Episode Transcript

Speakers: Craig Andrews, Alex Langan, Compliance Choir

[0:00] Craig Andrews: You never know how much time you have.
[0:02] Craig Andrews: For me, that stopped being an idea and became reality on August 22nd, 2021.
[0:09] Craig Andrews: The doctors put me on a ventilator and told my wife to call hospice so she could prepare
[0:14] Craig Andrews: for the day they planned to pull the plug.
[0:17] Craig Andrews: Six weeks later, I woke up to an entirely different reality.
[0:20] Craig Andrews: I could not walk, I could not talk, I could not even lift my own arm, and I woke up realizing
[0:26] Craig Andrews: something else, I had not made the right preparations for my family.
[0:30] Craig Andrews: The plans I thought were pretty good fell through when it mattered most.
[0:34] Craig Andrews: That is why fiduciary alchemy welcomes voices that would have warned me about the holes
[0:39] Craig Andrews: in my plans.
[0:40] Craig Andrews: My hope is that you live a long and prosperous life, but I also hope you make better plans
[0:45] Craig Andrews: than I did.
[0:46] Craig Andrews: So tune in, take notes, and stay with us through the end when bluesman grindle and the compliance
[0:51] Craig Andrews: choir.
[0:52] Craig Andrews: Bring a word of caution.
[1:00] Craig Andrews: Today I want to welcome Alex Langen of Langen Financial Group.
[1:04] Craig Andrews: Alex works with business owners, executives, retirees, and pre-retirees, he also supports
[1:09] Craig Andrews: businesses 401(k) plans.
[1:12] Craig Andrews: One of the ideas Alex shared that I really liked was the idea of creating a war chest
[1:16] Craig Andrews: of cash.
[1:17] Craig Andrews: The business owner has the room to do whatever is necessary, sometimes it's higher people
[1:22] Craig Andrews: when the opportunity is right, sometimes it has more consequential items, and so we're
[1:29] Craig Andrews: going to be talking about some of that today.
[1:33] Craig Andrews: Alex, welcome.
[1:34] Alex Langan: Thanks for having me Craig.
[1:37] Craig Andrews: You've been over on our podcast leaders and legacies, and I appreciate you coming on here,
[1:44] Craig Andrews: and I've forgotten.
[1:45] Craig Andrews: I know we talked about this, but remind me, do you or do you not eat scrapple?
[1:51] Alex Langan: I do not.
[1:53] Alex Langan: No.
[1:54] Alex Langan: I definitely do not.
[1:56] Alex Langan: I will have done some time though.
[2:00] Craig Andrews: Well, if you ever get bored and not sure how to fill your time, send a care package to
[2:06] Craig Andrews: Texas.
[2:07] Craig Andrews: Send some scrapple this way.
[2:08] Craig Andrews: We miss it.
[2:09] Alex Langan: I got you.
[2:10] Alex Langan: I got you.
[2:11] Craig Andrews: Well, you know, one of the things that we talk about in the intro to the podcast is how
[2:26] Craig Andrews: my life got shaken up immediately.
[2:28] Craig Andrews: Fortunately, I came back from it, but that's not always the case, and you were telling
[2:33] Craig Andrews: me a story that was just absolutely, absolutely heartbreaking about somebody you've worked
[2:38] Craig Andrews: with.
[2:39] Alex Langan: Yeah, a former client, he was on the phone, and he runs a business with several partners,
[2:45] Alex Langan: very, very successful business.
[2:47] Alex Langan: He was on the phone with one of his clients, dropped over from a brain aneurysm, went to
[2:53] Alex Langan: coma.
[2:54] Alex Langan: He didn't make it 48 hours, being 47, married, longtime wife, five kids.
[3:02] Alex Langan: So their life got turned upside down immediately, and he unfortunately did not have a plan put
[3:11] Alex Langan: together.
[3:12] Alex Langan: We were talking about funding a bicell agreement, and the formula was screwed up.
[3:17] Alex Langan: Again, my head's up on it.
[3:19] Alex Langan: They knew it.
[3:20] Alex Langan: It was on their to-do list, but they didn't get around to it because he was the oldest.
[3:24] Alex Langan: All the other guys who were in their thirties said the new is important from just from the
[3:32] Alex Langan: business continuity perspective, but they figured they had time 20 years, 10 years.
[3:39] Alex Langan: They figured they had some time, and so it wasn't a priority when now with the cash though
[3:46] Alex Langan: and the demands, the payouts, it's a significantly larger issue, not just for the business, but
[3:52] Alex Langan: more importantly for the widow and how she's going to survive.
[3:58] Alex Langan: She used to be strong for her kids.
[4:01] Alex Langan: She worked part-time.
[4:02] Alex Langan: Now she's got to go back to work full-time sooner than later.
[4:05] Alex Langan: It's just not a good spot to be here.
[4:08] Craig Andrews: Well, and you'd mentioned something about life insurance.
[4:15] Alex Langan: Yeah, we talked about it, recognized they needed it, I gave them even quotes.
[4:22] Alex Langan: It would have cost a couple thousand bucks a year for cheap term insurance, but the financial
[4:29] Alex Langan: burden of this problem would not be there.
[4:32] Alex Langan: It still would be heartbreaking, emotionally tooling, but at least you don't have the financial
[4:39] Alex Langan: reckoning that is now even more burdensome to the family and to the business to try to
[4:47] Alex Langan: figure out a cash flow.
[4:50] Craig Andrews: I would imagine with five kids, at least some of them are still at home.
[4:55] Alex Langan: Three of them are still home.
[4:59] Alex Langan: Yeah, three of them still are.
[5:01] Alex Langan: The two are still financially independent, but you know what it's like to be 25.
[5:07] Alex Langan: You're eating ketchup sandwiches and ramen noodles, trying to figure out whether to buy
[5:15] Alex Langan: your first house.
[5:18] Craig Andrews: Well I mean, the tough thing, and certainly the case for me, I mean, I never expected
[5:25] Craig Andrews: to die in my fifties, very nearly did.
[5:30] Craig Andrews: I mean, you just don't, I was very healthy and you just didn't, you just don't think
[5:39] Craig Andrews: it's going to be an issue.
[5:40] Alex Langan: Yeah, it's common to overlook your own mortality, yeah, you want to face that, everyone else
[5:46] Alex Langan: has to deal with it, I don't have to.
[5:49] Craig Andrews: You know, well, so if I put myself in his shoes, I can imagine, I mean, I'm a business
[5:59] Craig Andrews: owner, you're a business owner, it's hard work and there's always the, there's always
[6:06] Craig Andrews: priorities.
[6:07] Craig Andrews: It's not like you're not, the stuff that you're not doing is often important stuff because
[6:12] Craig Andrews: the stuff you are doing is even more important.
[6:16] Alex Langan: Yep, yeah, it's more important to get paid now, you can figure out the rest later, you
[6:20] Alex Langan: know, get the money coming in and you'll be, you know, once you get success going, you
[6:25] Alex Langan: know, then it'll snowball and then you'll have time to hopefully open up, delegate more
[6:28] Alex Langan: stuff down and be able to eventually get to that.
[6:32] Alex Langan: But it just gets more and more complicated, there's more and more tasks to do.
[6:36] Alex Langan: All of a sudden you have, you know, some serious business coming in, you got to support those
[6:41] Alex Langan: clients, you got to take care of them, the customers, whoever it is, you really got to,
[6:46] Alex Langan: you just get more and more old in different directions.
[6:49] Alex Langan: So you'd never really get back to what you, what's the most important thing is why you
[6:54] Alex Langan: start in the first place, you need to protect that.
[6:57] Craig Andrews: Yeah.
[6:59] Craig Andrews: So what are some of the common, let's start with the buy sell agreement.
[7:03] Craig Andrews: What are some of the common pitfalls because they probably had something in place?
[7:09] Alex Langan: Yep.
[7:10] Alex Langan: They did.
[7:11] Alex Langan: They had a formula that was in the details, you're like, oh, no, we're good.
[7:14] Alex Langan: The problem is that people don't look at this stuff, god forbid they start fighting or,
[7:18] Alex Langan: you know, death, disability, you got to look at all of it.
[7:21] Alex Langan: The divorce, death, disability, those are the big ones.
[7:24] Alex Langan: So divorce, if you're, if you build a business, do you want somebody's ex-spouse all the sudden
[7:30] Alex Langan: owning half of their shares, probably not.
[7:33] Alex Langan: So you better get them on board and the spouse on board that says, hey, you guys figure it
[7:38] Alex Langan: outside of this business, that conversation can be tough, but it's much easier to do it
[7:44] Alex Langan: when everyone's getting along than when people really start fighting and hating each other.
[7:48] Alex Langan: So that's one thing.
[7:52] Alex Langan: Other one, disability, you get a disability coverage if you want to, but what if somebody
[7:58] Alex Langan: who's disabled and can no longer, you know, do their share of the business, drive their
[8:02] Alex Langan: share of the business, what happens then?
[8:05] Alex Langan: It's worth noting.
[8:06] Alex Langan: Are they just going to sit back and collect the paycheck forever and then the other partners
[8:09] Alex Langan: pick it up?
[8:11] Alex Langan: What if they're sole proprietor?
[8:13] Alex Langan: Then it becomes a much bigger issue too.
[8:17] Alex Langan: Death obviously is the final curtain call.
[8:20] Alex Langan: So that can be fixed usually with some cheap term insurance just to cover you, emergency
[8:26] Alex Langan: cash flow too.
[8:28] Alex Langan: If you lose a business partner, you should have a little extra for that emergency cash
[8:33] Alex Langan: flow that actually can be injected so the person can go out and hire somebody to help
[8:38] Alex Langan: with whatever share of the business they were driving, or at least not to have to be forced
[8:45] Alex Langan: into liquidation to pay out the percent of ownership to the widow or whoever it was supposed
[8:52] Alex Langan: to go to, which I've seen formulas be like, oh, you have to pay it off, you know, you have
[8:57] Alex Langan: to pay, get the valuation done and pay it off within 90 days.
[9:01] Alex Langan: It's like, well, where's that cash coming from?
[9:04] Alex Langan: People will never think about that.
[9:06] Alex Langan: So it's good luck getting along from a bank, plus you're going to have to pay those interest
[9:11] Alex Langan: payments.
[9:12] Alex Langan: Is the cash flow really going to allow for that?
[9:15] Alex Langan: Probably not.
[9:17] Alex Langan: It's challenging.
[9:18] Craig Andrews: You know, one of the things I hear, and I've been in these conversations with folks, they
[9:24] Craig Andrews: are going in the partnership with someone and I'll ask them a couple questions about, you
[9:29] Craig Andrews: know, is there going to be a majority partner?
[9:31] Craig Andrews: I actually have a family member, I was talking to my wife about that, so I was like, a very,
[9:37] Craig Andrews: very more fundamental question, who's going to run the business?
[9:40] Craig Andrews: And there wasn't, you know, a clear, it was like, oh, hey, we are three, you know, three
[9:46] Craig Andrews: people that, you know, we all have our own low areas that we operate, and for them, they
[9:51] Craig Andrews: haven't even answered the question of, okay, who's the tiebreaker?
[9:54] Craig Andrews: Who's?
[9:55] Craig Andrews: A great question, who has president on their name tag or CEO, who's the one really making
[10:04] Craig Andrews: that final decision?
[10:08] Craig Andrews: But they're going into it, they're like, we get along great, we're complimentary, we're
[10:12] Craig Andrews: not going to go into each other, and they just have trouble seeing that the day will
[10:16] Craig Andrews: come where there needs to be that tiebreaker, where there needs to be that agreement.
[10:22] Craig Andrews: Mm-hmm, absolutely, like even on distribution of profits, something good and positive shown
[10:29] Craig Andrews: that you're doing well, like, who's going to determine whether or not take a distribution
[10:33] Craig Andrews: profits?
[10:34] Craig Andrews: What if one wants it, one doesn't?
[10:35] Craig Andrews: What are you going to do, not take it?
[10:38] Craig Andrews: I mean, somebody might be like, I don't want to pay the tax, the other person might be
[10:42] Craig Andrews: like, yeah, but my kid's going to college, I need the money to pay for college.
[10:45] Craig Andrews: Like, well, it's tough, I'm not paying tax, I'm not taking the distribution.
[10:49] Craig Andrews: Like, okay, it's not a good spot to be.
[10:54] Craig Andrews: Yeah.
[10:55] Craig Andrews: So, yeah, I've seen a lot of this, and the clarity of the plans, what matters, that's
[11:02] Craig Andrews: the most important thing.
[11:06] Craig Andrews: And the other thing would be, you know, it's, I think we have this belief, you know, and
[11:10] Craig Andrews: I've run into it when I'm taking on clients, and I've gotten to the point where we get
[11:15] Craig Andrews: through, we handle all the tough situations before they even sign on the dotted line.
[11:21] Craig Andrews: Because you sit there, you're going in, you're kind of euphoric, but, you know, we want to
[11:26] Craig Andrews: be really, really clear, because that's the best time to sort things out.
[11:32] Craig Andrews: And if you're building a business with some others, you want to sort it out before, while
[11:37] Craig Andrews: the enterprise value is still relatively small.
[11:39] Craig Andrews: Yep.
[11:40] Craig Andrews: And you want to revisit it every couple of years.
[11:42] Craig Andrews: Well, tell me about that.
[11:44] Craig Andrews: So to your point, the enterprise value is small.
[11:47] Craig Andrews: I've seen companies in existence for 20 years.
[11:50] Alex Langan: The enterprise value was $100,000, so they were real generous being like, hey, we're
[11:53] Alex Langan: going to make the enterprise value $500,000, we don't have to look at this for five years
[11:57] Alex Langan: or so.
[11:58] Alex Langan: And then 20 years go by, the enterprise value is $10 to $15 million.
[12:02] Alex Langan: And these companies are like, you have somebody dies, they're going to get a payout of $250,000.
[12:07] Alex Langan: Like, you know, hopefully all my business partners die, I pay their access or their widows $250,000.
[12:13] Alex Langan: And then I'll turn around and sell this company for $15 million.
[12:16] Alex Langan: That's great.
[12:17] Alex Langan: Like, it's not how, I haven't seen anybody do that, but legally speaking, that would be
[12:23] Alex Langan: what it would be worth, because they do not revisit the valuations and the formulas those
[12:27] Alex Langan: valuations are based on.
[12:29] Alex Langan: Yeah.
[12:30] Alex Langan: So it's an issue.
[12:31] Alex Langan: It needs to be looked at every several years.
[12:35] Alex Langan: Even my dad, one of the pieces of advice he gave me, he said, if you ever go into partnership,
[12:40] Alex Langan: never, never give up more than 49% or something like that.
[12:45] Alex Langan: And it was because when he came to the point of exiting, he and his partner couldn't agree
[12:50] Alex Langan: on what my dad's payout would be.
[12:52] Alex Langan: Wow.
[12:53] Alex Langan: Yeah.
[12:54] Alex Langan: Then you have to get to third party and sell to third party, but the partner is like, no,
[12:58] Alex Langan: I want to keep it all right.
[13:02] Alex Langan: Then there's no incentive.
[13:03] Alex Langan: You just stay there.
[13:04] Alex Langan: You're like, fine.
[13:05] Alex Langan: That's going to really work.
[13:06] Alex Langan: You're going to keep paying me my salary.
[13:08] Alex Langan: And this is going to go on for 30 years, or whatever, ever long I live, and then you're
[13:15] Alex Langan: going to have to pay me off the value of the company at some point or pay my widow out.
[13:20] Alex Langan: Yeah.
[13:21] Alex Langan: It's challenging.
[13:22] Alex Langan: Yeah.
[13:23] Alex Langan: So I saw one on the flip side, family business, they were trying to do some estate planning.
[13:30] Alex Langan: Their attorney gave them some pretty bad advice.
[13:34] Alex Langan: So I ran some back and back and numbers based off what they were telling me cash flow and
[13:38] Alex Langan: increase for valuations were because it was steadily increasing.
[13:43] Alex Langan: End of the day, they would have about four million.
[13:44] Alex Langan: He would have four million in estate tax.
[13:47] Alex Langan: I said, are you okay with that?
[13:50] Alex Langan: He's like, no.
[13:51] Alex Langan: He's like, okay, well, you know, you could gift it now, get it out of your estate, and
[13:56] Alex Langan: then just continue on or at least a portion of it.
[13:58] Alex Langan: So, you know, within a 10 minute conversation, he saved four million dollars in future taxes,
[14:04] Alex Langan: estate taxes come and do just by, because he doesn't need the money, he gives it to his
[14:09] Alex Langan: sons who are managing the business.
[14:11] Alex Langan: And now everyone's happy.
[14:13] Alex Langan: Yeah.
[14:14] Alex Langan: Yeah.
[14:15] Alex Langan: Yeah.
[14:16] Alex Langan: Not that the government doesn't need, you know, trillions of dollars, you know, let
[14:19] Alex Langan: alone the million that he was going to give, but I think the family could probably better
[14:25] Alex Langan: stewards of that money than the government.
[14:27] Alex Langan: But you mean, the organization that hasn't passed a budget and like, how many decades
[14:32] Alex Langan: now?
[14:33] Alex Langan: Yeah.
[14:34] Alex Langan: Yeah.
[14:35] Alex Langan: Yeah.
[14:36] Alex Langan: You know, that's just, that's just details, not as important.
[14:41] Alex Langan: Yeah.
[14:42] Craig Andrews: Um, so the, um, the other thing you mentioned was, um, insurance, you know, term insurance.
[14:51] Craig Andrews: And, uh, yeah, it's like dumb it down because there's like all sorts of different insurances
[14:55] Craig Andrews: out there and, um, what, what should people be looking at as a bare minimum business owners
[15:01] Craig Andrews: in particular?
[15:02] Craig Andrews: I, I like to look at, well, for your personal family, I like to look at roll of thumb, ten,
[15:08] Craig Andrews: roll of thumb, ten times their salaries, just like a starting point.
[15:12] Craig Andrews: They might need less.
[15:13] Craig Andrews: They might need more, but roll of thumb, ten time salaries, usually a pretty good starting
[15:17] Craig Andrews: point.
[15:18] Alex Langan: So you make hundred thousand dollars, a million dollars term insurance.
[15:21] Alex Langan: Um, I like to get it for 20 or 30 years, obviously if you're in your fifties, that might be expensive.
[15:27] Alex Langan: So at least 10 years, and that's on the personal side.
[15:30] Alex Langan: Um, if the business owner, you get to write the premiums off, although when you get paid
[15:35] Alex Langan: out that insurance is probably going to be taxable to some degree, depending on the
[15:39] Alex Langan: manner it's paid out, um, what is it categorized as?
[15:43] Alex Langan: But, um, I think you should do it.
[15:47] Alex Langan: I don't know why you wouldn't get, depending how much it costs, if your business is valued
[15:52] Alex Langan: at 10 million and you have two partners and once, you know, five million dollars, maybe
[15:56] Alex Langan: that's a little much.
[15:57] Alex Langan: Maybe you get two to three million, and then you just pay out the rest, the remaining money
[16:02] Alex Langan: over X amount of years.
[16:03] Alex Langan: Um, it'll help with taxes a little bit too, forever is getting to proceeds.
[16:07] Alex Langan: Um, you can do it that way, or I've seen it where there's smaller size businesses that
[16:12] Alex Langan: would struggle with the cash flow.
[16:14] Alex Langan: So say it's worth two million, two million, three million bucks, let's say three million,
[16:19] Alex Langan: a business partner 50, 50, so one and a half each.
[16:22] Alex Langan: Maybe they get a two million dollar, uh, policy and if something happens to them, they would
[16:26] Alex Langan: get in it.
[16:27] Alex Langan: They pay out the 1.5 million immediately and then they get the $500,000 that they can
[16:31] Alex Langan: put back into business for cash flow and to help hire some people, uh, for if they've
[16:36] Alex Langan: lost, you know, a crucial business partner, um, that they're able to get up and running
[16:42] Alex Langan: quickly with somebody, pay some good money to get somebody in there.
[16:45] Alex Langan: Mm hmm.
[16:46] Alex Langan: So just depends on the situation, but term insurance is usually the way to go.
[16:50] Alex Langan: I've seen other people do whole life insurance or IUL index universal life insurance.
[16:56] Alex Langan: I, if there's a need for it, that's great.
[17:01] Alex Langan: I, I usually don't like seeing business owners buy that.
[17:05] Alex Langan: It's expensive.
[17:06] Alex Langan: So if you do it outside of that to build some wealth inside an insurance policy or build
[17:11] Alex Langan: some asset up inside an insurance policy, that's great.
[17:13] Alex Langan: Do it outside.
[17:14] Craig Andrews: I just wouldn't do it.
[17:16] Craig Andrews: I wouldn't have a policy like that for a business.
[17:19] Craig Andrews: Mm hmm.
[17:20] Craig Andrews: Yeah, it's just, it's usually unnecessary unless they need it for, you know, bonding
[17:25] Craig Andrews: or as an asset, like the cash value, they want to use that as, as an asset on the books
[17:30] Craig Andrews: that that then yeah, that makes sense.
[17:32] Craig Andrews: But most businesses don't need to do that.
[17:35] Craig Andrews: And high level, what's the difference between term and whole life?
[17:38] Craig Andrews: Yeah.
[17:39] Craig Andrews: You compare it to houses, so term is like you're renting a house.
[17:43] Craig Andrews: You don't build any equity at, at the end of the year stay.
[17:47] Craig Andrews: You don't have anything to show for it.
[17:48] Craig Andrews: So if you're running a house, you know, you, you run for a year to yours 10 years, 20 years,
[17:54] Craig Andrews: you pay all that rent to and you don't have anything.
[17:56] Craig Andrews: You don't have any money, any assets.
[17:58] Alex Langan: Term insurance, you have that insurance for that set term, 10 years, 20 years, 30 years,
[18:03] Alex Langan: you pay to premiums all throughout.
[18:05] Alex Langan: When that term is up, you're done with the policy.
[18:07] Alex Langan: There's no cash value.
[18:09] Alex Langan: There's nothing in it to show for it.
[18:10] Alex Langan: But at least you're recovering for that period of time.
[18:14] Alex Langan: Whole life insurance or even IUL is permanent insurance.
[18:18] Alex Langan: As long as you pay to premiums, you will use it.
[18:20] Alex Langan: You're either going to get cash value built up or you're going to get, and or you get
[18:25] Alex Langan: the death benefits when you die, it will be paid out, hopefully to your loved ones.
[18:31] Alex Langan: That builds cash, cash value inside different mechanisms how to do it, but it builds cash
[18:36] Alex Langan: value, so it's like owning a house and building that equity inside the house.
[18:40] Alex Langan: So even if you wanted to cancel it part way through, you would have some sort of cash
[18:44] Alex Langan: value that you would be able to keep.
[18:49] Alex Langan: One of the things that I've heard about whole life, and this may be why it gets, you know,
[18:55] Alex Langan: a bad rap by some, is it's really critical how it's structured in terms of premium first
[19:02] Alex Langan: premiums versus what's the term paid up addition?
[19:05] Alex Langan: Yeah, you got it.
[19:06] Alex Langan: You got it.
[19:07] Alex Langan: Yeah.
[19:08] Alex Langan: No, you're a spot on.
[19:09] Alex Langan: So how I like to see it done is low level first primary insurance and then you do the
[19:17] Alex Langan: paid up additions.
[19:18] Alex Langan: That's actually the quicker way to build cash value inside the policy versus just getting
[19:25] Alex Langan: a ton of life insurance.
[19:26] Alex Langan: It depends what you're looking for, whether you're trying to accumulate cash value inside
[19:30] Alex Langan: a policy or maximize debt benefit, different carriers have different products, depends
[19:35] Alex Langan: on the need of what you're going for.
[19:38] Alex Langan: One thing I'd like to point out, and for some reason, insurance agents don't like to
[19:45] Alex Langan: share this, they are legally allowed to lower the commissions they accept.
[19:49] Alex Langan: Believe that or not, they don't have to accept all the commissions in the whole life or
[19:53] Alex Langan: IUL products, they can lower those commissions to a legal permissible amount.
[19:59] Alex Langan: They can't take zero, but they can take less.
[20:03] Alex Langan: And what that does is that just, it you accumulate cash value quicker inside the policies by
[20:09] Alex Langan: the insurance agent lowering their commissions.
[20:12] Alex Langan: Yeah, we do it frequently for our clients that are getting a whole life policy or something.
[20:18] Alex Langan: Okay.
[20:19] Alex Langan: And so again, just because all this is so confusing, folks other than you is so the premiums,
[20:28] Alex Langan: just paying towards the death benefit, is that right?
[20:31] Alex Langan: And then so the premiums go in, they pay, are you talking about the premiums pay up
[20:35] Alex Langan: additions?
[20:36] Alex Langan: Which one?
[20:37] Alex Langan: Well, help me understand the difference that what those two do at the same time.
[20:41] Alex Langan: Yeah.
[20:42] Alex Langan: So the premium is one of the same, a hundred bucks, thousand bucks, whatever it is, $10,000,
[20:47] Alex Langan: whatever it is, you pay that in a set amount will go to the baseline insurance.
[20:53] Alex Langan: The paid up additions are paid up additional insurance.
[20:58] Alex Langan: Yes.
[20:59] Alex Langan: It's cheaper.
[21:00] Alex Langan: They, they wait that differently inside the insurance carrier to provide an increased
[21:05] Alex Langan: cash value to that accumulation for that subcategory account, the paid up addition.
[21:11] Alex Langan: A lot of people don't structure it like that.
[21:13] Alex Langan: I don't know why.
[21:15] Alex Langan: Good at good agents will and you can always look at it.
[21:19] Alex Langan: It also depends on the product and the carriers and you got to be careful if you're an Asian
[21:24] Alex Langan: or financial advisor, if he's calling himself that, whether they're really what's known
[21:28] Alex Langan: as a captive agent, meaning that they work for only one specific insurance company.
[21:33] Alex Langan: There's multiple ones out there.
[21:35] Alex Langan: So usually if they're selling the insurance in their business card, have the same name
[21:39] Alex Langan: on it, that's a red flag that these people can only sell that and they usually get compensated,
[21:47] Alex Langan: either health insurance or whatever for selling that specific product.
[21:50] Alex Langan: Yeah.
[21:51] Alex Langan: Just something to be aware of.
[21:53] Alex Langan: Well, and that's kind of a good thing.
[21:54] Alex Langan: What are the questions when somebody is buying insurance?
[21:57] Alex Langan: What are some questions that folks should be asking to make sure that they're getting
[22:00] Alex Langan: the right thing for themselves?
[22:01] Alex Langan: Always ask if they're independent broker, I mean, the terms are all kind of interchangeable,
[22:07] Craig Andrews: but are they independent?
[22:08] Craig Andrews: Do they work specifically for the insurance company?
[22:10] Craig Andrews: They're going to tell you if they do a specific insurance company, yeah, but I'm the only one
[22:15] Craig Andrews: that can sell this product.
[22:16] Craig Andrews: It's amazing.
[22:17] Craig Andrews: Nobody else can sell it.
[22:18] Craig Andrews: Nobody has access to it.
[22:20] Craig Andrews: It's probably not true, but it's what they say.
[22:23] Craig Andrews: So just be careful with that, and then I always find it interesting when I get term quotes
[22:32] Craig Andrews: and I do this for a whole life or IUL, we're not a big insurance shop.
[22:37] Craig Andrews: We do it.
[22:38] Craig Andrews: We protect our clients as part of the contingency plan.
[22:41] Craig Andrews: Why you build your wealth?
[22:42] Craig Andrews: What if something goes wrong?
[22:43] Craig Andrews: You want to account for that.
[22:46] Craig Andrews: But I will get the quotes from very highly rated insurance companies.
[22:51] Craig Andrews: So A++, whatever it is.
[22:55] Craig Andrews: And then I just run them in who's the cheapest based off of this scenario, age and amount
[23:03] Craig Andrews: they want and then we do the underwriting.
[23:04] Craig Andrews: But I have no idea what the commission is on any of this stuff.
[23:07] Craig Andrews: It's just like, what's the cheapest option?
[23:09] Craig Andrews: Great.
[23:10] Craig Andrews: These guys are good.
[23:11] Craig Andrews: They should not go bankrupt.
[23:12] Craig Andrews: Let's go with the cheapest option.
[23:14] Craig Andrews: That should be how everyone should shop for it.
[23:17] Alex Langan: To commodity, as long as the company is rated highly and that the potential bankruptcies
[23:27] Alex Langan: is incredibly low, just go with the cheapest option.
[23:31] Alex Langan: So that raises another question.
[23:33] Alex Langan: There's some economists that follow ITR economics.
[23:37] Alex Langan: I'm not sure if you're familiar with them.
[23:39] Alex Langan: Yeah, they're great.
[23:40] Alex Langan: Well, you know they're predicting those as an area.
[23:43] Alex Langan: Yeah.
[23:44] Alex Langan: So let's say we hit this and tie it back to the insurance company.
[23:51] Alex Langan: You said, make sure they're credible.
[23:54] Alex Langan: What happens?
[23:55] Alex Langan: Yeah.
[23:56] Alex Langan: So we fill in the gaps for those that don't know, ITR economics is predicting another
[24:00] Alex Langan: great depression in 2030.
[24:01] Alex Langan: The depression with a D.
[24:03] Alex Langan: Yeah.
[24:04] Alex Langan: D.
[24:05] Alex Langan: Yeah.
[24:06] Alex Langan: And it's going to be ugly.
[24:07] Alex Langan: It's going to be nasty 20, 25% employment until about 2036.
[24:12] Alex Langan: We'll start pulling out of it.
[24:13] Alex Langan: And so it's going to make the great recession feel like, you know, walk in the park.
[24:21] Alex Langan: So when we hit that, what's that mean for some of these insurance companies?
[24:25] Alex Langan: Are people going to be paying into policies that will not be available to them?
[24:31] Alex Langan: It's possible.
[24:32] Alex Langan: Yeah, it's very possible.
[24:34] Alex Langan: I mean, especially poorly rated ones, it could even be probable.
[24:38] Alex Langan: It's funny you say that I created a portfolio analysis manager, I call Pam, that actually
[24:48] Alex Langan: is been running the doomsday scenarios that you speak about and it will literally show
[24:53] Alex Langan: you a quarantine exact portfolio, what your losses would be.
[24:56] Alex Langan: It's really, really neat.
[24:59] Alex Langan: It ties in Ray Dalio's because he's a doomsday scenario right now too, although I tend to
[25:06] Alex Langan: believe I follow what he says and I kind of, I tend to believe it.
[25:09] Alex Langan: So it ties all that together with ITR.
[25:13] Alex Langan: It's fascinating though, the devastation that this could have on portfolios.
[25:18] Alex Langan: That said, it's just like '08.
[25:20] Alex Langan: It should be worse, but just like '08 in that we had some pretty significant companies fail,
[25:28] Alex Langan: one significant company fail, governments can't unveil it out.
[25:31] Alex Langan: The issue this time is that how would that affect, I haven't found that the federal deficit
[25:38] Craig Andrews: is going to be kind of part of the key to this faltering.
[25:42] Craig Andrews: So what happens when the government tries to bail you out, but they're in default?
[25:48] Craig Andrews: Or they go through stagflation is the most likely outcome.
[25:50] Craig Andrews: So.
[25:51] Craig Andrews: Yeah.
[25:52] Craig Andrews: Well, I mean, in ITR, there are predictions, they say there's five factors that are driving
[25:57] Craig Andrews: it, and one of the factors is that healthcare costs are rising, you know, 20% year on year.
[26:05] Craig Andrews: Another is that the baby boomers are going into their most expensive years of healthcare.
[26:10] Craig Andrews: Yeah.
[26:11] Craig Andrews: And, but another is the national debt and the fact that to finance the US government, the
[26:18] Craig Andrews: bomb rates will have to be even higher, which will drive inflation.
[26:22] Craig Andrews: So it's going to make it worse because we're going to have to keep issuing bond to us treasuries.
[26:26] Craig Andrews: Right now, gold is the number one storage right now, since I decades and decades used
[26:31] Craig Andrews: to be US treasuries.
[26:32] Craig Andrews: Everyone's bail on US treasuries because of what's coming.
[26:35] Craig Andrews: It's fascinating.
[26:36] Craig Andrews: But with that, the year is going to be an increased supply in US treasuries because we're going
[26:40] Craig Andrews: to have to issue more treasuries to fund our debt.
[26:43] Craig Andrews: People, banks, international countries probably won't be buying at all.
[26:48] Craig Andrews: So they're going to have to raise rates.
[26:51] Craig Andrews: It's going to get ugly.
[26:52] Craig Andrews: It's probably going to be stagflation.
[26:54] Craig Andrews: On top of it, one of the other concerns is that so security is going bankrupt in 2032.
[27:00] Alex Langan: So that'll be about a 24% reduction for all current benefits.
[27:04] Alex Langan: So they can raise the Social Security tax on people from high earners.
[27:09] Alex Langan: They can do that.
[27:10] Alex Langan: That would help offset it.
[27:11] Alex Langan: And then what they did previously was they went from 65 to 67 to be able to receive for
[27:16] Alex Langan: retirement age benefits.
[27:18] Alex Langan: You know, they were parsing it by birthday and spacing out a couple of months, the younger
[27:21] Alex Langan: you are, the more they push you back to that 67.
[27:25] Alex Langan: They're going to have to do that to a lot of people on top of raising taxes.
[27:29] Alex Langan: It's going to be really, really ugly.
[27:32] Alex Langan: What's coming?
[27:33] Alex Langan: In my opinion, I hope I'm wrong.
[27:36] Alex Langan: Well, yeah, well, and the other thing is, it's not just going to be a US depression.
[27:43] Alex Langan: It's going to be a global depression.
[27:47] Alex Langan: It's just, yeah.
[27:49] Alex Langan: Well, see, AI is going to save us.
[27:52] Alex Langan: Well, at least it will help with some of the labor costs.
[27:55] Alex Langan: I don't think it's going to replace.
[27:56] Alex Langan: I disagree with Elon.
[27:58] Alex Langan: He's a smart dude, but if he's right, that AI has taken away jobs, it'll be the first
[28:04] Alex Langan: time in human history that technology advance resulted in fewer jobs rather than more.
[28:09] Alex Langan: And it's not, as of right now, the data is not there, that AI has taken jobs.
[28:13] Alex Langan: The data is showing that all of these large companies, Facebook, Google, they all way
[28:19] Alex Langan: way over hired, and now they're self-correcting and they're blaming AI for it, but they just
[28:24] Alex Langan: way over hired.
[28:25] Alex Langan: There's actually an increase in job postings for coders, and that's not one that's mostly
[28:31] Alex Langan: been attacked.
[28:32] Alex Langan: But there's an increase in coders overall, except for the ones that ever hired.
[28:36] Alex Langan: Everyone else is trying to increase hiring for that spot, which is right now most of
[28:42] Alex Langan: the best car googly with AI, because that's what AI is really good at is coding right
[28:46] Alex Langan: now.
[28:47] Alex Langan: Yeah, I think it will help productivity.
[28:51] Alex Langan: I have a Mac studio sitting here, a very nice one that I don't use as my computer.
[28:58] Alex Langan: It's the home for my agent.
[28:59] Alex Langan: And so I'm like going to ask if you have a call, yeah, a call bot running on it.
[29:03] Alex Langan: Yeah.
[29:04] Alex Langan: That's what you have to pull.
[29:05] Alex Langan: Yeah, I haven't done that yet.
[29:06] Alex Langan: Smart putting it in like a sandbox.
[29:07] Alex Langan: I'm afraid to like, oh, here's all your emails, your work emails, here's all these account
[29:12] Alex Langan: codes.
[29:13] Alex Langan: Oh, here's your credit card.
[29:14] Alex Langan: Like, great, I'm going to have some fun.
[29:17] Alex Langan: Like, I just don't trust it yet, so for good reason.
[29:21] Alex Langan: I mean, there's a story out there that, you know, one guy woke up one morning and his
[29:25] Alex Langan: agent had gone off and spent $3,000.
[29:27] Alex Langan: Oh, yeah, hopefully bought something good.
[29:30] Alex Langan: Well, he said, why did you spend that money?
[29:32] Alex Langan: He said, well, you gave me the directive to look for ways to optimize your operations.
[29:36] Alex Langan: And I found this product that would improve that.
[29:41] Alex Langan: And I found your credit card and I went off and bought it.
[29:44] Alex Langan: Wow.
[29:45] Alex Langan: Oh, that's cool.
[29:46] Alex Langan: I mean, it's scary, but it's cool.
[29:48] Alex Langan: Yeah.
[29:49] Alex Langan: So you have to have it.
[29:50] Alex Langan: Yeah, you have to have some guardrails in, but it's helped me tremendously with productivity.
[29:55] Alex Langan: And so I think it will, it'll be there by I don't think it's taken anybody's job.
[29:59] Alex Langan: Well, let's, let's wrap up with, with this.
[30:01] Alex Langan: I mean, we talked a lot of doom and gloom, you know, what's going to happen in the economy
[30:07] Alex Langan: over the next five years is beyond either of our control.
[30:12] Alex Langan: What should folks be doing right now to prepare for this potential doomsday?
[30:17] Alex Langan: So always go back to like, what was the original objective?
[30:25] Alex Langan: And so I clerked as Supreme Court of Pennsylvania and that's the one thing with Justice Aiken
[30:28] Alex Langan: who I worked under was phenomenal at, like people go on tangents, talking about all this
[30:32] Alex Langan: stuff.
[30:33] Alex Langan: And it always came back to what's the reason we're doing this, like what's the top priority
[30:37] Alex Langan: here?
[30:38] Alex Langan: Top priority would be, I assume, retiring comfortably, maybe it's probably close to one
[30:43] Alex Langan: of them.
[30:44] Alex Langan: So if that's the goal or whatever goal is you got to measure, come up with the financial
[30:49] Alex Langan: plan, how much do you have, how much do you need?
[30:52] Alex Langan: What's the risk you got to take to get there?
[30:55] Alex Langan: If you're getting closer and closer, don't take unnecessary risk.
[30:59] Alex Langan: I mean, you could for a little bit longer, I would start getting more and more concerned,
[31:04] Alex Langan: build up that more chest as an individual as well as a corporation, have your net three
[31:08] Alex Langan: to six months, emergency savings there, next should be a brokerage account, or there's
[31:18] Alex Langan: a lot of points set up, let's just assume it's a brokerage account, have some liquidity
[31:23] Alex Langan: in there, start aiming to build it up to when you're going to retire.
[31:28] Alex Langan: If you're retiring going into that age, or that timeframe in 2030, 2032, I would try
[31:34] Alex Langan: to have, make sure you're cash flowing well, 12 to 18 months of liquidity right there, ultra
[31:40] Alex Langan: short duration bond funds, money market, whatever it is, STIP, short term treasury tips, have
[31:48] Alex Langan: that there, and then build out from there, have some dividends that hopefully will pay
[31:52] Alex Langan: an additional six months, 12 months, you're going to have to cash flow for a minimum of
[31:56] Alex Langan: two years if this is a depression, maybe longer, but you're going to want to come with cash
[32:01] Alex Langan: flow, take the risk that you need to take.
[32:03] Alex Langan: If you're younger, just be aware this is going to be a hell of an opportunity to invest.
[32:08] Alex Langan: You're going to have, hopefully you don't lose your job.
[32:10] Alex Langan: That's always a saying, when your neighbor loses a job, it's a recession, when you lose
[32:14] Alex Langan: a job, it's a depression.
[32:16] Alex Langan: Yeah.
[32:17] Alex Langan: That's what I forget who says that.
[32:18] Alex Langan: I think that was Reagan.
[32:19] Alex Langan: Was it?
[32:20] Alex Langan: Yeah.
[32:21] Alex Langan: I think so.
[32:22] Alex Langan: Yeah, I haven't heard that in a while.
[32:23] Alex Langan: I think it was Reagan.
[32:24] Alex Langan: Yeah, that makes sense.
[32:25] Alex Langan: But it would be, just work through it, have savings built up in case for 2030, be prepared
[32:33] Alex Langan: for it.
[32:34] Alex Langan: If you're young, if the market gets crushed, this will be one of the greatest times to invest.
[32:41] Alex Langan: So, assuming you have 10, 20 years to get through it, in a 15 year period, every rolling
[32:48] Alex Langan: period of our 15 year, 99.9% chance of making money.
[32:53] Alex Langan: So if your timeline is over 15 years, don't fret, you're going to make money, you just
[32:57] Alex Langan: might not make as much as you want, over there's two, three, four years, whatever it is.
[33:01] Alex Langan: But that's the time you should be investing, because when everything comes back to historic
[33:05] Alex Langan: norms, you will make a lot of money getting back to that and following the treble.
[33:10] Alex Langan: Yeah.
[33:11] Alex Langan: So.
[33:12] Alex Langan: Well, Alex, I always enjoy my conversations with you.
[33:15] Alex Langan: I appreciate you coming on fiduciary alchemy.
[33:17] Craig Andrews: How can folks reach you?
[33:19] Alex Langan: You can find me on the website, langanfinancial, L-A-N-G-A-N, financialgroup.com.
[33:27] Alex Langan: My email address is Alex@langanfinancial.com as well.
[33:32] Alex Langan: So yeah, email me, look me up, if you just Google me, you should go to find me, too, Alex
[33:37] Alex Langan: Langan, I mean, capital Pennsylvania.
[33:54] Alex Langan: Excellent.
[33:55] Craig Andrews: All right.
[33:56] Craig Andrews: Well, thanks again.
[33:57] Craig Andrews: Yeah, thank you.
[33:58] Craig Andrews: Thank you for tuning in to fiduciary alchemy, the coolest financial podcast you're likely
[33:59] Craig Andrews: to find.
[34:00] Craig Andrews: We go looking for voices like the one you just heard, because I want you to dodge the mistakes
[34:01] Craig Andrews: that I made and learn it without the coma, without the drama, without nearly paying the
[34:02] Craig Andrews: man.
[34:03] Craig Andrews: I don't know why I lived, when so many others die, that part's still a mystery.
[34:09] Craig Andrews: Now some folks ask, Craig, what is it you do?
[34:12] Craig Andrews: Well, I'm telling you now, that's no mystery at all.
[34:15] Craig Andrews: We solve hard marketing problems in crowded markets, so good folks like our guests can
[34:19] Craig Andrews: rise above the noise, become visible, memorable, irresistible, and grow like never before.
[34:26] Craig Andrews: If organic growth is your problem, reach out, call me, let's make a plan and bring your
[34:30] Compliance Choir: next steps into the light, but don't leave yet, stick around a minute more and listen
[34:35] Compliance Choir: to bluesman grandal and the compliance choir deliver a word of caution, just for you.
[34:57] Compliance Choir: This podcast is for information, education, that is all.
[35:05] Compliance Choir: It is not financial tax or legal advice to guide your call, nothing here is an offer,
[35:17] Compliance Choir: nothing here is a buy or sell, no recommendation, no solicitation, I'm saying it plain and well,
[35:36] Compliance Choir: and I'm saying it plain and well, I'm saying it plain and well, I'm saying it plain and
[35:52] Compliance Choir: all kinds of hopeful things, every investment carries risk, principle can fade away, what
[36:06] Compliance Choir: are you doing, that truth is here to stay, fade away, fade away, yeah, that's the compliance
[36:25] Compliance Choir: blues, get your own financial tax and legal help before you make your move, that's the
[36:36] Compliance Choir: compliance blues, your situation's yours alone, your needs are not the same, different facts
[36:54] Compliance Choir: and different goals can change the whole damn game, so talk to somebody qualified before
[37:07] Compliance Choir: you make your move, that's the compliance blues, get your own financial tax and legal
[37:35] Compliance Choir: help before you make your move, that's the compliance blues, oh, oh, oh, oh, oh, oh,
[37:55] Compliance Choir: if a machinol only, educational to get qualified financial tax and legal advice, that is right
[38:25] Compliance Choir: for you.
[38:26] Compliance Choir: [Music]