You have stumbled on to another episode of Get Your FILL – Financial Independence, Long Life, where we explore ways to achieve those two goals.
It was so great talking to Tylene Henry a couple of weeks ago about financial independence and all of her tips and tricks on setting up our estate planning, so we’ve asked her back, and she’s gonna talk to us today about some things, including life insurance and other topics to help us get one step closer to our financial independence and our goals of having a legacy to leave for our families.
T: So when we talk about starting really young, that reminds me of a program that we did a couple of summers ago with the National Association of Black Women in Construction, an amazing organization called POWEROrgMath and the Space Lab in Detroit, Michigan. We had students that were aged 10 through 14 and we had an eight-session series, and we talked about things from budgeting to the difference between wants and needs. We had Comerica Bank come in and do an introduction to the stock market.
The kids learned about crypto-currency. They learned about… We did a project from the Louisiana Federal Reserve Bank that talked about hurricane Katrina.
And so it really put into action that difference between wants and needs and planning for an emergency and it gave scenarios of families that had all of their important documents, like birth certificates and social security cards, together in a place that if there’s an emergency, you can grab it and you can go.
And folks that don’t have a social security card, folks that might be expecting a check to come in order to take care of things – like don’t have a bank account, take that check to the liquor store to cash it and an emergency happens and they don’t have a home or a mailbox and you have no documents. Imagine the time it takes to get some relief.
So really just helping them to understand different aspects of financial well-being and how it is a money thing, but it’s also a lifestyle thing, and it’s an awareness thing, and so I feel like those children will definitely change for the better and having the experience of that class and we also help them understand: you love to play the Xbox. Well, that doesn’t change trade on the stock exchange. How do you invest in Xbox?
So they had to do the research to find the parent companies of the things, the juice box that they like, the games they like to play. Jordan’s not on the exchange, it’s Nike, right?
So doing these exercises to give them the real life exposure that they can really apply. But the question that you asked me is life insurance and how to get younger people or kids exposed. So that’s one of the things we don’t talk about money, so we should talk about money with our kids. We don’t have to tell them the mortgage balance and all that stuff, but having a conversation with them about the choices that they make and the things that they wanna do. The difference between a want and need. I need to eat food, but do I need to go to Ruth’s Chris, right… Maybe not, right?
So understanding that, ’cause this is kids and like, Well, you gotta eat well, you don’t have to… And if we plan our meals then, if we wanna have a nice dinner once a month, then we haven’t spent a couple hundred bucks on McDonald’s, Burger King and Wendy’s. And then we talk about protecting our life and our legacy through life insurance. I think there’s a lot of misconceptions about life insurance, a lot of people… Not a lot, but there’s some people who have either had a bad experience, or they’ve had someone to tell them that term insurance is bad or whole life is bad, or universal life is bad. The key thing is that everyone has a unique situation, and it’s important to know who you are, what your goals are and what’s important to you.
And from there, if you work with the trustworthy professional they can guide you to a product that is gonna fit in your budget, and gonna address the needs that you have.
But there’s no cookie-cutter approach when it comes to insurance. Some people, they wanna make sure they can take care of their kids’ college education. So the amount of life insurance that he may be more than someone else who has a similar budget and expenses. Someone whose home is paid off, they may need a different amount of insurance than someone who’s not. Someone who has kids, all of these things impact how much life insurance you should have. And typically when we’re younger, it’s going to be the cheapest.
That’s less of an expense for you. And even though when you’re 20 something years old, you’re not thinking about life insurance, but 20-year-olds are paying pennies on the dollar for coverage, 20-year-old can get a million dollar policy for less than 20 bucks a month depending on their health, right? But just in general, your average 20-year-old.
So I have more and more parents as they’re going into retirement and their kids are in high school, understanding because now they’re leaving their job and that insurance policy that they had may not come with them, so now they’re finding themselves to be 65 years old and they’re like it’s so expensive. I’m like, it’s not for your kids. Give them that advantage, have that conversation with them.
So I just think it’s something that is very important to be explored. But anyone who comes at you with the product and they don’t ask you any questions. It’s pretty much a bad sign and people always call me asking me: Well what kind of insurance is the best insurance to get? If I don’t know anything about you, I can’t tell you that. And I think that’s the difference between working with someone who’s a licensed professional and someone who kinda can sell insurance.
My goal with my clients is to help them to get to their goals and in building a practice, most of the time that’s accumulating some assets and having an estate plan and it takes time to do that, so I don’t need – a quick sale is not gonna do something for me in building my practice.
And so if you really wanna go about helping people, you have to get to know them and you might get to know them and learn that you can’t help them ’cause I can’t help people who don’t care about anybody else but themselves. I can’t, there’s nothing I can do for them, but there are people out there who really care about their family, they’re serious about their growth and financial independence. And I do my best to give them the relevant information to make informed decisions.
C: So there’s some maybe everybody else knows this and understands it, but I’m not 100% clear on how life insurance is gonna help somebody send their kid to college, if they’re still alive. So can you just talk through that a little bit?
T: There’s different types of life insurance. So some of the common terms you’ll hear is term insurance then you’ll hear whole life or cash value insurance. So typically, term insurance they relate it to like renting, you have it for a period of time.
And so, some term insurance is it’s a level meaning you’re gonna pay one amount for the period of the term. So maybe 10 years, 20 years, 30 years, could be 100 years.
Some term insurance, you have it for 30, you have it forever but each year, the right is gonna go up because the closer we get to the end of life, the more the cost of insurance is. Whole life products, typically, the cost of insurance is higher because it’s a level cost of insurance throughout your entire life as opposed to when you are 18 years old, the likelihood of you dying of some type of medical issue is very low, so the cost to insure you is not as much as if you’re 60-years-old.
So when we look at whole life insurance typically you’re paying a larger amount when you get that policy, even if you’re younger, but it’s the same amount over that period of time, because no matter what, when you’re paying those premiums with a whole life policy, you are guaranteed a certain death benefit.
Now, some whole life policies, if you get them from a mutual insurance company meaning, there’s not stockholders, typically they may be what’s called participating policies meaning so as opposed to when the company does well, paying dividends to stockholders, when the company does well, they have the formula in which they pay the dividends to the policy holders, which are the owners of the company. So that would be a way in which if someone has a policy that is eligible for dividends and dividends are paid into that policy over time, there’s a cash value that grows.
So typically, sometimes what folks will do is if… Let’s say I was 20 or so years old and I got a whole life policy and I’ve been paying that policy and now I’m 50, and my kids going off to college, I may have $50,000 or $60,000 in that policy that I could use to help to pay for college.
And there’s different strategies, so some people, they may have their child take some loans out because they want that money that’s in their policy to continue to grow and then once they graduate before the interest kicks in, they take the money out of their policy and they pay those student loan debt and typically what happens is gonna impact their death benefit, but typically they’ll still have some death benefit left and depending on the chassis or the type of whole life policy that would determine how it would continue to roll over time. But there’s different types of whole life policies. Some of them defer participating in dividends. So, they may roll a little bit over time, but the whole life aspect is more so, that you pay this premium, and this is gonna be your death benefit.
But some of the more established mutual companies, they have whole life products, that the death benefit as well as the cash value is gonna be growing over time, and it’s gonna be kinda reflective of how well the company does as far as the dividend. And now the thing about this… So that makes it not an investment when we’re saying, dividend is that once in most whole life policies a true whole-life policy, once that policy gets to a certain cash value, it’s never going backward. So even if the company doesn’t do is great the next year, it doesn’t pay as big of a dividend or doesn’t pay one at all, you’re never gonna lose that cash value but again, it’s gonna be very reflective, and it’s gonna be in reference to the type of policy you have and what company you have it with. So if you were looking at some type of policy that would build cash value, questions that you wanna look at, or things you wanna research or the financial history and stability of the insurance company, you wanna look at their claims-paying ability, you want to look at is what has their prior dividend writing has been and claims-paying ability is, yes, their ability to be able to pay the claims if all the policies got cash in it once.
But also you wanna know how they treat people when they have a claim, what’s their process. Do they value their policyholders? Do they have an efficient process, that if you’re grieving and you’re going through something that you can take care of it ’cause some folks they just don’t wanna pay, so you wanna know what is their history and are they in it for their policyholders? Because when you do it right, they’re leveraging large sums of money that they can be having that money to grow and it’s growing over time so there’s no reason why they can’t pay the claims it’s not a problem. And really, it’s something that companies brag about that are really in really doing the right thing for their policyholders. They wanna say: sometimes we’ve had people call and we had to clean taking care of in a week, we had someone that was going through the underwriting process and they submitted a conditional premium and they pass away during that period of time.
We completed our underwriting, and we found that we would issue them a policy, so even though they only paid a $20 term premium, with their… Their application we’re paying their family out that $500,000 or whatever that does benefit was. You wanna know what type of company, or people say… Oh, I went online and I paid 5 dollars for a million. Sometimes you get what you pay for.
If someone doesn’t wanna confirm that you still have a pulse, wanna confirm whether or not you have habits that are going to impact your longevity, like smoking. When someone smokes, it costs them a lot more money for insurance, it’s just the way it is. Because they’ve increased their likelihood of having something to occur in their medical condition that would impact how long they’re gonna live.
It’s just a fact… So yeah, that’s the gist of it, but I would definitely say it’s important to speak with a professional, and it’s important to be really clear. What do you want that life insurance to do for you? So hopefully, that answers your question.
C: Well, it does and it brings up a million more questions, so now how could you go about getting this information? Because I know that you’re a person who cares about people who’s gonna ask the questions who’s gonna do a good job.
I don’t know how easy it is to find other people like you who are going to be really responsible financial planners who have something in mind more than just getting some kind of an award for some of the most life insurance.
So how can we independently research that life insurance company and know the answers to the questions that you were just posing? Is there a way for a consumer to do that?
T: So there is a non-profit organization, it’s called LifeHappens.org, and I typically refer clients there, or not even clients, really, but people who have questions about life insurance and maybe they’re not really ready to dive into the conversation. I found that the information that they have there is not like gearing you towards any one thing or the other. They’ve got calculators on there to help you calculate how much life insurance is right for you.
So, they’re asking you questions about your situation and what you would want to happen… What you would want taking care of, and it will populate a number for you to let you know with the proper death benefit, recommended death benefit might be for you.
But www.LifeHappens.org. It’s a non-profit. And I found that their information is very relevant and I’ve gotten good feedback from consumers about the ability to digest the information to feel comfortable about making decisions around life insurance.
C: Breaking the first rule of law, which luckily, I’m not a lawyer, but I’m asking you a question, I have no idea what the answer is, but I know there are different types of financial planners and some of them get paid and some of them don’t, and some of them have a fiduciary responsibility to their clients and some of them don’t. Can you talk a little bit about that?
T: So typically, folks that have fiduciary responsibilities are Certified Financial Planners, they have a series of exams they have to take in order to become Certified Financial Planners and typically Certified Financial Planners do charge a fee for planning.
I am in a position now with one of my goals for this year is to get my Series 65, which would allow me to charge a fee for planning.
One of the things that kinda held me back for that from that is typically the people that I serve, they’re just getting started or maybe whether it’s ’cause they’re young or older and just getting started and so it’s hard for me to feel comfortable charging somebody a fee when I just need them to work on getting their emergency fund together.
But I will say, as my practice has grown, I’ve had the ability to get in front of more financially secure clients that are really looking for more strategy as opposed to those initial stages. But how do they look at their taxes and how do they do thoughtful estate planning above and beyond the power of attorney and health care initiative?
And so in those scenarios, I’m typically working with one of my partners that is a Certified Financial Planner in which they charge a fee because there’s a lot of analysis that goes into it and a lot of time… And so it’s kind of like we work hard at least me, I know I can speak for myself.
It’s expensive, you gotta pay for license fees, you’ve gotta pay for continuing education credits and errors & omissions, so all these things to just be in this industry, and space and similar to building trades and attorneys. There’s fees that you have to pay in or maintain your professional licensure.
So as I have matured and grown in my practice, I understand that fee-based planning is something that is, it is relevant and it’s something that can be helpful because some people, they feel good to say, they came in and talked to a financial advisor, but they’re doing nothing. So, that means you’re working essentially for free, and there’s no guarantee just because you come up with a financial strategy for someone that there’s some opportunity for you to be compensated because maybe they’ve got their things positioned well and they just want a second set of eyes. Well, there’s still a cost to leverage those resources.
And I believe the Series-65 as well as, I believe that I would still be considered a fiduciary in that aspect because when you’re paying a fee for financial planning, they have certain responsibilities and the biggest thing when they say, a fiduciary so there’s a difference between doing something that is not in the client’s best interest and doing something that is not – not in the client’s best interest, right?
So maybe it’s not the best thing that they could do but you get a commission or right. A fiduciary has a responsibility and a duty to make sure that any and every recommendation that they provide to that client is in that client’s best interest, and they can prove it. Now there are things that are up to your opinion or your personal preference, but in my opinion, a fiduciary is important.
I do think that people should ask those questions, but if you’ve got 100 bucks a month, do you think that the certified financial planner that people are paying $2,000 to $5,000 for a financial plan and they’re paying that annually, ’cause it’s kind of like a retainer, right?
Are they going to give you that time where someone like me who’s growing my practice – if you know you wanna do X, Y, Z and… But at the end of the day, it’s all about ethics, character and integrity.
And you could have a CFP and still not do the right thing, right?
Just like someone could be a police officer and still not do the right thing, or a parent and not do the right thing. So ultimately, you really have to take the time and see, do you feel confident in the person’s ability to provide you with the information that you need to make informed decisions? So trust is key. And you have to be really, really clear on how you wanna communicate. And some people, they wanna know what time it is and some people wanna know how the clock works, right?
And so, if you’re one of those people like a lot of the engineers that I work with, they… We go over and over this whole life. Well, how is the dividend calculated and this and that, and what is the mortality ratio? And I don’t know, you know what I’m saying, that… What I can tell you is this is what’s guaranteed at this point in time.
If things go well and we stay on track the way that we are then this is what it’s gonna be, but I can tell you for a fact that everything that you are putting in here from here to here, it’s gonna be accessible to you at this point in time, and it’s only gonna get better from there, right? But I’m not going through the mortality charts and all of that kind of stuff, but also, I’m only gonna work with and provide access to insurance companies that I’m confident in and that I know are gonna be act ethically, and gonna take care of the policy holders. Many of the policy holders are people that I care about. ’cause you develop these relationships over time, and they’re trusting me to put them with a quality company so that they can take care of their family.
C: This is a rarity for me because Tylene’s actually sitting here with me which is nice. Usually, I just have to see somebody on the screen and sometimes I don’t even get to do that. So where do you think or do you think real estate falls into a qualified, happy retirement plan or a financial plan, I should say?
T: So real estate is one asset class, so you have all these different asset classes and everybody looks at it differently, but one thing to keep in mind is that real estate, it can be a holding within a mutual fund company, right?
So if I have a 401K, and most for, I’ll just say this, after the 2007, 2008 most mutual fund or 401k don’t even offer things that are invested in real estate as a result of that debacle.
But what you have to be mindful of is if you’re investing in companies that are heavily reliant on real estate for their revenue and then you go and invest in apartment buildings, then you are heavily weighted in real estate, meaning that what happens with the real estate market is going to impact you a little bit more heavily because you’ve got different areas of real estate. So just like that whole thing of if you go to buy bread at Walmart, you still have an exposure to real estate and typically you wanna have some level of diversification, so that if something goes wrong with commodities or if something goes wrong with the large cap companies because of a legislative issue or something goes wrong with what you got invested in Europe, you have other asset classes that are not necessarily gonna be impacted by the same action.
And so it’s really all about diversification and making sure you’re not just getting a different loaf of bread from every place. And some people are like… Well, I’ve got, I have got rental properties, I’ve got duplexes and I’ve got apartment buildings.
You have got a real estate, you know what I’m saying? And yes, they’re gonna behave differently in different legislation, but at the end of the day, it’s still real estate, right? And so I can’t… My clients that are just into real estate, I can’t… They’re gonna do what they wanna do, but I just am very clear with them. The fact that if you’re gonna take the majority of your investment and you’re gonna put it into real estate, it’s in one area, it’s just like if you invest all your money into one house and that house burns down. It’s gone, right?
Whereas if you invest in this house and then maybe you decide that you want to invest in this company and then maybe you’re gonna invest, then you’ve got some things that are spread around.
So I don’t know if that answers your question, but they do have real estate, they do have retirement accounts that you can hold real estate in.
And one of the things that I do know is typically all of those monies have to go into the rents and things like that have to go back into the retirement account. The funds can be used to, for the upkeep and maintenance and things like that, and you have to have proper accounting, but it’s really gonna be a case-by-case basis. I see some people that wanna pull money out of their retirement account to invest in real estate. If, for anyone who wants to get in real estate, you have to do your research with anything you do. You can’t assume that you’re just gonna go take a house and buy it for $15,000 and flip it for $50,000 because there’s all these different things that can go wrong.
It’s just like with a doctor, I can go into the doctor and say: Man, I’ve got a headache, and he could say, “Oh you need to drink more water, or it could be an aneurysm you know what I’m saying, but I still have a headache, right? And it’s similar with real estate. It could be the greatest thing that happened. You flip that house, and it worked out well.
So now I’m gonna take all of my 401k money out and do it. Or it could be a bad thing. You get this house and now you’re liable for something nose and the foundation is cracked and it’s gonna cost you way more money than you planned.
So I would just say that if someone is really passionate about getting involved in real estate, they do their research and they try to find someone that they trust that’s been successful in the space they wanna be in, not just real estate in general, ’cause there’s all kinds of real estate, right?
There’s commercial There’s residential, there’s mixed-use space, you really wanna find someone that’s doing exactly what you wanna do and ask some questions and try to learn from them before you go and take all your hard-earned money and dump it into something that you’re not really sure about.
I would never just go buy a grocery store. I don’t know anything about running a grocery store, it could be a great grocery store, but I don’t know anything about it, and I could lose all of my money because I didn’t know about it. So, it’s all about managing risk, and the only way you can manage risk is by making informed decisions and there’s gonna be risk and you can lose and you can win but you don’t wanna put all your money on red if you don’t have to.
C: And finally, Tylene, I would like you to tell everybody how they can get in touch with you with the best ways to reach out to you, so you can give them some of your excellent advice.
T: So I would say www.TyleneHenry.com. And so that gives you a link to the financial services that I provide, but it also shows the different things that I do within the community and the non-profit sector. So a lot of people, they get into this space, and then they start volunteering because they wanna meet people, and board members. While I’ve been doing this, really literally my whole life since I was an undergrad, I’ve always had a passion to serve. It really makes me feel good and that doesn’t appeal to everybody. Some people are just like: how you’re gonna make me more money.
But I think there’s synergies in the relationships that we developed and we spend time cultivating and in addition to being able to help people in the area that I have an area of expertise in, I also like connecting them with other experts. I’m not a tax attorney, I am not doing people know I’m not dealing with that stuff, but I do have relationships with tax attorney, that I trust that I can connect people with someone that’s gonna give them reliable information.
I’m not a CPA, but I have CPAs that I trust, that I know are competent and can take care of my clients, and I have a couple CPAs, some of them work with people in the non-profit space, some of them more so work with business owners, some of them have a lot of clients that are in the medical profession and so I’m intentional about connecting people and resources, people that I know that they’re going to appreciate their communication style that they are going to be able to mesh well together. Because these are relationships that you build over a lifetime and so you really… You don’t wanna like… I have to meet with my financial advisor. Oh, I just can’t stand him, you know what I’m saying?
Not that anybody’s super excited, but some people really are excited to see me ’cause it’s like I literally have clients come in and I took notes on everything. The things that they said were important to them the first time I met them, which may have been three or four years ago, and we’ve checked off things on that list, we’ve added things to that list.
I know you said you didn’t wanna get married when I first met you, here you are, you’re married with three kids, with four on the way you know what I’m saying.
And so those are the things that really bring me joy.
And so when that appeals to folks and those are important things to them, and I know that it might be a good fit for us to work together, and I know everyone’s not my client, so I sometimes meet people that they’ve got something super complex and I will refer them to someone else that I trust that I think their skill set is a better suited to meet their needs, and that’s what’s important. You wanna make sure you’re connecting with professionals that are going to really care about making sure that you get what you need and not just them getting what they need.
And that way I get to work with people I like working with, you know what I’m saying?
C: You know I’m in the real estate space, which is why I asked you the question and I’m a real estate agent and I don’t work with people I don’t like. I just will not do it because so much of it like with you, so much of that relationship is trust. If they don’t trust me, and if I don’t like them, they’re probably not gonna trust me because I’m not gonna, you know what we we were just not gonna gel, we’re not gonna connect. And then we’re not gonna build that trust and it’s not gonna be a good relationship.
Unfortunately, as you probably did, you find that out the hard way but I just don’t… There’s a certain clientele that I have and they’re people who are happy and joyful and grateful and those are the people I wanna work and then everybody else can just get referred out.
And now, do people need to… People need to be in Detroit in order to work with you?
T: I have clients all over. So typically, in most states, licensing and things like that, are reciprocal. So I’ve had clients that they initiated their relationship with me in Michigan, and maybe they moved to a Las Vegas or Florida or whatever the case may be. And so, I have licenses in several states some insurance for investments, but typically it all starts with a conversation and my goal is just to really identify am I a good fit for you and then try to help you to understand how I may or may not be a good fit for the person for you, and that just is a conversation. And so sometimes when folks are in Michigan, I have the pleasure of meeting with them face-to-face, but even folks in Michigan that are super busy, we do ZOOM meetings so we’re still sitting face-to-face but we may not be in the same building or the same room.
But when you think about logistics and traveling around and people having families, we’re doing more and more zoom meetings and everything, but I still appreciate the face-to-face and my clients that I’ve had were a while, I’ll travel and meet with them. Because it’s important to definitely maintain and establish a really good relationship.
C: Tylene, thank you so much for sitting down with me this afternoon. I’m standing between Tylene and a relaxing glass of wine, so I gotta let her go, but I really appreciate it and all the links to her website and everything else that we talked about today is gonna be on my website, GetYourFILLPodcast.com where you can see, like I said, basically any book or resource that we talked about today, you’ll find a link there.
Thanks so much for joining me today. Let me know how you like the new format by leaving some feedback on the website, GetYourFILLPodcast.com, and be sure to tune in next week when we’ll be talking with Damon Amato, a developer, wholesaler, landlord and hard money lender, so he has a ton to share with us. In the meantime, have a great week.