David J. Murphy

The Past, the Present, and the Future walked into a bar. It was tense.

If you laughed at that, you might just be a geek. Like me.

Actually, I am a geek on many levels. I study nature. I devour books on theology, the history of inventions, and enjoy learning about scientific discoveries. But it gets worse. I am an enthusiast for life insurance.

I also like learning about things I will likely never do.

It was therefore pure bliss when, recently, while reading about the maple syrup industry, I coincidentally found the obvious need for life insurance, estate planning, and succession planning!

The Story (Abridged) of Maple Syrup Production
In 2014 the author Douglas Whynott published “The Sugar Season: A Year in the Life of Maple Syrup, and One Family’s Quest for the Sweet Harvest.” It is an excellent book!

Whynott explains that the process of making maple syrup is elemental. All it takes are trees and sap, fire and water, wood, steam, and smoke.

Maple trees react to temperature changes in late winter by heaving sap up their trunks. Maple sap is xylem sap, and it contains small quantities of sugar. In late winter, the tree’s root system draws nutrients such as dissolved minerals from the soil. This becomes the xylem sap that carries these nutrients from the soil to the leaves. When it is absorbed by the leaves the water is lost through transpiration.

For sap to flow, temperatures must fall below freezing (usually at night) and rise above freezing (usually during the day). The season typically lasts 4-6 weeks and ends when temperatures remain above freezing and buds begin to break dormancy.

Late winter’s sunny days in New England and Eastern Canada cause the temperature to rise from below freezing to above 40-50 degrees Fahrenheit. This sunlight-induced temperature change causes the trees to be “shocked.” The extent of the shock is directly proportional to the rate of the sap’s flow. The best results usually follow long, cold winters.

The process of making maple syrup begins by tapping the trees. In late January, February, and as late as March, workers drill holes, drive spouts, and then either affix buckets (traditional) or insert tubes (modern). Drill bits used in tapping are quarter inch in diameter. The spouts are tapped into the hole. Three taps are just right. Four is too many. The tubes are eighteen inches long and referred to as a “dropline.”

A single tap hole could ideally yield 40+ gallons of sap in a season; however, a more typical average is between 5-15 gallons. Sugar content of the sap varies widely among individual trees, but generally averages two to three percent. A hydrometer is used to measure sugar content.

It takes approximately 40 gallons of sap to yield one gallon (assuming 2.5 percent sugar) of maple syrup. Sugar maple (Acer saccharum) is the primary species targeted. Maple syrup is sold by the pound on the bulk market, rather than by the gallon. There are eleven pounds in a gallon.

On March 2, 2015, the USDA published the United States Standards for Grades of maple syrup. Section 52.5964 addressed the importance of Color in grading syrup. Maple Syrup can only be one of four grades—Golden, Amber, Dark or Very Dark. The color is defined as “the percent of light transmission through the syrup as measured with a spectrophotometer using matched square optical cells having a 10mm light path at a wavelength of 560 nm. The color value is expressed as percent of light transmission as compared to analytical reagent glycerol fixed at 100 percent. Percent transmission is symbolized by ‘%Tc.’”¹

• Golden—is the lightest color and is usually associated with the first sap flows during the sugaring season and offers a delicate flavor and lightest color. It often has hints of vanilla.
• Amber—is slightly darker than Golden with a light amber color and a rich, full-bodied maple taste of medium intensity.
• Dark—has a robust flavor that is more pronounced than Amber syrup and has a dark amber color.
• Very Dark—is the darkest of all the grades and has a very intense maple flavor. Consumers like the strong flavors of maple associated with this grade.

Syrup Gets in the Blood
Native Americans have a long history of producing maple sugar, a tradition which was adopted by early settlers. Over the last two hundred years maple syrup has become big business. In 2021, the United States produced 3.42 million gallons of maple syrup. In 2020 (excluding Vermont) there were 7,360,000 trees tapped in the United States. Vermont alone had 6,150,000.²

In 2021 these five states led the country in maple syrup production:³

• Vermont: 5,900,000 taps
• New York: 2,900,000 taps
• Maine: 1,890,000 taps
• Pennsylvania: 715,000 taps
• New Hampshire: 530,000 taps

In 2017 the United States was home to an estimated 9,492 maple farms.⁴ Like those in the other leading states, most VT producers are small, independent makers with an average of 3,451 taps that produce 1,221 gallons of syrup.⁵

Key players in the market as identified by Market Research Future in their Global Maple Syrup Market Research Report include multigenerational family farms working with local sugar makers to procure maple syrup.⁶

Tip: According to Manta.com (a great prospecting tool) there are “488 results matching ‘Maple Syrup Manufacturers’ near Burlington, Vermont.”

Children on these family farms grow up tapping trees in knee-deep snow, chopping wood for the fires, tending to the tasks of boiling, and bottling the syrup, and greeting customers. They spend their youth in and among the trees and absorb the magic of steam curling over the roof, sparks rising into the night sky, the scent of wood, the sweetness of the sap, and the character of a family farm.

In his book, Douglas Whynot chronicles one particular family with the surname Bascom.

Succession Planning Gets Sticky
The Bascom family has been producing maple syrup since 1853. Over seven generations propelled Bascom Maple Farms to current day. These multiple generations of people all had deep affection for maple syrup. James Bascom was a clever farmer who made a light-colored maple syrup in the 1800s. His son Eric attended theological school in Maine, where he met his wife, Elda Frost. After they married, they gave birth to a son named Ken. Both Eric and Elda were ordained ministers. In the late 1920s Eric bought Stone House Farm on Mount Kingsbury near Acworth, New Hampshire. The purchase price was $2,500, and Eric paid $30 per month to the widow who owned it.

Eric ministered to a church in Canterbury until the Great Depression made it difficult for congregations to afford ministers. That is when he turned to full-time farming. At first, Eric raised chickens, grew potatoes, and started a herd of dairy cattle. In addition, he tapped maple trees. Eric’s son Ken was thirteen when the family moved onto the farm permanently.

In 1942 the Bascoms made 600 gallons of syrup. Ken bought the farm from his dad in 1950 for $25,000. Eric and Elda returned to ministry. Ken and his wife Ruth built a new house on the farm and named it “Happiness Lodge.” He began marketing “Happiness Lodge Maple Products.”

Four children came along: Bruce, Nancy, Brad, and Judy. Bruce, the oldest, had a bad stutter growing up. This defined his childhood and resulted in a lack of confidence. He worked constantly beside his dad. “Ken would stand in front of Bruce waiting for him to get the words out and sometimes walk away before he did.”⁷ Bruce remembers his childhood as a time when he stood in the shadows trying to get out a complete sentence.

Ken was a man who yelled a lot, fired people often and quickly, was generally a tyrant to work for, and had no patience for managing people. Ken and Bruce fought. And then fought some more.

“In 1979 they drew up a partnership agreement by which Ken would sell the business to Bruce in 1989, under a financing agreement with interest.”⁸ While Ken focused on production, Bruce paid attention to profit. He developed great business acumen and his confidence grew.
Back in 1954, Ken Bascom hung 3,900 buckets and made 825 gallons of syrup. That grew to 6,900 buckets and 2,090 gallons in 1964. By the year 2000, the Bascoms produced 11,212 gallons of syrup from 35,000 taps.

Morten Bennedsen is professor of family enterprise at INSEAD and the academic director of the Wendel International Centre for Family Enterprise. He wrote, ^{“Too many business successions happen by heart attack. If you don’t plan and if the founder doesn’t want to speak about these things, ultimately nature will make the transition, and in the worst possible way.”9}

In 2005 Ken Bascom was diagnosed with stomach cancer. Before he died, his brother Paul asked him what it had been like to work all these years with Bruce. He said, “Have you ever been on a runaway horse?”¹⁰ Bascom Maple Farms now had one owner (Bruce), and he had become a force in the Maple Syrup Industry.

Bruce Bascom turned 60 in 2010. That year he expanded his operations by adding a huge new building. The cooler alone (the basement) was 100 feet wide and 210 feet long and contained 294,000-cubic-feet of refrigeration space, enough to hold 8 million pounds of syrup. He said, “My retirement will be spent paying for this new building.” Then he added, “The future is my biggest problem.”¹¹

He did not have offspring coming into the business, had no successor in the business, and had no plan for what would happen to the business if he died.

Bruce admitted that he had grown the business beyond his ability to manage it. He did not believe he could find the necessary tiers of people who would be motivated enough to make everything run smoothly.

“If I die, no telling what will happen. They’ll (his family) have to sell off parts of it.”¹²

Attention Independent Financial Professionals
Family businesses are hives of underlying, unspoken emotionality. Business decisions are not just business decisions but hopes and dreams of a legacy generation. Difficult things go on in family businesses like coercion, harassment, and manipulation. They are a hot mess filled with both promise and a sense of entitlement.

Every family business’s succession plan reflects the uniqueness of the family dynamics. Not every business owner wants to transition their business in the same way or at the same time. Some owners want to exit completely at a certain date. Others want to stay involved to a lesser degree over time but never exit entirely. These issues, as well as many others, must be considered.

Point: Without your help family businesses may not have a plan or achieve successful transition from one generation to the next.

With your assistance, families can address succession planning with reasonable care. The topics to discuss include:

• Anticipated timing
• Successor(s) identification
• Process for valuing the business
• Clear steps for implementing the plan
• Decisions regarding funding
• A plan for communicating with employees, customers, and other family
• Tax planning
• Contingency planning

Succession planning actually has two parts—the legal plan (written by an attorney) and the funding. One popular funding source is to use a life insurance policy to fund the transfer.

Tip: Here are some important questions to ask when meeting with the owners of a family business:

• Do you have a written succession plan in place?
• If yes: How is it funded? If no: Are you content knowing that your family will feud and fight?
• Wouldn’t you like to know today what will happen to the business if something happens to one of the owners?
• Are all the children going to be involved with the operation of the business if something happens to you?
• Does it make sense to transfer business ownership to children with no interest in the business?
• Do you want to treat your children equally or equitably?

Summary
The primary purpose of succession planning is to maintain ownership and operations within the family and the management/ownership team. Without a proper plan there is no way to prevent interference from the exiting owner’s other family members. Planning, preparation, and funding are needed in order to provide liquidity to pay estate taxes/retirement and avoid disputes with the exiting owner’s family regarding succession and value.

With your help, family businesses can achieve a smooth transition to the next generation.

The past, the present, and the future walk into your office. They represent three generations of a family business. Are you prepared to help them?

Footnotes:

1. https://www.ams.usda.gov/sites/default/files/media/MapleSyrupStandards. pdf.
2. https://www.uvm.edu/extension/agriculture/maple-statistics.
3. https://www.nass.usda.gov/Statistics_by_State/New_England_includes/Publications/Current_News_Release/2021/Northeastern%20Region%202021%20Maple%20Syrup%20Report.pdf.
4. “2017 Census of Agriculture,” Volume 1, Geographic Area Series, Part 51 (United States Department of Agriculture, National Agricultural Statistics Service, April 2019), https://www.nass.usda.gov/Publications/AgCensus/2017/Full_Report/Volume_1,_Chapter_1_US/usv1.pdf.
5. Ibid.
6. “Maple Syrup Market Research Report- Forecast to 2023 | MRFR,” accessed August 23, 2019, https://www.marketresearchfuture.com/reports/maple-syrup-market-4944.
7. “The Sugar Season: A Year in the Life of Maple Syrup, and One Family’s Quest for the Sweetest Harvest,” by Douglas Whynot, Da Capo Press; Illustrated edition (March 4, 2014), Boston, Massachusetts.
8. Ibid.
9. https://www.cnbc.com/2021/11/14/the-real-life-family-business-drama-not-on-hbos-succession.html.
10. “The Sugar Season,” by Douglas Whynot, page 80.
11. Ibid. Page 35.
12. Ibid. Page 120.

“Begin where you are and such as you are, without aiming mainly to become of more worth, and with kindness aforethought, go about doing good.” —Henry David Thoreau

“You can’t go back and change the beginning, but you can start where you are and change the ending.”—C.S. Lewis

On a dark and rainy morning in Cincinnati I found myself in heavy traffic heading downtown for an appointment with the owner of an investment company headquartered in my city. I secured an appointment with him on a thinly stretched referral. Everything rode on the back of the first few seconds when we shook hands. I had rehearsed what I was going to say and how I was going to say it.

Suddenly, on the right berm, there appeared a woman who stood beside her car looking at a flat rear driver’s side tire. She held an umbrella over her head, but to no avail since the sweep of passing cars caused moisture to swirl around her.

Looking at the time, and knowing the importance of my imminent appointment, I easily rationalized not stopping to help. On the other hand, “Look at her,” I thought, “She is in trouble.” I pulled over, urged her back into the car, removed the spare tire from the trunk, jacked up the car, replaced the flat, and had her going in less than 20 minutes.

My white shirt wasn’t. My tie looked like a washrag. I was now going to be late for the appointment.

The woman expressed sincere appreciation and we parted. I drove into town, parked the car, stopped into the bathroom off the lobby of a proximate hotel, cleaned the charcoal-colored grease from my hands as much as possible, and headed up the elevator to the prestigious offices of the investment company.

There, at the receptionist desk, sat a woman with a familiar face. It was the very woman whose tire I had changed!

Needless to say, upon hearing about the encounter she and I had that morning, this successful man in the corner office cleared his calendar so we could meet right then and there.

Then and There
“Here and now.” We throw these words about like toast crumbs we whisk from the breakfast table. But should we?

Look again at the two quotes above. “Begin where you are.” “Start where you are.” These are formidable words! All independent financial professionals will do well to carefully consider these four words, and then incorporate them into the advice that their clients need.

Let’s review these four words, Begin Where You Are, one at a time.

Begin:
The Cambridge Dictionary¹ defines begin this way:

• “To start to happen or exist.”
• “To start to do something.”
• “To do or be the first part of something that continues; start.”

When we are pressed into writing something—an essay, a letter, a note—the blank page before us is intimidating.

When we are working with people who have experienced bankruptcy, mounds of debt, disastrous investment results, reduction in income, or other financial woes and obstacles, we are likely to hear them say, “I don’t know where to begin.” At that moment all of their financial future rises up like so much looming blank paper.

Application(s):

• College Funding:
  • Question: “My children are now ages ten, eight, and six. How will I ever afford to send them to college?”
  • Answer: “The best advice I can give you is to begin now, to start a college savings fund, to make regular deposits, perhaps even by payroll deduction.”
• Retirement Planning:
  • Question: “My wife and I are ages 54 and 53. We have exactly $49,000 saved for retirement.”
  • Answer: “The best advice I can give you is to begin saving more now, to make sacrificial investments each month, and to consider accepting more risk now because time is limited.”
• Business Continuation Planning:
  • Question: “We have a Buy-Sell Agreement that states that when one of us dies or retires, that the Buy-Sell is triggered. The problem is my business partner is now 59 and looking to retire in five to six years. I have nothing set aside for the buy-out!”
  • Answer: “The best advice I can give you is to begin now, to start funding a permanent life insurance policy to accomplish both the living buy-out, and to prepare for the event that a buy-out becomes necessary due to death.”

Where:
Every person we meet is somewhere in their life “between the forceps and the stone.”² They are at a place in their life that they reached through either effort, or neglect, alone or with assistance, on purpose or accidentally.

The word “where” denotes location. All clients should be asked to consider the “where” of their lives. These are helpful questions:

1. You are somewhere right now. Can you describe it for me?
2. Notice the reality of the space around you. What is happening?
3. How did you get here?
4. Is there a purpose for you being right here?

When we encounter people for the first time, we see only the snapshot of their lives. Their habits and routines, beliefs, principles, preferences, prejudices, and practicalities must be properly assessed if we are to help them succeed financially. We discover what we need to know by asking questions.

Application(s):

• Estate Planning:
  • Question: “We bought our lake home for vacations and as a family retreat, but what will happen to it when we die?”
  • Answer: “Well, our planning must begin with questions:
    • Who actually wants it?
    • Who’ll pay for upkeep?
    • What’s the best form of ownership?
    • What’s the end game?”
• Longevity Planning:
  • Question: “If people are living longer, what does that mean for our retirement income needs?
  • Answer: “Well, our planning must begin with questions:
    • What does financial stability in retirement look like to you?
    • What do you wish you could afford to do in retirement? Do you have a plan to meet that goal?
    • How many months or years’ worth of your income have you saved?
    • How many years beyond retirement age should you plan for?”

You:
The common denominator for nearly all human beings is trying hard all our lives to be other people when in fact we were designed to be ourselves. This is particularly impactful in financial planning.

Founded by Bola Sokunbi, Clever Girl Finance® is one of the largest personal finance media/education platforms for women in the U.S. and enjoys the reputation of being one of the best finance websites for women. I discovered a helpful article there regarding the dangers of comparing ourselves with others.

“Knowing how well we are doing compared to other people isn’t helpful at all.”³

Why?

1. Enough is never enough. “If we see someone who has something better, suddenly the things we have just don’t seem good enough. The problem with this cycle is that it doesn’t end. When we compare, we are forever searching for more.”⁴ What each of us needs and wants is peculiar to us and we need to block the temptation to compare.
2. Comparing our financial wellbeing with others will only make us proud or unhappy. “Comparison is a liar. It tells you that you will be happy if you compare and then get what others have. But often, it’s the opposite. The higher we climb on the comparison ladder, the unhappier we may feel.”⁵
3. No one anywhere, at any time, is exactly like you. “The idea of wanting everything that others have, or more than they have, is actually pretty silly. Why? Because everyone is different! You can’t compare what isn’t the same.”⁶

Application(s):

• Legacy Planning:
  • Question: “We know people who are leaving their children and grandchildren significant wealth. How can we do that?”
  • Answer: “Are your children expecting something you cannot provide?” A better legacy than leaving loads of money is passing on the attitude of gratitude. Teach your children to be grateful for what they have. Then, anything you bequeath to them will be a surprise.
• Real Estate Investments:
  • Question: “How much home can we afford?”
  • Answer: “Whose needs are you trying to satisfy? Be excited about your own life. It’s difficult to purchase the right real estate for your own life when you are looking at someone else’s life and lifestyle.”

Are:
The word “are” places us in time.

• We were not always in existence.
• We have a past. We will have a future. We are here now.
• We are right here where time touches our lives.
• All our living takes place in the present.
• What will we do with the now?

Every person’s financial present has echoes of a financial past and will prove a precursor to a financial future. Past decisions led to indebtedness, and prior lack of self-discipline led to the shortage of current liquid funds, savings, and/or investments. Failure to apply sound financial principles in the present will cause a similar ripple effect in the future.

Application(s):

• A full financial review requires asking the right questions,⁷ like these:
  • What are some of your proudest financial accomplishments so far?
  • How did you get where you are today?
  • What plans do you have for your money?
  • What would you like to accomplish?
  • Do you feel like you are on track for where you want to be financially?
  • How do you feel about your spending habits? Do you maintain a budget?
  • Why are you here? Why is that important to you?
  • Who are you financially responsible for?
  • What is really important to you that we didn’t discuss today?

Summary
For independent financial professionals (IFPs), nothing can be more important than helping clients grasp the context of their lives, clearly ascertain the trajectories of their financial habits, and make present-day adjustments to help them accomplish their dreams or get back on track. Perhaps there is no better tool than these four simple words: “Begin where you are.”

Caution: In order to be effective, the IFP must see the client clearly, individually, and not impose assumptions, apply techniques, or suggest action steps incongruent with who the client truly is.

As C.S. Lewis wrote, “Take care. It is so easy to break eggs without making omelets.”⁸

Footnotes:

1. https://dictionary.cambridge.org/us/dictionary/english/begin.
2. Joni Mitchell, © March 19, 1976; Crazy Crow Music (as “Traveler”), renewed November 5, 1976, with additional lyrics (as “Hejira”).
3. https://www.clevergirlfinance.com/about/.
4. https://www.clevergirlfinance.com/blog/never-compare-yourself-to-others/#.
5. Ibid.
6. Ibid.
7. https://emoneyadvisor.com/blog/the-key-to-deeper-relationships-ask-the-right-questions-to-best-leverage-financial-planning-technology/.
8. Letters to Malcolm: Chiefly on Prayer, C.S. Lewis, Mariner Books; First edition (November 4, 2002).

“You can make anything by writing.”—C.S. Lewis

When I began my career in life insurance, I represented a “Northeastern Mutual” as such companies were called back then. Initially, I sold life iInsurance primarily to families. A senior agent in my office told me how to make a favorable impression on my clients such that they would remember me fondly. He said, “Throw out the plastic cover in which the Company issues the policies and buy leather pocket folders instead. Place each policy in the leather folder and present it formally when you deliver the policy.”

This turned out to be something the clients liked, but I doubted that it made all that much difference in our client-agent relationship.

Then something happened years later when I was now in the closely held business market. I sold a $5 million 20-year level term policy to a wealthy client. We agreed to meet so I could deliver the policy. I neglected to wait until more leather folders arrived. I went to the man’s office and handed the policy to the client across his desk. It was not even in a plastic cover. The policy consisted of the front and back paper cover that wrapped the policy pages, and all of it stapled together.

When he closed his fingers over the fold, an errantly raised staple punctured the tip of his forefinger. He said, “ouch,” and dropped the policy on his desk. What he said next convicted me and caused me to blush with shame.

“I am paying $9,000 per year for this insurance. How much does someone have to spend before you are willing to invest in a proper policy wrapper?”

Lesson learned.

Paper
“The visionary starts with a clean sheet of paper and re-imagines the world.”—Malcolm Gladwell

We take many things for granted, including paper.

In the Winter of 1777-78, George Washington’s Continental Army famously suffered serious deprivation in the snows and cold of Valley Forge. Throughout the Spring they resupplied and rebuilt their fighting preparedness. As of June 1778, however, they still lacked one key necessity—paper for their muskets. To achieve readiness ahead of the Battle of Monmouth, army commanders sent fighting men out in search of paper. They found a house where Benjamin Franklin once lived and where there was a printing office. There they found 2,500 undistributed copies of a sermon written by the Reverend Gilbert Tenant, entitled, “Defensive War.” They sent all this paper back to Monmouth for use in plugging the muskets. In the end, the ferocious battle with the British ended in a draw. ¹

When I attended Miami University in Oxford, OH, in the late 1970s, a popular major was Pulp and Paper Technology. Ohio was home to numerous paper mills, including several for Mead Corporation, which at the time was one of the largest paper producers in the United States. The Mead Paper Mill in nearby Dayton, OH, was established in 1848.

The first U.S. paper mill was built in Pennsylvania in 1690. Until the mid-1860s American paper mills used the Chinese method of shredding old rags and clothes into individual fibers to make paper.

The paper used to print the original Declaration of Independence was Dutch. The first copies of this quintessential American document bore at least three different Dutch manufacturer watermarks. “The Federalist Papers,” a 1788 collection of essays by Alexander Hamilton, James Madison, and John Jay were printed on English paper.²

The first wood-based paper was not made in the United States until 1863.

Before the 1870s, newspapers were printed on rag paper made of cotton and linen fibers, according to Timothy Hughes Rare and Early Newspapers, a dealer in old newspapers. These materials often originated as discarded clothing. Rags. “Because so much paper was consumed in the printing of newspapers, the latter became known as ‘rags.’”³

Rags to be made into paper were in short supply in the United States during the Civil War. After the Battle of Gettysburg in the Summer of 1863, ragmen came to strip off the blood-soaked uniforms from the fallen to sell to papermakers. “Three ragmen loaded their wagons with the clothing they had stolen and sold it to the Jacob Hauer paper mill on nearby Codorus Creek.”⁴

The mill found supplies of rags difficult due to the disruption of the war on their supply chain of wandering ragmen (men who gathered rags from people looking to dispose of their worn-out garments). The mill welcomed any and all rags up until the uniforms, bandages, and slings arrived from the Gettysburg Battlefield. “The army sent in cavalry and infantry troops to stop the stealing, and the 21st Pennsylvania Cavalry apprehended the three ragmen as they were taking a wagonload back to the paper mill.”⁵ These three men served their punishment by clearing battlefields of dead horses, the dirtiest and hardest of jobs. The mill went out of business, and subsequently was sold at auction to a man named Philip Henry Glatfelter. The Glatfelter Company still makes paper today at the same location.

As the demand for paper grew, the mills changed to using cellulose fiber from trees because wood was less expensive and more abundant than cloth.

Life Insurance on Paper
In the distant history of life insurance, companies issued certificates to the person who sought financial assistance upon the death of the insured. A sort of gambling became popular in which people bought certificates of life insurance on public figures. In the U.K., the Life Insurance Act of 1774 put an end to gambling in that it stipulated a person had to have an insurable interest if he was to take out a life insurance contract on somebody else.

In America, individual states began crafting regulations designed to protect life insurance consumers and restrict fraud. Not surprisingly, the states with the most active legislatures were also those states in which the most insurance companies were domiciled. (New York, Connecticut, Pennsylvania, New Jersey, Massachusetts.)

Whereas only 43 companies existed in the United States on the eve of the Civil War, the growing popularity of life insurance resulted in the establishment of 107 companies between 1865 and 1870.

Until the late 1860s, all of the life insurance policies issued in the U.S. were printed on rag or linen paper. The majority of these policies consisted of one or two pages. No consistent standards existed in regard to the provisions or stipulations of these policies.

A demand for federal oversight of the life insurance industry grew in the aftermath of the Civil War. Thankfully, the industry and the individual states agreed that the life insurance industry was best governed through state regulation. However, an apparent need arose for a method for coordinating regulations between states.

On May 24, 1871, the very first meeting of The National Convention of Insurance Commissioners convened in New York. Representatives from the various participating states traveled by stagecoach and train to New York City. The organization changed its name officially in June 1936 at the Annual Meeting which took place in St. Paul, MN. The new name: “National Association of Insurance Commissioners.”

In 2021 the NAIC celebrated its sesquicentennial anniversary. This is from the NAIC’s website:

Thinking Nationally, Acting Locally: Our state-based system brings regulators together and empowers them to act in the best interests of the people in their states. At the same time, we also enable commissioners to collaborate and learn from each other, while applying resources to individual states’ needs.⁶

In 1995 the NAIC adopted the “Life and Health Insurance Policy Language Simplification Act” known as NAIC Model Regulation 575.

This Model Regulation provides guidance to life insurance companies in drafting policy language. “The purpose of this Act is to improve policy language in order to facilitate the insured’s understanding of the coverages provided.”⁷

Section 5, Minimum Policy Language Simplification Standards, provides this guidance: “No policy forms…shall be delivered or issued for delivery in this state, unless:

(1) The text achieves a minimum score of 40 on the Flesch reading ease test;

(2) It is printed, except for specification pages, schedules, and tables, in not less than ten-point type;

(3) The style, arrangement and overall appearance of the policy give no undue prominence to any portion of the text of the policy or to any endorsements or riders; and,

(4) It contains a table of contents or an index of the principal sections of the policy, if the policy has more than 3,000 words printed on three (3) or fewer pages of text.”
Note the words: “It is printed.”

What’s on the Paper
A typical life insurance policy spells out who the parties to the contract are. The policy defines each of the following: the Insurer, the Insured, the Applicant-Policy Owner, and the Beneficiary. Beyond defining the parties, life insurance policies contain extremely important provisions. These are designed to provide the consumer with understanding, protection, and clarity. Many standard features were introduced singularly by individual companies throughout the industry’s history.

Examples:

• In 1864, Manhattan Life introduced the Incontestability Clause into their policies in an industry first that became law 40 years later.⁸
• In 1860, New York Life was the first insurer to issue life insurance policies containing a Nonforfeiture Clause, entitling the policy owner to a prorated benefit or refund if they missed a payment.⁹

In addition to these key provisions, life insurance policies include:

• Free Look Provision. Companies give the policy owner a period of time to return the policy after acceptance and receive all premiums paid.
• Grace Period. Companies grant the policy owner an additional period of time to pay the premium after it has become due.
• Suicide Clause. Insurers will not cover a death caused by a suicide that occurs during the first two years of the policy.
• Reinstatement. Companies allow policy owners to reacquire coverage under a policy that has lapsed due to failure to pay premiums if new proof of insurability and payment of all missed premiums are submitted.
• Entire contract. Companies will include a provision that the policy, together with the attending application, a copy of which application shall be attached to the policy and made a part thereof, shall constitute the entire contract between the parties.

The hands of a policyowner, who is in receipt of a freshly-delivered life insurance policy, hold—in readable print and on spine-bound paper—the contractual reality of both the dream and the determination to provide for one’s family.

Summary
Life Insurance is a printed contract, governed principally by state law. It is basically a promise that the issuing carrier makes to pay a specified amount of money to a designated beneficiary when the insured person dies. The promise is made in consideration of the application and the payment of premiums.

The policy is a printed document that covers all the benefits, terms, and conditions of the policy. Within the legal world of contracts, life insurance policies are unique because they contain provisions that are aleatory, unilateral, and contracts of adhesion.

“’Aleatory’ means that the insurer’s promise to pay the policy proceeds is conditioned upon an uncertain event (i.e., the insured’s death within the term of the contract).

‘Unilateral’ describes the fact that the insurance company is the only party to the contract which makes a legally enforceable promise.

‘Adhesion’ is a legal recognition that the policyowner was not in a position to negotiate with the insurer on the terms of the contract and the resulting document is not evidence of the normal ‘give and take’ negotiation and bargaining found in a standard contract.”¹⁰

All this, and paper too.

While we no longer rely on paper wads to prepare our weapons, paper is an important part of everyday life. “We use wrapping paper, greaseproof paper, sandpaper, paper napkins, paper receipts and paper tickets. We decorate our walls with wallpaper, posters and photographs, we filter tea and coffee through it, package milk and juice in it and as corrugated cardboard, we use it to make boxes.”¹¹

Paper, in the form of a life insurance policy, acts as material proof of our promise to provide for our dependents, ensuring that our planned goal for their economic well-being, even after our death, will actuate in a disciplined manner.

We can make our love posthumous because of two wonders: Life insurance and paper. Even as precious as trees are, it is fair to say that life insurance is worth the paper.

Footnotes:

1. “Paper—Paging Through History,” by Mark Kurlansky, W. W. Norton & Company; Illustrated edition (May 23, 2017), ISBN-13: 978-0393353709.
2. Ibid.
3. https://www.cincinnati.com/videos/news/2016/04/08/82802968/.
4. “Paper – Paging Through History,” by Mark Kurlansky, W. W. Norton & Company; Illustrated edition (May 23, 2017), ISBN-13: 978-0393353709.
5. Ibid.
6. https://content.naic.org/about.
7. NAIC Model Regulation 575 Life Insurance Policy Language Simplification, April 1995.
8. https://www.manhattanlife.com/About-Us/History.
9. https://www.newyorklife.com/newsroom/history-of-innovation.
10. Article written by Stephan R. Leimberg, Robert J. Doyle, Jr., and Keith A. Buck found here: https://www.thinkadvisor.com/2016/08/10/15-legal-issues-every-life-insurance-policy-should-address/.
11. “How the invention of paper changed the world,” Tim Harford, BBC World Service, March 2017, https://www.bbc.com/news/the-reporters-38892687.

“I’m writing a book. I’ve got the page numbers done.”—Steven Wright

At a few points in my career, I was responsible for product development for the life insurance carriers that I served as either a consultant or an employee.

With each product developed we had one great fear: that we would only sell a handful of policies. These, in turn, would require the companies to maintain them on the administrative systems, adjust the plan description files with each system modification, and require the company to report and track the profitability of even the small number of policies on the books until they lapsed or became claims.

The first thing I did in that role was ask our distributors what they thought was missing in our product portfolio. Then I asked my sales teams what they believed they could enthusiastically get behind in regard to a new product. Lastly, I met with our administrative teams and sought their advice, concerns, and ideas.

Then the fun began. I made an appointment at the State Departments of Insurance in my home state and in the neighboring states. I would show up with a box of donuts for the civil servants and begin reviewing the filed product forms of our leading competitors. The donuts were intended to grease the skids for all the photocopies I needed.

Armed with the suggestions of our home office staff, the dreams of my sales teams, the unrealistic expectations of our distributors, and a decent understanding of the competitive landscape, I produced an Executive Summary of a proposed new product. The next step—approval by senior management.

At that point our actuarial team took over. I provided them with competitors’ rates, product performance comparisons, and product feature summaries.

In a short while, I could hear the numbers crunching.

Life insurance is many things but, at the bottom, it is about numbers. Math.

Guesses
The number of ants alive on the earth right now is estimated at 1016 (ten thousand trillion). This educated guess means that there are roughly one million times more ants than the number of people alive today (approximately 7.5 billion). In a happy coincidence, individual ants vary in weight between one and ten milligrams, which means “the remarkable result of these several guestimates together is that all the living ants weigh about the same as all the living humans.”¹

There exists, therefore, a rough biomass equivalence between ants and people.

(Lest we get too impressed, the total mass of either all ants or all people would fit within a cubic mile of space, an area that could nearly be hidden in remote portions of the Grand Canyon.)

Question of Importance: Do educated guesses really matter? (Think COVID-related cases, hospitalizations, and deaths.)

Precision
“Crucial to the making of almost anything is the matter of its measurement. In English, this usually involves the use of the near-invisible adverb how, with its interrogative determination of to what extent and to what degree something might be. How long is it, how massive, how straight an edge, how curved a surface, how hard, how close the fit?”²

Today, most of the world utilizes the International System of Units (SI). This system, adopted by all countries except the United States, Burma, and Liberia, “defines the seven fundamental units of length, mass, time, electric current, temperature, amount of substance, and light intensity—otherwise known as the meter, the kilogram, the second, the ampere, the kelvin, the mole, and the candela.”³

In addition to these physical measurements, manufactured things possess geometrical characteristics, such as straightness, flatness, circularity, cylindricity, perpendicularity, symmetry, and parallelism. In the world of engineering, these physical and geometrical characteristics are measured to the finest tolerance, that is, the least permissible variation in dimensions or geometry.

According to a definition from The American Society of Mechanical Engineers, the industry standard, ASME Y14.5M, tolerance is “the total amount a specific dimension is permitted to vary. The tolerance is the difference between the maximum and the minimum limits.”⁴

Example: If an ideal part is to be 0.5 mm +/- 0.1mm, any resulting product between the range of 0.4 to 0.6 mm will be acceptable; the rest will be rejected.

Tolerances may also be expressed with any number of decimal places. The more decimal places are included, the stricter the tolerance is.

Example: Four decimal places, expressed as (.000x), (e.g., ±0.0005″).

Question of Importance: Aren’t you glad that there are rigorous requirements for precision manufacturing, especially for something as important as aerospace parts (think, jet engines) where a variation of just a few thousandths of an inch can lead to equipment failure or worse?

Guesses, Precision, and Importance in Financial Services
Products in financial services require adequate pricing in order to be both marketable and sustainable. In the life insurance industry, the elements of product pricing include mortality, interest rates, expenses, sales compensation, and lapse assumptions. Annuities, disability income and long term care products require similar pricing assumptions with the addition of morbidity.

Getting these assumptions (guesses) wrong can have devastating results.

Example: Long term care.

Paying for long term care is one of the greatest financial risks Americans face in retirement. Studies show that one-in-five individuals can expect to spend more than two years in need of long term care. This exposure represents a significant financial risk.

Back in the 1980s and 1990s an increasing number of insurance carriers began offering LTCI to fund out-of-pocket payments by the elderly and their families. By the mid-to-late 1990s more than 100 companies were selling policies to individuals and employer groups. “In 1990, 380,000 individual policies were sold; by 2002, 755,000 policies were sold in that year.”⁵

“In 2003, the pattern of annual increases in sales came to an abrupt end. In fact, LTCI policy sales began to decline rapidly. Between 2003 and 2009 individual policy sales declined by nine percent per year. Thus, in 2009, fewer policies were sold than had been sold in 1990. Moreover, while in 2002 there were 102 companies selling policies, by 2009 most of these companies had exited the market; that is, they had stopped selling new policies.”⁶

Question: It is worth asking, if the need is important, and the marketplace is growing, why would sales plummet and companies exit the product space?

Certainly, the companies entered the market because they believed it represented a profitable opportunity. “Many companies entered this market to take advantage of an opportunity that they knew existed, even if they were not completely certain about how to exploit it profitably. For 40 percent of the companies that left the market, their initial business strategy was to grow modestly in order to learn the business and improve their management of the product over time. Only 16 percent had aspirations of becoming market leaders.”⁷

It all comes down to math. (And wrong guesses.)

“Regarding the pricing of early policies, there was little basis on which to develop an estimate for future morbidity (i.e., the chance that someone would develop a condition that required use of long term care services) in the context of private insurance. In order to price these early policies actuaries relied on national data sources like the 1977 and 1985 National Nursing Home Surveys.

For other pricing parameters, like voluntary lapse rates and mortality, there was a reliance on the experience of Medicare Supplement policies and standard mortality tables. For this reason, voluntary lapse rates priced into initial policies were much higher than what they ultimately turned out to be. (In fact, there is no other voluntary insurance product in the market that has experienced lower voluntary lapse rates than what is found in LTCI policies.)”⁸

The math is important: “Even small errors on multiple assumptions can lead to major changes in the product’s underlying profitability. All of the major determinants of premium and product profitability have been going in the wrong direction: Interest rates are significantly lower than what was priced for, voluntary lapse rates are lower than for any other insurance product, morbidity is somewhat worse than expected and mortality is actually improving.”⁹

Distribution Influences Math
I had a hand in developing many different types of life insurance products, including whole life, current assumption whole life, universal life, level term, and indexed universal life. We made many educated guesses and relied on less-than-precise models. We did, however, focus on the important. Here are what we deemed important:

• The product would be sustainable. It could remain on the shelf indefinitely and not impact the bottom line negatively.
• The product met a definable need in the market. There was a real person with a real need that the product was designed to meet.
• The company had the administrative systems to service the policyholders who bought the products. The policyholder could expect, and receive, satisfactory service in terms of time standards, accuracy, and dependability.

Over the last several decades, insurance carriers, brokerage general agencies, and independent financial professionals have all alike pushed the knife edge of competitive advantages deep into the heart of long-term profitability for life insurance, annuities, disability income, and long term care products.

LIMRA and NAILBA collaborated on a tremendous survey published early in 2022 entitled, Inside the Intermediary: BGA and IMO Survey Results. They surveyed 60 BGAs and IMOs, over 400 independent life insurance and health producers, and eight senior executives from BGAs and IMOs. I was interested in what the independent producers said was their number one reason for placing business with top carriers: Product pricing.¹⁰

Insurance carriers know that every product they introduce is ubiquitously quotable in comparison with all other like products. The competitive pressure requires actuarial precision.

Question: Does the distribution system’s expectation of ever-improving product performance, lower rates, and new features obscure the importance of reaching more people with the necessary coverage and protection? In other words, rather than always seeking the so-called best product, do distributors lose sight of the pressing need to find new unprotected customers?

Underwriting Influences Math
In February 2021, Deloitte published an article entitled, The Rise of the Exponential Underwriter. Underwriting is partially about guesses, but mostly about math. Underwriting manuals have always been compendiums of experience-driven classifications. “Traditionally, underwriters have utilized decades of static, historical information to develop rules and guidelines to assess risks.”¹¹

There has never been the opportunity like now for underwriting to apply an innovative application of technology, AI, and data analytics. The article defines “exponential underwriters” as those utilizing “new data sources and advanced technologies to augment human underwriters to a degree never seen before.”¹²

“In life insurance, while historical health records would continue to be essential, insurers may get a more comprehensive and current assessment by tracking predictive data variables via fitness wearables and social media.”¹³ This, in turn, will create pricing relief through greater efficiencies.

All the guessing is getting more sophisticated!

Summary
In the insurance business, and particularly in independent distribution, success is a function of right guesses, precision when needed, and focus on the important. These responsibilities are shared between the home offices and the distribution partners.

We can overemphasize precision—the numbers—to the exclusion of the important—the people. Steven Wright’s quip implies that what goes on the page is far more important than the page numbers.

Similarly, the number of people owning our industry’s products far exceeds the value of making sure only a small number of people have the very best rate.

Faces, not facts, are what we need to always keep in focus! 

Footnotes:

1. “Tales from the Ant World,” Edward O. Wilson, Liveright Publishing Corporation, 10/05/2021, ISBN-13: 9781324091097.
2. “The Perfectionists: How Precision Engineers Created the Modern World,” Simon Winchester, Harper; 1st edition (May 8, 2018), New York, NY, ISBN-13: 978-0062652553.
3. Ibid.
4. https://www.asme.org/codes-standards/find-codes-standards/y14-5-dimensioning-tolerancing.
5. LifePlans, Inc. (2012). 2011 Long-Term Care Top Writers Survey Individual and Group Association Final Report, Waltham, MA. March.
6. https://aspe.hhs.gov/reports/exiting-market-understanding-factors-behind-carriers-decision-leave-long-term-care-insurance-market-1.
7. Ibid.
8. Ibid.
9. Ibid.
10. https://www.nailba.org/assets/LIMRA%20NAILBA%20Inside%20Intermediary%20Final.pdf.
11. https://www2.deloitte.com/us/en/insights/industry/financial-services/future-of-insurance-underwriting.html.
12. Ibid.
13. Ibid.

Annie Dillard’s essay entitled Total Eclipse is considered to be a masterpiece of literary nonfiction. Dillard describes her personal experience of a solar eclipse in Washington State. She describes a total eclipse in terms that define its uniqueness.

“The second before the sun went out, we saw a wall of dark shadow come speeding at us. We no sooner saw it than it was upon us, like thunder. It roared up the valley. It slammed our hill and knocked us out. It was the monstrous swift shadow cone of the moon. I have since read that this wave of shadow moves 1,800 miles an hour. Language can give no sense of this sort of speed—1,800 miles an hour. It was 195 miles wide. No end was in sight—you saw only the edge. It rolled at you across the land at 1,800 miles an hour, hauling darkness like plague behind it. Seeing it, and knowing it was coming straight for you, was like feeling a slug of anesthetic shoot up your arm. If you think very fast, you may have time to think, “Soon it will hit my brain.” You can feel the deadness race up your arm; you can feel the appalling, inhuman speed of your own blood. We saw the wall of shadow coming and screamed before it hit.”¹

A total eclipse may be the very best way for human beings to experience “the universe as a clockwork of loose spheres flung at stupefying, unauthorized speeds.”²

A total eclipse is its own thing, unlike all other things.

C.S. Lewis wrote: “we should attempt a total surrender to whatever atmosphere is offering itself at the moment…and make the determination to rub one’s nose in the very quiddity of each thing, to rejoice in its being (so magnificently) what it is.”³

That is what Dillard was intending to do in her essay.

Author, speaker John Piper includes Lewis among the writers that influenced him most. Specifically, Lewis taught Piper to attend to the realness of things. “To wake up in the morning and to be aware of the firmness of the mattress, the warmth of the sun rays, the sound of the clock ticking, the sheer being of things (quiddity as he calls it). He helped me become alive to life. He helped me to see what is there in the world—things which if we didn’t have them, we would pay a million dollars to have, but having them, ignore.”⁴

Note: The word “Quiddity” (noun) comes from the Latin “quid” which means “what.” It is defined as “The very essence of; the inherent nature of something or someone.”⁵

Synonyms of quiddity include actuality, essence, existence, integral, quintessence.⁶

Quiddity is the “thingness” of a thing. The “thisness.” The essential essence or “whatness” of what makes something what it is.

Question: What is the quiddity of that thing we call a butterfly? Is a butterfly’s “thingness” the entirety of its history? In the moment that we see a butterfly are we also imagining when it was an egg, a caterpillar, its chrysalis, where it traveled, or all the flowers it visited?

When we explain something, we do not generally divide it into its parts, describe how all the parts behave, or present its entire history. When telling someone about our new car we may elaborate on some of its features, but we are not likely to delineate every part and how they work together to make it run.

The Quiddity of Life Insurance
Life insurance has its own quiddity, thingness, thisness, and whatness that makes life insurance what it is.

Question: As independent financial professionals, how adept are we at communicating winsomely, and engagingly, the quiddity of life insurance?

Starting point:

• Life insurance is a contract between an insurer and a policy owner.
• Life insurance is a promise made by the insurance company in exchange for the policy owner’s premium payments.
• Life insurance policies identify the following:
  • The insurer: A company regulated by state insurance departments.
  • The policy owner: The person who owns the policy.
  • The insured: The person whose life is insured.
  • The beneficiary: The person named by the policy owner to receive the policy’s death benefits.
• Life insurance pays a death benefit to the person named by the policy owner when the insured dies.
• The beneficiaries can use the money for whatever purpose they choose.
• Life insurance is regulated at the Federal and the State level.

So far, we have only described the parts. We have only kicked the tires.

We have not yet treated potential consumers as the feeling, relating, seeing, listening, smelling, receptive creatures that they are. Nor have we begun to explore the magical, relevant, terrifying, and ecstatic aspects of life insurance.

Time to take it out for a test drive!

• Life insurance solves a frightening financial problem. When a person dies, earned income disappears. A spouse, children, or anyone dependent on the insured financially, will be left without support.
• About the time unpaid bills are overdue, and the grieving family members are under severe stress, the life insurance death benefit arrives, providing funds to meet financial obligations.
• Money appears in time to help relatives pay for burial and other end-of-life expenses.
• Life insurance provides a replacement for the income that the insured intended to use to cover these expenses:
  • Mortgage payments.
  • Childcare to replace the loss of a stay-at-home parent.
  • Giving freedom for family members to make it through college.
  • Debts such as car loans.

Wait! Have we really arrived at the very quiddity of Life Insurance? No. Try these:

• Life insurance is designed to help people take care of their loved ones who are dependent on the Insured’s income.
• Life insurance helps a family keep the family business in the family.
• Life insurance helps responsible people experience one less thing to worry about at night.
• Life insurance avails thoughtful people the opportunity to finish life well by providing for loved ones even in death.
• Life insurance prevents economic hardship from being added to emotional distress.
• Life insurance replaces obstacles with opportunities.
• Life insurance provides peace of mind.
• Life insurance can be a gift of love.

Now that, finally, is the quiddity of life insurance.

Application
In her essay, The Givenness of Things, Marilynne Robinson points out that “We know only what we know, only in the way that we know it or can know it.”⁷

What if we met people who were curious about a red rose in a vase on our desk? How could we persuade them of its worth? Would we start by warning about the possibility of pricking fingers on its brutally real thorns? Or would we encourage them to rub their noses among its perfumed petals? To fully explain a rose, we need to juxtapose the pain with its beauty.

We can postulate that potential consumers (future policy owners) will only know about life insurance what they know, only in the way they know it, based on the knowledge they have gained from reading or hearing others discuss it.

For the independent financial professional there are therefore two opportunities in regard to communicating the quiddity of life insurance:

1. Enhance what people know about life insurance by providing educational, relatable, authentic, and practical information.
2. Make it easier for people to learn more about the quiddity of life insurance by preparing engaging stories and practicing the art of highlighting the power of life insurance to fulfill dreams, activate love, and keep promises.

Summary
Annie Dillard wrote about seeing a mockingbird make a straight vertical descent from the roof gutter of a four-story building. “…The mockingbird took a single step into the air and dropped. His wings were still folded against his sides as though he were singing from a limb and not falling, accelerating thirty-two feet per second, through empty air. Just a breath before he would have been dashed to the ground, he unfurled his wings with exact, deliberate care, revealing the broad bars of white, spread his elegant white-banded tail, and so floated onto the grass. I had just rounded a corner when his insouciant step caught my eye; there was no one else in sight. The fact of his free fall was like the old philosophical conundrum about the tree that falls in the forest. The answer must be, I think, that beauty and grace are performed whether or not we will or sense them. The least we can do is try to be there.”⁸

Dillard saw this moment, felt in her soul the quiddity of it, and wanted to share it with others.

We all want to enjoy the chocolate-ness of chocolate and the coffee-ness of coffee. Similarly, we who know its value should want people to grasp the quiddity of life insurance.

The least we can do is come alongside people to help them see what we see.

Footnotes:

1. https://www.theatlantic.com/science/archive/2017/08/annie-dillards-total-eclipse/536148/.
2. Ibid.
3. “Surprised by Joy: The Shape of My Early Life,” C.S. Lewis, HarperOne; Reissue edition (February 14, 2017).
4. John Piper, “Books That Have Influenced Me Most.” https://www.desiringgod.org/articles/books-that-have-influenced-me-most.
5. https://www.collinsdictionary.com/us/dictionary/english/quiddity.
6. https://www.thesaurus.com/browse/quiddity.
7. “The Givenness of Things: Essays,” by Marilynne Robinson, Farrar, Straus and Giroux (October 27, 2015).
8. “Pilgrim at Tinker Creek,” by Annie Dillard, (Published June 1, 2000 by Harper Perennial) (first published 1974).

In a certain Middle Eastern country, the local phrase for “Congratulations!” directly translates to “May it be holy!”—isn’t this an excellent cheer for new babies, weddings, new homes, and job promotions?

an you imagine how different LinkedIn notifications would be if, upon your work anniversary or promotion, you received “May it be holy!” messages instead of “Congratulations!”?

Question: Is there a degree to which the financial services business can be considered holy?

What Is “Holy?”
Holy is deeply embedded in religious concepts and vocabulary. The Jewish and Christian sacred texts, in particular, are replete with usage of Hebrew and Greek words translated as the English word “holy.”

In the Old Testament there are over 830 instances of the term in all its forms.
“Holy” is often used to describe God’s glorious nature, which is majestically, radically distinct from all creation.

Is there more to this concept other than its religious meaning?

Hebrew is an interesting language because words carry the meaning of the original root word. Therefore, the Hebrew word most commonly translated “holy” is “Qodesh” which comes from the root word “Qadash.” This word means “to set apart for a specific purpose.”¹

Holy is that which is separated from the normal in a conceptual way.

In this sense, something can be considered holy if it is set apart from everything else to do a specific job for a unique purpose.

How Can Financial Services Be Set Apart, or Holy?

Question: As an independent financial professional, can the work that you do become holy—in the sense of “set apart?”

After four decades in independent financial services, I have concluded that only one thing defines our efforts as holy: To the extent that we activate, implement, validate, employ, execute, put into practice, and help one person carry out love for another, our work is holy.

Shakespeare wrote, “Thy advice, this night, I’ll put in practice.”² (Reading this out loud sounds a little Yoda-like!)

In independent financial services, we make it a habit of saying, “Your love for your family, this night, I will help you put into practice.”

Love Is Holy
It was again William Shakespeare who wrote, “Love is holy.”³

Similarly, Author Marilynne Robinson wrote, “Love is holy because it is like grace—the worthiness of its object is never really what matters.”⁴

Question: What does financial services have to do with love?

Everything. Consider:

• Why do people buy long term care insurance? According to the National Institute on Aging under the U.S. Department of Health and Human Services, the prudent person should “Begin by thinking about what would happen if you became seriously ill or disabled. Talk with your family, friends, and lawyer about who would provide care if you needed help for a long time.”⁵ Why would they take care of us? Our care will be the responsibility of the people who love us and on whom we depend.
• Why do people buy disability income insurance? According to the United States Government, people who care for their “loved one with special medical needs…and disabilities can get paid to provide care.”⁶ Further, “As a caregiver for a parent, spouse, or child with special needs, you may need help.”⁷ There are government programs designed to help compensate the person caring for, loving, a disabled person. The reason for DI is not only the insured’s love for family, but to find funds to reward the selfless, sacrificial love the caregiver has for the disabled insured.
• Why do people buy life insurance? According to the Insurance Regulatory and Development Authority of India (IRDAI), which is an autonomous body set up under the IRDA Act, 1999: “Anyone who has a family to support” needs life insurance. “When human life is lost or a person is disabled permanently or temporarily, there is loss of income to the household.”⁸ To support someone is to demonstrate love.
• Why do people save money for their children’s college expenses? According to the Office of the State Treasurer of South Carolina, “Future Scholar (529 plan) has helped South Carolina families reach their financial educational goals for their children. Our highly rated 529 college savings program continues to provide numerous benefits such as tax advantages, investment options and flexibility of use that enable families to save for their loved ones’ future.”⁹
• Why do people set money aside for retirement? According to the Social Security Administration’s Department of Research, Statistics & Policy Analysis, “Significant differences exist in retirement savings outcomes by marital status at young adulthood. For example, higher proportions of married young women (aged 22 to 35) were in households reporting retirement as an important savings goal compared to single and cohabiting women. Married women and men were significantly more likely to have an individual retirement account (IRA) or a defined contribution (DC) pension plan in their household at young adulthood than were their cohabiting and single counterparts.”¹⁰ But why should marriage be positively linked to retirement savings at young adulthood? The answer:
  • “From a psychological perspective, the long-term commitment implied by marriage may allow young adults to envision their old age and retirement needs more readily.
  • Marriage may also encourage young adults to feel more connected to their future selves, leading to more future-focused behavior.”¹¹

Point: In our closest relationships we enjoy the holiness that is love. The independent financial service industry exists and is set apart from all other industries to serve people who are organized in families to fulfill their desire to protect and provide for their loved ones.

Truths about Families Can Be Extrapolated to Governments
The astute reader will have perhaps taken note of the fact that in each instance above, the source citing love as the reason for why people take financial actions is a government entity. Why would governments be inclined to weigh in on subjects related to financial services? Could it be that the needs within a family are congruent with the needs of a people, nation, or society?

“The success or failure of any government in the final analysis must be measured by the well-being of its citizens.”¹²

Consider the U.S. Constitution’s Preamble: ‘‘We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.’’

1. Union: Sound financial preparation and planning helps keep families and loved ones united.
2. Justice: Through estate and financial planning every member of a family can be treated justly.
3. Insure Domestic Tranquility: Can it be any clearer than the words “insure” and “domestic?” Proper planning in financial areas helps maintain the peace among loved ones within families.
4. Common Defense: Why do we recommend periodic review of beneficiary designations? Why do we urge people to have a Will? Why do we promote the use of trusts, LLCs, and other legal constructions? To defend their loved ones from creditors and others. Why do people purchase liability insurance for actions related to driving, home ownership, boating, etc.? To defend their loved ones from the financial liabilities arising from negligence.
5. General Welfare: Financial services exists to help people provide for the welfare of their loved ones now and in the future.
6. Blessings of Liberty: Liberty is about the freedom to choose. The fact is, life insurance, disability income insurance, long term care insurance, retirement savings, and college savings are vehicles for providing our loved ones with choices in the future.

The independent financial services sector is not only impacting families and individuals, but whole societies.

Does it not seem altogether appropriate that governments have generally given tax advantages to the products offered in independent financial services?

Application
All of us in independent financial services have the opportunity to create and distribute products that are uniquely set apart, and that gain their holiness from the act of serving the objective of love enacted.

Caveats: Being holy is not easy. Love is not easy.

Fyodor Dostoevsky, in his profound novel, The Brothers Karamazov, wrote, “Love in action is a harsh and dreadful thing compared to love in dreams.”

Evelyn Waugh, in his novel, Brideshead Revisited, wrote, “No one is ever holy without suffering.”

A.W. Tozer, in The Knowledge of the Holy, wrote, “Faith is an organ of knowledge and love an organ of experience.”

Question: Wait, to build my individual financial services practice, to serve as a successful wholesaler, or to perform my home office job effectively, I need to be willing to embrace harsh and dreadful things, suffering, and difficult experiences?

Yes. But it is not as scary as it sounds.

Practical Tips:

• Spend the right amount of time. The job in financial services is never just to complete a task. It is always to make someone’s life better. Even if we feel like we completed the task at hand, we keep investing the time necessary to make sure the client or customer knows they have been seen and heard and that their love will be actuated.
• Accept people for who they are. Each person is motivated to demonstrate love for family and others in an individualistic way. While we can make suggestions based on what we have seen other people do, we must have the humility not to prescribe. Instead, we describe, then inscribe.
• Appreciate people for what they do. In independent financial services we celebrate every time a person decides a course of action, establishes a plan, and sets in motion something that will insure to the benefit of the people they love. The best thing we can do is make that celebration palpable. Tangible.
• Step into hard. Where there are humans, there is suffering. And difficulties. Never anticipate how someone feels about something involving their families and loved ones. Lean in and learn. Broken relationships abound. This does not excuse us from working harder to find the right solutions and properly tailoring recommendations and approaches. For where there is suffering, there’s an opportunity for us to create set-apart services based on love.
• Practice patience. There are certain people we actually prefer not to work with. It is admittedly hard to work with someone who sees life through an entirely different ideological lens than ours. We all know the command to love our neighbor like ourselves. Should we only do the “set apart” thing when we feel like it? C.S. Lewis wrote, “Do not waste time bothering whether you ‘love’ your neighbor; act as if you did.”¹³ We need to have the flexibility to work with people who feel differently about vaccinations, mask wearing, and the best approaches to resolving poverty, equality, immigration, illegal drugs, improving education, etc.
• Expect nothing in return. In their amazing modern parable, The Go-Giver, Bob Burg and John David Mann wrote, “Your true worth is determined by how much more you give in value than you take in payment.”¹⁴ In independent financial services we seek to serve as many people as we can, and sometimes get paid.

Summary
We must embrace our roles in independent financial services as people who provide something set apart for a specific purpose. The one thing that defines our efforts as holy is our ability to help people actuate their love for others in practical ways. The independent financial service industry exists to serve people organized in families and help them achieve their desire to protect and provide for their loved ones.

Truly, no other industry is similarly set apart for this distinct purpose.
One way we can encourage one another to have this proper focus is to revise how we celebrate career accomplishments. Maybe instead of saying “Congratulations!” when someone is the top producer, earns the “Wholesaler of the Year” award, or when the carrier reaches its sales targets, we could exclaim…

“May it be holy!”

Footnotes:

1. Ancient Hebrew Lexicon, vituralbookword.com publishing, Jeff Benner.
2. “Two Gentlemen of Verona” (Act 3: scene 2) William Shakespeare.
3. “All’s Well That Ends Well,” a play by Thomas Middleton and William Shakespeare, published in the First Folio in 1623.
4. “Gilead,” by Marilynne Robinson (Farrar) The 2005 Pulitzer Prize Winner in Fiction.
5. “What Is Long-Term Care?,” found here: https://www.nia.nih.gov/health/what-long-term-care.
6. “Help and Support for Caregivers,” https://www.usa.gov/disability-caregiver.
7. Ibid.
8. “Why Buy Life Insurance?” https://www.policyholder.gov.in/why_buy_life_insurance.aspx.
9. https://futurescholar.com/ and https://treasurer.sc.gov/what-we-do/for-citizens/college-savings-programs/.
10. https://www.ssa.gov/policy/docs/research-summaries/marital-status.html.
11. Ibid.
12. https://www.ncbi.nlm.nih.gov/books/NBK221231/.
13. “Mere Christianity,” C.S. Lewis, Geoffrey Bles (UK), Macmillan Publishers, HarperCollins Publishers (US) 1952.
14. “The Go-Giver,” Bob Burg and John David Mann, Penguin Random House UK, 2007.

The financial services industry is often focused on helping people to both get more and keep more. Our mission is aligned with helping people achieve their dreams. We also help people prove their love by providing for, and protecting, their families.

What if we all improved our ability to help people prove their love by giving more?

Amy Carmichael was born in Ireland in 1867. She served as a missionary to India where she rescued young girls and women from temple prostitution (which was basically a form of sex-trafficking). She gave her life to save the lives of others.

Carmichael wrote a book about love entitled “If.”¹ Here is a quote from that book:
“You can give without loving, but you cannot love without giving.”

Grandparents
A good starting point for our industry is helping grandparents prove their love for their grandchildren by making wise and appropriate gifts.

My wife and I had a marvelous October 2021! We welcomed two new grandchildren into the world! Daniel was born on October 10 and Wendy was born on October 31. They bring our total number of living grandchildren to 6! (Sadly, we lost one.)

Like many of our similarly aged friends, we adore our grandchildren! Recently, we have been pondering the best ways to demonstrate this love.

Gifting
Perhaps the most straightforward way to demonstrate our love is to give each grandchild an outright gift of money. We could individually gift each grandchild up to $15,000 in 2021 without having to file a gift tax return. Since we are married, we could both make cash gifts to all six grandchildren ($180,000) with no gift tax implications! (Okay, we love them, but let’s not go crazy!)

We would want their parents to set this money aside on behalf of our grandchildren for future educational expenses, medical costs, or a down-payment on their first car or house. But there is no guarantee that our wishes will be respected.

Thankfully, there are multiple other strategies we can employ:

• Contribute to a 529 college savings plan.
• Give money from a donor-advised fund.
• Set up Uniform Transfer to Minor Act (UTMA) accounts.
• Establish a Delaware dynasty trust.
• Buy some shares of stock that can grow over the long term.
• Name them as beneficiaries in our will or trust.
• Make contributions to Individual Retirement Accounts (IRAs).
• Purchase an individual permanent life insurance policy on each child.

529 Plan
If we want to designate our gift for post-secondary education, a 529 account is a great tax-advantaged way to do it. We just need to be careful in choosing who owns the account because that will affect who can make decisions on the account, take disbursements, or change the beneficiary.

Donor-Advised Fund
Many brokerage firms and banks offer donor-advised funds. We could use these funds to teach our grandchildren about philanthropy and establish the means of giving them a share of the money to designate to charities of their choice. We simply need to notify the institution of the money within the fund that our grandchildren can grant to the charity of their choice.

UTMA Account
We can open UTMA accounts in the name of a grandchild, but an adult (their parents) will keep control of the account until the child reaches age 18-21 (depending on what state they’re living in). The money in these accounts could be used on anything the grandchild needs.

Delaware Dynasty Trust
A Delaware dynasty trust can allow us to financially benefit multiple generations! We could fund the trust with an amount up to the maximum available generation-skipping transfer (GST) tax exemption. The trust assets can pass from generation to generation, free of estate or GST tax.

Shares of Stock
We can buy our grandchildren some shares of stock that can grow over the long term. Of course, the downside of giving shares of stock in some companies is the risk that the company may not thrive over the long term. As an alternative, we could buy shares in exchange-traded funds or mutual funds. In this way we could teach them valuable lessons about investing.

Named Beneficiaries
By naming our grandchildren as beneficiaries in our will or trust we (as the grantors or trustors) are able to specify a set amount of money or a percentage of our total accounts as we desire each child to have. However, if our grandchildren are minors at the time of our deaths, the trustee or executor of our estate will face the responsibility of creating safeguards before the inheritance can be distributed.

Individual Retirement Account
Once the grandchildren are working, we can contribute to IRAs for each child. This includes both traditional and Roth IRAs. Each year we can contribute as much as they earn. In 2021, up to $6,000.

Life Insurance
If we bought a cash value life insurance policy on each child these policies could provide minimum financial protection now. In addition, the policy can be structured to give the child options in the future to purchase additional amounts without underwriting when there’s a greater need for additional coverage. These policies will build cash value that our grandchildren could access for any reason.

Question: As an independent financial professional, are you guiding your clients who are grandparents in these various approaches to gifting?

No Good Deed Goes Unpunished
Before recommending any of these ideas to grandparents, we will do well to remember several things:

• Remember that any gift can interfere with Medicaid eligibility. “Under federal Medicaid law, if you transfer certain assets within five years before applying for Medicaid, you will be ineligible for a period of time (called a transfer penalty), depending on how much money you transferred. Even small transfers can affect eligibility. While federal law allows individuals to gift up to $15,000 per year (in 2021) without having to pay a gift tax, Medicaid law still treats that gift as a transfer.”²
• Keep in mind that today’s tax-free transfer amount is set to expire after 2025. That means it is possible that the amount your clients who are grandparents can transfer free of estate tax to their grandchildren may be lower in the future.
• There is a downside for grandparents gifting assets during their lifetime to their grandchildren. Under 2021 tax law, stocks and other assets that appreciate in value will not receive a “step-up” income tax basis. This means that grandchildren who receive gifts of appreciated property or securities will be subject to capital gains tax on the built-in appreciation when they sell the assets.
• Wise grandparents will ask their children for permission before they make large or numerous gifts for their grandchildren. Parents can feel disappointed and embarrassed rather than joyful whenever they feel a sizable gift from the grandparents eclipses anything they themselves can give their own children. Grandparents should always honor the parents by giving a gift they approve of.
• While grandparents may desire to leave their grandchildren with an awesome inheritance, giving large sums of money or assets may not be appreciated by the parents. Some parents may see such large inheritances as a hindrance to their child’s character development.

Like everything else within the realm of financial services, there is greater complexity than the general public can comprehend. Even when it comes to simply wanting to demonstrate love through giving, there are good, better, and best ideas, and there are also bad, worse, and potentially disastrous consequences.

What if we as independent financial professionals elevated our own skills in the art and science of gifting? We would then be in better shape for coaching our grandparent clients!

Then we, too, could show our love by giving (sound advice).

References:
1. “If”, by Amy Carmichael, 1965, Zondervan, Grand Rapids, Mich.
2. https://www.elderlawanswers.com/how-gifts-can-affect-medicaid-eligibility-10006.