Taxevity Interview With Promod & Jeevan Sharma
August 22, 2022
When we think of family business wealth, we don't normally think about insurance.
But just like any other investment, insurance has many benefits that most of us are unaware of.
Tune in to find out why and how SMART family business owners use insurance as a wealth asset!
• So welcome back to the business Brothers podcast.
• My name is Purdeep Sangha, I am the co host for the show.
• My brother harjeet Sangha is on a little bit of a Hiatus.
• Right now, he's busy with his two young sons of.
• If you haven't heard, he has a son.
• His name is older, son's name is Axel.
• And he just recently, a few months ago had his second son and he named him rodent.
• So you can say, my brother is a little bit busy here.
• So I am taking the lead on hosting the podcast.
• And today, we have some pretty Cool guests here today we have promoted and jeevan Sharma.
• They are family business owners but they also help family business businesses themselves.
• So promote and jeevan.
• Welcome to the show here today.
• Thank you very much.
• Thanks for the opportunity.
• Yeah, my I'm looking forward to our conversation.
• You guys are in a very interesting space, so maybe you can tell me a little bit about what you guys do and your background.
• Sure I'm promote.
• And what we do is life and health insurance for people who have needs, people have wants and also people who have the desire to give gifts and so that includes family businesses which is your audience here
• Very interesting.
• and I'm cheap insurance as mentioned and so I help my dad with the business.
• So I do a lot of the backend work here at Tech 70 also, things like preparing illustrations for clients or client presentations or marketing.
• Things of that nature and by Nature, my training rather as a cfp.
• Oh interesting.
• Seriously if be great and so tax.
• 70 I got asked.
• Where did that name come from?
• Well, as you know, with branding, it's very hard to find a web URL that isn't taken if you want a.com and in our world insurance is used for tax planning in many situations.
• It's a tool that has many advantages there and so if you look at the transferable Actuarial risks like okay you're a CFB.
• I'm an actuary and family Enterprise advisor.
• There is mortality morbidity disability longevity.
• Tax 70 kind of fits into that.
• So, it's in a sense.
• It's saying that taxes can last for a very long time.
• Also, and we help with strategies that include Insurance to help deal with some of those concerns.
• That's pretty interesting.
• So when you say an actuary I'm I'm super interested in that because I think that I think numbers math all these formulas.
• Can you maybe you can enlighten me in terms of what an actuary does.
• Well, an actuary is trained to measure and manage risks, so that's really the core and when I started off, there weren't many places that actuaries worked.
• It was mainly insurance, companies Consulting companies or the government.
• And over time, it's expanded quite a bit, so their actuaries working and climate change and all sorts of other sorts of risks.
• But in my case, it was more about transferring risks, that are morbidity disability longevity.
• Mortality, so kind of like, Low life and health insurance.
• Interesting. So it sounds like you have a pretty interesting combo here similar to my brother and I he's kind of the numbers, he's a corporate finance, the wealth management guy and I have all the other stuff so jeevan your the financial planning spacer.
• You have your cfp?
• How does that add to what your dad is doing on the actuary side and on the family Enterprise side?
• So it adds a little bit of extra I suppose context for us when we're dealing with things like corporate cases.
• So when it comes to more than mechanical side of things in terms of, you know, say RG t0 H, or things of that nature where, you know, I'm not an expert when it comes to corporate tax planning or corporate finance by any means.
• But if a client, you know, is incorporated or family businesses Incorporated, it does that, that extra little bit of expertise there.
• In terms of more of the personal planning side that can also play a role because there are certain aspects when it comes to Personal Insurance planning like, you know, CPP thinks of things like that which are important to know about a surly.
• My father doesn't know about those things but is important than I knew about them as well.
• So getting the cfp designation was a good way of going about that.
• Yeah.
• And what you may find is that contrary to what the designations may say jeevan is probably more of the numbers person.
• That I am if even though it had different trading.
• So, my interest tends to be more on the marketing side, for example, and so we do have very complementary skills, but they work together to end up helping clients.
• That's very interesting.
• So your guys is combination here.
• Why should family business owners care about what you guys do?
• So what is it?
• That you help them with?
• Well, we hope them with a range of different things.
• The family business owners have additional complexity in their lives because they've got the business, they've got the family, they've got the ownership considerations.
• And so, as an example, if you've got a family business, and one child is in the business and another child isn't that, and you want to be fair where you think that fair means, each of them gets the same inheritance.
• Then what do you do?
• You want to give one the one child in the business?
• The business?
• And then cast to the other child so that they're treated in a way that seems fair.
• Or in this case equal, so insurance is a way to create that cash.
• So that that liquidity is there and the business can continue and the children outside the business can also continue so Insurance can help in ways like that.
• You probably have other ideas.
• Certainly so we have clients who have been working in their family business for maybe they usually they've started in many cases.
• Has where they've been doing what they've been doing for 30 or 40 years.
• And for much of that time, they didn't really see the money piling up, right?
• They had kids, they have mortgages everything for University, education's, but now I'm talking about me know,
• Hahaha.
• okay, alright.
• Okay, people.
• Okay.
• But, yeah, those types of clients, you know, sort of turn around while their accountants turned them around really and they say, look, you've been accumulating money like quite a significant amount for the past.
• Over 10 years because you don't really have any liabilities your kids.
• So grown up, and moved out, you're sitting on a whole pile of cash.
• Let's find ways to use that to enhance your network, even further and might not immediately sound like insurance has any place in that discussion, but it's actually quite crucial to protecting that net worth if someone were to pass away because the government of course does like to take a cut off, everyone.
• So, everyone's money,
• Definitely.
• so paying for that with insurance Goods, often much cheaper overall then simply, you know, giving the government a slice of your financial pie.
• It can also help with estate generation for younger business owners, who haven't quite reached that wealth accumulation stage at least not significantly and there are other benefits.
• For example, Sheltering corporate assets from the password.
• Taxation, which is quite punitive across most of the provinces and territories.
• So there are many ways that insurance can help there.
• You know, I really like your approach and the tax Equity part actually makes a lot of sense, because when most people think of insurance, they think of K deaf or something that they're not happy with.
• But this is an opportunity to actually, like, you said, give gifts, equalize or make things more fair have tax advantages.
• It seems like it's a real tool or there's a number of tools that you have in your tool kit to help family business owners, increase your wealth reduce the And actually make family members, I'm going to say a little bit happier with the end outcome.
• Yeah, that's exactly right.
• So you thank you for that summary.
• So, Insurance in our Marketplace is used primarily for wants.
• It's not that the clients need the insurance, they have assets, but by using insurance, they could be in a better place.
• Our challenge is educating people because sometimes insurance has been presented to them in ways that make it look too good to be true that it's just magical, it does all these things and it's not, it's just a financial asset.
• And the question is whether it's the right choice?
• Voice.
• Or whether there's something else, that would be better for those clients.
• So we need to educate the clients.
• We also need to educate their advisers and I guess that's where my Actuarial training can be a value because I actually develop products and so knowing how the products work, how the insurance companies make their money can be valuable in picking the right products, and having people feel comfortable that the products will work the way that they're being presented.
• So it's almost like you have an inside scoop there.
• Yes, that's that's one way to say it, huh?
• Yeah, which is really interesting.
• So I want to go back to an example that you talked about.
• You talked about an example where one one child.
• I'm going to say I'm going to use that term is working in the business and the other one is not and to make things more fair.
• There's an insurance policy.
• However, that structured for the one that is not in the business.
• So can you elaborate a little bit out on that?
• Because the one thing that pops into my mind there, and just from personal, This is my brother and I have always been part of the family businesses.
• We've we both worked in them and some capacity I was probably a little bit more active than my brother just because I was the older one, but he was always active in some instance and he was never really out of the picture.
• So for, for an individual, let's just say I'm, I'm the brother that's in the business and I've been working in it day in and day out.
• I put, you know, put everything I've done in terms of my time effort after school, To this business and then let's just say my brother's out there, he's not part of the business but now he gets his Hefty insurance policy.
• How do you come across those conversations where maybe the person The Sibling that's in the in the business, as how is that fair?
• And how do you, how do you deal with those conversations?
• And how do you talk to the the parent or the founding generation around those conversations?
• If there is a lot of complexity there.
• Now, in our world, we work with other advisers, who would be better suited to answering those sorts of questions.
• We basically stay in our lane, which is the life and health insurance.
• But by being family into the family Enterprise advisor, is you are pradeep, we have a certain language a certain tool set that we can use to help in communication and sometimes the parents are simply not aware of what they're doing.
• They think that it's important to give the same Amount to each child.
• They think that if it's not equal, then it's not fair.
• But the child that's been in the business, maybe they lost out on other opportunities because they're in the business because it was important to their parents to do that.
• So maybe they've made more of a sacrifice but at the end, if Insurance isn't there, perhaps then here's the business.
• Now you're both shareholders in it and you've got a brother who wasn't really in the business who is now helping make the decisions.
• And so the parents may not have considered the implications of their inaction or their current planning and that's where other advisers, who understand more of the family Dynamics can be very important to make the parents understand the options, they have available and the consequences of the status quo
• Yeah, that's very important.
• So, thank you for bringing that up and I think that's very, very interesting because I think a lot of times we think of, as insurance being kind of clear-cut, you buy a policy and there you go.
• But there's a lot of behind-the-scenes conversations and considerations that need to be talked about in a family situation for family business owners.
• So I remember when I was in the banking sector and was in charge of the retail Network and insurance was part of the product portfolio that we had and we Take a look at our highest performers and we noticed that the highest performers were the ones that believed in the insurance.
• The most, they're the ones that had the highest.
• I'm going to say closing rate, and I don't want to, I don't like to use that term, but I'm going to use it because we're all familiar with sales Insurance isn't necessarily.
• You know, something you want to force on something or someone it's a need and we've all seen some of the challenges that happen when people don't get insurance.
• So have you come across or can you share some stories?
• May be good news.
• Maybe bad news of some families that have used it effectively and families that might have missed out and some of the challenges that they faced as a result of not using Insurance effectively.
• Yeah. Maybe the example would be the nursery.
• Yeah.
• Do you want to just give the background to sure?
• So this was a I guess it was really a nursery like a plant nursery business started by a couple.
• I think this was probably about 30 years ago, probably something like that.
• We could we can't give too many specifics because they're in the GTA and there are people on this call who probably shop there.
• Yeah, of course.
• Totally get it.
• We know we know that confidential is very important.
• They grew the business and now they've included the Next Generation and their planning.
• So they're looking at getting some insurance to sort of smooth that transition and deal with any bumps that might come from, you know, probate and final taxation things of that nature.
• So, that's the situation where, you know, it's not obviously they're still around.
• So it's not a situation where there's been an immediate benefit for the Next Generation but it's the sort of planning that will will prevent any hiccups between the, the new, the new siblings who are Partners.
• Yeah.
• So the situation there is that two of the children are working in the business and two of them are not
• It is.
• and the parents are getting closer to retirement.
• And so that, now, thinking about the future, like, where do they get retirement income from?
• Because if they take too much from the business, then there isn't really enough for their children, running the business, they are land rich, but they need that because the round were they are like there.
• Our residential neighborhoods being built.
• So the land could certainly be sold but they have to figure out some things for themselves.
• They weren't really aware of the tax implications of what would happen.
• They think of all of the land as their principal residence but it's not like they have their principal residence on the property but most of the land isn't part of that.
• So there's a big tax bill.
• They don't necessarily want the children to have to sell off a portion of the land to pay the tax bill so Insurance can be a way.
• Way to help with that and also to provide money for the two children who are not in the business.
• Interesting. And do you work closely with the tax professionals that the family business owners have their own professionals?
• Or do you have your own tax professionals that you go to when it comes to these complex tax issues?
• But we work with other Specialists because we focus on life and health insurance.
• So we need to collaborate.
• So with the tax experts, the investment experts Etc.
• So those are typically, sorry.
• Those are typically, the advisors we work with some contacts for ourselves.
• Personally, we don't really refer clients to that that sort of expertise.
• I mean we would if there was a need but generally our clients are the clients of another advisor.
• So we're fitting into that advisors process that advisors team.
• So they bring you into the picture into the conversation because there's a specific need.
• That's been identified already.
• You guys just have the expertise to be able to figure out what is the right product.
• What is Right service in some maybe even have conversations that haven't been had.
• And uncover some situations that for example, someone like myself as a family business advisor for family.
• Enterprise advisor wouldn't have noticed because I'm not a insurance or tax expert.
• Yes and again not to harp on family Enterprise advisors as being the most amazing people in the sector but we've learned how to communicate.
• So while we're in different niches, we do know how we can talk and we have our tools like the three Circle model Etc that we can use to simplify the communication and to make sure that things aren't being missed.
• Yeah, there's a Common Language there and that's something that I see quite often as a business advisor.
• That's really my area of expertise is the audience knows is that, I find that when there is a lack of communication or language, that's common amongst the advisers, the family, really misses out because things get they fall through the Hoops.
• If things, just things just fall apart things, take longer things are missed.
• And unfortunately, it's something that can be easily overcome.
• Or if people are actually on the same page.
• So I'm glad you brought up that common language part because that's very important.
• So Insurance a lot of people when they think of insurance if they haven't been introduced to Insurance think of it as being.
• Like I said simple.
• But it's it's not a space that they want to get into.
• It's not a conversation that they want to have because it's uncomfortable for a lot of people and I think there's also the misconception that it might even be too.
• Pensive or that you have to go through this extensive Health, interviewer, questionnaire or peeing in a cup and blood tests and all these kinds of things, how do you get people to overcome those?
• I'm going to say, fears or barriers when it comes to insurance.
• Yeah, I mean there are a lot of misconceptions as you've noted, some of the things you're referring to are more applicable in situations where someone has a need for insurance.
• So, for example, they have a mortgage and they need to cover that off in case it were to pass away.
• So, the family has a home in situations like that, the clients are quite focused on the cost because they see the insurance as an expense.
• They want to minimize that expense.
• They want to get rid of the insurance as soon as they can.
• Most of our work is where Insurance isn't needed.
• So it's really an asset.
• You've got money sitting in different buckets and you're moving money generally from the fixed-income bucket.
• So things like bonds gics, and you're putting it into this other bucket.
• And so there's really no cost.
• So to speak.
• It's not something that's affecting anyone's lifestyle because you're taking assets that are already sitting there and you're saying, let's move some into this other asset called insurance and if you do, That you get certain advantages that arise.
• I really like how you put that.
• Yeah. And when it comes to even those situations, there are clients who are concerned about the underwriting process which would be do the Medicals and do we really want people looking at our financials and collecting our social insurance number once, they look at the benefits of what they can get from it, from the insurance strategy that we're proposing it.
• I would say in 90% of cases those Has become nine issues, it's really more of, that's a matter of familiarity.
• They just want to know what the process is.
• And if something goes wrong, what are the remedies?
• And then we describe that to the clients and it's usually fine and I'd say seven or eight years.
• I've been in the business.
• We've only had one situation where a client simply would not proceed with the paramedical interview and it was because they wanted to make sure that the information they had told us in the air.
• Application was exactly what they told the paramedical company and I hate to say it, but some people may not be completely forthright, and those situations is really nothing you can do, but it's exceedingly rare.
• And most clients understand that they either need insurance in which case, they'll, you know, sort of bear the burden of going through the process of getting it, which again isn't awful.
• It's not as bad as some people think, but there are steps to it and if it's a want situation, then The client will see that the benefit is also worth going through the application and medical process.
• And there is a bit of a side benefit of going through Insurance underwriting.
• Not something you'd want to do for fun.
• When you go to your family doctor, they can basically tell you how you are today and give you things to keep you in good condition until the next time they see you.
• And they can see you.
• A lot of times with insurance, the underwriters are only looking at you once and they're using predictive medicine.
• And so they're saying that for someone in your condition.
• What is it?
• What is it?
• Likely going to happen in terms of your life expectancy?
• So it's almost like projecting things and there may be things that are discovered because the test that the insurance companies do are different than test and normal doctors do like with our family doctor, like like he's been criticized for having too many vitamin D tests so I guess ohip keeps track of how many different tests and said, okay, you can have one if you want one, but just keep in mind.
• With insurance, they're really predicting into the future.
• What happens with people like the the particular client, and sometimes there are medical issues that are identified and it's possible for the client to take action to help prevent problems.
• So they may not be able to get insurance or to get insurance at a low cost but they've done things that have actually helped them with their existence, their life expectancy.
• Yeah, you know, this really interesting because I think that's a whole other thing to say rabbit hole.
• We talked about the medical system and,
• Yeah.
• and general practitioners and some of the things that are overlooked there, but I think that's a really good point.
• I think there's like you said, you can uncover things and I'm a firm believer that everything happens for a reason and so it, you know, if you're going to uncover something, you're going to cover something and it's actually a positive.
• Again, going back to the insurance part.
• How many?
• If you could If you could give an estimate, how many family businesses, our family business owners.
• Do you believe how the right Insurance strategy or tax strategy in terms of a percentage that you've come across?
• Is it, do you think three-quarters of the people have one?
• Do you think half the people have one?
• Do you think it's a small fraction that's out there just based on your own personal experience?
• Yeah, it's very difficult to estimate that and there hasn't been a lot of research in that area.
• The families, that we end up talking to are the ones who are looking at doing something.
• So, their primary advisor, whether it's their investment advisor, or their accountant has identified a situation where Insurance may help them and they're interested enough in order to take a look at that.
• My guess would be the majority.
• Haven't really done this because insurance has all those stigmas associated with it because it's Would dying and people don't want to think about that.
• Maybe they've had a bad experience in the past or it's been pitched as being too good to be true etcetera.
• And then there's also the issue of what they've been sold because in the insurance world, the advisors get, so get paid commissions and so there's an incentive to sell things.
• And maybe what, the client got isn't really the right thing for them, but it's really hard for us to know in aggregate because that information is not available.
• And I love statistics and things, but there's not much to analyze.
• Yeah.
• And our experiences as was mentioned, most of these clients are not sort of your typical everyday family business, who doesn't have any planning in place, like, usually, they're well established and at some point in their careers, they've had some form of protection or grandparents protection implemented.
• So I would say like amongst our clients is probably 60 or 70 percent but in the general population, again hard to say
• You know, I really want to enforce this concept of having a right tax professionals by your side, or giving you advice.
• Because I've seen a lot of horror stories, I've had some personal family members who have passed and, and they were strong headed.
• So I'm going to say that they were strong head and strong-willed and they didn't take the full advice of the advisers and things happen to them.
• So, in this one particular instance, I had an uncle that had a business.
• Successful business passed away.
• And he, it was successful enough that they had a management team, but he was still the main.
• You can say operator.
• And when he passed a business, just basically folded, right?
• Because it wasn't necessarily that the expertise, wasn't there.
• It was just more of the morale, right?
• That figurehead was no longer there and the Strategic Direction.
• And so the business was folded, and as a result, it had a ripple effect.
• Not only through his immediate family but all of their children's families as well.
• And so I've seen the challenges that can result from that and I can see how some advisors May fold when someone is strong with like a family business.
• Owner, is strong-willed, what happens when you come across?
• Someone who is?
• That is so adamant and strong, but is going against what?
• You're trying to advise them on doing, is there, is there a technique technique or tactic or some way that you get them to think about things differently?
• Only because as business owners, typically they have their own mindsets they have their own way of doing things.
• The approach we take is to provide education and the opportunity to buy.
• So someone has a belief that insurance companies won't pay claims or it's all a scam or whatever, we're not there to change their minds because realistically we couldn't do that.
• I think we have a situation recently.
• The client wanted things in writing that the insurance company guaranteed, they would pay the claim and all this stuff like you can't like all you can do is make sure things are in place, but you have to be honest and all these So in our model, we're in essence, be to be, so we work with other advisors.
• So there would be a primary advisor who has a relationship with that client.
• And so we don't make the recommendations about insurance because we're conflicted.
• We're going to say buy this insurance by that insurance.
• Like what else do you expect us to say?
• But they do trust that other advisor.
• So what we do is we when we get information about a client, we put together Insurance options and discuss it with that.
• Advisor first to see whether things make sense.
• And if it turns out that perhaps a leveraging strategy where you're borrowing against engine insurance, contract would be a good choice.
• But the advisor knows that client doesn't like borrowing money because in their head like once you pay off your mortgage, that's the last debt.
• You have you would ever have that we're not going to present that but ultimately, the typical model would be the advisor hosts.
• The meeting we come in and explain how Insurance might be able to help.
• Then we go away.
• The advisor has discussions with that client and the advisor is the one who makes the recommendation because they know that client they probably known them for years and have built up trust.
• So that's the way that we deal with that.
• So if we were B to C then it would be very different.
• We'd have to learn how to close and all of these things that aren't really in our skill set.
• Like we're nice people but we are there to really educate and then there needs to be motivation from either the client or there.
• Advisor.
• Who cares enough to say you really need to do this because if you don't, there are these consequences.
• That's really interesting.
• So it's the need and the want in the desires already there you're just trying to give them the best options to be able to get to their goals, basically.
• Yes.
• Okay. Okay, okay.
• So, this is interesting because this podcast and, you know, when it comes to business Brothers, we are all about being real.
• We are very much about being unconventional, though being real and being real personal and we try not to offend anybody.
• But we in all honesty to because you talked about working with other advisors.
• One of the challenges that I come across sometimes is the quality of advice and the level of expertise that other Visors are giving and sometimes I look at some of the stuff, the advice that's been given I say, where did you get this information from?
• And who in the heck, advised you?
• Do you see that?
• Because you're saying you work with other advisors and what I see in a lot of cases and this isn't about any particular discipline, but what I see is a lot of times those advisors aren't leading their clients in the right path or they've missed something significant.
• What do you do in those instances?
• If if you've ever Across that, how do you, how do you re educate those advisors and how do you have that conversation?
• Do you have direct conversations with the client or do you leave that up to the advisor to maybe correct some of those issues or challenges?
• Yeah. Like each advisor is an expert in their own Niche and so it's will use it accountants as an example.
• So they're experts in certain things but they're not experts in insurance, but they probably have opinions about insurance and it may be well, don't get insurance by term investor difference or whatever and it may be self-preservation.
• Because if something goes wrong with the insurance, it's not the insurance person who gets blamed.
• It's the accountant because the account was depressed and party.
• So why should they take the risk of Ending Insurance when it's something they don't necessarily know all that much about.
• So the other advisors need to have enough interest in wanting to learn.
• And if they do, then what we do is we educate them in private over an extended period of time.
• So, we would say that when you're talking to a client, just give us a call, describe the situation and we'll tell you where Insurance may or may not fit.
• When we prepare the insurance options, we show them to the advisor first.
• So in this process, we're upping the advisor become more comfortable with insurance themselves and sometimes we find that the advisor has issues with the size of the premium.
• Like we've got cases like that and so the issue because they're not seeing it as an asset transfer, they're seeing it as a cost and so it takes extended time to help people get over those types of biases, just as it would take us, time to get over our own biases outside of Ish.
• Yeah.
• That's a very good way of putting it.
• That's very interesting.
• So for again, go back to the family business perspective.
• How do you?
• How do you basically?
• We see that there's a need there right now and where we're located not too far from each other, we're in Ontario, Canada.
• And do you see a specific way for family business owners to educate themselves when it comes to insurance?
• Is there a place that they can go to?
• Is it your Wait, where do you encourage people to listeners out there to really get more information if they're thinking about insurance or if they haven't even thought about it.
• But there's a triggering event and actually let me, let me I'm going to come back to this here in a second.
• I'm going to, I'm going to pause that first question here.
• Let's talk about triggering of events because I think that's very important.
• So one of the trigger events for me, when I got insurance on the personal side was when we found out that my wife was pregnant.
• That was one of the very first things that I did was, I went and upped my life insurance.
• Because I knew that there was this, someone else that I can have to look after now and Stephen something happened to me than my unborn.
• Child will have to be taken care of, what are some triggering events.
• So this is good for the audience because this is really important for you to pay attention to this because you might be going through a specific scenario situation.
• That is a trigger event that you should pay attention to.
• So you can get the proper protection or For tax planning that you need.
• So promote or jeevan?
• Can you talk about a future maybe five or six triggering events that you think are very important to for people to pay attention to
• Sure one would be a change in lifestyle for a family member and let me go more into detail.
• We have a client who's a doctor and she has a sister who has some disabilities and her mother used to take care of the sister.
• But now, the mother has entered long-term care, which means that someone else to take care of the sister.
• And that person is her.
• And as soon as that happened, she realized well, I'm the only one Left.
• If something happens to me, my sister has nowhere to go and she can't take care of herself.
• So that was a triggering event for her to get disability insurance critical illness Insurance things to take care of both of them.
• If something were to happen to her while she's alive as well as life insurance.
• So that's an example of, you know, some this case something happened to her mother and it was a Cascade effect that led to her looking at Insurance.
• Of course, there's the standard situation oceans of buying a home or expecting a child.
• It could also be that I think people sometimes have a bit of a wake-up call as to their own mortality.
• A good example of this would be well, the start of the covid.
• Pandemic, we noticed that you know, a lot of people were starting to look at Insurance because they realized, you know what I have, I'm not a mortal.
• Look what's happening in the world and that can also be triggering event, it doesn't have to be that significant.
• Certainly, but there's a whole slew of things to consider when it comes to looking at one's own health, and one's own future goals for what, you know, someone wants to accomplish.
• If they're not there anymore for both their legacy and for the people that they care for, right?
• So, those examples so far, have generally been need-based where it's like something happens and we need insurance because we don't have enough assets.
• There are other kinds of triggers such as being successful in business, and starting to accumulate retained earnings.
• So in Canada, retained earnings are taxed at around fifty percent.
• So that's a lot of tax.
• If some of that money is put into an insurance contract, then there is no tax on the growth and there are ways that that those assets can be used by taking loans, personally, at cetera so that could be a triggering event.
• There could be the sale of a business.
• This for example.
• So now there's a lot of tax that needs to be paid at that time Insurance, can't help, but that moment but perhaps a charitable gift is made at that time.
• But so the say that like a million dollars is now donated to a charity but now the million dollars is gone.
• The tax savings can be used to buy a million dollars of life insurance.
• So in a way, The Heirs are then kept whole, so there can be things like that or it might be just regular financial planning where now the financial plan is updated.
• It and it shows the the tax liabilities that deaf.
• And then what are different ways to cover that?
• So there are the need-based things and they're also the want based things and the wants often arise when awareness is brought because people don't necessarily know that insurance could help in situations where they're still alive.
• Very interesting because one of the buckets that we focus on at business Brothers Is wealth elevation.
• So I'm going to ask this question, just kind of as a new being a pretend I'm going to be here.
• So, do you believe that insurance is a method to increase a person's wealth?
• Now, you got a stumped, I would say no that's not really an appropriate, use of insurance.
• And Sierra rate, certainly not be happy if we said yes.
• So we would we I think we would both agree that it's not really a way to generate wealth.
• I did touch on the sort of the phrase of estate generation, but that's not really to, you know, increase your net worth just for the Take a, you know, having more money for your heirs.
• It's really, so there's money to support your errors and their goals, or perhaps, you know, a spouse that's survive with, with their goals.
• But if someone was to say, you know, can I just get 10 million dollars of insurance?
• So my my kids, you know, can get a mega yacht or something that wouldn't really be appropriate
• Hahaha.
• and that's not happening, so don't worry about it.
• So, I think, I think there's a fine line between, you know, getting Insurance to address a need or a want and you know maybe going too far with that approach.
• Guess if you look at insurance and I'm thinking of permanent life insurance, hear it functions very much like a bond.
• It's sometimes called the life Bond.
• It's a bond that stays there forever so it could be part of someone's fixed Investment Portfolio.
• So, they've got money sitting in gics or bonds that are quite heavily taxed.
• Some of that money could go into insurance and then you, Of an asset.
• But a bond is not going to necessarily beat the stock markets or investing in your own business and things.
• And so sometimes Insurance gets presented as being too good to be true.
• And It's not a magical investment, insurance companies have to make money, they're not just creating wealth.
• And sometimes when it looks like insurance is magical, it's because it's being compared against something else unfairly.
• So, it takes time for us to convince advisors the about the suitable ways to use insurance.
• And then also to convince the clients because chances are very high, that they've seen something that seemed quite sizzly and they were The cool about it and then they don't necessarily look at Insurance where it does have substance.
• Okay, so, I appreciate that answer because I think that just talks to your, basically your morals and your ethics there.
• So, I have two questions here.
• Do you believe that insurance is a good way to protect your wealth?
• yes, that when we can answer quickly,
• Look at that, that was a quick one.
• And secondly, have you seen instances are circumstances?
• Where people, maybe obviously not yourselves, but other advisors have potentially LED people to believe that insurance.
• Or let me just redirect that that insurance has been used maybe or misused or abused, because you're talking about ways, you know, buying a yacht or whatever that is.
• Have you seen people try to work the system when it comes to insurance?
• Yes, I mean, we have seen situations where insurance is used where we didn't quite see why it was being used.
• Apart from, there's the belief that insurance is sold, not bought, and so someone who is very good at sales, can convince people to get things and give all the reasons why it's a good choice when perhaps it isn't.
• Because the issue with insurance is that Advisors are not necessarily fiduciaries, so it's not that they're out to do bad things but they may not present the cons of something, as well as they present the pros.
• And in our approach, we want to educate people because if anything, it's more important for us to maintain the relationship with the advisors, we support then with their clients.
• So if it turns out that a particular client doesn't get something, but they feel better about their advisor because they were shown in sure.
• Assurance in a way, that finally made sense to them then we've achieved our goal.
• But yes, we have situation seen too many situations where insurance has been used in ways that would be a little questionable from my perspective as an actuary knowing how the products work and then jeevan your perspective to.
• Yeah, I mean, there are certainly situations where it's been marketed in a way that's it's just false, really it?
• For example, we have a few Policies that we were looking at on behalf of our clients, where, you know, they bought these policies, 20 years ago and the advisor said, yeah, this policy will yield 9% a year forever.
• And, you know, now in the current day those policies are collapsing because it when that 9% doesn't happen, the policy no longer performs and there's no cash value to keep the policy going.
• And now, the insurer comes to the client and says, well, you know, This policies cost is Hostess policies.
• Premium increases each year.
• Now it's going to cost you about thirty seven thousand dollars a year, even though it cost you maybe $500 a year when you bought it would you like to do that?
• And the client says well no.
• And the insurer says, okay, we understand say goodbye your two million dollar policy and it's not necessarily the insurer being evil there.
• It's the advisor back then not having sold the client something.
• That was appropriate because there are, there are Actually, in some cases where a policy like that makes sense, but just not for most clients, great and then Services also important.
• So the product was perhaps not monitored because the advisor gets paid essentially at the time, it's old and not so much for ongoing service.
• But without the ongoing service, the chances of that product performing as expected our reduced quite a bit.
• So insurance is just like any other portfolio, it should be monitored, it should have attention to it at some particular time, Whatever frequency it is.
• So that's that's really interesting.
• So you guys have actually educated me on a number of things here.
• So I want to thank you.
• And we've talked about the pros and the cons and I appreciate your honesty because promote, you talked about something, I think a lot of times insurance is kind of oversold.
• It's, it's made to be this magic formula to, you know, take.
• Let's just say an altar wealth.
• Ultra wealthy person to make them even more wealthy and so I'm glad you clarified both you gentlemen, clarified a few things there so that just goes to your integrity and it gives some things to think about for our listeners as well.
• So if our listeners are interested in learning more about strategies when it comes to tax or Insurance, where can they find you guys?
• And the best place would be to visit our website tax 70.com so ta X EV ity.com.
• That's cool.
• So they can go there and I'm assuming that there's some way to contact you through the website as well.
• Yeah, there's a contact page.
• We have like, we're all over the place.
• So like we're on LinkedIn.
• People can connect their, we have our company page.
• We have hundreds of videos on YouTube, so as long as they search for tech-savvy, they'll find us and we'd be happy to connect with with them whatever way they would like.
• Okay, awesome.
• Thank you, gentlemen.
• I want to thank you both for Mo the and jibon for being on the show today.
• I got a ton of value.
• I'm hoping that you listeners out there, got a ton of value to.
• So we will see you next time.
• Take care of everybody and we'll see you on the next episode.
To find out more go to Taxevity.com
• My name is Purdeep Sangha, I am the co host for the show.
• My brother harjeet Sangha is on a little bit of a Hiatus.
• Right now, he's busy with his two young sons of.
• If you haven't heard, he has a son.
• His name is older, son's name is Axel.
• And he just recently, a few months ago had his second son and he named him rodent.
• So you can say, my brother is a little bit busy here.
• So I am taking the lead on hosting the podcast.
• And today, we have some pretty Cool guests here today we have promoted and jeevan Sharma.
• They are family business owners but they also help family business businesses themselves.
• So promote and jeevan.
• Welcome to the show here today.
• Thank you very much.
• Thanks for the opportunity.
• Yeah, my I'm looking forward to our conversation.
• You guys are in a very interesting space, so maybe you can tell me a little bit about what you guys do and your background.
• Sure I'm promote.
• And what we do is life and health insurance for people who have needs, people have wants and also people who have the desire to give gifts and so that includes family businesses which is your audience here
• Very interesting.
• and I'm cheap insurance as mentioned and so I help my dad with the business.
• So I do a lot of the backend work here at Tech 70 also, things like preparing illustrations for clients or client presentations or marketing.
• Things of that nature and by Nature, my training rather as a cfp.
• Oh interesting.
• Seriously if be great and so tax.
• 70 I got asked.
• Where did that name come from?
• Well, as you know, with branding, it's very hard to find a web URL that isn't taken if you want a.com and in our world insurance is used for tax planning in many situations.
• It's a tool that has many advantages there and so if you look at the transferable Actuarial risks like okay you're a CFB.
• I'm an actuary and family Enterprise advisor.
• There is mortality morbidity disability longevity.
• Tax 70 kind of fits into that.
• So, it's in a sense.
• It's saying that taxes can last for a very long time.
• Also, and we help with strategies that include Insurance to help deal with some of those concerns.
• That's pretty interesting.
• So when you say an actuary I'm I'm super interested in that because I think that I think numbers math all these formulas.
• Can you maybe you can enlighten me in terms of what an actuary does.
• Well, an actuary is trained to measure and manage risks, so that's really the core and when I started off, there weren't many places that actuaries worked.
• It was mainly insurance, companies Consulting companies or the government.
• And over time, it's expanded quite a bit, so their actuaries working and climate change and all sorts of other sorts of risks.
• But in my case, it was more about transferring risks, that are morbidity disability longevity.
• Mortality, so kind of like, Low life and health insurance.
• Interesting. So it sounds like you have a pretty interesting combo here similar to my brother and I he's kind of the numbers, he's a corporate finance, the wealth management guy and I have all the other stuff so jeevan your the financial planning spacer.
• You have your cfp?
• How does that add to what your dad is doing on the actuary side and on the family Enterprise side?
• So it adds a little bit of extra I suppose context for us when we're dealing with things like corporate cases.
• So when it comes to more than mechanical side of things in terms of, you know, say RG t0 H, or things of that nature where, you know, I'm not an expert when it comes to corporate tax planning or corporate finance by any means.
• But if a client, you know, is incorporated or family businesses Incorporated, it does that, that extra little bit of expertise there.
• In terms of more of the personal planning side that can also play a role because there are certain aspects when it comes to Personal Insurance planning like, you know, CPP thinks of things like that which are important to know about a surly.
• My father doesn't know about those things but is important than I knew about them as well.
• So getting the cfp designation was a good way of going about that.
• Yeah.
• And what you may find is that contrary to what the designations may say jeevan is probably more of the numbers person.
• That I am if even though it had different trading.
• So, my interest tends to be more on the marketing side, for example, and so we do have very complementary skills, but they work together to end up helping clients.
• That's very interesting.
• So your guys is combination here.
• Why should family business owners care about what you guys do?
• So what is it?
• That you help them with?
• Well, we hope them with a range of different things.
• The family business owners have additional complexity in their lives because they've got the business, they've got the family, they've got the ownership considerations.
• And so, as an example, if you've got a family business, and one child is in the business and another child isn't that, and you want to be fair where you think that fair means, each of them gets the same inheritance.
• Then what do you do?
• You want to give one the one child in the business?
• The business?
• And then cast to the other child so that they're treated in a way that seems fair.
• Or in this case equal, so insurance is a way to create that cash.
• So that that liquidity is there and the business can continue and the children outside the business can also continue so Insurance can help in ways like that.
• You probably have other ideas.
• Certainly so we have clients who have been working in their family business for maybe they usually they've started in many cases.
• Has where they've been doing what they've been doing for 30 or 40 years.
• And for much of that time, they didn't really see the money piling up, right?
• They had kids, they have mortgages everything for University, education's, but now I'm talking about me know,
• Hahaha.
• okay, alright.
• Okay, people.
• Okay.
• But, yeah, those types of clients, you know, sort of turn around while their accountants turned them around really and they say, look, you've been accumulating money like quite a significant amount for the past.
• Over 10 years because you don't really have any liabilities your kids.
• So grown up, and moved out, you're sitting on a whole pile of cash.
• Let's find ways to use that to enhance your network, even further and might not immediately sound like insurance has any place in that discussion, but it's actually quite crucial to protecting that net worth if someone were to pass away because the government of course does like to take a cut off, everyone.
• So, everyone's money,
• Definitely.
• so paying for that with insurance Goods, often much cheaper overall then simply, you know, giving the government a slice of your financial pie.
• It can also help with estate generation for younger business owners, who haven't quite reached that wealth accumulation stage at least not significantly and there are other benefits.
• For example, Sheltering corporate assets from the password.
• Taxation, which is quite punitive across most of the provinces and territories.
• So there are many ways that insurance can help there.
• You know, I really like your approach and the tax Equity part actually makes a lot of sense, because when most people think of insurance, they think of K deaf or something that they're not happy with.
• But this is an opportunity to actually, like, you said, give gifts, equalize or make things more fair have tax advantages.
• It seems like it's a real tool or there's a number of tools that you have in your tool kit to help family business owners, increase your wealth reduce the And actually make family members, I'm going to say a little bit happier with the end outcome.
• Yeah, that's exactly right.
• So you thank you for that summary.
• So, Insurance in our Marketplace is used primarily for wants.
• It's not that the clients need the insurance, they have assets, but by using insurance, they could be in a better place.
• Our challenge is educating people because sometimes insurance has been presented to them in ways that make it look too good to be true that it's just magical, it does all these things and it's not, it's just a financial asset.
• And the question is whether it's the right choice?
• Voice.
• Or whether there's something else, that would be better for those clients.
• So we need to educate the clients.
• We also need to educate their advisers and I guess that's where my Actuarial training can be a value because I actually develop products and so knowing how the products work, how the insurance companies make their money can be valuable in picking the right products, and having people feel comfortable that the products will work the way that they're being presented.
• So it's almost like you have an inside scoop there.
• Yes, that's that's one way to say it, huh?
• Yeah, which is really interesting.
• So I want to go back to an example that you talked about.
• You talked about an example where one one child.
• I'm going to say I'm going to use that term is working in the business and the other one is not and to make things more fair.
• There's an insurance policy.
• However, that structured for the one that is not in the business.
• So can you elaborate a little bit out on that?
• Because the one thing that pops into my mind there, and just from personal, This is my brother and I have always been part of the family businesses.
• We've we both worked in them and some capacity I was probably a little bit more active than my brother just because I was the older one, but he was always active in some instance and he was never really out of the picture.
• So for, for an individual, let's just say I'm, I'm the brother that's in the business and I've been working in it day in and day out.
• I put, you know, put everything I've done in terms of my time effort after school, To this business and then let's just say my brother's out there, he's not part of the business but now he gets his Hefty insurance policy.
• How do you come across those conversations where maybe the person The Sibling that's in the in the business, as how is that fair?
• And how do you, how do you deal with those conversations?
• And how do you talk to the the parent or the founding generation around those conversations?
• If there is a lot of complexity there.
• Now, in our world, we work with other advisers, who would be better suited to answering those sorts of questions.
• We basically stay in our lane, which is the life and health insurance.
• But by being family into the family Enterprise advisor, is you are pradeep, we have a certain language a certain tool set that we can use to help in communication and sometimes the parents are simply not aware of what they're doing.
• They think that it's important to give the same Amount to each child.
• They think that if it's not equal, then it's not fair.
• But the child that's been in the business, maybe they lost out on other opportunities because they're in the business because it was important to their parents to do that.
• So maybe they've made more of a sacrifice but at the end, if Insurance isn't there, perhaps then here's the business.
• Now you're both shareholders in it and you've got a brother who wasn't really in the business who is now helping make the decisions.
• And so the parents may not have considered the implications of their inaction or their current planning and that's where other advisers, who understand more of the family Dynamics can be very important to make the parents understand the options, they have available and the consequences of the status quo
• Yeah, that's very important.
• So, thank you for bringing that up and I think that's very, very interesting because I think a lot of times we think of, as insurance being kind of clear-cut, you buy a policy and there you go.
• But there's a lot of behind-the-scenes conversations and considerations that need to be talked about in a family situation for family business owners.
• So I remember when I was in the banking sector and was in charge of the retail Network and insurance was part of the product portfolio that we had and we Take a look at our highest performers and we noticed that the highest performers were the ones that believed in the insurance.
• The most, they're the ones that had the highest.
• I'm going to say closing rate, and I don't want to, I don't like to use that term, but I'm going to use it because we're all familiar with sales Insurance isn't necessarily.
• You know, something you want to force on something or someone it's a need and we've all seen some of the challenges that happen when people don't get insurance.
• So have you come across or can you share some stories?
• May be good news.
• Maybe bad news of some families that have used it effectively and families that might have missed out and some of the challenges that they faced as a result of not using Insurance effectively.
• Yeah. Maybe the example would be the nursery.
• Yeah.
• Do you want to just give the background to sure?
• So this was a I guess it was really a nursery like a plant nursery business started by a couple.
• I think this was probably about 30 years ago, probably something like that.
• We could we can't give too many specifics because they're in the GTA and there are people on this call who probably shop there.
• Yeah, of course.
• Totally get it.
• We know we know that confidential is very important.
• They grew the business and now they've included the Next Generation and their planning.
• So they're looking at getting some insurance to sort of smooth that transition and deal with any bumps that might come from, you know, probate and final taxation things of that nature.
• So, that's the situation where, you know, it's not obviously they're still around.
• So it's not a situation where there's been an immediate benefit for the Next Generation but it's the sort of planning that will will prevent any hiccups between the, the new, the new siblings who are Partners.
• Yeah.
• So the situation there is that two of the children are working in the business and two of them are not
• It is.
• and the parents are getting closer to retirement.
• And so that, now, thinking about the future, like, where do they get retirement income from?
• Because if they take too much from the business, then there isn't really enough for their children, running the business, they are land rich, but they need that because the round were they are like there.
• Our residential neighborhoods being built.
• So the land could certainly be sold but they have to figure out some things for themselves.
• They weren't really aware of the tax implications of what would happen.
• They think of all of the land as their principal residence but it's not like they have their principal residence on the property but most of the land isn't part of that.
• So there's a big tax bill.
• They don't necessarily want the children to have to sell off a portion of the land to pay the tax bill so Insurance can be a way.
• Way to help with that and also to provide money for the two children who are not in the business.
• Interesting. And do you work closely with the tax professionals that the family business owners have their own professionals?
• Or do you have your own tax professionals that you go to when it comes to these complex tax issues?
• But we work with other Specialists because we focus on life and health insurance.
• So we need to collaborate.
• So with the tax experts, the investment experts Etc.
• So those are typically, sorry.
• Those are typically, the advisors we work with some contacts for ourselves.
• Personally, we don't really refer clients to that that sort of expertise.
• I mean we would if there was a need but generally our clients are the clients of another advisor.
• So we're fitting into that advisors process that advisors team.
• So they bring you into the picture into the conversation because there's a specific need.
• That's been identified already.
• You guys just have the expertise to be able to figure out what is the right product.
• What is Right service in some maybe even have conversations that haven't been had.
• And uncover some situations that for example, someone like myself as a family business advisor for family.
• Enterprise advisor wouldn't have noticed because I'm not a insurance or tax expert.
• Yes and again not to harp on family Enterprise advisors as being the most amazing people in the sector but we've learned how to communicate.
• So while we're in different niches, we do know how we can talk and we have our tools like the three Circle model Etc that we can use to simplify the communication and to make sure that things aren't being missed.
• Yeah, there's a Common Language there and that's something that I see quite often as a business advisor.
• That's really my area of expertise is the audience knows is that, I find that when there is a lack of communication or language, that's common amongst the advisers, the family, really misses out because things get they fall through the Hoops.
• If things, just things just fall apart things, take longer things are missed.
• And unfortunately, it's something that can be easily overcome.
• Or if people are actually on the same page.
• So I'm glad you brought up that common language part because that's very important.
• So Insurance a lot of people when they think of insurance if they haven't been introduced to Insurance think of it as being.
• Like I said simple.
• But it's it's not a space that they want to get into.
• It's not a conversation that they want to have because it's uncomfortable for a lot of people and I think there's also the misconception that it might even be too.
• Pensive or that you have to go through this extensive Health, interviewer, questionnaire or peeing in a cup and blood tests and all these kinds of things, how do you get people to overcome those?
• I'm going to say, fears or barriers when it comes to insurance.
• Yeah, I mean there are a lot of misconceptions as you've noted, some of the things you're referring to are more applicable in situations where someone has a need for insurance.
• So, for example, they have a mortgage and they need to cover that off in case it were to pass away.
• So, the family has a home in situations like that, the clients are quite focused on the cost because they see the insurance as an expense.
• They want to minimize that expense.
• They want to get rid of the insurance as soon as they can.
• Most of our work is where Insurance isn't needed.
• So it's really an asset.
• You've got money sitting in different buckets and you're moving money generally from the fixed-income bucket.
• So things like bonds gics, and you're putting it into this other bucket.
• And so there's really no cost.
• So to speak.
• It's not something that's affecting anyone's lifestyle because you're taking assets that are already sitting there and you're saying, let's move some into this other asset called insurance and if you do, That you get certain advantages that arise.
• I really like how you put that.
• Yeah. And when it comes to even those situations, there are clients who are concerned about the underwriting process which would be do the Medicals and do we really want people looking at our financials and collecting our social insurance number once, they look at the benefits of what they can get from it, from the insurance strategy that we're proposing it.
• I would say in 90% of cases those Has become nine issues, it's really more of, that's a matter of familiarity.
• They just want to know what the process is.
• And if something goes wrong, what are the remedies?
• And then we describe that to the clients and it's usually fine and I'd say seven or eight years.
• I've been in the business.
• We've only had one situation where a client simply would not proceed with the paramedical interview and it was because they wanted to make sure that the information they had told us in the air.
• Application was exactly what they told the paramedical company and I hate to say it, but some people may not be completely forthright, and those situations is really nothing you can do, but it's exceedingly rare.
• And most clients understand that they either need insurance in which case, they'll, you know, sort of bear the burden of going through the process of getting it, which again isn't awful.
• It's not as bad as some people think, but there are steps to it and if it's a want situation, then The client will see that the benefit is also worth going through the application and medical process.
• And there is a bit of a side benefit of going through Insurance underwriting.
• Not something you'd want to do for fun.
• When you go to your family doctor, they can basically tell you how you are today and give you things to keep you in good condition until the next time they see you.
• And they can see you.
• A lot of times with insurance, the underwriters are only looking at you once and they're using predictive medicine.
• And so they're saying that for someone in your condition.
• What is it?
• What is it?
• Likely going to happen in terms of your life expectancy?
• So it's almost like projecting things and there may be things that are discovered because the test that the insurance companies do are different than test and normal doctors do like with our family doctor, like like he's been criticized for having too many vitamin D tests so I guess ohip keeps track of how many different tests and said, okay, you can have one if you want one, but just keep in mind.
• With insurance, they're really predicting into the future.
• What happens with people like the the particular client, and sometimes there are medical issues that are identified and it's possible for the client to take action to help prevent problems.
• So they may not be able to get insurance or to get insurance at a low cost but they've done things that have actually helped them with their existence, their life expectancy.
• Yeah, you know, this really interesting because I think that's a whole other thing to say rabbit hole.
• We talked about the medical system and,
• Yeah.
• and general practitioners and some of the things that are overlooked there, but I think that's a really good point.
• I think there's like you said, you can uncover things and I'm a firm believer that everything happens for a reason and so it, you know, if you're going to uncover something, you're going to cover something and it's actually a positive.
• Again, going back to the insurance part.
• How many?
• If you could If you could give an estimate, how many family businesses, our family business owners.
• Do you believe how the right Insurance strategy or tax strategy in terms of a percentage that you've come across?
• Is it, do you think three-quarters of the people have one?
• Do you think half the people have one?
• Do you think it's a small fraction that's out there just based on your own personal experience?
• Yeah, it's very difficult to estimate that and there hasn't been a lot of research in that area.
• The families, that we end up talking to are the ones who are looking at doing something.
• So, their primary advisor, whether it's their investment advisor, or their accountant has identified a situation where Insurance may help them and they're interested enough in order to take a look at that.
• My guess would be the majority.
• Haven't really done this because insurance has all those stigmas associated with it because it's Would dying and people don't want to think about that.
• Maybe they've had a bad experience in the past or it's been pitched as being too good to be true etcetera.
• And then there's also the issue of what they've been sold because in the insurance world, the advisors get, so get paid commissions and so there's an incentive to sell things.
• And maybe what, the client got isn't really the right thing for them, but it's really hard for us to know in aggregate because that information is not available.
• And I love statistics and things, but there's not much to analyze.
• Yeah.
• And our experiences as was mentioned, most of these clients are not sort of your typical everyday family business, who doesn't have any planning in place, like, usually, they're well established and at some point in their careers, they've had some form of protection or grandparents protection implemented.
• So I would say like amongst our clients is probably 60 or 70 percent but in the general population, again hard to say
• You know, I really want to enforce this concept of having a right tax professionals by your side, or giving you advice.
• Because I've seen a lot of horror stories, I've had some personal family members who have passed and, and they were strong headed.
• So I'm going to say that they were strong head and strong-willed and they didn't take the full advice of the advisers and things happen to them.
• So, in this one particular instance, I had an uncle that had a business.
• Successful business passed away.
• And he, it was successful enough that they had a management team, but he was still the main.
• You can say operator.
• And when he passed a business, just basically folded, right?
• Because it wasn't necessarily that the expertise, wasn't there.
• It was just more of the morale, right?
• That figurehead was no longer there and the Strategic Direction.
• And so the business was folded, and as a result, it had a ripple effect.
• Not only through his immediate family but all of their children's families as well.
• And so I've seen the challenges that can result from that and I can see how some advisors May fold when someone is strong with like a family business.
• Owner, is strong-willed, what happens when you come across?
• Someone who is?
• That is so adamant and strong, but is going against what?
• You're trying to advise them on doing, is there, is there a technique technique or tactic or some way that you get them to think about things differently?
• Only because as business owners, typically they have their own mindsets they have their own way of doing things.
• The approach we take is to provide education and the opportunity to buy.
• So someone has a belief that insurance companies won't pay claims or it's all a scam or whatever, we're not there to change their minds because realistically we couldn't do that.
• I think we have a situation recently.
• The client wanted things in writing that the insurance company guaranteed, they would pay the claim and all this stuff like you can't like all you can do is make sure things are in place, but you have to be honest and all these So in our model, we're in essence, be to be, so we work with other advisors.
• So there would be a primary advisor who has a relationship with that client.
• And so we don't make the recommendations about insurance because we're conflicted.
• We're going to say buy this insurance by that insurance.
• Like what else do you expect us to say?
• But they do trust that other advisor.
• So what we do is we when we get information about a client, we put together Insurance options and discuss it with that.
• Advisor first to see whether things make sense.
• And if it turns out that perhaps a leveraging strategy where you're borrowing against engine insurance, contract would be a good choice.
• But the advisor knows that client doesn't like borrowing money because in their head like once you pay off your mortgage, that's the last debt.
• You have you would ever have that we're not going to present that but ultimately, the typical model would be the advisor hosts.
• The meeting we come in and explain how Insurance might be able to help.
• Then we go away.
• The advisor has discussions with that client and the advisor is the one who makes the recommendation because they know that client they probably known them for years and have built up trust.
• So that's the way that we deal with that.
• So if we were B to C then it would be very different.
• We'd have to learn how to close and all of these things that aren't really in our skill set.
• Like we're nice people but we are there to really educate and then there needs to be motivation from either the client or there.
• Advisor.
• Who cares enough to say you really need to do this because if you don't, there are these consequences.
• That's really interesting.
• So it's the need and the want in the desires already there you're just trying to give them the best options to be able to get to their goals, basically.
• Yes.
• Okay. Okay, okay.
• So, this is interesting because this podcast and, you know, when it comes to business Brothers, we are all about being real.
• We are very much about being unconventional, though being real and being real personal and we try not to offend anybody.
• But we in all honesty to because you talked about working with other advisors.
• One of the challenges that I come across sometimes is the quality of advice and the level of expertise that other Visors are giving and sometimes I look at some of the stuff, the advice that's been given I say, where did you get this information from?
• And who in the heck, advised you?
• Do you see that?
• Because you're saying you work with other advisors and what I see in a lot of cases and this isn't about any particular discipline, but what I see is a lot of times those advisors aren't leading their clients in the right path or they've missed something significant.
• What do you do in those instances?
• If if you've ever Across that, how do you, how do you re educate those advisors and how do you have that conversation?
• Do you have direct conversations with the client or do you leave that up to the advisor to maybe correct some of those issues or challenges?
• Yeah. Like each advisor is an expert in their own Niche and so it's will use it accountants as an example.
• So they're experts in certain things but they're not experts in insurance, but they probably have opinions about insurance and it may be well, don't get insurance by term investor difference or whatever and it may be self-preservation.
• Because if something goes wrong with the insurance, it's not the insurance person who gets blamed.
• It's the accountant because the account was depressed and party.
• So why should they take the risk of Ending Insurance when it's something they don't necessarily know all that much about.
• So the other advisors need to have enough interest in wanting to learn.
• And if they do, then what we do is we educate them in private over an extended period of time.
• So, we would say that when you're talking to a client, just give us a call, describe the situation and we'll tell you where Insurance may or may not fit.
• When we prepare the insurance options, we show them to the advisor first.
• So in this process, we're upping the advisor become more comfortable with insurance themselves and sometimes we find that the advisor has issues with the size of the premium.
• Like we've got cases like that and so the issue because they're not seeing it as an asset transfer, they're seeing it as a cost and so it takes extended time to help people get over those types of biases, just as it would take us, time to get over our own biases outside of Ish.
• Yeah.
• That's a very good way of putting it.
• That's very interesting.
• So for again, go back to the family business perspective.
• How do you?
• How do you basically?
• We see that there's a need there right now and where we're located not too far from each other, we're in Ontario, Canada.
• And do you see a specific way for family business owners to educate themselves when it comes to insurance?
• Is there a place that they can go to?
• Is it your Wait, where do you encourage people to listeners out there to really get more information if they're thinking about insurance or if they haven't even thought about it.
• But there's a triggering event and actually let me, let me I'm going to come back to this here in a second.
• I'm going to, I'm going to pause that first question here.
• Let's talk about triggering of events because I think that's very important.
• So one of the trigger events for me, when I got insurance on the personal side was when we found out that my wife was pregnant.
• That was one of the very first things that I did was, I went and upped my life insurance.
• Because I knew that there was this, someone else that I can have to look after now and Stephen something happened to me than my unborn.
• Child will have to be taken care of, what are some triggering events.
• So this is good for the audience because this is really important for you to pay attention to this because you might be going through a specific scenario situation.
• That is a trigger event that you should pay attention to.
• So you can get the proper protection or For tax planning that you need.
• So promote or jeevan?
• Can you talk about a future maybe five or six triggering events that you think are very important to for people to pay attention to
• Sure one would be a change in lifestyle for a family member and let me go more into detail.
• We have a client who's a doctor and she has a sister who has some disabilities and her mother used to take care of the sister.
• But now, the mother has entered long-term care, which means that someone else to take care of the sister.
• And that person is her.
• And as soon as that happened, she realized well, I'm the only one Left.
• If something happens to me, my sister has nowhere to go and she can't take care of herself.
• So that was a triggering event for her to get disability insurance critical illness Insurance things to take care of both of them.
• If something were to happen to her while she's alive as well as life insurance.
• So that's an example of, you know, some this case something happened to her mother and it was a Cascade effect that led to her looking at Insurance.
• Of course, there's the standard situation oceans of buying a home or expecting a child.
• It could also be that I think people sometimes have a bit of a wake-up call as to their own mortality.
• A good example of this would be well, the start of the covid.
• Pandemic, we noticed that you know, a lot of people were starting to look at Insurance because they realized, you know what I have, I'm not a mortal.
• Look what's happening in the world and that can also be triggering event, it doesn't have to be that significant.
• Certainly, but there's a whole slew of things to consider when it comes to looking at one's own health, and one's own future goals for what, you know, someone wants to accomplish.
• If they're not there anymore for both their legacy and for the people that they care for, right?
• So, those examples so far, have generally been need-based where it's like something happens and we need insurance because we don't have enough assets.
• There are other kinds of triggers such as being successful in business, and starting to accumulate retained earnings.
• So in Canada, retained earnings are taxed at around fifty percent.
• So that's a lot of tax.
• If some of that money is put into an insurance contract, then there is no tax on the growth and there are ways that that those assets can be used by taking loans, personally, at cetera so that could be a triggering event.
• There could be the sale of a business.
• This for example.
• So now there's a lot of tax that needs to be paid at that time Insurance, can't help, but that moment but perhaps a charitable gift is made at that time.
• But so the say that like a million dollars is now donated to a charity but now the million dollars is gone.
• The tax savings can be used to buy a million dollars of life insurance.
• So in a way, The Heirs are then kept whole, so there can be things like that or it might be just regular financial planning where now the financial plan is updated.
• It and it shows the the tax liabilities that deaf.
• And then what are different ways to cover that?
• So there are the need-based things and they're also the want based things and the wants often arise when awareness is brought because people don't necessarily know that insurance could help in situations where they're still alive.
• Very interesting because one of the buckets that we focus on at business Brothers Is wealth elevation.
• So I'm going to ask this question, just kind of as a new being a pretend I'm going to be here.
• So, do you believe that insurance is a method to increase a person's wealth?
• Now, you got a stumped, I would say no that's not really an appropriate, use of insurance.
• And Sierra rate, certainly not be happy if we said yes.
• So we would we I think we would both agree that it's not really a way to generate wealth.
• I did touch on the sort of the phrase of estate generation, but that's not really to, you know, increase your net worth just for the Take a, you know, having more money for your heirs.
• It's really, so there's money to support your errors and their goals, or perhaps, you know, a spouse that's survive with, with their goals.
• But if someone was to say, you know, can I just get 10 million dollars of insurance?
• So my my kids, you know, can get a mega yacht or something that wouldn't really be appropriate
• Hahaha.
• and that's not happening, so don't worry about it.
• So, I think, I think there's a fine line between, you know, getting Insurance to address a need or a want and you know maybe going too far with that approach.
• Guess if you look at insurance and I'm thinking of permanent life insurance, hear it functions very much like a bond.
• It's sometimes called the life Bond.
• It's a bond that stays there forever so it could be part of someone's fixed Investment Portfolio.
• So, they've got money sitting in gics or bonds that are quite heavily taxed.
• Some of that money could go into insurance and then you, Of an asset.
• But a bond is not going to necessarily beat the stock markets or investing in your own business and things.
• And so sometimes Insurance gets presented as being too good to be true.
• And It's not a magical investment, insurance companies have to make money, they're not just creating wealth.
• And sometimes when it looks like insurance is magical, it's because it's being compared against something else unfairly.
• So, it takes time for us to convince advisors the about the suitable ways to use insurance.
• And then also to convince the clients because chances are very high, that they've seen something that seemed quite sizzly and they were The cool about it and then they don't necessarily look at Insurance where it does have substance.
• Okay, so, I appreciate that answer because I think that just talks to your, basically your morals and your ethics there.
• So, I have two questions here.
• Do you believe that insurance is a good way to protect your wealth?
• yes, that when we can answer quickly,
• Look at that, that was a quick one.
• And secondly, have you seen instances are circumstances?
• Where people, maybe obviously not yourselves, but other advisors have potentially LED people to believe that insurance.
• Or let me just redirect that that insurance has been used maybe or misused or abused, because you're talking about ways, you know, buying a yacht or whatever that is.
• Have you seen people try to work the system when it comes to insurance?
• Yes, I mean, we have seen situations where insurance is used where we didn't quite see why it was being used.
• Apart from, there's the belief that insurance is sold, not bought, and so someone who is very good at sales, can convince people to get things and give all the reasons why it's a good choice when perhaps it isn't.
• Because the issue with insurance is that Advisors are not necessarily fiduciaries, so it's not that they're out to do bad things but they may not present the cons of something, as well as they present the pros.
• And in our approach, we want to educate people because if anything, it's more important for us to maintain the relationship with the advisors, we support then with their clients.
• So if it turns out that a particular client doesn't get something, but they feel better about their advisor because they were shown in sure.
• Assurance in a way, that finally made sense to them then we've achieved our goal.
• But yes, we have situation seen too many situations where insurance has been used in ways that would be a little questionable from my perspective as an actuary knowing how the products work and then jeevan your perspective to.
• Yeah, I mean, there are certainly situations where it's been marketed in a way that's it's just false, really it?
• For example, we have a few Policies that we were looking at on behalf of our clients, where, you know, they bought these policies, 20 years ago and the advisor said, yeah, this policy will yield 9% a year forever.
• And, you know, now in the current day those policies are collapsing because it when that 9% doesn't happen, the policy no longer performs and there's no cash value to keep the policy going.
• And now, the insurer comes to the client and says, well, you know, This policies cost is Hostess policies.
• Premium increases each year.
• Now it's going to cost you about thirty seven thousand dollars a year, even though it cost you maybe $500 a year when you bought it would you like to do that?
• And the client says well no.
• And the insurer says, okay, we understand say goodbye your two million dollar policy and it's not necessarily the insurer being evil there.
• It's the advisor back then not having sold the client something.
• That was appropriate because there are, there are Actually, in some cases where a policy like that makes sense, but just not for most clients, great and then Services also important.
• So the product was perhaps not monitored because the advisor gets paid essentially at the time, it's old and not so much for ongoing service.
• But without the ongoing service, the chances of that product performing as expected our reduced quite a bit.
• So insurance is just like any other portfolio, it should be monitored, it should have attention to it at some particular time, Whatever frequency it is.
• So that's that's really interesting.
• So you guys have actually educated me on a number of things here.
• So I want to thank you.
• And we've talked about the pros and the cons and I appreciate your honesty because promote, you talked about something, I think a lot of times insurance is kind of oversold.
• It's, it's made to be this magic formula to, you know, take.
• Let's just say an altar wealth.
• Ultra wealthy person to make them even more wealthy and so I'm glad you clarified both you gentlemen, clarified a few things there so that just goes to your integrity and it gives some things to think about for our listeners as well.
• So if our listeners are interested in learning more about strategies when it comes to tax or Insurance, where can they find you guys?
• And the best place would be to visit our website tax 70.com so ta X EV ity.com.
• That's cool.
• So they can go there and I'm assuming that there's some way to contact you through the website as well.
• Yeah, there's a contact page.
• We have like, we're all over the place.
• So like we're on LinkedIn.
• People can connect their, we have our company page.
• We have hundreds of videos on YouTube, so as long as they search for tech-savvy, they'll find us and we'd be happy to connect with with them whatever way they would like.
• Okay, awesome.
• Thank you, gentlemen.
• I want to thank you both for Mo the and jibon for being on the show today.
• I got a ton of value.
• I'm hoping that you listeners out there, got a ton of value to.
• So we will see you next time.
• Take care of everybody and we'll see you on the next episode.
To find out more go to Taxevity.com