Quite a few posters in here have extreme hate for ay life insurance other than term. I am interested in the reasoning behind this other than the guy makes a profit. What are the cons to whole life that creates all this hate?

A lot of investment advisors or planners are really glorified salesman. I started investing on my own back in 2008 and it's really simple if you do the smart thing and invest in stable dividend paying companies and hold the investments. It's the buying/selling that destroys people's returns and that is usually done by the "investment specialists" so they get a commission. They will say they have to "rebalance" your portfolio, code word for we need to buy/sell to get a commission.

If you find 8-10 good dividend paying companies (eg. Altria, JNJ, P&G) with a very long term approach, you will be way further ahead.

If I took the difference between a term life product and a whole life product and invested it straight into the market (say S&P 500) I would be way ahead. The management fees and costs that the product takes makes it a complete waste of money.

If you invested the amount you'd pay for whole life into mutual funds, you'd come out ahead. So why wouldn't you do that?

Here's a good explanation - http://whitecoatinvestor.com/...sons-to-consider-it/

The link is from a guy who often posts on bogleheads.

Would like to have some questions prepared to ask when we go if the LR has any tips or advice?


The topic of Adviser Fees came up recently, and it got me thinking.

I've been putting money away monthly in an RRSP(Canada) for close to 20 years. The amount is starting to get up there - combination of my own contributions and the interest and growth of some of the investments.

To me all of this has been long term. Just keep putting it away every month. Take the learned advice of the adviser, on some fine-tuning here and there each year. This is not something that I will be touching/needing God willing, until I am closer to 70 (56 now).

However, I keep seeing these ads quite frequently for a number of these "self-serve" investment companies and they are saying some worrying things about how much my current adviser and his company are making on these fees.

Should I be concerned?

Are some of these new-online, self-serve options like SimpleWealth - https://www.wealthsimple.com/en-ca/ a "better" option?

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Steve Fleck @stevefleck | Blog

I only use Turbotax for the few family and friends that I prepare because it is better than using plain paper forms and handwriting in the numbers. And I don't feel like learning a new program to prepare the three or four returns I do for family that I can't do at work.

I wouldn't use it professionally, we use Prosystemfx at work.

Because it's a shitty and expensive financial product marketed as a legitimate investment. It's designed to enrich the seller and underwriter.

To get a reasonable amount of coverage (death benefit) - you'll be paying crazy high premiums - that are paying the commissions first. If you bail out early you'll lose this money.

Even without the details I don't get the allure of the product - fund a massive policy so that when I die my heirs get a fat payout? Wtf is the point? If I instead invest all this money in vehicles that have lower fees and higher expected returns - my heirs will be better off anyway, right?

If I die during the accumulation phase the term policy kicks in. It's just way more efficient and cheaper this way.

Whole life policies work for financially illiterate people who are basically broke their entire life. When they die, they bail out their broke relatives before all the money gets blown again. They would not have invested otherwise because looking at a 401K or IRA or a brokerage account with hundreds of thousands sitting in it would be too tempting.

But are you including the death benefit in that? Sure the mutual funds are going to be a higher interest bearing tool than the cash value of the whole life, but if the premiums were invested do you think they would be more than the cash value and death benefit of the whole life?

Death benefit may not be a big priority to some, but it is to others. Also so far the death benefit is tax free according to my limited knowledge would it not be a decent way to transfer $1mil to heirs tax free?

Genuinely curious with no horse in the race. I see a lot of hate for whole life and people who sell it but don't often get the reasons behind it.

Insurance as risk management and financial management are two different functions and should be viewed as separate.

Most financial advisors are very buy and hold which is very conservative when the market is moving up and too risky when the market is in decline. I have an advisor who manages a portion of my assets - a portion I have in very conservative bonds and REITS and dividend bearing sticks as someone else mentioned.

Well people are showing you numbers that you don't seem to want to take seriously. If this was truly a better deal than sticking the premium amount into S&P500 index then the product wouldn't need a sleazy salesman would it?

I didn't read the whitecoatinvestor post but I bet you his math includes all the figures. Sure, the death benefit may be tax free...but your premiums are after-tax. Not so with contributions to tax advantaged plans. Anyway, you don't need to take our word for it.

To Fleck - YES, I WOULD BE WORRIED about the cost of your portfolio. If it's sitting in crap funds you're paying large amounts of fees. You said it's getting up there. Say you have 750K. If your mutual funds have an expense ratio of 1% (not unusual at all) - you're paying $7,500 in management fees/year. Same amount in something like VTI (with a 0.05% expense ratio) would cost you $375 in fees/year (and statistically likely to outperform over a 30 year horizon).

Possibly

So, lets say a FA / cfp - whatever you call them, they take 1 percent of everything under 100k under management or .5 of everything over, then the fund its self if you are in a single fund takes x%, then there maybe transaction costs

If you go direct to vanguard or blackrock and get whole or market indexing you eliminate the advisors percentage and transaction costs

Its either in Boggles book or a random walk the compounded effect of fees on capital over time. It is not good

Rather than present your reasoning you revert to telling me I am not listening (to something you haven't said). Calling people who sell it sleazy without reason other than your opinion, and then telling me not to take your word for it after you presented no reasoned response.

About in line with your typical LR post. Why should someone take your opinion into account if you can't present a reason for it? As I said I have no dog in the fight, I own term insurance, but I am genuinely curious as to reason behind the hate for whole life.

Doesn't matter. If you took the difference in cost between term and whole life, invested, not only could your named beneficiary get that invested money that has grown, but you have that term policy (unless you stopped once you had more than enough in investments) as well. Further, just think of the math. The insurance company has to get paid, and they are investing in things that have costs associated with them. Not only are you paying for their direct expense ratio cost, but you are also paying their overhead. Plus they are going to be investing in more stable items, such as being heavy in bond products. So it's a lose, lose, lose.

That makes sense. I guess the only potential issue with tying term together is if you start a 20 year term at age 25, it is going to be a decent amount more money to get a new policy at 45, then 65 is going to be nuts especially if you have any health problems that might preclude you altogether from getting the insurance.

But that is a lot of if's and requires a dogged dedication to having the death benefit which one may not need/want once they get to 65. My dad just turned 62, I think a nice inheritance to leave to us 4 kids was important to him before, but now that we are all doing decent on our own it is less important and we tend to encourage him to spend his money and enjoy it.