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Life Health > Life Insurance

Potpourri 2009

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In the course of a year, a number of subjects of interest come to mind but would not fill an entire column. So, as usual, I save them and at year’s end bundle several that are still germane into a single article. The following seem appropriate for 2009.

Great Expectations: Some years ago Gladys and I were touring China with a small group. Among the places we visited was a small rural village. Life was primitive there. The homes were old and the livestock, pigs and chickens mostly, lived in part of the house. The beds were made of straw and few possessions of any kind were visible. There were few cars, bicycles being the main form of transportation. The doctor in town had a stall in an open air market. The only visible tools that he had were a stethoscope and a screen, behind which he examined his patients. The people were friendly and welcoming.

Our Chinese guide pointed out that despite their meager circumstances the people were genuinely happy and that was very evident. He went on to say that the reason they were happy and content was that they had few expectations from life and those were being met.

I believe this is a good lesson for politicians when they are running for office. Often they build expectations in campaign rhetoric that are not met after being elected. Too often after the campaign is over a new group of cronies comes into power and it becomes business as usual all over again. More often than not, previous office holders are trashed so that the concept of change, of any kind, gains traction. Then reality sets in–changes in the form of big projects we cannot afford do not come to pass and expectations are not met. People become angry as well as disappointed.

Moral: Never undertake vast projects with half-vast ideas.

Seat at the Table: In the 15 years I spent in Washington as CEO of NALU (now NAIFA) I was often admonished by our lobbyists, and others, that when vital legislation was being considered we would have to modify our positions in order to gain a “seat at the table.” A seat at the table, in theory, was to provide an opportunity to give input that would be helpful in crafting appropriate legislation. Occasionally it worked, but more often it was a myth. Such invitations usually meant ‘come and behave yourself and don’t be critical of what we are trying to do.’ Violators of this notion were usually removed from their seat and demonized by the opposition.

One such incident comes to mind. We were invited to the Treasury Department to discuss an important piece of tax legislation that would have had a profoundly negative effect on our policyholders. We met with a deputy secretary of the Treasury (I think that was his title) and before we even sat down at the table he said, in a very hostile way, “The train is already leaving the station. You had better get on board or you will be left behind.” Loosely translated he meant agree with us completely or get lost.

Well, we didn’t agree at all and contrary to his bluff, the train had not left the station. We, in conjunction with the ACLI, mounted a grassroots push on Capitol Hill and the measure was soundly defeated. The seat at the table was useless from the start, for there was no real interest in our point of view. The interests of our policyholders were better served by not caving in to threats.

On the other hand, there have been times when we have sat down with reasonable people and helped to create useful legislation that solved a problem without destroying valuable policy provisions. Such encounters were a welcome relief from the often bellicose approach taken by some. Contrary to the low rating Congress gets in polls, there are some truly great people there who work hard to do the right thing.

Moral: Be careful of who is setting the table before you accept an invitation for a “seat at the table.”

Report Card: Most of us have in one way or another been affected by the current recession. I thought it might be of interest to share my own report card of how things have worked out the past two years, particularly 2009.

o The value of our home, our main real estate asset, has declined by more than one-third. Predictions are that perhaps in 3 to 5 years most of this value will be restored. But it is not a certainty and if we sell sooner to go into a retirement community, we won’t see the gain.

o Our stock portfolio lost, at its low point, about 40%. There has been some recovery but we have a long way to go.

o We have a charitable minitrust (variable annuity) that has lost 50% of its value and our income is down accordingly.

o By contrast, we have a charitable fixed annuity with the same organization and the income from it is unchanged.

o Other annuities we own (our main source of income) are all guaranteed and income remains steady and unchanged.

o The cash value of our life insurance policies continue to grow as guaranteed, with dividends off only about 8%.

My expectations regarding my guaranteed insurance products are being met and I am a happy camper. No wonder I believe so fervently in the guaranteed products we sell.


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