Eurekonomics challenges conventional wisdom myths
By Jeffrey Reeves MA
Eurekonomics is a 21st Century system for building wealth and managing personal finances.1
Meanwhile, the Behemoths have successfully led Americans on a fool's journey. Behemoths created the myth that bigger is better, and that Behemoths know better than you how your clients should create wealth and manage their personal finances.
These Behemoths are:
- big government
- big unions
- big banks, investment firms, and stock insurance companies
- big businesses and their lobbyists
- big universities and school systems
- big community organizers
Here's one of the most pernicious of the conventional wisdom myths:
Accumulating cash value tax free in a life insurance policy is a bad idea. Instead, you should pay as few dollars as possible to buy the largest possible amount of life insurance. That generally means buying term insurance or underfunded universal life insurance.
This myth seems to make a lot of sense because the life insurance industry collaborated with the mutual fund industry and investment brokers over the past 30 or so years to convince Americans that it actually does makes sense.
It doesn't make sense. Eurekonomics challenges this myth.
First, let's take a look at some history. In 1975, when I was just 35 years old and a novice in the insurance and financial services industry, the typical American family3 had little or no equity investments such as stocks, bonds, and mutual funds. They also had no mortgages on their homes, or were working diligently to pay off the mortgage; credit cards were not in general use4 ; Americans for the most part owned their automobiles outright; had significant amounts of cash in savings accounts at a local savings and loan, bank, or credit union; and more savings growing tax free in whole life insurance policies.
One more thing: They had peace of mind about money issues. They knew that they would be able to care for themselves financially.
What happened? The short version5 is that the Behemoths convinced Americans to move their money from those secure savings vehicles -- where the Behemoths could not get their greedy hands on them -- into accounts that the Behemoths controlled. The timeline goes something like this:
- 1974: First there was the ERISA6 money grab from the biggest Behemoth of all -- the dolts in DC -- and the promise of a secure retirement via self-funded investment accounts, such as IRAs and 401(k)s. ERISA allowed the Behemoths to move money directly from Americans' paychecks into the accounts of the Behemoths. How's that working out for America? The Behemoths have trillions of your clients' dollars, there is no significant accountability, and Americans have no real control of the money they've given over to those accounts
- 1977: A. L. Williams attacked whole life insurance as being too expensive, offering low rates of return, and not providing enough coverage. He invented the "buy term and invest7 " lie that sucked billions of dollars from whole life insurance policies -- and other savings accounts that offered guaranteed returns -- and moved those dollars into risky mutual fund investments. We all know where that has led us
- 1978: Next, the failed investment firm E. F. Hutton invented universal life8 so they could illustrate higher returns within a life insurance contract and move more money from secure savings into the accounts of Behemoths. No matter that the policies didn't live up to their promise, translating into the loss of control of billions of dollars by everyday Americans like your clients
- These misrepresentations were followed by the credit card explosion that allowed the Behemoths to tap not only the cash reserves of American's, but cut further into their paychecks and cash flow at rates that make the loan sharks of the mob look like the Little Sisters of the Poor
- Then came the investing orgy and the refinancing and equity harvesting schemes of the 90s and early 2000s. We all know where that's led us.
There's just no room for savings in this scheme of things, so the Behemoths sell term insurance to stop your clients from putting their money into participating whole life insurance and local savings accounts where the clients have control.
Here's the Eurekonomics alternative to the current flawed paradigm.
You should use as many dollars as possible to buy the smallest possible amount of life insurance and accumulate the largest amount of tax-free savings in your life insurance policy . If that policy and its secure savings do not provide enough death benefit to care for your family if you die, then add a convertible term rider to the base policy or buy a separate convertible term policy to make up the difference.
Eurekonomics Challenge No. 1 Prove the conventional wisdom that accumulating cash value tax free in a life insurance policy is a bad idea. Instead, you should pay as few dollars as possible to buy the largest possible amount of life insurance. That generally means buying term insurance or underfunded universal life insurance.
Proof means that you use:
- Actual performance information. No forward-looking hypothetical illustrations that rely on averages and returns that we all know will never come to be
- Actual clients. No back-testing using results that are based on historical performance which no one investor or issued insurance policy actually achieved
- Long periods.
- maybe the three plus decades from 1974 [ERISA] until today
- the three plus decades since A. L. Williams foisted his distorted views on America 
- the three decades since E. F. Hutton misled America to believe that a shareholder owned investment company would create an insurance product that served the client first and the bottom line second 
- maybe the three plus decades from 1974 [ERISA] until today
2Conventional wisdom is doing what everyone else does and thinking what everyone else thinks because that is what they are doing and thinking.
3I know this since I had 15 uncles, 16 aunts, and dozens of cousins. I attended a small high school in the mid-to-late-50s, and knew many of the parents of my classmates, as well as those classmates themselves. They all fit this profile -- even the "rich kids."
4The bank card industry started in 1966, and didn't gain credibility for more than a decade. My brother designed the first ad campaign for the VISA card a few years later.
5The full report is available on request.
6Employee Retirement Income Security Act is a welfare plan for the other Behemoths that didn't want to continue paying for defined benefit pension/retirement plans.
7The full report is available on request.
8The full report is available on request.
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