In our latest Tier One Interview, our CEO, Jay Judas, spoke to Michael Seltzer, CLU ChFC, Principal of Vérité Group, LLC, an international provider of premium loan financing strategies. The two discuss Michael's career, premium financing, AG 49 and working with a spouse. Read the interview in full below.
JAY: I like you a lot. When I met you in the hallway of a John Hancock-sponsored meeting in Boston about six years ago, I had no idea who you were or where you fit in the life insurance industry. I just knew that I wanted to hang out with you some more. At the time, I was transitioning from purely working in Asia and the Middle East to growing a private placement life insurance company. Within days, we were on the phone trying to figure out how we could work together. Let’s start by hearing more about your company, Vérité Group, and where you and it fit in the life insurance world.
MICHAEL: Thanks for me including me, Jay. You know I am a huge fan of yours and it made my day to be asked to participate. At Vérité, we refer to ourselves as a financial intermediary, meaning we sit between the advisory community, high end life insurance advisors, CPA’s, T&E Attorneys, Family Offices and the lending community.
We are called upon to arrange financing of large life insurance premiums permitting high net worth individuals to obtain the insurance they want and need without having to endure the pain of paying those large premiums, thereby allowing use of those premiums to be reinvested in higher alternative investments.
JAY: We are going to circle back to talk more about premium financing and your thoughts on the current state of affairs in our industry. First, I want to hear about your upbringing, education and what led you to start a life insurance career via an agency system. There are a lot of mixed thoughts about agency career paths and I know, based on your experience, you have an opinion.
MICHAEL: Wow! Of course I have an opinion! I was brought up in Queens NY. My father was what was referred to as a peddler, an appliance salesman, so my impression of sales was very negative.
I was looking to kill time between my undergraduate and graduate schools. My plan was to become an “Industrial Psychologist”. Before you ask, an industrial psychologist observes, analyzes, and interprets human behavior in professional environments in order to recommend or create improved hiring practices, training programs, feedback systems and management techniques to boost company performance. You are laughing as much as I am today thinking that would have been fun!
I had decided that I would get a job for six months until my graduate school started classes, so I answered an ad for a “management consultant” and it turned out to be a job as an insurance agent for MONY. I passed. No way was I going to do any job involving sales.
Quite accidentally, while interviewing at an employment agency, the owner of the agency insisted I interview with her cousin at NML (Northwestern Mutual Life). I hesitated, but to her credit, she insisted and persuaded me to go meet him. I joined NML and stayed for 24 years before entering the independent system.
Today, I am a critic of the career system and have become a public advocate against whole life insurance. The career system promotes one size fits all and, in general, sells only whole life insurance products with a 30-year track record of diminishing returns. In what world can that be best for the client?
Generally speaking, people, regardless of economic standing, want true choice, open architecture and not what is best for the advisor at the sacrifice of the client.
JAY: No one would argue with me when I say you are a well-established, internationally known leader in premium financing. I spent fifteen years distributing large universal life contracts outside of the United States which were almost all financed by clients’ private banks. It did not occur to me that premium financing was once again becoming a popular strategy in the U.S. market while I was away. You were the first person who opened my eyes to a sophisticated approach to using leverage to purchase life insurance. Why is premium financing growing in popularity and where does and doesn’t it fit?
MICHAEL: As more and more affluent people become aware of the advantages of premium financing, its popularity increases, especially now with the pandemic.
We have been extremely fortunate that many carriers and distributors of life insurance have engaged us to present premium financing webinars and other training services.
Our team at Vérité realizes we are in a period unlike any other. People universally are concerned about their and their loved one’s mortality while simultaneously being concerned about their business and personal economics. This convergence is leading people to reevaluate their life insurance with a view toward making sure they are properly insured.
Premium finance allows folks to obtain the amount of life insurance they want and need without having the pain of paying the full freight premiums.
JAY: I’m sure many of our readers are, at this point in the article, crying out to hear how all the changes in our industry are impacting premium financing. First, we have a historically low interest rate environment that doesn’t appear to be going anywhere for some time. Then, many carriers restricted premiums and the maximum issue ages of insureds—basically not wanting to take in large sums of cash and not wanting to cover older risks. Finally, we are seeing the cap on IUL indices being reduced. What does that mean for Vérité Group and your clients?
MICHAEL: These are trying times to say the least. The convergence of all of these negative changes all at once most definitely makes our business and life insurance industry challenging. We are fortunate that we have such a skilled team with deep experience in the services Vérité offers.
Specifically, we are being even more conservative in our designs, preparing clients for some possible poor performing years, managing the implementation of large policies more carefully and, most importantly, setting realistic expectations among our clients. For some of our older prospects and clients, we have had to take a pass because the economics, while they might work in our favor, are not good for the client. Until such time that the carriers create new policies with pricing that works for premium financing, we are recommending those affected clients to simply buy the insurance, if available, by paying the premiums without incorporating leverage. When conditions improve, we can re-visit using PF with a client’s in-force policy.
JAY: Can you explain what “AG49” is? I suspect that over half the people I hear use the term either have no idea what it is or maybe only generally understand it. Definitely tell us how you feel about it?
MICHAEL: Sure! I think you’re right about not as many knowing about AG 49 as they should. Back in September of 2015, the regulators came together and said they felt many carriers were projecting unrealistic returns for their respective IUL policies. As a result, these regulators created methodologies that need to be adhered to in order to have some consistency in the market.
AG 49 takes the cap and floor for the index with some historical data, a look back for the ‘point to point’ of the S&P, and essentially takes the setting of what we call the prescribed rate out of the hands of the carriers. Illustrations shown to clients must adhere to the maximum illustrative rate dictated by AG 49.
JAY: From my perspective—and I’m sure that of many others—you are very fortunate to be married to Iris. She manages Vérité Group’s operations but, more importantly, keeps you focused on working with clients. I’d love to hear how you and Iris got together and how she was pulled into the industry. Is it difficult to manage a life together where your personal lives and work undoubtedly mesh together?
MICHAEL: Iris and I met almost 20 years ago. A blind date with a great result.
When Vérité started back in 2009, we were underfunded and understaffed, so we reached out to Iris who previously was an office manager for an advertising firm and asked her to help out with some of the admin stuff.
It was difficult in the beginning because her entire knowledge of the business was garnered by listening to me on the phone. Yes, I know!
Today, she is my most valued ally. Under normal conditions, since I travel so much, Iris began traveling with me most of the time, which made travel more fun but also helps with her familiarity with both our business and the industry. We found she is a soft presence to my sometimes harsh presence. She listens to my talks and frequently offers some good advice.
Iris helps manage the staff, money and is a great sounding board who is my voice of reason.
JAY: You’re living in Miami Beach but spend a lot of time in Manhattan and travel internationally quite a bit so I’m sure you will have no problem listing a few of your favorite non-steakhouse restaurants and non-steak dishes fit for a business meal. What do you recommend?
MICHAEL: Non-Steak? Interestingly enough, my preference for business meals is rarely the food. I like to find restaurants that have a good, simple menu, but, more importantly, offer a low level of noise and a pleasant environment where we can have a business meal without feeling we have to compete with the noise level in the restaurant.
There is Greek place in South Beach, Santorini, that has some great dishes. It is large, bright and overlooks a hotel pool. Santorini also has one of the most hospitable staffs and I feel like I am at home each time I visit.
In NY there is a French Bistro on Park and 21st. L’Express has great food, especially for breakfast – order the omelette just like it is listed on the menu. Turns out once I introduce folks to it, they ask if we can meet there.
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Since its inception, Life Insurance Strategies Group has solely focused on the individual high net worth life insurance market. We do not sell products. This allows us to offer unbiased, pragmatic advice. Visit us at www.lifeinsurancestrategiesgroup.com.