Date accidentally excised. Let’s say it was Y2K. My occasional business column in the Venice Gondolier.
Original title: Are You Asking For Investment Advice Or Approval? – JDW
Just because you know where you want to go doesn’t mean you are headed in the right direction.
Driving down U.S. 41, I am surrounded by automobiles with blinking directional indicators. Yet nobody is turning. At a stoplight, a vacationer from a foreign land leans out his window and asks for directions to a particular destination.
I know the place well.
“That’s about five miles back,” I tell him. “You are headed in the wrong direction.”
He looks at me with that expression. You know the one I mean, like I’m the one who’s lost. Apparently, my response isn’t what he wants to hear. “That can’t be true,” he grumps, then rolls up his window. When the light turns green, he drives on, heading farther and farther away from his stated destination, doubtlessly looking for someone to tell him he’s on the right track.
I am still thinking about this guy when I walk into my office. Carol tells me there a call waiting on line one. “Somebody wants your financial advice,” she says with a smile. I stifle a laugh.
The caller is not even a client. I have shared the wisdom of the ages with this guy. I give him hundreds of dollars of my time and nothing comes of it. I know where he is and I understand where he says he wants to go. He wants to preserve his assets and he wants growth and he wants to sleep well at night. Don’t we all? When he’s looking at a four-foot putt for a birdie to break a 100 for the first time, he doesn’t want to be worried about the stock market.
I know the place well. I tell him, he needs long-term care insurance for him and his wife, life insurance to cover the eventual estate problem, and he should put his money, anything he doesn’t need immediately, which is most of it, into an index annuity. It’s guaranteed and the extra return can be applied to his LTC premiums.
“I am too young for long-term care insurance,” he says, “and I am too old for an annuity.”
“No,” I responded. “You are in denial about the former and uninformed about the latter.” If he understood me, he ignored me.
“I am thinking about viaticals,” he says.
I muffle a scream. Better you should bury cash in a jar in the back yard. You see the advertisements all the time. Fourteen percent return guaranteed, one of them proclaims.
“The Wall Street Journal said viaticals may well be a smart investment,” my caller tells me.
“And when did The Wall Street Journal say that?” I ask.
“1991,” comes the answer.
You really want my financial advice? Do not make an investment based on an eight-year-old opinion that may not have been accurate when it was fresh.
A viatical is a business contract between one or more buyers and a terminally ill person. The buyer typically purchases an existing life insurance policy from the terminally ill person as a percentage of the death benefit. The ill insured gets to enjoy the proceeds during the remainder of his lifetime, and the buyer profits by the difference between the purchase price and the funds paid out by the insurance company.
Seems simple enough and not a little morbid.
But suppose the terminally ill person’s beneficiary sues to invalidate the contract. Suppose there are unknown claims against the estate. Suppose the terminal person doesn’t die right away. Suppose he makes a recovery. Suppose a miracle cure is discovered.
Every day this human being continues to live, the return on his money declines. Guess who is responsible to continue to pay premiums on that policy?
A viatical is basically a bet against the most basic instinct of mankind, self-preservation. Not a smart bet. And not even a real investment. A viatical is a private contract between the buyer and a person they haven’t met, depending on information – a doctor’s prognosis – the buyer cannot easily verify. There are no valid guarantees. There are no state auditors looking over anybody’s shoulder.
“Viaticals are entirely unregulated,” I tell my caller. “Entirely unregulated.”
“But 14%. Fourteen percent. That’s pretty sweet,” he says.
“You are too old for empty promises and too young to be swindled out of your assets,” I tell him.
“Still… 14%.”
His final words before hanging up.
He didn’t call wanting my advice. He wanted my permission.
But I couldn’t give him the answer he wanted to hear.
I know the place too well.
[Actual Gondolier editor’s note at end.]
Jack Welch is a licensed insurance agent with Bankers Life and Casualty in Sarasota.
He is a resident of Venice and was a journalist in Oregon for many years before moving to this area.
