Every day I go for the same walk through the same neighborhood. Yet every day I notice something new.
There’s a section of sidewalk which is really pretty weird. It’s situated on a small slope, and set back from the road. So, it feels like you’re walking through the country (sort of)… but on a sidewalk.
Anyway, there’s a row of houses along this little path.
And, there’s a large wooden privacy fence protecting the homes.
Walking down this path is so peaceful and helps calm me down. Which I need because GETTING to this sidewalk usually requires I traverse a dangerous hellzone between my home and where the sidewalk starts (or ends, as the case may be).
This hellzone demands I yell, scream, and flip off drivers who careen towards me and speed up (yes really) instead of slowing down to allow a pedestrian to not be… you know… squashed because said jackass left for work too late and is now trying to use my street as a through-street (I’ll save that story for another day. It’s a doozy).
Where was I?
So I get to the sidewalk and my blood pressure INSTANTLY drops.
I was looking at the privacy fence yesterday and I noticed something.
You can sorta see through the wooden planks. Not much but you can see slivers of peoples’ yards.
I hadn’t really noticed that before.
Then, for some reason, I got to thinking about how common it is to not really see the whole picture or understand things in life.
Sometimes we see glimpses of the truth, but often it’s hidden behind a privacy fence.
Like life insurance. You know, I’ve been reading more about the history of the financial industry lately.
I came upon an interesting tidbit that filled in some of the gaps in my own knowledge.
One in particular stood out.
One reason many people don’t know a lot about whole life insurance is because of the FTC.
They published a booklet in 1979 which contains numerous factual misrepresentations of the product which the press picked up on.
Now… why would our government publish lies? They never do that. ;)
So… one of the reasons this thing became a thing was because in the 1960s Ralph Nader decided to turn his attention to the life insurance industry. He (incorrectly) classified life insurance as an investment and told the public how terrible its returns were.
A then football-coach-turned-life-insurance-agent (named Art Williams) decided to go on a crusade to destroy life insurers who sold whole life as a core product offering.
He believed Nader’s criticisms…
So he started a company called A.L. Williams & Associates.
This is the company that single-handedly invented an industry around the modern idea of “buy term and invest the difference”.
At the senate hearing, the vice president of his company was very outspoken, saying:
“When life insurance becomes a haven for tax dodgers and a means for the wealthy to avoid paying their fair share of taxes, then Congress should take action…Failure to act now is tantamount to putting the Congressional stamp of approval on these abuses.”
The testimony, along with the other panelists, did a fantastic smear job against the product and the industry.
After the hearing, Williams was victorious.
In his book, Coach: The AL Williams Story, he writes,
“We put the FTC report on top of every client’s kitchen table. We passed out flyers by the thousands. The report supported everything we claimed. Its credibility just couldn’t be denied. Every man and woman in A.L. Williams felt a new conviction that our crusade was 100 percent right for consumers. … Consumers now knew the real story behind “trash value” life insurance. With a choice, they came to A.L. Williams every time.”
The FTC made Williams a billionaire because he had the government backing his claims… and a good sales gimmick to sell to consumers to get them to raid their existing whole life policies to buy term insurance and invest with his company.
His claims were false… but it was a great story to sell to the masses.
Life insurance actuaries had explained to him and Congress (and still do) that whole life IS “buy term and invest the difference,” except it’s wrapped up into one product. Furthermore, that product is not really in competition with stocks, bonds, and mutual funds because of it’s unique structure…
It’s that unique structure that allows insurers guarantee performance of the contract.
It’s also that unique structure which allows any policyholder to enhance the performance of any investment strategy or business venture…
Anywho, there’s a LOT more to this story. If you want to hear the rest and read a few more things you’ll NEVER hear in the mainstream financial press, hit the jump below: