Tier One Interview: Frank Seneco
This month Jay talks to Frank W. Seneco, President, Seneco & Associates, Inc. & Seneco Global Advisors and a board director of First Financial Resources (FFR). The pair discuss Frank's path through the industry, placing private placement life insurance and annuity cases, producers and producer groups and, of course, restaurants. Read the interview in full below.
JAY: Ten years ago this past summer, I was attending the annual PPLI & PPVA Conference in Chicago when my friend and company counsel, Tom Morante, pulled you over to me before the first day’s session was to begin and said, “The two of you should get to know each other.” At the time, Tom was a partner at Holland & Knight in Washington, DC and Miami and I knew it was smart to follow his advice. I’m glad I did because you are the rare producer who has deep expertise in all the life insurance segments I’ve worked in – foreign national, private placement, premium financing, executive benefits, retirement planning and wealth transfer. In fact, I’m the one who is often learning from you, and you’ve been a gracious teacher as well as a good friend, Frank.
We are going to talk how you built such an expansive portfolio of practice areas but, first, tell me about your business which includes leading two producing entities: Seneco & Associates for your domestic clients and Seneco Global Advisors for your foreign national and U.S.-nexus clients.
FRANK: It’s great to be here with you Jay. I remember that day well when Tom introduced us, you were working with BF&M, the old Bermuda Fire & Marine, at the time. You’ve been a great friend and wonderful resource in the global life insurance industry. I have learned a lot from you as well.
Both of our companies, Seneco & Associates and Seneco Global Advisors, focus on structuring sophisticated life insurance strategies to provide protection and tax minimization solutions for clients and their families. This could be to provide protection for future estate or inheritance taxes, buy/sell planning, or to reduce or eliminating taxes on investment portfolios as part of a multi-generational plan.
Seneco & Associates is our US based entity which focuses on US domestic clients and more traditional life insurance products and strategies. Here we focus on income tax reduction strategies with sophisticated pension designs, to advanced life insurance for protection purposes, mainly for estate and business planning using techniques such as split dollar, premium financing etc. The range of products we use here are traditional whole life, indexed universal life (IUL) to guaranteed universal life (GUL).
Seneco Global Advisors is our international insurance consultancy. This company focuses on offshore life insurance planning for US families, foreign nationals, and wealthy global citizens. The main focus is on offshore PPLI, but we do also offer international protection-based policies - term, GUL and IUL - for foreign clients.
JAY: Most of the best life insurance producers I know didn’t enter our business as their first choice. You’re no different in this regard. Walk me through your upbringing and then your career path that led you to where you are today.
FRANK: I would say I had a modest upbringing. We were an average middle-class blue-collar family - my dad was a steelworker and my mother a stay-at-home mom. When I was younger, I had gotten interested in business, specifically accounting, and my plan was to become a CPA. But plans sometimes change in life.
I had a young family and needed to get a job so I could support them. I really did not know what I was going to do with myself. A family member who used to work as a debit agent for Met Life back in the 1970’s, suggested I give insurance a shot. He explained to me the way it worked and suggested I look into it. I ended up putting in an application.
I wound up walking into the local Met Life office, and pretty much told them I was looking for a job. They gave me one of those LIMRA Career tests to see if I would meet the criteria as a good candidate to work in insurance sales. I was pretty excited, that was until they came back and told me I did not pass the test! (laughing)
Not to be discouraged, I said to myself, “Well, if Met Life will not hire me, then maybe another company would.” As I said, I was motivated as I needed to earn money. I wound up calling up a Prudential office in my hometown and setting up an interview. They also gave me a career test to see if I would be good in insurance sales. Luckily, they had a different test and I passed!
In 1990, I started my career with Prudential in their district agencies channel, which was
what was left over of the old debit business. I was assigned a debit territory with clients and received a base pay. This was to service the existing clients where we used to go and collect premiums door-to-door and sell them new policies when needed. At that time, the focus was on multi-line coverage, so we offered and sold life, health, annuities, mutual funds, along with auto and homeowners.
Things were going along well for the first year and a half - of all the product lines we were offering, life insurance was always what interested me the most. Because I wanted to keep increasing my knowledge and customer market to work in the advanced planning space, I wound up leaving to go to Mass Mutual and into their ordinary agency system. This was quite an eye-opening experience.
While I did get a great education on product mechanics, and was introduced to advanced planning concepts at Mass, I was not having success from the sales side. When I look back, Mass was a good opportunity, fantastic training, but I may have been a bit young to have moved over there at that time.
After a little over a year at Mass Mutual, I wound up leaving and going back to a different Prudential office. Again, back in district agencies and selling multi line coverages on a debit. Here, I felt like I was taking a step back and it was a market that I wanted to move on from.
I wasn't very happy, and again a year later, I decided it really wasn’t for me, and I decided to leave Prudential again. I was very discouraged, I had my family, a wife and now two kids, and still needed to earn a living to support them.
It was at this point that I thought of leaving the life insurance industry all together. I considered taking a job internally as a client representative for major health insurance company just to earn a steady pay. My heart just was not in it. Actually, I kept telling my wife at the time that I was waiting for the person that hires people for that position at the health insurance company to call me back. That went on for a few weeks.
Things were not looking good, and I was just not sure what I was going to do. A very good friend of mine whom I used to work with at Prudential called me and told me he wanted me to meet this local general agent from an insurance company called Indianapolis Life. He had already set the meeting up.
I knew who the general agent was, he was an absolute legend in our area, and one of Indianapolis Life’s all-time leading agencies. He had a reputation for closing very large life insurance sales with very wealthy families. I remember I was pretty nervous to meet this gentleman.
As I mentioned, I was trying to find a place where I belonged to get my career going in the life insurance business. At this time, I had no office to work out of, and certainly no paycheck. I remember going in to meet the general agent and his staff. From right when I walked in, everything just felt right, like I was supposed to be there at that office. He did tell me that Indianapolis Life did not finance agents, so no paycheck was offered, but he did make me a promise. He knew I wanted to learn advanced markets, and the deal was, if I brought in prospects, he and his team would teach me advanced life insurance sales and how to close business. He also gave me a spot in the basement of the office to work out of. Again, no financing, but I had a desk, a phone and an opportunity-- it was a start.
This was a turning point in my career. From this point on, I knew I was in the right place and things just started to go in the right direction.
It was at this time, aside from learning advanced planning techniques, this new agency taught me how to network with other professionals, and close sales.
I started networking with tax lawyers who were associates at estate and tax law firms and accountants at CPA firms. This has worked out well because many of these professionals and I have grown together over the years.
In 1996, I left the agency while still keeping a great relationship with the general agent and started Seneco & Associates, a completely independent life insurance firm.
Thankfully, things have grown significantly over the years, and our markets and clientele have increased. We now have the privilege of working with high net worth and ultra-high net worth families across the US and around the world, designing, implementing and administering large, sophisticated life insurance portfolios.
I have to say, that if it was not for this general agent, teaching and providing me his guidance, I don't know if I would be in the industry today. I will forever be grateful that he gave me a chance to prove myself.
JAY: That’s an amazing story, Frank, and a good lesson about persistence. Let’s talk about what’s happening in the marketplace. Ever since President-elect Biden released his tax proposals last November, there has been a renewed interest in private placement life insurance and annuities. You’ve been placing these policies consistently for over two decades so I’m sure you get a chuckle out of seeing folks suddenly discover PPLI. In your practice, you work with both U.S. and non-U.S. clients in applying private placement solutions. What are some of the common strategies you deploy with these different types of clients?
FRANK: Yes, the recent tax proposals have certainly increased interest in PPLI and PPVAs. A lot of people are talking about it. When done correctly, they can be an extremely powerful planning tool that adds tremendous value for clients and their families.
It's funny, because for as long as private placement has been around, approximately 35 years in the U.S., there are many professionals who have not heard of it. When people do discover it, they sometimes think it’s too good to be true, but once they realize it is for real, they understand and see the tremendous benefits it can provide.
With U.S. clients implementing PPLI here domestically, we see most of the polices being taken out mostly through trusts in Alaska, Delaware, or South Dakota. This is to take advantage of the low state premium tax opportunities provided by these jurisdictions. These are always going to be a MEC or non-MEC because of the U.S. onshore guidelines about tax compliance.
The strategies can be as basic as a multi-generational trust just applying and funding the policy with current trust assets. Or, in the case of where we need to get additional assets into the trust to fund a policy, we do utilize strategies like loans to trusts, gift sale transactions and private split dollar.
In the offshore market, we see policies being implemented with both U.S. citizens and foreign nationals. For U.S. persons, we see the standard MEC and non-MEC designs, but offshore is where things can get interesting. There is the ability to design other policy structures that are compliant for U.S. purposes. These are typically, Frozen Cash Value (FCV), Zero cash Value (ZCV) or Limited Cash Value (LCV) policies. These other policy structures are usually used to fit into a specific plan for a client or family.
For foreign clients with no ties to the U.S., we see them also incorporating the FCV, ZCV or LCV policy designs, or a policy can be customized to meet the qualifications of their home jurisdiction.
Finally, in today’s world, we are seeing clients and families who are citizens of multiple countries. Such having both U.S. and U.K citizenship, as an example. Special care does have to be considered because you may need to have a policy design that is dual compliant for both jurisdictions.
Compliance in this marketplace is very important.
JAY: As if catering to life insurance clients all over the world didn’t keep you busy enough, you are currently in your second go-around as a board member of the FFR producer group of which you’ve been a member since 2005. I recognize First Financial Resources as a powerhouse organization in our industry which, I believe, has been around since 1984. Fill us in a bit about FFR, why you lend your time to serving on the board and what that experience is like.
FRANK: First Financial Resources --FFR as its commonly known -- is one of the oldest independent producer groups here in the U.S. It was started back in the 1980’s and is one of the premier producer groups in the industry today.
It is 100% owned by its members and this fits in very well for our model of independence.
FFR provides direct access to the highest levels at many of the U.S. domestic life insurance carriers. I’ve been able to meet and develop great relationships with senior executives and underwriters at many of these companies. This is a tremendous value to our firm and helps us provide the best solutions for our clients.
This is my second time around serving on FFR’s Board of Directors. I had the privilege of being FFR’s Chairman of the Board in 2014. I owe a lot to FFR, I feel it added to my growth in the industry and provided me another opportunity to further expand in the U.S. marketplace.
JAY: Lately, I’ve been noticing a lot of aggressive marketing activity related to a number of advanced life insurance strategies. It made me think about all the highly ethical producers in our industry and how they take the high road but may be dragged down by the actions of others. You’re at the top of my ethical producer list, Frank, and I know you are troubled by some of the practices you’re seeing. Do you mind if I put you on the spot by asking if you could give a few examples of what’s going on out there and how you address your clients who have been approached with questionable strategies?
FRANK: I don’t mind at all and thank you for the compliment. We certainly look to take the ethical road when recommending and implementing strategies for clients.
I’m seeing more and more aggressive strategies that are being pushed out in the marketplace. To me, this is a very big concern because it just gives our industry a bad name.
In what I call the retail market here in the U.S., which is utilizing traditional whole life and indexed universal life products, lately I’m mainly seeing what I consider abuses of these products being used in mostly some kind of tax strategy. This would be plans like Charitable LLC’s, and 831(b) Micro Captives where the promoters of these plans are touting an income tax deduction, and where a whole life or IUL are implemented inside of the program.
Many times, these promoters are telling the clients they will help defend the clients if the IRS ever challenges the tax deduction or the strategy. To me this is just a recipe for disaster. Many of these programs are perceived as abuses by the IRS and need to be reported with a client’s tax returns as either a “Reportable Transaction” or a “Transaction of interest”.
In the PPLI space, I’m seeing a growing number of aggressive strategies and policy designs that I’m concerned about.
Mostly these are coming from agents and smaller offshore PPLI carriers who need to come up with a way to drive business in the door.
These are things like practitioners telling U.S. clients to contribute portions of an operating business into a policy prior to a liquidity event, or to contribute artwork or income producing real estate inside of a PPLI policy. In many cases the clients are unaware that they must relinquish control of the assets because of the investor control doctrine, or these assets may have to be liquidated in part to meet required diversification rules.
Most of the time, we run into clients that do not understand what they have gotten into or the required compliance. We have a situation which we are advising on, where the client did purchase a policy from what is technically an offshore insurer. Somehow the purchase was done here in the U.S., but that’s another story. The agent or advisor that put the client into the product, did not inform the client they would have IRS and Fincen (FBAR) offshore reporting requirements because of their interest in the policy. Luckily, we caught that in time.
Finally, I’m also seeing what I would call some crazy synthetic reinsurance structures being implemented with some PPLI policies. This is where an agent sells a traditional retail policy, and that coverage is used to provide the reinsurance for the new PPLI.
There are multiple versions of how this is being done. Don’t get me wrong, there are legitimate ways to do this, but from what I’m seeing, there is a lot of pushing the envelope just to generate compensation. Done correctly this can be an excellent option for the right client. Done irresponsibly, it can have very negative consequences.
The main thing I see whether it is an aggressive tax strategy where clients are being told to buy whole life or IUL inside the strategy, or PPLI that is designed pushing the envelope, clients do not understand what they are getting in to.
JAY: Thanks for describing the specifics of what you’ve been seeing, Frank. You’ve pretty much created a primer for other advisors for what they should be on the lookout for in terms of aggressive strategies.
Your FFR commitment on top of running your business eats into your free time but I know you do have a couple of passions outside of work. One of them has to be enjoying your new role as a grandfather; albeit a super young one! What else are you doing in your off hours?
FRANK: Thanks Jay, people tell me that I’m young to be a grandfather and I like hearing that! I’m fortunate to have my son Alex, daughter Stephanie and granddaughter Lena close to me. It's because I had the family so early on that I wound up in the life insurance business.
Other things that I like to do include deep sea fishing, motorcycle riding, traveling and enjoying great wines. Recently, I caught my first Marlin!
JAY: If I let you list your favorite restaurants and dishes without my usual restriction of no steakhouses or steak dishes, you would name five steakhouses. Don’t even try to deny it. Our readers should know that I once showed up at a very packed Sparks, a popular, old-school steakhouse in Manhattan, and used your name to get a table. I think I said, “Frank Seneco sent me.” It was like something out of a movie! But let’s see if you can manage to name a few of your favorite non-steakhouse spots and the dishes you recommend.
FRANK: (Laughing) Yes, many people that know me, know that I love steakhouses, and that Sparks Steakhouse is my favorite. I do love going to great restaurants, I guess it’s my thing.
Hmmm, not naming steakhouses may be tough, but let me give it a shot. These are in no particular order:
Mastro’s Ocean Club in Newport Beach, CA.
Seafood there is great and, yes, they have steaks too. The seafood tower they put out with the dry ice makes quite an impression.
Chazz Palminteri Italian Restaurant, NYC.
If you’re a fan of Chazz’s and the movie “A Bronx Tale”, which I am, you’ll really like this place. Great food -- the whole menu is good, but I would say try the Rigatoni Con Cime Di Rapi or “A Bronx Tale.”
Shun Lee Palace, on East 55th St NYC
This is an upscale Chinese restaurant, a nice upscale place with great food. It’s all good but I would say to try the “Chan Do Chicken” or “Neptune’s Nest."
Limoncello in the North End of Boston, MA
Great food and a lot of fun in Boston’s North end. I would recommend the “Meatballs” as an appetizer and the Linguine Alle Vongole (red sauce) as an entree.
Adrianna’s New Haven, CT
In my hometown, if I'm not at Sparks in New York City, this is my go-to locally and where I took you to lunch six years ago. I would highly recommend the John Dory (seabass).
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