In 1965, AL Williams died of a heart attack. He had a lifetime policy, but left the remaining Williams clan underinsured. This left an impression on his son, Art L. Williams, Jr., whose cousin later introduced him to the concept of term life insurance, which was relatively unknown at the time and provided much more face value at cheaper rates.
Driven by the financial hardships his family had endured, Art launched himself into being an ambassador for life to term with an almost religious fervor. He coined the phrase “Buy Forward and Invest the Difference,” BTID for short, launched a new company on the concept, had some 200k agents under its umbrella, and the rest is history.
Or is that it?
Some 40 years later, a study published in the May 2015 issue of the Journal of Financial Service Professionals indicates that Williams’ great experiment had unintended consequences for families. “People don’t buy term and invest the difference,” said David F. Babbel, a co-author of the study. “They will most likely rent the term, expire it and spend the difference,” leaving many families uninsured rather than simply underinsured when a loved one passes away.
Even the small percentage of people who fully execute Art’s tips and invest the difference can emotionally invest in the market by buying high and selling low, or buying managed investments without realizing the potential impact of associated fees on their savings. People who think they are playing it safe by overfunding a 401k beyond the amount an employer matches often do not consider that if the administration fee is 3%, they should make a 3% return each year to cover expenses and protect your principle.
Assuming everyone who bought long actually invested the difference wisely, all of life still offers advantages that BTID does not offer. Lifetime locks in insurability, allowing the insured to purchase additional coverage with accumulated cash value, even if their health has deteriorated to the point that they can no longer purchase new policies. Additionally, they can borrow against cash value, convert it into guaranteed income, or take tax-free distributions.
Chris Blunt, Executive Vice President of New York Life, Noting the Value of BTID to Investment Firms, Says: “Generations of Wall Street professionals have been trained by their firms to ditch cash value life insurance so that investment firms can keep those dollars under management. ” It also notes that you don’t need to decide between term or permanent life insurance. Young families can buy both and convert the term to life as their income increases.
Art Williams’ legacy consists of overpriced term-only options and a drastically reduced pool of brokers who, like the Wall Streeters mentioned by Blunt, drive just one product and openly undervalue all other options available to their prospects, what he calls insurance. cash value “junk value” and a “terrible product” and touting BTID as the one-size-fits-all solution. The 40-year look back at this way of selling detailed life insurance in this study does not support these claims. American families deserve more in terms of options and advice.