How to Use Financial Tools to Attract, Engage and Retain Employees

One of the biggest costs in your business is labor cost. Depending on your business, what you pay for your staff both in wages and benefits can easily hit between 30% and 40% of your revenues. Between the wages, existing benefits, and the actual cost of recruitment and turnover, what can you do to attract and retain your very best people. And that's coming up next on Marc Haine Live. Welcome to this episode of Marc Haine Live. This is where small business owners and entrepreneurs pick up core skill sets to help them work on their business, not just in their business. I am your host, Service Expert and Master of Experiences Marc Haine. And I am so grateful that you're joining us today. My guest today is financial guru Sari Abraham. And we will be talking about financial vehicles you can use to increase employee engagement and employee retention. But we'll get to that in just a moment. In the meantime, I'd love it if you were part of this conversation. You can go ahead and you can subscribe to this program. And I'd love to make sure that you are notified whenever I bring you Some new fresh content. And while you're at it, why don't you go ahead and leave a review about this episode? Let me know what you think. But more importantly, share this episode if you know someone could benefit from it. You know, I have known business operators that when times are really good, they try to maximize their profits. When times are not so good, they try to minimize expenses. All too often though, it is our investment in our employees that is the first thing to get cut. So that brings us to our Question of the Day. What are your strategies to retain the people that you have? Obviously, in order to do retention strategies, you have to think of a whole bunch of things. But what are some of the things that you're doing to make sure that you retain the people that you have? I'd love for you to share your comments. Go ahead and post this on social media and please use the hashtag #ExperienceLeadership. As I mentioned, my guest today is financial guru Sari Abraham. Sari is the owner and the principal at Financial Asset Before founding Financial Asset Protection though, Sari worked for the likes of Allstate, Blue Cross Shield, Cigna HealthSprings, and Humana. He helps business owners and employees grow safe, predictable wealth regardless of market conditions. Sari, welcome to the show! It's so nice to have you.

Hey Marc! Thank you so much for that warm introduction. And thank you so much for having me on. I appreciate it.

Yeah, I'm looking forward to our conversation today. Before we get into today's conversation or today's topic, could you dig a little bit deeper into what you do for your clients?

Yeah, definitely. As you mentioned, I run a company called Financial Asset Protection. We're a financial services firm and we help clients in all 50 U.S. states with growing wealth, protecting wealth, business, operating a business financially. We're kind of the money problem solvers for businesses. We do so more from like a financial coaching perspective and help the clients really achieve their goals. So overview, that's what we do and kind of how we do it.

And so, are there any or do you have specific industries that you serve? Who are your customers?

Yeah, our primary niche, our focus are real estate investors and real estate brokers. But it's not exclusive to them. So, we still have most of our clients I would say are entrepreneurs, about 60% to 70% of our clients are entrepreneurs, but mostly in real estate niches.

Okay, cool. In past episodes, we've talked about the cost of labor turnover. It's a huge component, especially for small businesses. We've discussed how important making retention engagement strategies part of an overall strategic plan and how strategic planning can really help people define their success as they go forward. What are some of the problems your clients are trying to overcome?

Yeah, that's perfect. As you mentioned that is that it costs about, I think about 122% to replace and train another employee. So, that means if you're paying an employee right now $100,000 a year, it would cost you about $122,000 to find a new employee and train that to replace that employee. So, that's one problem we're constantly solving is how to decrease employee turnover. In other words, increase employee retention because there is profitability behind that number. That's one of the problems trying to solve with business owners.

Yeah. What do you think is the— so right now, we have this whole big thing called the Great Resignation. Some people believe in it. Some people say it was just a matter of time for it to happen and that COVID and remote working and hybrid environments are just contributing factors. In your experience though, What can business owners do to kind of help alleviate some of those struggles that they're having with the retention of their employees?

Yeah, so they need to look at some of the reasons. Like, as you mentioned, like COVID is a big one. People don't want to get COVID or they don't want to be in that environment. It's definitely changed a lot of physically meeting up with people. And then, there's also a lot of competition right now amongst where employees could work. In other words, it's more leverage on the employees than it is on the employers. So I guess in order to be more competitive and to retain more employees, you need to think of what employees want, truly want, and how you can help them as the employer get there. Like for example, one thing that a lot of employees want is they want more freedom and they also want to lean more towards entrepreneurship. That's a big contributing factor in the Great Resignation. So, One thing that I think that would help a lot of business owners is that if they were to give employees something more long-term to hang on to, because if, for example, you have Employer A and then Employer B. So if Employer A says that I'll give you $100,000 a year, and then Employer B says, well, I'll give you $110,000 a year, that kind of transition is kind of temporary. So Employer B might win in that specific time, but it's only a matter of time until Employee C comes and says, I'll give you $125,000 a year, or whatever the case is. It's really kind of like short-term bargaining. And I think you need something more long-term. Like for example, something more long-term could be that, hey, if you stay with me for the next 10 years, I will turn over this amount of money to you plus interest through this type of financial vehicle. Now, the employee has something much bigger to look forward to and to stay on. And the employer could actually increase— they could bet that that employee is going to stay with them longer because there's something at the end of the tunnel that they could— there's some light at the end of the tunnel that they could wait for. something that will reimburse them for their time more than they could do on their own or through other employers.

And so, I mean, that's great in theory. This idea of I hire a brand new person and we sign contracts and we say, hey, if you're with us, if you stay with us for 10 years, you're going to get X amount of money because we're going to start investing in a financial vehicle for you. However, does that lock the employer in on Regardless of the quality of work that this employee does, what then becomes the liability for the employer?

Well, yeah. So then for the 10-year period, the employer can contribute. As the employer is contributing into this asset, it's part of an asset of the company. So there's really no loss or no risk during that 10-year period. Now, as far as the quality of the employee, that's up to the employer to judge that, right? So for example, If you hire somebody and their work isn't good, you can let them go. And then, if you do let them go in that time, you still own that asset that you've been investing in. So, I mean, it's not—

Okay, so let's dig a little bit deeper then into what you're talking about because I'm not quite getting it. And I'm sure people listening to it have a bunch of questions. So, this idea. So, what kind of financial vehicle are you talking about? Do you have any kind of specifics?

Yeah, definitely. I have a specific one. So, it's part of something called the Infinite Banking Concept or the Bank on Yourself concept. And what that means is that There's an underlying asset that's a very powerful one. Out of typically 450 vehicles, only one of them could do all the things we're going to mention today, and that one is cash value whole life insurance. So what this means is, let's say I own a company, and let's say I have employees that I want to retain. I could take out a life insurance policy on them, a cash value whole life insurance policy, high cash value policy. The company would own the policy. It would own the cash value in it. The company would be the beneficiary of that policy if something were to happen to that employee, and the employee would be the insured. Now, I could tell the employee that I'll pay into this over the next 10 years, I'll invest into this, and there's a projected amount that's going to grow with the policy. It's going to earn interest and dividends over that 10-year period. And we might project that in the next 10 years, it'd be worth X amount of dollars. Now the employee has something to look forward to. So I would own the policy. Now, let's say the employee leaves halfway through there, like year 5. I would still own the cash value in the policy and the policy itself. And I could even still keep insuring that employee even after the employee is long gone, is no longer working for us. And then at the same time, if the employee did stay, I could turn over the ownership of the policy to the employee. And there's some tax benefits with doing so. And now the employee would get to own this policy. They get to have all the cash value in it. They get to own the future growth of the policy. And they get to change the beneficiary from the company to their spouse or their children, whoever they want. They're in control now of the policy. So, this is kind of like, this is I think better than just jumping for another employer that's going to give you a 5% raise or a 2% raise or however much. There's something a little bit more concrete and a little bit more long-term for both the employer and the employee.

Okay, very cool. So, now I get it. Now, I understand this idea that so, it's actually an asset that the company would own. It's something the company would pay into. This is not something the employee is paying into. Am I right?

That's correct.

And so, because the employee is not paying into it at all, the employer owns the rights to the whole policy. Is there like you mentioned 10 years? Does it have to be 10 years? Is there like an escalating kind of release that you could do on something like that?

Yeah, the good thing about this is that you're in complete control. It's not like for example, With 401s and I think RSPs in Canada, there's a lot of restrictions behind them and a lot of rules you have to follow. With this type of strategy, you could bend it to however you want. You could say 5 years, you could say 20 years, you could say 5 years if you hit this goal, if you don't hit the goal, 10 years if you hit this goal. So you can modify it however you want. You can also only offer it to certain employees if you want to. You don't have to offer it to everybody. So there's a lot of flexibility and control over what you can do and how you could structure. It's all really based off of other, like for example, how you have other employee agreements. You could pay somebody however much you want, how often you pay them, how often you bonus them. It's really an agreement that you could do. And I think that applying like a financial specialist within this mix could really help kind of come up with some creative strategies on how you can retain more employees.

Very cool. The thing that pops into my mind is some people might be watching this and they'll go, oh, okay, I'm just going to call up my insurance provider. I'm just going to do this on my own. Are there right ways and wrong ways of being able to execute something like this?

Yeah, absolutely, 100%. So there's about— in the United States, there's about 1,200 life insurance companies that offer life insurance. However, of those 1,200, about 3 of them could do everything we're going to talk about today. The cash value, the tax benefits, the ability to transfer the policy. There's a lot of intricate, like, small little details you need the policy to have. In other words, it's not just a whole life insurance policy. There has to be certain qualities and certain parts to it that are properly structured. That will help you achieve your objective. Because anybody can go and talk to their local insurance agent and buy a whole life policy and try to do this on their own. But I would say that most of the time it's going to be improperly structured. And when you do it that way, it's going to be useless. Like, for example, there's something called base life insurance. If I went to my local agent, I said, hey, I want to retain more employees, I need whole life insurance. The agent might say, all right, sure, no problem. What if that agent writes up a contract that's 100% base life insurance? That means that every dollar that goes into the policy is only going towards life insurance. Now, you might retain this employee, and for 10 years, you might be putting in $10,000 a year and come to find the cash value at the end of year 10 is only $10,000, meaning that you put in $100,000 into the policy and the cash value is only $10,000. That's very possible. That could actually happen. Had the policy been properly structured with the right company, you might have had $120,000 over that 10-year period instead of only $10,000. It's very small parts like this that you need a competent advisor and somebody who focuses on high cash value life insurance to really truly build out this policy. Also, I would prefer or recommend that you work with a broker rather than a captive agent, because what that means is life insurance companies hire advisors and brokers and agents. So typically somebody could either be a captive agent, they only represent one company, that's only the company they're allowed to represent. They might be a salaried employee or an independent agent, but they can only represent one company. And then the opposite of that is a broker, and the broker could represent many companies. And that's who I recommend you would work with. I recommend you work with a broker that specializes in high cash value whole life insurance for creative options, not just selling life insurance, but really selling it in a way or using in a way that could achieve things like lowering employee turnover or increasing asset protection or things like that.

Yeah, that's really a good piece of advice because of course, the solo agent representing just the company can only represent the portfolio that the company has.

Yes, correct.

Very cool. I want to dig a little bit deeper into some of what we're talking about today. And we'll do that right after this.

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Welcome back. We are talking about Some financial vehicles that we can use to help retain and engage our employees. But also, as a way to maybe attract brand new employees. So, Sari, you were talking about using life insurance. Now, this idea of if a company is going to pump money into a program, let's say, I don't know if they Let's say for the sake of argument, $300 a month per employee goes into a program. Wouldn't it be better for them to focus on putting it into a 401 or in Canada, the RRSPs where the value of what they're putting in represents the value of the investment?

Yeah, absolutely. I agree. I think that definitely could be definitely an option. And that's something that a lot of employers are already doing, right? They already have 401s. There's a couple of problems, though. So from a financial standpoint, there are a lot of restrictions to 401s. Like, for example, you have to wait until you're 59 and a half to use the money. If you use it before that, then you would have to pay a 10% tax penalty plus ordinary income tax on the withdrawals. Then you could do loans too, but those also have rules. There are contribution limits, like you can only do up to $20,000 a year. There's parts of the 401 are going to be invested in the stock market, so it's going to be market risk or volatility. So I agree with you that is one very common option that a lot of employers do. They use 401s. However, there are better ways to invest money over long periods of time. And I think that this is where the life insurance policy, cash value policy works, because the opposite is there are no contribution limits. There are no restrictions on loans and withdrawals. You can access the money for— the employer could actually access the money at any time. So can the employees once they own the policy. Anybody who owns the policy could access the loans the policy via loans and withdrawals at any time, no questions asked. It's the most liquid form of savings is using cash value life insurance. Also, the policy is only invested with the life insurance company itself, and life insurance companies are very— they're regulated in terms of what they could invest in. So what that means is there's more protection of the cash value for the clients. There's actually guaranteed protection for the clients. So in other words, If another market crash happens or another 2008 happens or some sort of horrific market, something in the market happens, the cash value of the life insurance policy is not affected by that. So there's more guarantees and more growth for that that 401s and other types of vehicles like that can't provide. So this translates into the benefits for the financial benefits for the employer and potential employee once they own the policy. Now, as far as more on an employer level, or as far as competition, a lot of employers are also going to offer 401s as well. So we want to think about how do we retain the employees and how we can be more unique and more like have value propositions that are going to be more interesting for the clients— or sorry, interesting for the employees. And a lot of employees already know 401s. They already know the restrictions. They already know the contribution limits. They already know the match. So, if we can come up with— if we can show them this, I think that that'll increase more engagement and more retention from the employees.

Very cool. Would this be a taxable benefit?

Yeah, definitely. So, there's a lot of tax benefits behind this. So number one, and I'm speaking more from the U.S. context. So, the growth of the policy as it's growing, as it's accumulating interest and dividends, is going to grow tax-free. And then, in most situations, the loans and withdrawals are also tax-free. I mentioned, look, for example, you could do a 10-year period where you're saving into it for 10 years. During that 10-year period, the employer could use that money. They don't have to lock up that money somewhere. They could put money in and then borrow against it and use. And as you're doing so, there's tax benefits with that. They don't have to pay taxes on loans and withdrawals, even if it is above cost basis, meaning that if I'm putting into the policy and there's actually gains above what I'm putting in, those loans and withdrawals could also be tax-free. Now, also, let's say, for example, there's something called the bonus plan where I bonus the employee towards the life insurance policy. This is more if the employee is actually using the life insurance policy. I could say, for example, all right, I'm going to take $100,000 and then write it off. Now I take that off of my payroll or whatever. I get a loss of $100,000 and it goes to the employee through their life insurance policy. Now, they have the retention through that. Plus, the employee now pays that $100,000 bonus through their normal taxable gains. But the employer writes off that $100,000 in addition to their payroll deductions and other expenses that the business might have.

Very cool. So, for the employee, when somebody signs up for this and there's this policy in the employee's name where the beneficiary is the employer, the employee wouldn't pay any taxes on this.

Sorry, the employee wouldn't pay any taxes?

Yes.

Yeah, correct.

So it's only once they get the money, that's when the tax would kick in, and that's when they would pay income tax on the money that they cashed in.

Yeah, and that could be determined based off of how it's structured. So you could do it that way where as the employer is contributing to the policy, they're getting a tax break, and then the employee now pays the taxes. So in other words, Somebody's paying the taxes. Either the employee pays the taxes or the employer. And then sometimes you could have it where the employer is using after-tax dollars to fund the policy, and then the employee would get tax-free gains and withdrawals, and they would take over the policy tax-free. So that could be determined. And really, like, you can get creative with this. You could bend it to however you want. Somebody has to pay the tax, either the employer or the employee.

But the taxes are only paid once the policy is cashed out.

Yes, correct.

Okay, very cool, very cool. For operations who are in recovery mode like right now, I talk to a lot of small businesses. They're struggling to meet their expenses, catch up on the debt that COVID has created in itself. I mean, there's a lot of people trying to catch up with their landlords and all that. How should they proceed when it comes to trying to balance their debt load versus what they need to be doing to invest in their employees?

Yeah, definitely. I think one huge part is working with somebody who can do a thorough financial analysis, somebody who can kind of take a look at your personal and business financials and kind of take a step back from providing any advice, but really look at what's working right now, what's not working, what needs to be improved, what debt needs to be paid. Not all debt is bad. For example, if you have an outstanding mortgage with 2.75% interest rates, that's really— there's really no need to pay that off. That's actually a good form of capital versus if you have credit cards with 18% interest, that needs to be addressed as soon as possible. So you want to work with somebody who's going to take a step back and kind of look at all your financials and might even see something that you didn't see. And a lot of companies might even do this. A lot of financial planners might even do this for free as a way to kind of give you some value upfront. They'll do the free analysis to get— we actually do the same thing. We do a free financial analysis both for the business side and the individual side. to take a look at like what really needs to be addressed. And then, to kind of understand your goals, your short-term goals and long-term goals. And then, kind of find the alignment between where you're at and where you want to go. And then, help you kind of meet that bridge.

Very cool! And we've had episodes before where we talked about brokers coming in and the fact that brokers are there to be of service to create these vehicles, to be able to counsel the their clients. But the clients aren't the ones having to pay that bill. It's whatever kind of spin-off comes out. That's where the money comes from in order to pay for your services.

Exactly, yes. Spot on, exactly. So, like for example, if I help a business owner free up like let's just say $10,000 a year and we can— it's almost like a puzzle. If we can solve like more than one problem with one vehicle, then most of the time, the business owner is going to want to do it because it's solving problems. It's not just a product they're buying. It's solving problems. It's going to save them money long-term or make them— and/or make them more money long-term, a combination of both of those. And we might do this. So it's to grow predictable wealth, to retain employees, to take control of their financial matters. Like for example, one thing you could do with this is that you can have a line of credit that you own that you could put money into and take money out as you want. One problem with business lines of credits from banks is that there's a lot of terms and conditions more in the favor of the banks. Like for example, A line of credit is typically callable. That means that if I have an outstanding line of credit with the bank, the bank can call me and say, hey, Siri, this line of credit is coming to an end. We're going to shut it off right now, and you have 5 years to pay back the loan with interest. And if you don't, we come after you personally. We come after you. There's a lot of things like that in terms of conditions and lines of credit that are more favorable for banks. And it's not guaranteed that you have, even if a bank says that we'll give you for the next 5 years, $100,000 that you can use, it doesn't mean that they have to provide you 5 years. They can cut it down to 1 year. They can freeze your account. There's a lot of things that they can do, and that could obviously interrupt the business and make more problems, make it more problematic for business owners. Whereas with the bank on yourself concept and the use of cash value life insurance, you have your own line of credit outside of the hands of banks that you could use. You could recycle that money. In other words, you're not locking up that money only just to retain an employee. You could use it initially just to retain an employee or a couple employees. And then, use that money to pay your vendors, to pay your suppliers, to pay other employees, to pay your property taxes and whatever you want. Like kind of having that money keep flowing in your business.

So, but this is only the cash value that they're allowed to borrow against, right?

Yes, correct.

So, what percentage of those kinds of payments? So again, if I mentioned $300 a month as an example, What percentage of that would go to the actual life insurance policy, and what percentage would go into the cash investment part?

Good question. So it could— that percentage could vary based off of the client and the goals and other things like that, and also the amounts of how much they're doing. I would say it ranges between 10% and 50%, more towards— it's going to be with a smaller policy, it's going to be more on the higher end, like 40% to 50% of every dollar. That goes into the policy will go towards the life insurance, and the other 50% or 60% will go towards the cash value. But when we're doing larger policies, it might be 10% or 20% or 30% that it's going towards life insurance, and the rest is going towards the cash value. That really depends on the analysis and the companies and the projections of kind of having everything aligned and matched. But yeah, a portion is going towards the cash value, and then a portion is going towards life insurance. And really, everything we're talking about today is going more towards the cash value and growing that cash value over time and then being able to leverage that. Now, let's say, for example, fast forward, we have $100,000 in cash value in the policy we built up. Part of that is from premiums we put in, and then part of that is from interest and dividends the insurance company has been crediting the account. Now, we could borrow up to 90% of that amount. So we have $100,000, for example, we could borrow up to 90% of that. At any time, that's really the only limit. It's the limit towards the overall amount. You could do as many loans as you want. You could take out a loan every week or every month. As long as you have up to 90% cash value, you could do that and you could pay it back on your own terms. So that $90,000, for example, you borrow 90%, you could pay that back next month. You could pay back next year. You could do monthly payments. Really, you're your own banker. You can control the payback of that. And while you're doing all of this, while you have this outstanding loan, your policy is growing regardless of that outstanding loan or not. In other words, let's say, for example, in real estate, for people who understand real estate, if you have a property that's worth $500,000, that's the market value, and you take out a loan for $100,000 against your property, it doesn't affect the appreciation of the policy. In other words, the property is going to appreciate regardless if you have an outstanding loan against it or not. And the same is true with life insurance. If you have cash value in the life insurance policy and it's growing every year, earning interest and dividends, when you have an outstanding loan against it, it's going to keep growing. Because when I go to use that money, when I go to borrow that money, I'm not subtracting from the cash value. I'm borrowing from the insurance company's general funds, leveraging the cash value I have as collateral. That's how we can keep the policy growing and accumulating interest and dividends. uninterrupted while still being able to use that money, which is key for business owners. It's the concept is to keep using that money even when it's parked somewhere. They could leverage that, borrow against it, and then keep the business moving.

That sounds quite— it sounds so creative. It sounds like such a creative way to be able to do that. But of course, the employer has to be willing to cough up that extra percentage for the life insurance aspect of it. Is there a sweet spot that that people should be looking at?

Yeah, it really could depend. It depends. I would say between 5% and 10% of gross income or gross sales could be allocated to a life insurance policy premium. So if you make $100,000 in gross sales, that goes towards the entity. From that, $5,000 to $10,000 or 5% to 10% go towards premiums towards a life insurance policy because Again, you're not locking up the money. So, it's not like you have to— you do have to contribute towards it and then kind of adjust other expenses you have. But you're not entirely— that 10% you put in is not gone. You can turn it around and borrow against that and then use that for different areas. So, I would say 5% to 10% of gross sales is a good sweet spot.

Fantastic! This is really great information, Sari. How can people get in touch with you if they want to learn more?

Yeah, absolutely. Thank you, Marc, for that. We could do a free consultation, a free 30-minute call. And we can go through kind of your goals and objectives and what you want to accomplish. If you go to finassetprotection.com, it's finassetprotection.com. You can schedule a free call that way.

Fantastic, fantastic! I want to dig a little bit deeper, talk a little bit more about some cautionaries. And we'll get to that right after this.

Thank you.

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Welcome back! We're talking with Sari Abraham. We are talking about financial vehicles that you can use to kind of create a retention program and an attraction program for your business. Sari, I've talked to brokers before about benefit programs that the employees are using and that sort of thing. Is this something that when an employee does this, do they have to jump on and sign up their employee in order to make this happen?

Well, yeah, you want the employee to be engaged in this. And it's obviously to show them the benefits of doing this and showing them that if they stayed for X amount of time or however you want to structure the agreement, it would show the benefits of the employee. And the good thing I mentioned earlier is that you could do this for certain employees. Like, there's something called a key man or key person policy. This is where, like, for example, if you have an executive in your company and you're worried if something were to happen to them, like, if something were to happen to them or if they left somewhere else, your business would be in danger. You could have this policy specifically for them. It's usually a higher cash value life insurance policy that insures the key person. And the good thing about it, too, is that even if, let's just say, for example, after the agreement is If they left and went somewhere else, you would still be able to keep insuring them. And this way, later down the road, if there is, for example, a life insurance proceed, it would go towards the business income tax-free.

Wow! Wow! Is there a moral issue with that? That if somebody was your VP of Operations, he's left now and 8 years later, God forbid something happens to him, but you have this life insurance policy on him. that now your company gets to benefit from that?

Yeah, definitely. I mean, at one point, like Walmart for example, at one point was taking out key person policies on all their employees. So, like I think obviously, definitely there could be some moral issues with that. It's really based off of what's agreed on. And I think that there has to be that blend, right, between business and capitalism and morals. And I think it depends on different people and different beliefs and people have different morals for different things. But yeah, I think that maybe you could do something where it's like, even if, for example, if I'm insuring you and then you left and then something happened to you 10 years down the road and the company did get the life insurance, maybe the company could also add in another layer to that contract, to that agreement that says that we'll give you of that life insurance, we'll give 50% to your family later down the road, even after you're gone. Maybe that could be a good reputation on behalf of the company. The company did take the risk of allocating those premium dollars during that whole time. They were able to meet the policy. They took the risks on. So there would be some reward for them that way. But as far as the life insurance part, yeah, you're right. It can get a little bit tricky because we're talking about people's lives. We're not just talking about business and taking on that additional expense. So, yeah, I agree with you. I think it's subjective, and I think that's something that should be talked about.

Very cool. So, which brings me to what then if an employer comes to an employee with this kind of program, what are some of the things the employees should be thinking about in order to protect themselves as well?

Yeah, they want to definitely look at the terms and conditions. In some situations, the employee should hire their own attorney. If they're an executive at a company, for example, they should take on that expense of hiring their own attorney. To review the contract to make sure that what it means to get the policy in the next 10 years. Are they getting the actual policy? Are they getting a percentage of the cash value? They want to clarify those terms. They also want to make sure that, for example, what kind of protection they have. They want to consider their future with the company, too. If they've only been working with the company for a year and they really don't see a future, maybe it's not really— I mean, the employee doesn't really have that much of a risk. Do it. But at the same time, you want to think of long-term. Do you see yourself staying with the company for— realistically ask yourself, do you see yourself staying with the company for the next 5 or 10 years or however the employer has written the contract? Because remember, the employer is starting this. They're coming up with the idea. They're working with their financial planners, their accountants to put all this together. So review the contract. If needed, hire outside counsel on your own expense to review it, somebody independent. Typically, the company accountants or the financial planners would explain this to the employee. They'll show them how it works and everything. But still, I think it's up to the burdens on also the employee to be able to make that competent decision on their own and really review the terms. The thing about this type of practice or this type of strategy is that it's not fixed across the board. It's not like everybody has the same plan across the board. It could really be based off of— there's so many variables from the way it's structured to the type of company to the way it goes to the employee and the employer. There are so many variances that you want to make sure you understand what those are.

Yeah, yeah. You know, I have a hard time when we say to people who are going in for a $20 an hour job, oh, before you sign a contract, hire yourself a lawyer. It gets to be— it's one thing if you're a high If you're a high-paid executive making 6 figures and you hire a lawyer for an hour just to review a contract. But when you're a $20 an hour employee, that can be the difference between putting food on the table or not for a month.

Yeah, exactly. That could be your whole paycheck. Just the 1 hour. Some attorneys charge $300, $400 an hour. That could be 50% of your weekly salary.

Yeah, it's a little bit of a challenge. So, are there anything like— so, we talk about the employer having ownership of this policy. Is there any kind of program out there that gives a graduated release to the employee? So for instance, after year 1, I would get 10% of my policy and 10% of the liquidity of that policy. Year 2, maybe I have 20%. And then, we get year— by year 10, I now have 100%. Is that possible as well?

Absolutely. Yeah, you definitely could do so. And I think that would be more fair, right, for the employee to do it that way. That way they don't have to like— because what if they stay with you for 9 years and then they left and it's like, oh, you got nothing for the 9 years, you know? So yes, you could do it. Absolutely. You could do it gradually and you could even do it more like exponential where it's like 10% for the first year, 50% for, you know, year 2. You can, however you want to structure it. It's really, it's a private contract that's not based off of federal guidelines or other guidelines. You are in control of those guidelines. And however, as long as it's legal and tax compliant with the approval of your accountant and your lawyer, you could do anything you really want with this.

Very cool, very cool. But it is endemic or it does require that the employee do their due diligence as well?

Yes, correct.

I've talked to brokers who have been responsible for doing benefit programs in for Intact teams. And when I talk with them, I get a sense that they get really frustrated because employee uptake is rather low when it comes to 401s or in Canada, RRSP contributions, matching contributions, that kind of thing. What's been your experience when it comes down to these kinds of programs?

Yeah, the pushback is more from the employers just because— and the reason for that mainly is because they're not really familiar with this concept. It's a foreign concept. Like, everybody knows 401s and RSPs. There's a lot of buy-in from that because people already know what it is. There's a lot of marketing behind it and familiarity with those concepts. But when we come and we talk about life insurance and cash value life insurance, a lot of people, first of all, don't even know what it is. Most people, when they think of life insurance, they just think of death insurance, just something that covers you when you pass away. They're not really thinking of an intricate policy with cash value and creative solutions like that. I had the number two is that when people do hear a lot of times when people do hear, especially in North America, when people do hear cash value, they think of other financial gurus out there who have kind of created a bad reputation for cash value life insurance. Because if you remember, Mark, in the beginning, you know, this could be a bad strategy. It could it could be it could get in the way of your goals if it's structured the wrong way from the wrong company. It's really like a there has to be a proper equation at place of. Of the right company in the right way. So a lot of people over the years, especially like in the '80s and '90s when life insurance companies stepped into the finance— stepped in more into the financial services world as far as competing with banks and financial institutions, a lot of companies, a lot of brokers would go out there and say, you know, hey, instead of doing the stock market or instead of doing this, do this life insurance policy and allocate this. And they had all these like crazy projections, 20%, 25% rate of returns. Which is not— you're not going to get that with life insurance policies, or I don't think you're going to get that most places. You're not going to get 20% to 25% in different places. But a lot of these insurance companies and brokers ended up getting sued in the '80s and '90s because they were just doing these ridiculous projections. And then people from that era that have experienced that might have a bad taste. So when here I am coming to a business owner explaining cash value life insurance, they're going to say, no, it's a scam. Scam. There's a lot of things that I don't understand with it. They're not going to want to do it. It just sounds off for them. So those are the main 2 pushbacks we get from employers. And really, this is why it's important for employers to listen to podcasts, to read books about this concept, to really kind of take their minds away from social media and what the media might talk about and other people might talk about. And then really for them to do their own due diligence and figure out, to kind of evaluate the logic behind this and to see, Hey, maybe this thing is actually more concrete than it sounds. And then based off of the research they've actually done on this.

Very good. So which brings me to my next question, which is what are the cautionaries? What should they be looking out for?

Yeah, so number one, they should be asking themselves, is this congruent? Does this connect with their goals? Does it match their goals? Or is this something that's going to completely take them away from that? And what I mean that, let's say, for example, the goal is high cash value, employee retention, being able to use that money as a line of credit, the tax advantages. One thing that I mentioned in the beginning is that you can get a policy that you put in $10,000 a year, and then 10 years later you only have $10,000. In other words, it was high death benefit, very tiny cash value. You want to make sure you want to look at the projections and the illustrations and make sure that the cash is actually going to grow, and then kind of look at the growth of that cash to match your projections, your business projections. And then number 2, there's typically a guaranteed side and a non-guaranteed side on an illustration. Focus, kind of evaluate both. Both of them are important. The guaranteed is obviously, as it sounds, guaranteed. The insurance company will pay you that amount. Make sure the insurance company has been around for over 100 years so that way they could actually meet those guarantees. If a new life insurance company is in the market and they're telling you they can guarantee the growth for the next 40 or 50 years, have they been around that long to be able to guarantee that amount of money? And then also look at the non-guaranteed side too. The non-guaranteed side is the same as the guarantees. Plus dividends. So dividends are not guaranteed. That's the difference. And then look at the dividend track record of that company. We work with some insurance companies that have been in business for over 100 years and have a proven track record of dividends. And really, it's not so much the use of this concept is really not a rate of return concept. It's not a matter of for every dollar I give you, how much are you going to give me next year or 2 years from now? It's really slow, boring, conservative returns, 4%, 5%, 6% every year compounded. But you still want to look for those. You still want to be able to evaluate those and then take those projections and then match them with what your accountant and your bookkeeper have and see, you know, is this going to really match? And obviously, with the help of your financial planner to make sure that, you know, is this heading in the right direction or is this going to take us off track and put us somewhere else?

Yeah, yeah. This has been fantastic. There's so many considerations. But number one, I like that you have this criteria that, you know, deal with a company that's been around for 100 years. Because then, it's a question of number one, look for a reputable company first.

Yes.

This has been such a great topic, Sari. Do you have any last thoughts about what we've been talking about today?

Yeah, so there's a lot of free content out there. If you listen to this and you like this and you still want to find out more, you could reach out to us. Or if you don't want to reach out to us, just yeah, you still want to learn about this, you could check out our podcast, Thinking Like a Bank. There's also a bunch of other podcasts out there talk about this. This is called infinite banking or bank on yourself. And if you search like bank on yourself for employers or bank on yourself employee retention, you find a lot of free content out there to learn more about this. And we definitely recommend that you learn more about this, not just hear one podcast and then make a call and then buy this. There's more to it in between. So definitely check this out. It's a pretty interesting concept, something that a lot of big companies and big banks have been doing for hundreds of years. And something that small business owners could do on a small budget.

Fantastic! This has been really great. Could you remind everybody one more time how they can get a hold of you, Sari?

Yeah, so they can go to our website. It's finassetprotection.com. F-I-N assetprotection.com.

Terrific!

Thank you so much for sharing what you know today, Sari. It is absolutely clear that this is a passion point for you. And that you really truly love this aspect of the financial business. It's great!

Thanks, Marc. Thank you so much for having me on.

Why don't you let me know if this was of value to you? As always, my offer stands. If you would like a complimentary 30-minute brainstorming session with you and your team with me, please feel free to book yourself on my online calendar. The link is in the show notes. I am here to be of service. And of course, you can tell that I'm passionate about this idea of creating the experiences for your employees, creating the experiences for your customers. So, if you know anybody who needs that, please go ahead and share the podcast with them. And if you haven't done so already, why don't you go ahead subscribe to this feed? There's more episodes. There's more experts coming up each and every week. I am so blessed that I have people like Sari who want to come onto this podcast and share their knowledge. to provide you the value. And so, by subscribing, you will get first dibs whenever I bring you the content that will help you work on your business, not just in your business. My name is Marc Haine. I hope that you stay safe, stay healthy, and you dare to be the exception.