Archimedes is alleged to have said, “Give me a lever long enough and a fulcrum upon which to apply it, and I’ll move the world.” (Rumors to the contrary notwithstanding, I wasn’t there to hear him say it. I’m taking it on faith that’s an accurate quote.) The military refers to powerful weapons systems or concepts as force multipliers.
Paging back through the history books we can see countless examples of this in every field. The tractor came along and accomplished in a fraction of the time more than what many farmers with horses and mules possibly could. Nuclear power drives huge Navy ships further and faster than wind power ever could. Even small computers now achieve more than what thousands of people with adding machines or the first electronic calculators ever thought possible.
Those of us in financial services have a financial tool that is at once blindingly simple and unimaginably powerful. This is a lever so powerful that we haven’t yet fully harnessed that power to do good or even visualized its ultimate potential. It has the ability to benefit people and to change the world.
What is this financial force multiplier? We hardly have to ask. Plain and simple, it is life insurance.
Americans are demonstrably some of the most generous and philanthropic people in the world. Every year they give huge amounts of money to worthy causes all over the globe. Almost before a disaster is done wreaking its havoc, Americans have opened their hearts and wallets and are sending aid to the victims. Private assistance usually precedes and, in some cases, even surpasses, government help.
If underwriting rules say that total life insurance on high net worth individuals can match the value of their assets, imagine harnessing a fraction of that asset value to double an individual’s net worth. Imagine the transformational potential if even a fraction of our collective wealth– say, ten percent– tapped and used for charitable purposes linked to life insurance.
Over the last decade or so, microloans have become a growing method to help those in need in other countries. They are used to launch enterprises that start them on the path to self- sufficiency. Seeds are purchased to start small food plots for market crops. Livestock is provided to start small farms. Fabric and treadle sewing machines launch clothing manufacturing shops.
The loan repayment rates by recipients of the microloans are exceptional and the return-on-investment generated for those contributing to the funds is respectable. The largest return, however, is the satisfaction in seeing the dramatic changes created by the loans.
Some very high profile philanthropic individuals have made large public donations of their wealth to charitable causes. Bill Gates, Warren Buffet and Lorry Lokey all have given these amounts in a public forum, but it isn’t to say, “Hey look, ain’t I great!” Rather it is to challenge the nation to follow suit.
These gifts are fantastic and have done a tremendous amount of good. However, they don’t even begin to scratch the surface of what is possible. The really exciting part, however, is that you don’t need to be a multi-millionaire to use this financial lever.
The amplification factor works with $15- to $20- a- month amounts as well as larger sums. A lot of small levers combine to provide the financial lift of larger ones. Those with modest means have the ability to benefit charitable causes near and dear to their hearts and see their donations magnified.
Imagine, if you will, the impact that small monthly donations for $10,000 to $25,000 life insurance policies would create if the proceeds of those policies were ultimately turned into micro-loans. This is leverage on top of leverage. Does that pique your interest and fire your imagination?
Advanced planning scenarios help lower estate erosion while also providing significant resources to charitable institutions. It’s a win, win, win situation. Life insurance is frequently a prime mover in these planned giving situations.
Those of us in the financial community have a fantastic opportunity to expand the horizons of our client’s thinking. We can show them ways to indulge their desire to help others, even when they don’t have massive amounts of cash to spare. For those of more substantial means, we can share more elaborate approaches.
We are in the enviable position of providing clients with both the lever and the fulcrum to move their charitable world.