About Mark Pace

T. Mark Pace

When there is an immediate need for cash at the time of someone’s death, it has been my experience that life insurance, when properly acquired and managed, is one of the best tools ever invented for the creation and transfer of wealth. However, life insurance is rarely acquired properly and, because it is mistakenly assumed to be a "buy and hold" asset, it is never managed. The resulting financial disasters are far too frequent and completely avoidable.

If you would like to learn more about any Pig-in-a-Poke blog posts or discuss any other life insurance issues, contact T. Mark Pace at Mark@objectivereview.com


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Pace’s Pig-in-a-Poke

About Pace’s Pig-in-a-Poke

Pace’s Pig-in-a-Poke, provides an arena for sharing the four great passions in my life. My three foundational passions are:

  1. Invest in yourself first;
  2. The genius in all of us, and;
  3. We can all live a long healthy life.

These three support my life work and my fourth passion; LIPM™ (Life Insurance Property Management).

As the blog title suggests, my focus is on debunking all of the myths, misuse, and muddled thinking that has accumulated in the life insurance industry. And, from time to time, I will go outside of the specific world of life insurance and share my views on my other three passions.

I hope you find my blog worthy of your attention, informative, and occasionally inspirational. I welcome your comments, questions and suggestions.

Mark Pace

The Six Pillars of Life Insurance Optimization: Pillar #2 “The Protocol”

The Poke

When life insurance is treated as a simple commodity, one that can be purchased and forgotten about, the opportunity to optimize its performance as a valuable and competitive form of property is too often lost.

The “commoditization” of life insurance is a sweeping, attitudinal issue deeply ingrained on both sides of the buying and selling conversation; buyers, those who own and/or are responsible for life insurance, are just as likely to treat it like a commodity as those who sell it to them.

And, commoditization of existing (older) products is accelerated because the conversation between the creators of the products and the advisors and agents who sell life insurance is almost exclusively about the price, features and benefits of the latest and greatest new product. They ignore the policies already on the books and in force!

So, we are faced with a situation – because of product saturation – in which agents and advisors either sell what they are used to selling (which is most often what they have been trained to sell) or they run hot and cold with the “product d’jour”. Either way, they do not employ a process to assess which product types, or mix of product types is best suited to their client’s needs.

(For more on how the pressure to always be selling impacts the behavior of agents and advisors see “Do you keep cool under Q4 sales pressure?”, September, 2011)

The Poke Exposed

Life insurance is a complex form of property. It is not a commodity. Within each policy is a unique set of complex and flexible property rights. When these are understood and professionally managed, the performance and value of life insurance can be optimized.

Managing life insurance property rights and optimizing its performance and value, requires a relatively sophisticated skill set along with a deep and active understanding of how the industry works. Skill and understanding must be supported with proven systems and expert resources. Perhaps most importantly, it also takes time… a precious commodity meted out in tiny dollops by both advisors and clients during the typical life insurance acquisition process.

Pace’s Poke Remedy

During my many years (decades!) spent working on thousands of cases, I have developed a fundamental approach to life insurance property management that is at once easily understood and rigorous in its application.

I first introduced the Six Pillars of Life Insurance Optimization in this blog on October 29, 2011. The first pillar is relatively self-explanatory as it says you must start by selecting the appropriate amount of life insurance and the correct time period.

Pillar #2 warrants a little more attention and explanation.

Choosing the right product type or mix of product types begins with applying modern investment decision-making principles. For example, in the cases we work on, life insurance is either the “safe” portion of a much larger investment portfolio or it is a portfolio of life insurance products unto itself.

In the first instance, life insurance usually plays the same role as bonds do in a typical balanced portfolio. (It is not quite as simple as it sounds because even when a policy is seen as the “safe” part of a portfolio, other issues arise. For example, the availability and flexibility of cash flow to pay premiums is always a critical consideration. Another consideration is balancing the desire for cash accumulation early on with maintaining the death benefit later on and then balancing both of these with the need for the policy to grow in value over time. There simply are a lot of factors involved in making good decisions about what product type or types are to be used.)

And, when life insurance is purchased as part of a stand-alone portfolio of policies, the mix of product types selected is also comparable to investment portfolio design. In a life insurance portfolio, the various product types are chosen and “balanced” based on the risk preferences and goals of the portfolio owner. (That said, large life insurance portfolios are most often driven by a very conservative, long-term strategy.)

Beyond mentioning it is necessary to include carrier diversification in this conversation, going into much more detail about matching policies with diversification strategies is not practical at this point. But, what I hope has become obvious, and what I believe is most important here, is the need to be asking questions like: “Why is this type of life insurance being recommended?” and “What process was used to determine these policies are right for this portfolio?”

Another question that is vital to the long-term success of any life insurance policy or portfolio of policies, “What process is being used to make sure these policies are still the right ones?” Unfortunately, this question is seldom asked.

Answering these and all other necessary questions results in something we call the “Personal LIPM™ Protocol”. (LIPM™ is short for Life Insurance Property Management). Once again borrowing from the world of investment and asset management, a “protocol” is very similar to the more familiar Investment Policy Statement created by an advisor to direct all investment purchasing and re-balancing decisions.

In summary, you can see that creating a “protocol” for life insurance property selection and retention makes asking and answering questions that typically go unaddressed, unavoidable. A simple series of what, why, how and when questions, based on a personalized protocol and asked during life insurance acquisition and over time (we recommend an annual optimization review), is a critical step towards optimizing life insurance property value and performance.

In my next blog, Pace’s Pig-in-a-Poke will examine Pillar #3 of the Six Pillars of Life Insurance Optimization: The appropriate underwriting class.

In the meantime, if you would like to learn more about how to choose and manage the right product type or mix of product types and develop a protocol for your clients, sign up for our next ObjectiView Open Webinar on Thursday, March 1, 2012 from noon to 1:00 p.m. EST.

Register today by clicking here

The Six Pillars of Life Insurance Optimization

Pillar #2, The Protocol: choosing the right product type or mix of product types
A 45-minute webinar from ObjectiView
Thursday, March 1, 2012 
The webinar begins at Noon EST


About the author

Mark Pace
Mark Pace
When there is a need for immediate liquidity at the time of someone’s death, it has been my experience that life insurance, when it is properly acquired and managed, is one of the best tools ever created for the creation and transfer of wealth. However, in my 35 plus years of experience, life insurance is rarely properly acquired and never managed… thereby creating a monumental financial disaster for many individuals that should never happen.

If you would like to learn more about this Pig-in-a-Poke subject or discuss any other life insurance issues, contact T. Mark Pace at Mark@objectivereview.com


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