And the policy designs that I see over and over is there's just a few years of premiums paid and then pretty soon policy loans sold as some concept of tax free retirement income. And of course, that's what ends up having customers call me that end up becoming clients, because none of these designs actually work in the real world and these policies just blow up. And you're right. I just, I tried a case, the first plaintiffs verdict I know about in an IUL case recently, in May of this year, May of 2024 in Idaho, where we got a $1.5 million verdict against Pacific Life Insurance Company and the. The agent or producer that sold that product.
[00:03:39] Speaker B: Yeah, it's really interesting. So how many of these cases since 2018 would you say you've tried or been involved in litigation on so far at this point?
[00:03:47] Speaker A: So, yeah, I've litigated just hundreds of them. I started these, you know, I'm, I've been a lawyer since 1997. It's always been complex litigation.
About 15 years ago, I started a securities practice where we represent retail investors who either get sold bad products or have a rogue advisor do something negligent. And along the way, I started getting involved a lot of Ponzi schemes when they blow up.
[00:04:17] Speaker B: Going after the Bernie Madoffs of the world who made off with all the money.
[00:04:20] Speaker A: Correct. And problem is, the person who's running the Bernie Madoff of that situation, by the time it blows up and they're caught, they're headed off to prison and most of the assets are gone. So we sort of had a focus on finding the helpers along the way. Maybe people who knew or should have known that they were promoting this scheme, but for the lure of commissions or easy money, they ignored it. So, you know, the accountants, the lawyers, CPAs, or even sometimes advisors or insurance agents. And that's how IUL dumped in my lap in 2018, a massive Ponzi scheme blew up called Future Income Payments.
And when I got involved, I realized that the Ponzi customers are being advised to park their money in this Ponzi scheme called fip. Fip. And over three, four, five years, they would deploy a tranche of that money into this thing called an Index Universal Life Policy.
And having been a complex securities litigator, sued all the major investment banks is the first time I'd run across one of these products.
And it took me an incredibly long Time to even understand how they work. I mean it is. And I still to this day with my experts, we, we talk about it. It's, it's, it's an insurance product, but it is one of the most just complex financial products any of us continue to run across to this day. And I'll tell you, having done it now for six years and depose dozens and dozens of agents and advisors, I haven't found one that understands how they actually work. We understand how they work because I've spent years breaking them down and cultivating experts. But most of these agents, I say they sell the illustration. They don't sell the product because they don't know how the product works or how it performs. And that's, that's where the trouble comes in.
[00:06:15] Speaker B: Well, and having deposed so many people, what would you say even from your perspective and your experience having done this so many times and, and with products from multiple insurance carriers, because every carrier is a little different. Every product has its own uniqueness. There's a lot of detail devils in the details and the fine print on these, I would imagine. What would you say about even the home office folks that work at the insurance companies and maybe you've had a chance to dispose of it. Are they individuals that even understand these products to a degree. Are you finding or is there still a lack of knowledge base even there sometimes at that level?
[00:06:51] Speaker A: Yeah, I mean there are some people, I think very high level inside the carriers that understand them. But I think for the most part it's the sales force that is the, is the problem here is, you know, each carrier through their portals, you know, provide sales guidelines and marketing guidelines and everything else and they really leave it on these agents around the country. But look at that and understand it. You know, they may give them a PowerPoint, they may give them a, a sales pitch, but that's really all it is. They're teaching them how to sell the product. They're not teaching them the underlying fundamentals behind these products, which are incredibly complex. I mean, you know, I come across the case I tried in Idaho. The, the agent sale of the Pacific Life product was the first Pacific Life IUL he'd ever sold. And he actually presented the illustration to my client, his customer at the time, before he'd even receive his final authorization to sell Pacific Life products. And I think inherently the problem is, as people in the industry know, the commission structures on these are huge. And of course on the back end, the carriers are making a lot of money. I think I saw some article recently like IUL is the second largest life insurance product being sold in America today and probably will become the number one in the next one or two years. Because these are really high fee, inexpensive products for carriers. They're huge commission products for agents. It just creates this recipe where there's a lot of appetite to sell, sell, sell, and not enough to look at suitability concerns and knowing your customer. And are these the right product for the person you're sitting across?
[00:08:48] Speaker B: It's so interesting you say that. And one, you know, a couple things that come up for me now, never having, you know, sold a universal life or variation of a universal life product. I, I've been in the industry a number of years. I'm not 16 years in the industry in Canada, of course, so we do have some differences there a little bit. But fundamentally, from all of my conversations with colleagues and, and breaking down the, the product from my vantage point, the things that I've learned consistently and heard from many other experts is really how these products primarily push the results and the onus onto the policy owner and they almost strip away all of the requirements for the insurance company to be on the hook, if that makes sense. Whereas in comparison to like a whole life product, a dividend paying, a participating whole life product, the insurance company's taking on fundamentally all the risk components and they're absorbing that and making guarantees versus an IUL saying, okay, hey, you want to go and do it yourself? Cool. We're going to unbundle all the pieces, we're going to open it up in a buffet menu, we're going to put it in a product and we're going to let you choose all your options. But the moment you choose it, the onus is on you for the rest of the time.
[00:10:05] Speaker A: Yeah, yeah, I mean, that, that, that's, and it's, it's fundamentally, it's incredibly difficult for.
Even so, you know, in the, in the finra world, we call it the concept of the sophisticated investor.
I mean, I, I represent some really, really high net worth people in my premium finance cases who are incredibly successful in their industries. They're incredibly sophisticated. But you know, you spend a couple hours with them walking through this IUL product and every time you, you show them something and then spend, you know, two hours explaining what a particular paragraph means, they still don't understand it because they are again, they're so incredibly and inherently complex.
You know, my favorite quote that I have from a deposition as I was getting into the weeds with one of the really big sellers in the AOL Marketplace, we were talking about how the crediting indexes work and where that money goes and how much goes into insurance companies general funds and how much is used for the, you know, sort of collared option strategies. I remember he looked at me and said, well, you're just way above my pay grade at this point. And I said, well, you know, you are the one that sold the product, so that's a problem.
And I, and I just see that over and over and over is again, it's the simplest thing in the world. But I really think the problem is a lot of these agents, you know, they sell the illustration and not the product. They believe, they believe the illustration is guaranteed and don't understand even though somewhere there it says non guaranteed.
I find that these guys that go to a seminar or sales conference and they learn about this product, they see the illustrations. You know, I've even seen marketing material that says how well this illustrates. They just, they, they're blinded by the commission structure and the fact too that you have big names on that illustration, right? PAC Life, Minnesota Life, Allianz, National Life, aig, the, the biggest insurance names in the world. And so a lot of times, like strictly my sophisticated client that I guess they say, look, a, this is a guy who I trusted, who I believed and he represented. This illustration is how this works. And I'm looking here at this name of this giant AAA rated insurance company, truly, what could go wrong? And now I learned, of course, that none of this math actually works in the real world. And now I'm way upside down and I've lost all my premium money that I've paid over the last five or six years. And I think sometimes too when I walk these agents through this at a deposition, usually it's the first time they've, they've even read the policy. I've taken depositions of agents who have not read the products they're selling, have never even sat down and read cover to cover an IOL product policy design or the policy. They get that illustration, you know, from their BGA or whoever and they push these things and they just hope they work.
[00:13:31] Speaker C: Certainly not a recipe for long term success or desired outcomes. And one of the things that comes up for us in our regulatory environment, given that, you know, we, Richard and I, you know, have ownership interest in a very large managing general agency that now operates in the United States as well, that the regulatory bodies are telling us that what they're presently doing is they're meeting with agents in a mystery shop type capacity and going through the process of being sold this type of product. And the evidence based data that they're gathering is suggesting that this is, for a lack of better description, a pandemic of misunderstanding the, the product, not solution selling it.
Not really developing a deep understanding of, of what the prospective policy owner is actually trying to achieve. Not clearly outlining and explaining what the risk characteristics are of a product like this. It's all sensationalized primarily here. Here are all the wonderful amazing outcomes and it's alarming to hear what these regulators are saying. And now some of these insurance carriers are bringing agents in to say, walk us through your process of how you're selling and placing this product and more importantly, what are you doing to provide ongoing service and have discussions around the actual performance of the product versus what was perhaps promised at the time of sale.
[00:15:17] Speaker A: Yeah, I mean I, I see, you know, the gamut of this sort of misrepresentation in the space is, you know, the worst is there are some very large carriers. You know, usually when I come knocking there's a, it's not just one problem. There's, there's a huge problem. Yeah, I, I've sued, you know, agents that run their own agencies, you know, 10, 15, 20, 30 times. But what's interesting is, you know, they'll, they'll leave, one carrier will have enough, but then they'll go get license at another carrier to be a producer for them. Then you get into the discovery and we see the back and forth in the background of, you know, them essentially trying to figure out how to get this person through compliance just so they can sell because they're prolific sellers.
You know, the other big issue that I see, you know, now we have a new, you know, administration coming in which is really focused on deregulation.
You know, there have been a lot of chatter.
I'm on the litigation side of course, but you know, I keep in touch with those around the country who are promoting more regulation for people who can sell these products. Particularly there was a push to be securities license to sell any index product which I think would have really alleviated a lot of bad outcomes in the IUL space. But I don't see that happening anytime soon. I think it's going to be back to the wild west. And the biggest thing I see is middle class retirees and soon to be retirees targeted by these shops. And what they do is they do a financial profile of them and they figure out either how much they have in a qualified retirement account, whether it's an IRA or 401k and they try. Well, they don't try. They convince them and over a period of years to deploy all of that into an iul and they sell it as a tax free retirement plan, which of course we all know that's, you know, you're mixing tax problems with mathematics which will not work. And it's just a recipe for disaster.
And I get calls, you know, every week of people saying I lost my life savings of 50, 60, 70,000 doll. The problem is that, you know, we can't take those cases and the fees and expenses of bringing that case in a, you know, a far away state.
It usually leaves those customers without any recourse. And this is just happening over and over. There's particular agents and carriers that really target that sort of band of middle income people just for the commissions. And it is a ticking time bomb. I think in the financial space you.
[00:18:07] Speaker B: Mentioned, Robert, the risks, and you indicated some mathematics around it. My assumption is you're focusing to some degree around the cost of insurance structure, the annual renewing term type of impact. So for folks of ours maybe listening in that aren't familiar with that, I'd be very interested from your perspective, being someone who's outside of the industry, but very ad depth and I'm sure this is a big component of how your cases end up being tried and around this, this area. But how does the cost of insurance structure with a lot of these policies really create a. I like to think of it as an implosion type of a situation where it almost implodes upon itself.
What would you say about that from your vantage point?
[00:18:53] Speaker A: Yeah, I mean, you know, a lot of people don't understand that these are nothing more than a complicated term insurance policy with a chassis of very expensive riders and other bells and whistles surrounding that term. You know, if you look at the cost, obviously the cost of insurance is this sort of upward linear line as you age within these policies each year. But what really hits you inside of an index universal life product is what every carrier refers to fees and expenses. You know, so you look at your, like I was looking at one recently where the cost of insurance was like $16,000 for that year, but the fees and expenses were $94,000. And you know, you wonder like, all right, well what is that paying for? And it's, it's really hard to get from a carrier what that is paying for.
You know, it's a mixture of risk underwriting and then the expenses associated with, with behind the scenes, what they actually are doing on the credit union indexes. And the complicated, you know, work that takes place back there.
And that is what really can, can create this recipe for disaster. And I don't know whether you guys come across this. Most of almost every single one of my cases is some version of you pay this premium payment for five years and it's fully funded, which of course is not true. You know, there's an anticipated planned annual premium. But it's funny that that premium payment that's fully funded usually matches the, either the 401k account or the IRA or whatever pot of money the client had at that time that was going to be deployed over that five years. And like magic, all of it gets deployed into the IUL and everything is now fully funded. And then of course, they take their first policy loan to, you know, use the mechanism of what they were told is tax free retirement planning. And then they get a letter saying, hey, we need a $90,000 payment or your policy is going to lapse. And then they have to come find someone like me. And you just see those stories over and over and over.
And it just, it's something that I really thought I would see a sort of a downtrend after our.
We litigated these cases really heavily between 2018 and 2022 and resolved about 350 cases across a lot of carriers. And I just assume these carriers would send out, you know, memos and bulletins and sort of, hey, stop doing this. But if anything, it's accelerating. It's crazy.
[00:21:48] Speaker C: Can you imagine that with a lot of these carriers, especially those that are publicly traded, that not the, you know, perhaps the, the person who owns a few shares of stock, but the majority stockholders applying, you know, some degree of, of pressure on these carriers to continue, you know, pushing these products, given the degree of profitability.
[00:22:12] Speaker A: Yeah, I think it probably there's gotta be a calculation somewhere that along the way they're going to have an expense ratio of having to pay or resolve claims versus how much they're making. And I'll tell you, I mean, I don't know any lawyer in the country that brings more IUL cases than I do because I, I kind of know I'm now so prominent in the space. I know the group that does because we trade information.
And I mean, I'm not even, you know, 1% of the cases I bring. I'm not even 1% of the yearly sales of these guys. So they just made such an incredible amount of money. And you can look, I mean, most of the larger ones are mutual fund companies, but they do publish their annual reports. And I read the annual reports every year because I want to see A, how much they're making and B, how much they're paying in litigation. And I'm always astounded how small the litigation payments are compared to the profitability of these companies. It's, it's just they are, they are the, the massive, you know, elephant in the room for sure.
[00:23:19] Speaker B: You mentioned earlier about almost, I'll call it some repeat offenders or folks that you've, you know, tried multiple times, you know.
[00:23:28] Speaker A: Yeah.
[00:23:29] Speaker B: You know, is there, is there, you know, some large YouTube personalities or people that you, you find that you're commonly seeing that showing up repeatedly and you're getting another call from a client like, hey, I got involved with so and so, and this is happening again. Like, you know, you kind of mentioned that they're getting recontracted and you know, getting, you know, shut down by this carrier and they go to another carrier. So I'm just curious, you know, what would you want consumers to be aware of as, you know, if they're watching this, how can they think about this and protect themselves and what are some things they should really be looking out for?
[00:24:01] Speaker A: Yeah, there, there are, there are many red flags to watch out for. You know, the biggest issue in this space is anyone who is recommending you to take a hundred percent or close to 100% of whatever your investment portfolio is and deploy it into one product is giving you bad advice.
That's what I see over and over is, you know, you've got this IRA, you've got this 401k, maybe you've got a whole life product. We're going to take all that and we're going to, we are going to move it into, over time, this one IUL product which is going to be the BN solution, you know, end all solution for you. And I think, you know, that's sort of just securities 101 is asset allocation and I used it in the Pac Life trial. They have a great chart. It's a pie chart. You know, it shows your portfolio should be a mixture of cash, real estate, equities, bonds, fixed income, life insurance products. So you think of it as a pie and each slice of the pie is what makes up your asset allocation. The problem is these agents and some of these people are securities, license sell this as the whole pie.
So if it goes bad, what happens? Your entire portfolio goes bad.
[00:25:23] Speaker C: Right.
[00:25:23] Speaker A: That's why you talk about, you know, today, in today's world, buying low cost ETF and index funds is the way to go, because you buy a little bit of everything so that if you're invested in 100 companies and 10 of them tank with the other nine, you're doing okay. You know, over time you're going to be fine. But if, if all your money is in an iul, that's a recipe for disaster. And if anyone's recommending that to you, you should know that they don't have their best interests at heart. But to get back to your question, yes, that is the biggest. You know, I just got a huge case this week from California and I always ask, like, how did you meet this person? And this is someone who is.
It's all. They all seem to have the same kind of recipe. They have a YouTube channel, they are on their local television doing some form of retirement or tax advice and they usually have a radio show.
And those are the, you know, really prolific sales folks around the country.
And, and, and their whole effort is to market, market, market and, and get these customers coming in so they can then sell them the Iuls. But, you know, and I've sued a fair number of those folks, you know, call them out by name. Doug Andrews is one of the biggest IUL promoters in the country. He has a great YouTube channel.
But when they were Live Abundant, I think I sued every single insurance agent that worked for Live Abundant over their IUL strategies. They've, they've rebranded to, I think what's called Laser Financial. But I saw the other day, Doug is, Doug's still doing his IUL infomercials on YouTube and there's a lot of other ones out there. There's, you know, wfg, which is a big promoter that has almost like a multi level marketing program set up for agents. You know, the idea is to sell you an IUL but also recruit you to be a salesperson for IULs. Yeah, Curtis Ray is another big one who just got hit with the big cease and desist order in the state of Washington there. There's some really prolific IUL sales folks out there.
And it sounds great, right? Tax free, retirement income for life. All you got to do is bank away a little bit of premium each month for each quarter each year.
What could go wrong?
[00:27:45] Speaker C: The problem is, do you see PHP on that list as well?
[00:27:49] Speaker A: I heard that name a lot. Php. I've not come across that I can remember a PHP case, but that name has been brought up to me several times in recent months to be able to look out for, you know, a lot of my work has transitioned over to the Premium finance space because with the current status of, you know, the way the bond market is and interest rates are the loans surrounding the premium finance, the interest rates have become so high that people are getting lots of collateral calls, lots of huge interest payments. And so, I mean, I'm in the mix of probably 15 to 20 really significant premium finance cases right now that we're trying to stop the bleeding. And then, you know, you have to litigate into a solution. Right, right.
[00:28:37] Speaker C: And if you, if you could think of even, I don't know, three really powerful, impactful questions that a prospective policy owner should be asking the advisor or, or even just what your top questions would be.
[00:28:56] Speaker A: Sure, sure. What are they? So I, I think anyone should ask, the first question is what are you licensed to sell me?
If you're, if you're telling me that my 401k account or my IRA, which is nothing more than a basket of, you know, equities and bonds is no good, what is your alternative recommendation? And if that person says, I'm licensed to sell you insurance, the only thing they can sell you is insurance. And if they only license the insurance or certain annuities, they can't even sell you. And so I think, you know, that's step one. What licenses do you hold? And if someone is making a recommendation to you to build a strategy for retirement income and they don't hold a securities license, you have to raise a red flag and say, I may need to think about this a little more. The next big question is how do you get paid on this product versus the other products? So you know, how, if their securities license and they're managing a 401k or IRA or other investment account, how do you get paid on that? And then how do you get paid on that? Ul Most people, I hear the sales pitch is the insurance. You don't pay me anything, the insurance carrier pays me. Well, that's kind of true, but the commission's coming from the premium, so you are paying that person. And when they're getting, you know, between 90 and I've seen as high as 120% or the first year target premium commission, that's something that should be disclosed to the customer. And the third thing I think they should do is when that illustration is shown and they're promising that this tax free retirement income strategy is going to work or this premium finance strategy is going to work, just say, I tell you what, do me a favor at the, at the, at right there at the end of that year, you know, whatever year it is, where the, where the, the last tax free policy loan is illustrated just right. I guarantee this will work inside your name.
And if they're not willing to do that, then you got some questions to ask and you probably should get up and leave and say, thank you very much and have a nice day. And I'd say we've. So we've built a website called the Investor Loss Los center that has a lot of those actually there, the red flags to look for the questions to ask. And obviously we do that to highlight our litigation work and for people to find us if they need a lawyer. But we've also done it as just sort of an education thing, you know. Probably the best phone call I received recently is a buddy of mine.
His family owned a business and they sold the business and we were talking about something else. He called me just a, you know, chitchat, and he said, remind me again what it is you're doing. I said, well, you know, I'm really doing these IUL cases all over the country. He's like, wait a minute, what is that? I said, index Universal Life. And he was like, holy smokes, that sounds familiar. I think some guy just, he said, I'm about to take $10 million from this sale and deploy. Can I send you this? And he sent it to me. It was a premium finance IUL deal. And I say, man, run from that. And so I didn't, you know, I didn't make a giant legal fee off of it, but I kept him from probably losing millions of dollars over the next four or five years.
And I, I think, you know, we, we call it affinity fraud is these guys are very good at cozying up to their, their customers. You know, whether it's through a church group or social group or golf group or. Steak dinner is always a big one. I'll tell you. I got an email today from a former client that said, I just want to thank you so much. A friend of mine had been invited to a steak dinner to hear an IUL pitch. And I talked her out of going because of what happened to me.
And it just, it just, it's happening all over the country. And I just think it is a massive ticking financial time bomb. And you know, as loud as I think I am about it and some others who are in the financial industry raising the red flags, it just, it in the noise of just our 24 7, you know, environment, it just does not penetrate.
And I, I hate seeing the financial havoc that it can really cause to, to people who can't afford to lose this type of money at the age they are in life 100%.
[00:33:31] Speaker C: Yeah, it's, go ahead, Rich.
[00:33:33] Speaker B: I'm very curious, you know, because you know, you've, you mentioned a couple names, you mentioned the Laser Group or Laser Fund and with Doug and his crew, you know, you talked about a couple different companies, I guess on the repeat offender list.
You know, I imagine to some degree there might even be, you know, some of these advisors you've, you know, you've, you've spoken with through some of these legal proceedings that, you know, again, maybe they didn't, there's, it's not necessarily that they had the bad intentions, but they maybe just, they just didn't have good information and they just weren't making good decisions on their own.
And some of that comes from a top down perspective where they're getting their information, where they're getting their training from. So what would you speak to about that as far as maybe someone watching this is an advisor. Maybe they just got started in the industry or maybe they are very interested in being able to help people with IULs because they think they're a great product. So what would you indicate to that person as to where they should start their learning journey to make sure that they're putting themselves in a good position to be able to actively help the clients they want to serve?
[00:34:39] Speaker A: Yeah, I think that's a great question. You know, the problem that I see across the space is, and when I say bga, you guys are familiar with what I'm talking about, right?
You know, the broker, general agent or the imo, the independent marketing organization. What I see in almost all these cases is some level of, you know, I call it continuing education, where they bring them out to their home office or they bring into a conference and they teach them just how to sell the product.
[00:35:10] Speaker B: Right.
[00:35:11] Speaker A: They don't really teach them about the product and the underlying intricacies of the product or how it works. And so I think if you're, if you're thinking about selling iul, one thing you need to make sure you understand is actually how the product works. You need to understand, you know, of that every dollar that goes to the carrier premium, how much is cost of insurance, how much is fees, how much is expenses, how much ultimately gets to go into the crediting index. And you need to have a deep understanding of how the crediting index works.
You know, be surprised. So many of these guys, they act, they think the person's money is actually in whatever the index is. Like if it's S P500. And then when you explain it to them, it's like, no, that's just a credit union index for benchmarking purposes.
And, and it just kind of blows their mind. And, and I've seen some actually get upset because they realize, wait, I really have harmed my customers because I didn't know what I'm selling.
And I think that's the biggest thing. If you want to be, you know, the financial services industry is a great profession to be in, but you, you really have to have your customers best interests at heart. And you should not sell a product that you do not have a deep and full understanding of. Like for example, I'm a litigator, I'm not a tax lawyer. I should not give anyone any tax advice. It would be malpractice for me to tell you, you know, what's bonus depreciation and you know, what you can put into capital gains versus ordinary income. I have an idea. I mean I could talk about it, I have a generalized knowledge of it, but if I tried to actually, you know, do a complicated tax return for you, I would totally be committing legal malpractice. And it's the same thing in the financial services. And I'm including just guys and ladies who were just insurance licensed. You know, my, my son started out as an insurance license guy. He sold insurance from Northwestern Mutual and now he's gotten securities licenses with a private wealth group. I mean those are great products. Life insurance is a wonderful product, but when you grab and cherry pick one that happens to be the highest commission paying product in the country, and you recommend that as the sole and only strategy for your customers, you probably need to do some deep reflection on what it is you're doing. And the worst thing is when a lawyer shows up like me and can potentially drive you out of that industry because I've done that to agents.
[00:37:43] Speaker C: Yeah, that is really, really, really great advice and part of, part of what you do. So what, what if there were agents like Richard mentioned who just wanted to be proactive in making sure that they're not, you know, harming their clients? Could they hire an organization like yours to say, hey, you know what, we want to assemble the best structure in how we educate how we get a prospective policyholder to clarity the guardrails that we should absolutely avoid crossing over, like you mentioned around encouraging someone to liquidate registered or non registered investment accounts and put all their money in to this type of product. So is there a method that your organization makes available to, to folks like that who just want to Be proactive in making sure they're doing things the right way.
[00:38:40] Speaker A: Yeah, that's a great question. You know that I litigate the cases. So my toolbox is. Is when you lost money in iul. But I do, I talk to a lot of people, just about. I go, I do a lot of seminars and speak at conferences and warn of the dangers. But I do know there's some folks in the industry that are happy to provide their time and expertise and who write about this a lot. You know, one of my experts is a guy named Bill Boersma who runs OC Consultant. He writes a lot about IUL products and their dangers. Larry Ribka is another guy who owns a large RIA in. In America that, you know, he writes a number of articles about the dangers of IULs, particularly, he writes a lot about premium finance IUL problems.
But, you know, the problem is it's the ebb and flow of information. Right. You have, you have people like me and Larry and Bill who are writing these wonky articles about the dangers of this. And you got some clown on TikTok, he's like, I just made $500,000 in commissions this year. Let me show you how to do it. And that sounds pretty good, right? I mean, who wouldn't want to do that?
And so it's just a balance. It's just, it's. It's crazy.
I see.
I mean, I saw a case the other day where, believe it or not, there's. It's, it's. It's the case that got Curtis Ray in trouble in Washington where their strategy was buy an IUL from us, then take policy loans and buy a second IUL from us.
And we're going to leverage your first one, laddering to all of this just incredible arbitrage for you. And at the end, you're going to have this turbocharged retirement investment.
I mean, I've seen cases where agents have recommended people go get home equity loans to fund IUL premium payments, which is totally not allowed. Totally not allowed by any carrier. But they were doing it over and over and over and just, you know, fudging on what the source of funds was.
[00:40:56] Speaker B: I can see that becoming very problematic when the interest rates started to rise, I would imagine.
[00:41:01] Speaker A: Yeah.
[00:41:01] Speaker B: Cause some sleepless nights, they're losing their.
[00:41:03] Speaker A: House and their invest their investment product.
[00:41:07] Speaker B: And their insurance if the insurance collapses. So they got no protection for their family, no home to live in, and nothing left for retirement.
[00:41:15] Speaker A: That's exactly right. And that is. That's the funny thing is at the end of the day. You sometimes forget that an IUL is nothing but a life insurance product.
[00:41:23] Speaker C: Right.
[00:41:23] Speaker A: Because that is almost the last thing they're sold for. They're really promoting and marketing this idea of tax free retirement income or on the premium finance side, you know, they love the word arbitrage during the arbitrage between the loan interest payments. And of course what is illustrated to be the internal crediting that builds up your ability to take those loans eventually. And then the craziest things I see, I think they must all go to the same seminar where they teach them that, you know, the first thing we're going to do is a irrevocable life insurance trust. And so they have a trustee who's not the owner or the beneficiary of the policy, but they're still illustrating down the line policy loans to the owner of the policy. And I'm like, but that's not how this works. When you have it, it's called irrevocable for a reason.
And it's just, I'm like, how does this get through underwriting? Like I'm doing a huge premium finance case, several of them right now, where this complicated trust was put in effect for no good reason.
And then they're illustrating policy loans back to someone who's not the trustee or the, or the beneficiary of the trust.
It's just the level of just insane policy design is just, it's some, it's comical, but it's also just unbelievable.
[00:42:52] Speaker C: Wow.
[00:42:53] Speaker B: What I'm curious about in, you know, your process of doing this now you're six years, well into the rabbit hole, I guess of the IUL so space speaking to so many different insurance carriers and advisors as well, multiple professionals involved in the mix. What, what have you learned, I guess, or your perspective, Robert, you know that the insurance, insurance industry has so many different products. We have living benefit products, critical illness, disability, so on and so forth. We've got your primary insurance buckets are term insurance, whole life insurance and universal life. And then there's the sub buckets, there's the IULs, there's variable, there's a whole host of universal life in the bucket. And then under whole life there's a number, there's non participating participating, then there's customization. So there's a lot of kind of like primary categories and then the subcategories. I'm just curious, what have you learned about other types of products along the way? You know, like for example, if you were to think about what's going on in sales practices of what you see with these Universal Life Index products and how they're constructed. Really as a. Jason likes to say, they're a term insurance product with a Vegas style slot machine attached to the side of them.
In comparison to say the traditional, been around for 200 years, whole life structure, typically a participating policy where you become a co owner in the company and they're taking on a lot of the risks through actuary assessment. What would you say are some of the fundamental differences between these two buckets?
[00:44:23] Speaker A: Yeah, I mean, you know, one, one of the big differences I see is the folks who focus on, you know, term is term. It's, it's pretty straightforward, right? Yeah, yeah.
[00:44:31] Speaker C: You're seeing the benefit.
[00:44:32] Speaker A: Yeah. And the whole. And if you think of it, you know, as a securities lawyer, you think about it just from straight up financial advice is, you know, you want term when you're in your 20s and 30s and 40s and building your wealth and raising a family that if you're the primary breadwinner or something happens to you, your spouse and your children aren't going to suffer. But as you get to a certain age, your reliance on insurance should be less and your reliance on letting your investment accounts or whatever work for you. And when you start making more money, sort of the adage is you should layer in a whole life policy for yourself. And those are obviously much more complex, but they're also pretty straightforward because it's all, you know, depending on the product, it's mostly the guaranteed whole lot ideas.
[00:45:16] Speaker B: Right.
[00:45:16] Speaker A: What I'm finding, and I think, and I want to be clear about this, most of the people that I sue and I sue a lot of insurance agents. The problem is too that these are insurance agents who are pretending to be something they're not. They're, you know, they're calling themselves wealth architects or retirement specialists or some version of. They're not getting close to calling themselves a financial advisor, but pretty close.
They're, they're not doing this because they're malicious people or they're intending to harm. They're doing it because it's all about the power structure. Right. You know, you have your carriers, then you have your field reps, then you have the BGAs and the IMOs. A lot of those people, they know how these things work, but they are spending a great deal of time developing and empowering a sales force to sell.
And if you think about it in a financial advisor relationship or even a whole life relationship, which are mostly, you know, done through shops who have a level of you might have an insurance professional and you might have a securities professional that's a long relationship with that customer. You know, a life insurance sale that's not whole life, if it's particularly iul, it's just focus on that.
You know, your, your relationship is usually that, that sale.
Now you, you want them to make the premium payments, of course, but once they've made that first year target premium and you've gotten your commission, you're not doing a whole lot. Now what I do see is most of the larger agencies, they have some version of a yearly review whether, you know, they'll get their annual statement and they'll go over it with them. But what I find in my litigation cases is they get the annual statement, go over it with them because they know if they're looking at it, they're going to see some red flags in there, particularly the fees and expenses in there. It's what I hear over and over is this is a long term strategy. We've got to let this thing work. You know, don't worry, keep doing what we're doing, the design will work and sit back at our illustration, etc. Etc. But I think that's the biggest thing is anyone who's thinking about becoming someone who sells an iul, they should really spend a lot of time reading up on it and understanding it and making sure they're not setting themselves up. You know, the worst thing you can do, I think as a professional is to go into something with good intentions and particularly like who do insurance ages target, right? Friends, family, acquaintances. Can you imagine if in your hometown you go sell 20 IUL products and five years from now they all blow up and everyone's running around town saying what a con man you are, you know, what terrible person you are. That's, that's not something you want. You don't want a lawyer coming like me that's going to sue you and you know, raise all sorts of regulatory problems for you and other issues. So I think, I think people, insurance professionals, you know, it's, what's the old eagle song, the lure of easy money.
None of this money is easy. The commission structure is huge.
But I think that's another red flag to say why is it so big and who's really making the money here?
And I think these guys and ladies and other professionals who are being, you know, solicited through social media and YouTube and you know, the ideas of this infinite banking through IUL need to really have their guard race and really spend some serious time looking into it and reading about it before they jump to it is something they want to sell.
[00:48:52] Speaker B: And anyone indicating, for an example, like Infinite Banking, you know, and then incorporating IUL as part of that similar description, I mean, they're automatically at a. At a trademark disadvantage because Infinite Banking is trademarked and registered, and those assets are owned by the Nelson Nash Institute. And in no way, shape or form is IUL allowed to be associated with that terminology.
[00:49:14] Speaker A: Right. And I see it a lot in my litigation where, you know, there it's some. Some type of, you know, phrase, Infinite Banking. This, you know, be your own banker is a big one.
You are the bank, you are the retirement account. I see all of that.
And it gets you in trouble because, you know, then someone along like me comes along and has those documents and papers and books that they've written about it to solicit this business, and it just, it violates every corporate policy procedure or whatever carrier they were writing for at the time.
[00:49:53] Speaker B: Now, now, I know in Canada there's a. There's a common trend of surrender charges to the policy owner on. On policies that exist for a number of years. I assume it's very similar in the States on many of those policies. How do you find that that creates an impact for people? And is that being well described to them as. Well, like, as an example, we often, you know, Jason, myself, the members of our team, will have people reach out to us for assistance. Most people, when they come to you, they've got. We call it the junk drawer of financial products.
And often the junk drawer is filled with different insurance policies, and they don't remember what they have commonly, whether it's term policy or whatever it is. And often we'll see people who have a universal life contract of some style, maybe IUL or other, and there's surrender charges on there. And they don't understand when they're there or why they're there when they fall off. And so how do you find that that creates an impact for a lot of the people that you're litigating on behalf of?
[00:50:47] Speaker A: Yeah, I mean, that's a big deal because, you know, typically in the States, the surrender charges are. They. They sort of DE. Escalate year one through 10, highest in year one, lowest in year 10. And usually after year 10, there's no surrender charge in most IUL products, but that factors in usually around year two or three, where that's about the time someone may realize they're upside down. You know, they're getting that annual policy statement and they're Thinking, wait a minute, I've put $500,000 in premiums in and my cash surrender value is $350,000.
What's, what's going on here? And then they start realizing, oh, wait, there's a surrender charge. There's all these fees and expenses. And what it really does is it combines, you know, with the fees and expenses to create this sort of cannibalistic approach to the policy where the policy is just eating all your cash, right? And, and so once they realize there's a problem, you know, so much of their sort of principal basis has disappeared. And of course the carrier will write you when you complain, they'll write you a very nice letter, you know, about how great the product is and how it performed exactly as, as represented. And of course, you know, if you'd like to get your premiums back, we're happy to give you what's left, but we're taking our surrender charge too, of course.
And I think that happens a lot. And I think a lot of people feel powerless to take on, you know, a multi billion dollar insurance company.
And I think it's just another one of those things that you should add it to your checklist is, you know, when you're asking those initial questions, what happens if I get into year four or five and I don't like this? What can I do? You know, do I, do I have to pay to get out of it? And of course, you know, you don't have to pay to get out of them. They're gonna, you've already paid. They're just gonna keep part of your money before they write you that check. But it's, it's all the same.
But I think that is another problem. People are, they're surprised about that. You know, it's another one of those surprises. The fact that the illustration was not guaranteed, that's a surprise.
When they learn about how much their agent got as a commission, that's a surprise.
You know, just over and over and over. That's the problem. There's too many bad. Some surprises are good. You know, my wife surprises me with a, you know, delicious rib eye on the grill tonight. That's a good one.
If the dog eats it, that's a bad one.
Same thing with the Iuls. You know, there's just too many bad surprises in these things that pop up in year two and three and four and five.
[00:53:25] Speaker C: That is so interesting because, you know, it's, it's not a product that we. I've never illustrated one. I've never placed One, I've never purchased one. And nor would I. You know, we just, we don't collide with problems of that nature with participating whole life insurance contracts.
It, we just don't see it. And so, but yet what comes up for us, given that our area of specialization is cases where people are conflated, they're saying, well, hey, you can buy, you can buy an infinite banking policy.
Well, if I'm you and I'm sitting down with somebody who's using language like that, I'm saying, point me in the direction of where I can go buy that.
[00:54:19] Speaker A: Right.
[00:54:20] Speaker C: Because they don't exist.
You're, you're, you're purchasing an insurance product, hopefully from a reputable life insurance company. And when you're dealing with a participating whole life insurance contract, it, it is never has been, never will be an investment.
And so if your desire is to invest, then just understand that there, there are risk characteristics associated with the function of investing. And I just find time after time where I run into people who have these types of contracts. Those discussions, even if they did occur, the policy owner has either developed a sudden case of amnesia or there's been no contact since the sale.
[00:55:13] Speaker A: Right.
[00:55:14] Speaker C: So the policy owner, I don't retain information that someone shares with me a hundred percent.
I need, I need to have that repeated back to me. I need to make sure that. And so having a cadence of really educating your customer and servicing them and supporting them and just calling the risks what they are like, look, you need to understand the risks associated with this. And those discussions just aren't happening. It's very concerning.
[00:55:48] Speaker A: That is very true. A lot of times they aren't happening because those selling them don't even understand them, you know.
[00:55:54] Speaker B: Right.
[00:55:54] Speaker A: I think, you know, probably 90% of the financial services marketplace doesn't even touch IULs. You know, most large broker dealers don't allow their securities license folks to sell them, number one.
And number two, most financial professionals don't like them. They just, you know, whether you're insurance based or whether you're investment advisor based, it's just not a product you're comfortable selling to a customer. But there is a, you know, that 10% out there. And I'm just, I'm making up these numbers. But I'm saying there is that group out there that doesn't, but they do it prolifically. I mean, they're not selling one or two. You know, I, I recently sued an insurance agent that ran a pretty big agency in the Southeast. I knew of 250 IUL products he had sold and he'd sold those in like a span of 30 months.
Whoa. You know, there's no way you can sit down with that many people and come up with a robust financial plan and then land on the fact that, oh, an IUL is the best thing for you and 100% of your portfolio should be in it.
So I think it goes back to again, you know, it's, it's a top down problem. And that's probably the articles that Richard's seen me comment on in the Financial Times, particularly insurance News, is, it's, this is a, a carrier level problem where they, I think they've made a decision. They're fine deploying a sales force just to sell the product. And if they don't work and if they lapse, they're willing to accept that risk because it'll balance out into a large profit for them. And I think sadly, you know, that we're seeing that sort of capitalistic approach to this industry on steroids because they know that there are agents out there selling these inappropriately and without real suitability guidelines being met, but they still allow it because they just make so much money.
[00:57:58] Speaker C: That's, I think that's so accurate and you know, any, and just speaking to this from the vantage point of 16 years of, of humble experience in this industry, I would not do business with a company if, if I understood that the life insurance carrier spent more time evaluating the risk to their business versus what's best for the policyholder.
You're not going to have or receive any of my business because that tells me everything I need to know but where the focus is. And yes, you know, a life insurance company's motive is to be profitable, that's completely understandable. But when you're prioritizing that over the best interests of the policyholder, that, that's out of integrity. And I could not envision myself doing a biz doing business with a company like that. And it's just, it's really, really disappointing to, to know that, that what you described is what occurs. It's like, look, sales are flowing. What are we worried about?
Yeah, our stock, our stockholders are happy, our executives are happy, our sales force is happy. Well, what about the policyholder? The who? The policyholder. The who?
The policyholder. Let's move on to the next item on the agenda, everybody.
[00:59:29] Speaker A: That's right. Like, yeah, they're just, I tell people all the time, you know, these agents particularly, they don't view these people as customers. They just, they view them as a commission Generating widget, right. That, you know, if I can just get the right amount of premium placed.
That's the other problem is you have insurance agents who, you know, if you're, if you're an independent insurance agent in a, in a small city anywhere in America, it's hard, it's a hard business to make a living at. It's a lot of competition. You know, you're trying to probably sell some annuity products, you're trying to sell some term, you're trying to sell some whole life, you're trying to hit maybe six figures in income. And if I come along to you and say, hey, I gotta, I got an opportunity for you, but if you get in my little IUL network, you're gonna make 4, 500, $600,000 a year, they're like, yes, I'm in. How do I do it? And so again, it's that commission structure, I think, blinds a lot of people to the red flags that ordinarily they would see and think about.
But that lure of really high compensation can assuage those fears and questions very quickly. And it's just like anything else, the more you sell it, you know, the more that dopamine hit of, you know, that first big commission, you want it over and over and over. And there are some guys around the country that have leveraged that into, you know, 7 and 8 figure of revenue streams.
And until the carriers decide, you know, they want to change that structure, I think we're going to see. And you guys would probably get called a lot on, I bought this from somebody and it's blowing up and I need to figure out how to salvage.
[01:01:25] Speaker C: We sure do. Yeah.
[01:01:26] Speaker A: I mean that, you know, that's a, that's a big thing. And a lot, a lot of my clients come to me from financial professionals who, you know, get some new client and they're looking at their portfolios and they're like, what is this toxic piece of trash? You know? And they're like, oh my God, I hope you can tell me, because I don't know. And it's not working enough. Throwing a million bucks at it. And they tell me it's worth $200,000 and I don't know what to do.
It's just, it's, it's a, it's a story that I think, unfortunately we are going to see more and more and more of month particularly I'm sure you guys have seen, you know, I refer to it as the Tick Tock salesman. I mean, they're all over Tick tock. They're all over LinkedIn, just promising high commissions. And this convict, you know, they be your own banker, infinite banking.
I put in 400amonth and now I'm, my net worth is 2.5 million. I mean, none of that's true, but they're, they're, they're co opting people and it's a multilevel marketing scheme. And it just so happens they're selling IULs, which to me is insane. And the carriers have to know about it and they haven't put a stop to it because they must be selling policies and make a lot of money.
[01:02:36] Speaker C: This was such a great conversation.
[01:02:39] Speaker B: There's a number of people even that I serve as clients who at one time were licensed themselves in one of the companies you'd mentioned with a three letter acronym earlier on in our conversation. And it was before IULs were really a commonplace item. And so they're more of a typical universal life contract. And they themselves sold the policy that they have on their own life, but they couldn't explain it to me. And we have to go through and figure out, okay, well what do you have? How is it working? Is it meeting the objective? Your life needs have changed, Is it still meeting the objective? Did it even meet it? Then what are we going to do about it? Oh, we've got these surrender charges, so you have the coverage, which is good, but long term it's going to create this problem. By the time we get to 65, you know, your, your cost of insurance is spiking on that exponential curve. Like if you're not funding it properly, which you haven't for the last eight years, you're not going to hit the targets. Even if you did do well in the quote unquote investments, it's almost impossible for you to create what you originally thought you were going to get. We have to really pragmatically think about this. What are we going to do to make sure your family's protected, your needs are covered? You can actually create something that you wanted to create. We have to create a pivot. And that's unfortunately a very common conversation that I think, you know, we're having these days.
[01:03:58] Speaker A: Agreed. Yeah, I mean, it's just like I said, these are one of the most complicated products I've ever come across. And I'm including securities product is not a securities product, it's an insurance product. But it is incredibly complex, filled with language that is unique to this one type of product.
And it takes a significant amount of time and study and work to understand it. And I tell you, I learn new things about these products every day. Every time I talk to somebody new or talk to a different professional or look at them a different way.
And I think that fundamentally is the issue. It is something that is being sold by Salesforce Force. Probably 99 of them have no understanding of what it is and how it operates other than the fact that it is built to get them a large commission if they can make that sale.
And that I truly think that is one of the real problems with this industry. And the other is, you know, they're, they're empowering these sales agents to sell something they don't understand.
And they know that, but they don't care. And the agents, you know, think again. Goes back to the idea, well, if I'm selling something for, you know, midlife or secure in or an alliance or an AIG or pacific life or a national life, they're not going to steer me wrong. So this thing must work until it does.
And then a lot of times they, they don't understand even then. And then you educate them and there is sort of a light bulb that goes off and, and. But it's too late at that point. You know, people's, people's financial lives have been ruined and it, you know, it continues happening every day.
[01:05:46] Speaker C: Very good point. This was such a great conversation. Thank you, Robert.
[01:05:51] Speaker A: Yeah, thanks for having me on, guys. I've really enjoyed the conversation and getting a chat about this a little bit.
[01:05:58] Speaker B: Well, hopefully we'll be able to provide a lot of awareness from what you've shared with us for our listeners. And again, we appreciate you committing the time. And you know, Robert, we like to close our show asking a final question. And so you've been helping people on a number of things in malpractice suits, the Ponzi schemes of the world, helping people recover a lot of their capital through these types of losses. So you may not know it, but you're showing up as the litigation superhero for those individuals that you serve. Our question for you is, who would you most like to be a hero to?
[01:06:30] Speaker A: Yeah, it's a great question. You know, I talk about people, unfortunately come to see me, a lawyer like me, and, and, and me and my team, when usually the worst thing in the world has happened to them, whether it's, you know, we have another side of our practice, which is significant personal injury and wrongful death. You know, either someone's been critically harmed or forever injured or dead or in the IUL space, you know, their financial lives have been destroyed and they lean on us to put all of that back together. And it's incredibly rewarding. You know, we take on those burdens that they can't do themselves. I say, you know, the great thing that I do, and I said this in Idaho and I truly mean it. You know, where else can a 75 year old retiree in America take on Pacific Life Insurance Company or any of the large carriers and have a level playing field?
It's not going to be at a local state house, it's not going to be in Congress in D.C. it's certainly not going to be with a regulatory agency. The only place left is a courtroom in front of a jury. And so that, that is, that is what we provide because that is truly the last level. You know, you can't bring your team of lobbyists in there. You can't bring, you bring a lot of lawyers, but you can't influence politicians or anything. You have a, you know, an unbiased judge and a jury of your peers and, and it's, it's the last place you can get justice. And that's what we do. And we're proud to do it, happy to do it. And you know, maybe we'll change the industry one, one case at a time. It's going to take me a while, but you know, we're giving it a shot.
[01:08:16] Speaker C: Well, we certainly respect the work that you're doing and this has been so informative for our community and we'd love to, we'd love to have you back, you know, as, as the industry continues to, I guess, wade through this type of stuff and there will be a number of new things that you discover as time goes on as well. And so we'd love to have you back on the show, but this was incredibly informative. Thank you.
[01:08:39] Speaker A: Yeah, for sure. Thank you so much, guys. I really appreciate it.
