♪ California's top casino and entertainment destination is now your California to Vegas connection. Play at Yamaha Resort and Casino at San Manuel to earn points, rewards, and complimentary experiences for the iconic Palms Casino Resort in Las Vegas. ♪ Two destinations, one loyalty card. Visit yamaha.com/palms to discover more. Today on Radical Personal Finance is live Q&A.

♪ Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less. My name is Joshua. I am your host. Today is Friday, which means it's a live Q&A show.

Works just like Call & Talk Radio. You call in, we chat about anything that you want to talk about, could be any question, any topic. I don't know what's coming. I just open up the phone lines and chat with you. ♪ I get really good feedback about these shows.

They're my favorite shows each week to do, and you always notice that there's quite a diversity of topics. I always try to put the time stamps for you in the episode, so if there's a particular topic that you're interested in, you can see the questions that are covered in the time stamps.

But of course, naturally, all of the show is naturally engaging and interesting, so I can't imagine why you wouldn't just start at the beginning and listen your way through. But I really enjoy doing these shows, and I know that you guys really enjoy hearing them as well. If you would like to join me for one of these Friday Q&A shows, I would love for you to do that.

You can do that by signing up to support the show at patreon.com/radicalpersonalfinance, patreon.com/radicalpersonalfinance. And if you sign up to support the show there, you will gain access to these Friday shows. You can call in, you can talk to me about anything that you want to talk to me about, ask any questions.

It's up to you. We just open up the phone lines and talk about anything you have going on. And in that spirit, John in Pennsylvania, welcome to the show. How can I serve you today, sir? - Hi Joshua, yeah, thanks for taking my call. I had two questions. The first one's about my disability insurance.

About three years ago, I purchased disability insurance at a job that I was at. Had currently, or at that time, had covered already 60% of my disability insurance needs. And so at the time, I was able to buy a policy that covered, I believe it covered 60% of the remaining 40% of my salary.

So a relatively small amount of coverage, but disability insurance was pretty expensive. So it still was a good chunk for a yearly premium. But I felt, I was convinced by some of your shows that that's a very necessary insurance to get. And I was happy to get it at the time.

And now my question is, I have a new job where my income, at least temporarily, is more than 2X what it used to be. And I guess I'm curious if I could go and get more disability insurance coverage now, which I'm guessing is yes, and if I could, would the cost amount basically increase linearly with the coverage amount?

Or is there other multipliers in there that I'm not taking into account? - Short answer, yes and yes. When your income increases, you're able to qualify for more coverage. Now what happens is the percentage of your income that you can cover actually goes down. So if you were earning $50,000 per year, the insurance company would do a calculation and they would say, well, you're earning $50,000 per year, we're gonna assume you pay a certain level of taxes, but basically at a $50,000 per year job, they would wind up giving you total coverage between your group insurance and your individual policy.

They would wind up giving you total coverage that would basically be 100% of your pre-disability earnings. But if your income increased from $50,000 a year to $150,000 a year, you can get more coverage, but the percentage of your earnings that you can cover will go down. So it would probably go down at $150,000 salary to something like 80% or 85%.

If your income increased from 150 to $350,000, once again, you could increase the total monthly benefit, but the percentage of your income that you can cover will go down. And so if you're at $350,000 of income, they would probably cover 60% of your pre-disability earnings. So the short answer is yes, and you can increase the coverage amounts, but you won't ever get up to 100% coverage when you get up into higher income earning amounts.

Second question is yes, disability insurance benefits do go in terms of price on a linear basis, more or less. So if you were looking at a contract and you had a contract that was for $3,000 a month versus a contract that was for $6,000 a month, the price is gonna be fairly linear, not 100%.

It's not gonna be $100 a month of premium for the one and then 200 for the next, but it'll be $100 a month for the one at 3,000 a month, and then it'll be $178 for the second one at $6,000 a month. So the coverage amount will be fairly linear.

You do still have the other options that you can change other than coverage amount that will affect the premium, duration of benefits, when the benefits start, definition of disability, et cetera, but as long as you're in the same occupation class previous as you are now, yes, it'll work on a fairly linear basis.

- Okay, thank you. And the income amount that they're basing it off of, does that always tie to base income or does that include bonuses, stock equity, things like that? Is there like a total compensation factor there or is it always going base salary? - Depends on the company and depends on the structure of the policy.

Usually in a group disability contract, those will most often reflect exclusively a base salary coverage. They sometimes do include bonuses, but they will usually include just simply the base salary for group disability. However, for an individual disability policy that you're buying individually, those will usually include total income. Now, they don't have to, but most of the time you will cover total income.

And so this is one of those things where an insurance agent, when you're talking to an insurance agent, if you are a person who has a large amount of your income made up of bonuses and commissions, et cetera, then you can cover those with an individual disability policy, but usually those aren't covered with a group policy.

But yes, so the answer is it depends, depends on the type of contract we're talking about and the basic structure of your income. - Okay, thank you. I appreciate that. Do we have time for the second question? - Yep, go ahead. - Or should I wait till the end?

Okay, so my second question, and actually part of the reason I was coming to you for the first question, is my insurance agent that I had sought out from Northwest Mutual, and I liked him a lot. He worked with us for quite a bit of quotes, and then I ended up getting a disability insurance coverage.

He had followed up the year after. The next year, I think I just missed scheduling with him to follow up. And then it turns out he unfortunately is disabled himself. He's going through a really tragic illness, and he's not able to speak and just isn't able to follow up.

Well, I got a call from someone who, I believe I said was from his office, and they were just kind of touching base with his accounts. But I sort of felt like I got a little bit of a bait and switch there, because this person is associated with Northwest Mutual.

They do seem somewhat associated with his office, although I can't find a direct line for that. But he obviously knows my previous agent. But this guy is primarily a wealth management person. And as I was going through and answering a bunch of his questions during a casual conversation, I kind of felt the switch to him wanting my business as a wealth manager.

And I had already given him a lot of information that I would have felt comfortable giving to my insurance agent for certain needs analysis and different things. And then all of a sudden I felt very uncomfortable giving it to him, 'cause I kind of felt like he was coming in to offer his services beyond just insurance quotes.

So at this point, and on top of that, the guy that was reaching out to me, he didn't have any accreditations for, what is it, CLU, or he wasn't really a CFP, or not CFP, but one of the other designations for being a certified financial planner. So long story short, it's not like he was giving me any bad stuff.

It was a good conversation. But in the end, I kind of just wanted to send him an email to say, "Can you please destroy all the notes or records "you have of my conversation with you? "Because I really don't wanna continue "going down this line necessarily." But I didn't know if writing back to him in an email is a sufficient way to, I don't know, if it's a legal requirement for him to do so, but I kind of wanted to force him to somehow maybe destroy those records.

(laughing) I know it's just a bit of a privacy thing, but I'm not sure if there's any way to really do that now that I've already let that out. - There's really no way that you could do that. Could you send him the email? Sure. Would it do any good?

No. Basically, the guy would read it, and he'd be like, "What on earth?" Like, all I do all day is ask people about their money. He doesn't really care anything about who you are or anything. And so from his perspective, the fact that you told him how much money you have really doesn't matter at all to him.

- I had a listener of mine who bought one of my courses, and then he bought one of my courses, and he registered with a, I think it was a 33-mail or I think an opaque email address. It was like, you know, 125X57, opaque email address. And then he bought one of my courses.

He didn't like it. He asked for a refund. I gave him a refund. And then he writes back to me and says, "Will you please destroy all evidence of, "will you please remove my records from your system?" And I'm sitting here looking at this email address that is xy472@opaque.com.

And I'm tempted to write him back and say, "Are you kidding me? "The reason is, you're using this email address, "which is totally fine with me. "Like, I don't care what your name is. "I don't care who you are. "I just do my best to give, I don't care.

"It doesn't matter to me at all." And I don't have any records of you that anything like, am I supposed to go to my system and manually delete you? So I just decided, well, it'd be silly for me to respond with some snarky email, that's bad form. So I just ignored the email.

And then he writes me again two months later. He's like, "Did you please confirm "that you deleted my stuff?" And I'm sitting here looking at it again, just saying, "Listen, I don't know anybody out there "who's more sympathetic to your privacy efforts, "but I'm not gonna waste my valuable time "to go into my system and try to figure out "how to delete xy125@opaque.com, "this guy who registered with what I'm sure is a pseudonym "and somehow removed you from my system." Like, the whole point, oh, no, it was a pseudo mail thing.

And I'm like, but this is the whole point you use it. If you don't wanna be in my system, then burn the email address and move on. Like, I don't care, and I'm not gonna take my valuable time to go and do this thing for you. So I gotta imagine that you would get a similar kind of reception from that guy, and he wouldn't be anywhere near as sympathetic to privacy efforts as I am.

But I think that at the end of the day, it's a good lesson for you and for listeners that when it comes to your information, the only way to protect your information is not to tell anybody your information. And it's especially important even when you're dealing with things like dealing with financial planners.

And I've talked about this extensively. Now, I don't think that for most people, it's that big of a risk for you to share your personal information with a financial advisor or with a financial planner. Most financial advisors don't care. Just kind of like doctors seeing naked people, financial advisors knowing how much money people have, I can't keep it straight in my head.

It just doesn't matter to me how much money you have or don't have. It doesn't, it's just for most, in most situations, it's really not a big deal. But you need to be aware of the fact that when you tell somebody what you have and where it is, you lose control of that information.

So let me describe what happens in the situation when you're dealing with a financial advisor's firm. All the information that you tell them is, in today's world, used to be it would just go into a file, right, somebody would write it on a file, and it would be, you know, pieces of yellow paper and stuck into a manila file, just sitting in someone's office.

Now, most of the time, there's a digital system. And the digital systems, with any reasonable firm, are gonna be decently secure. It's gonna be encrypted in some way. It's going to be, it's gonna be restricted, usually. So a big firm like Northwestern Mutual, the information that's in the notes is not gonna be available to everybody.

So the guy who is in one cubicle, that information is not available to the guy that's in the next cubicle unless he's assigned to them. But that information is available at every stage of the chart. So you've got the individual insurance agent, then you've got the managing director. Well, the managing director has an override responsibility for the insurance agent.

So the managing director can see all the client notes for that particular file. Those notes can be seen by the managing partner. They can be seen by all of the compliance staff, the compliance officer of the firm. They can be seen by the home office. And so every bit of information that you give to a financial advisor, to an insurance agent, you should assume is now going to be part of your permanent file.

And in that situation, if anybody is given access to that permanent file, they're gonna have access to that information. And so in a situation like you're describing where your primary insurance agent became disabled, what happened was, kind of internally, the way that insurance agencies work, you have a set of clients, and you have a specific insurance agent who is the primary agent who services that you as a client.

That's been your interface. But in the hierarchy, you have a couple other levels, and these are usually called a district agent, depending on the terminology of the firm. Just the pure insurance terminology would be a district agent, and what's called a general agent. And so a general agent is somebody who goes to an insurance company and negotiates a geographic contract for to develop a particular region for that insurance company.

So they say, "If you'll give me licensing rights "to the state of Pennsylvania, "or if you'll give me rights to the city of Pittsburgh, "then with that information, "I'm now going to develop this particular city." And they get the exclusive right to that geographic area and to service people who are within that, to develop offices.

It's not that somebody can't move in and buy an insurance policy from a guy on the other side of the city, but it's that they get the exclusive right, the general agent gets the exclusive right to establish offices for that insurance company within that geographic area. Now, that general agent, once they establish that contract, it's the general agent's job to go out and to hire and to recruit district agents.

And so the district agents also get assigned a geographic area, but it's a smaller geographic area. It's a specific neighborhood, or you can have this side of town over here. And it's the general agent's job to populate their geographic area that they've negotiated the contract with the insurance company.

It's the general agent's job to populate that geographic area with offices. Those offices are going to be overseen by the district agent, and then the district agent will now go out and recruit insurance agents, individual insurance agents. When an insurance agent sells an insurance policy, then the insurance agent gets a commission, the district agent gets a commission, and the general agent gets a commission.

And so the commissions get split, the commission that's paid from the insurance company to the agents, the commissions get split at all three levels. But each of the agents, they're all insurance agents, but at each level, they have different goals that they're trying to meet. So what happens is, when your insurance agent became disabled, the district agent is actually the one who oversees that individual insurance agent's book of business.

Now that individual insurance agent, depending on what happened with his contract with the insurance company, whether it was his disability, whether they thought that he would come back or not, that's all kind of internal and opaque to you. But what happened is that if that insurance agent, if it was decided that, hey, he had a really bad illness, he's disabled for forever, he's not coming back, then all of those policies that are sold, that have been sold by that agent, now roll up to the district agent for servicing.

And the district agent now wants to make sure that those customers of his agency are taken care of. And this is what happens when somebody goes to an insurance company, they work there for three years and then leave, et cetera. And so he takes that agent's files, and he divides them up among his other insurance agents.

Because there's a huge amount of, number one, it's just good business, right? They're promising, they wanna service clients. But there's also tremendous financial incentive to service those clients well, because as people's needs change through the years, they'll need more insurance policies, they'll need other lines of business. With a big insurance company, it's not uncommon for an individual policy owner to own five, seven, 10 insurance policies with one particular company.

And so that district agent wants to do a good job of servicing his agency's clients. They're called, it's not a very flattering term, but it's what they're called, they're called orphan clients. So your agent is gone, whether he left the business, retired, died, was disabled, your agent is gone, and now here you're an orphan client.

You still have your policies with the company, but who's gonna service those policies for you, and who's gonna sell you additional lines of business? So the district agent takes them and divides them out among other insurance agents. And so the other insurance agents are basically given the file, and they say to them, here, here's John, who lives in Pittsburgh, go ahead and call John and introduce yourself, and we'll assign the file to you.

So I used to do this all the time, right? I would be given, I was a high-performing agent, and so you're given, after you've established yourself and whatnot, then your district agent will give you these files. And so what you do is you call, you introduce yourself, and you do any service work.

You check up on beneficiary designation, see if there are any policy adjustments that need to be made. But it's also a fresh opportunity for you to establish a new relationship. And now, instead of the person just simply having the district agent's number, now they'll have an individual insurance agent.

Usually there will be now a personal relationship. You've met them, they've come in, you've provided in-force illustrations, you've kind of updated, see if anything has changed. And if you have a chance to cross-sell on something, then you go ahead and cross-sell on something else. And so what the guy is, what you're describing is an entirely normal process with any insurance agency anywhere.

And what that guy was doing was looking to cross-sell. He's looking, he's talking to you, he's recognizing, hey, here's a guy who has a bunch of insurance with us, but we're not managing any of his money. Why aren't we managing any of his money? And is there some way that I can attract him and interest him in our money management business, our wealth management business, in addition to his insurance business?

So that's how it works internally. And you don't really have any control over the information once you give it out. For example, when you took out an insurance policy, you listed on that insurance policy all of your individual information. You listed your income, you listed all of that. And that's now part of the information that the insurance company has.

There's not a huge danger in this with regard to information security. There have been rogue insurance agents and people throughout the years who have stolen people's identity. There have been people who would go through the files and steal somebody's name 'cause they've got all the info there is in the file.

You've got your name, you got your birth date of birth, you got your social security number, you got your address, and you've got everything you need for identity theft. And so insurance agencies and wealth management companies, the compliance officers are pretty strict about this. And they watch very, very carefully for any kind of sense of fraud or illustrations of fraud.

That does happen on occasion. And if that happens, then there very clearly is a case, a criminal case that's brought, and the insurance agents prosecute those rogue agents, the insurance companies prosecute those rogue agents very hard. But short of that, short of actual criminal fraud and theft, identity theft, you don't have any control over the information, and there's no right to privacy that you have other than their duty to engage in reasonable protection of your information.

But let's say you start going through, you all of a sudden, you told your insurance agent all about your money, and you applied for new disability insurance based upon your 2X higher income, but now all of a sudden you wind up getting divorced, and you didn't tell your wife that you were making 2X higher income, you were just trying to hide that.

Well, if that comes out as a component of your divorce case, then your wife's divorce attorney can subpoena those records, and now those records will be used to demonstrate that you're not selling the truth, and you told the insurance agent you were making such and such amount of money.

Which is why I have tried to be clear, when it comes to financial planning, you need to think very carefully about what you want to say to a financial advisor, and what information you want to give to an insurance company. If you're going to be hardcore for some reason, just due to your makeup, and your desire for privacy, whatever, if you're gonna be hardcore, where you don't want anybody to know anything about what you have, then not only can you not tell anybody at all, but more importantly, you're probably not gonna be able to even get the policies.

If you can't demonstrate that, hey, I make $100,000 a year, and here's my pay stub, you're not gonna get the insurance. So this privacy of financial information thing is difficult. It's one of the reasons why, you know, I don't advertise my consulting services very much because I don't devote a lot of time to it.

But when I have done that over the years, I've often said, I'm about the most private financial advisor, like I'm about the only way that you'll actually get a private financial consultation. Because I don't care what name somebody gives me, I don't care about any identifying information, you can just give me the details.

I don't keep records, I don't keep notes, I just simply write it all down on a piece of paper, and at the end of the day, I drop the piece of paper in a shredder. And I have no, because I don't sell insurance, and I don't sell investments, I have the ability to do that, and it's legal.

I just simply give information, just like I'm telling you right now. So that's an overview of the business. What I would say is don't worry about it. You can't change much about it. Even if you did go and change it, even if you requested it, chances are the guy would probably not delete it anyway.

If I were an insurance agent, I wouldn't delete it. Because I would get concerned now, if I'm going in and I'm keeping my notes in the phone call, now I'm putting that into our, probably most, at this point, the vast majority of files are kept digitally. So I put this into client notes, that here's my information on the phone call, that John's got X number of dollars, and he's got this and that and the other thing.

Well, if I go in and I delete that note, number one, it's not even possible really to delete the note. Because there's always gonna be electronic record of it. But now if I delete the note, my compliance officer's gonna come up and say, yo buddy Joshua, why did you delete this note about all your phone records with John?

And so, I wouldn't worry about it, and it's not possible to remove it, is my summary for you. - Yeah, I appreciate that. Especially the overview of how the business is structured. And that's pretty much what I assumed anyways, exactly to the point of what you said at the end, where it might actually be problematic for them to delete notes or bring up questions.

So I kind of figured I was screwed in that way anyways. And really the biggest thing that I felt sort of offended by was just the bait and switch of like the guy that doesn't even have the CLURA, the insurance designation came in under that guy's. But again, it probably isn't such a big deal, and maybe I should just not worry about it.

So I appreciate it. One follow up, if the guy that I was working with was a managing director, would there be ways for me just to call Northwest Mutual and ask who his district agent was to see if there's someone else that is properly accredited to talk to about insurance products, or would they just point me back to the same guy?

- Yeah, so let me talk to that for a moment. So obviously, as the possessor of numerous credentials, I think that credentials matter and they help a lot. And in many cases, credentials are a very good sign to watch for to see is this person knowledgeable about what they're doing.

There can be various reasons why somebody doesn't have significant credentials, and that may or may not mean that they are a good or a bad agent or a good or bad financial advisor. I know a lot of certified financial planners that I would never want giving financial advice to my wife if I'm dead, right?

That's always the example I use. I always tell her, okay, listen, this is the person that you go to if I'm dead, this is who you take financial advice from. I know a lot of financial CFPs who I wouldn't want giving financial advice. And I know a number of people who I would want giving financial advice, and to my knowledge, they're not necessarily CFPs.

So I don't view that, I view it as one indicator of many, but not an exclusive indicator of everything that can be done. Now, what it may indicate, and with a company like Northwestern Mutual, what it often does indicate is if somebody has no credentials, the first thing that you wanna look at is you wanna look at actually what their, if you have an email from them, look at their email signature.

And these big companies that mix insurance and investments, they'll have usually about three different labels that people will use. And if you read the disclosure language, right, the page and a half of language at the bottom of the email that they sent you, if you read that, it will tell you what the person's status is.

And so with most of these big companies, the first thing that they'll have will be some kind of what's called a financial representative of some kind. The term financial representative is a term that is tilted in the lingo and the parlance of the financial industry in the direction of insurance sales.

And so the term financial representative may include somebody who's licensed to, they will be licensed to sell insurance, 'cause that's the first thing. They may or may not be licensed to sell investments. And so if you read the disclosure language, you'll see whether or not there's an investment company reflected in the disclosure language or exclusively an insurance company.

And so the financial representative is one business model. Then the second business model is what's called a financial advisor. So if somebody's business card says financial advisor, that's going to indicate that, first of all, they are licensed to sell investments. And more importantly, they're going to be licensed to sell investments and they can also do that and they can work as a fiduciary and they can also charge fees for investment management.

So usually with a big insurance company, like a New York Life or a Northwestern Mutual, most new representatives will start as a financial representative and then they may move to be a financial advisor if they want to do the investment business. The third model is what's called a wealth management advisor usually.

And a wealth management advisor has a slightly different structure where now they'll be licensed with, usually the trust company that the insurance company owns and they will have a slightly different management perspective. Now, these are technical FINRA regulations as to why there's these different names. It's totally opaque to the consumer.

The consumer has no idea what any of these things mean. But these are technical regulations indicating is somebody Series 65, is somebody, are they operating as a fiduciary or are they not operating as a fiduciary? What exactly is their structure? And so, why did I go into this? Just simply to point out that what the lack of credentials might mean is it might mean that somebody is new to the business.

Sometimes people will, in servicing these clients, there's no requirement that the district agent has to assign this orphan client file to somebody who's new or somebody who's not new. Now, usually they won't assign the file to somebody who's brand new because the person who's brand new is usually not good enough.

They don't understand enough to effectively service the client. So, usually they'll assign these to people who are experienced, a little bit experienced. But there's a range in that. And so, sometimes they will assign an orphan file to somebody who's new. And remember, the district agent doesn't know any of the details.

They just simply have a list of names. And the filing system indicates, hey, so-and-so insurance agent has become disabled. He had 1,347 clients. So, let's take these 1,347 clients and we'll assign 50 of them per month to these five agents in our business. And it's just an assignment in a computer.

There's no individual personal information. Now, if you don't like the guy that called you for whatever reason, just say, I don't like you and I don't wanna work with you. And then call the district agency up and say, listen, I would actually like to talk to an insurance agent, but I would like somebody who has a CFP or has a CLU and a CHFC.

I'd like someone with a little bit more experience. Will you please reassign me? And they can reassign you. And it's not a big deal to have that done. So, if that's what you're looking for, is just to have an individual agent, but someone else, then yeah, you always have the right to call up and say, hey, I'd like somebody else and talk to another insurance agent.

And it does happen from time to time. And I think that although most insurance agents want their clients to be their clients, at the end of the day, my theory has always been if somebody doesn't like me, then you need somebody that you do like. And not liking somebody is totally fine.

- Yeah, thanks. I appreciate that. And as far as the conversation with the agent went, or agent or the representative went, it was okay. But in doing, I was trying to take some of your advice from old shows and do my research on the people I'm working with. And I had found some less than admirable things online about this person as far as just old Facebook postings and all those things.

But he is younger and maybe that's just gonna come back to haunt anybody of his age by leaving those things up. - It's a double-edged sword working with an agent. Here was how I used to do it. So when I started in the insurance business, I was 23 years old and I really didn't know much.

You go through the basic learning process that you would go through is you take an insurance licensing course, that's 40 hours, right? In the state of Florida it was. It was a 40-hour class where you learn about life insurance, disability insurance, and health insurance. And then at the end of that, you get your state insurance license, that licenses you to be able to sell life insurance, disability insurance, and health insurance.

Then you go through some form of training by your company. And so in my case, it was three weeks of training with the company. Most of that training will usually be tilted in the direction of sales training. There will be some basic product training of here's what our company's products are, but the company, most of the training will be sales training because that's what the company's in the business of doing is training, training, training, training, training.

It's training, training salesmen to sell. Here's how you sell. Here's how you actively approach people, et cetera. So a lot of the product knowledge comes through the form of self-study. So you can't, and you can't, they don't give you hours and weeks and weeks and weeks of product knowledge.

And then quickly you're out there in the streets selling. Now, when I was a young insurance agent, what I always looked at it is I would tell people who are older, I was like, listen, I'm new in the business. I don't know everything there is. But I'll tell you what, I work a lot harder than most other people and I'm pretty smart and I get good answers.

And so if I don't know something, I'll tell you I don't know it and I'll get the answer. And then if I don't know the answer to something, I go and ask a senior agent, somebody who's been around for 40 years, and I say, hey, how does this work?

Or I call the home office and I talk to the attorneys and you can speak to a product specialist and say, explain to me how this particular thing in our insurance policy works. And so I think there's a good argument to be said for working with somebody who's younger, who's actually much more motivated to help you.

When I was new in the business, I would do anything for a client. Once I had a little bit of revenue built up, once I had a broader client base, I still wanted to provide good service, but I would not waste my time chasing down some answer for somebody who was annoying.

I would just bump that person off and say, that's it, next. You know, I'm not gonna waste my time working with somebody who's annoying, who's sucking up all my time with all of these intricate questions, et cetera. And so that's something that happens over time just from the business perspective of the insurance agent.

And so you should assess it both ways. I don't think that having somebody who's young and who's novice is necessarily a bad thing in the world of insurance. And let me be clear, when I'm here, I'm talking about insurance. And the reason I say that is because at the end of the day, your contract is a contract with an insurance company, not with an individual sales representative.

So I could happily, at 23 years old, I could sell an insurance policy to a big, established, super rich guy, and it wouldn't bother him that I was the guy who sold the policy because his contract is not with me. He's not establishing his relationship with me at 23 years old.

He's establishing the relationship with the insurance company, and I'm the salesman putting the deal together. I'm getting a commission, I'm gonna service it, but at the end of the day, it's the insurance company. Now, that is very different when we get into the world of investments. Now, depending on the type of investment strategy, it may be a little bit different or a lot different, but it is different when you get into investments because now with investments, especially if you're having some kind of fee-based arrangement, if you're giving some kind of authority to the financial advisor, some form of control over your accounts, control over your investment strategy, now that is one of those areas where you really don't wanna be working with somebody who's novice and who's junior, but in the world of insurance, I think you can safely and effectively work with a young person, somebody who's not particularly credentialed because your contract is not with them.

Your contract is with the company, and if that person demonstrates themselves to be motivated to get the right answers for you, then that's a pretty good thing, and I think that what is common, what most of those companies will teach, and I've had friends with, even though I used to work for Northwestern Mutual, I know that system, or at least how it was when I was there, but I also still have, I have friends who are district agents with other companies and who run offices with other companies, and so what is very common, and you have to recognize this, is that people know, first, the individuals know when they get in over their heads.

So if you are Mr. Megabucks, and you're looking at some complex scenario, and your attorney has just told you to buy $20 million of second-to-die life insurance, well, that junior agent is gonna be super excited about the case, but the first thing they're gonna do is they're gonna pick up the phone, and they're gonna call one of the senior agents, the guy who's been doing this for 40 years, and they're gonna have the team of advanced planning attorneys in the home office working on the case, et cetera, and so they're gonna bring in the people on the case that are needed to get the right answer, but the vast majority of stuff is not that complicated, and so if you've got a couple of life insurance policies, disability policy or two, there's just not that much need for, that's not advanced insurance work.

You don't need somebody who's a CLU, CHFC, CFP, blah, blah, blah, to do well with buying disability insurance. It's not necessary. They will, so judge the person based upon, do they give me honest answers? Do they say, "I don't know"? Do they seem like they're willing to listen to me, or do they seem like they have an agenda, and it's just a matter of, "Hey, here's what I'm gonna pitch to you this week." Those things are, to me, the most important things when it comes to insurance, because they have the resources, and if at any point in time you feel like, "I like this person," they listen to me, they're not just trying hard to sell me something that I don't need, they're not ignoring me, but I like them, but they might need a little bit of help, just ask them, say, "Listen, can you bring in somebody "who has a little bit more experience with you next time "and do some joint work?" And then that's the way you get access to a more senior insurance agent.

- Okay, thanks. Yeah, I appreciate the perspective on that, and I definitely knew that was where you came from, and you had some insecurities about being young in the role early on from your previous stories. So yeah, good to get that perspective. I appreciate it. - My pleasure. It is interesting, and you gotta figure out where you are in the whole long, where you are in the chain, because youth can be, as I said, youth can be an advantage or it can be a disadvantage.

And somebody who's young may not know a lot, but they'll also probably work really hard for the business. And once they get into it a few years, then most insurance agents that are successful, if you start to become a difficult client in some way, they'll fire you and move on.

And fire you just means they just stop. With investment business, most financial advisors too will fire their clients if they have any self-respect, is you get rid of your most difficult clients constantly. The clients that cause you all the trouble, every year you get rid of your most difficult clients.

And so in that situation, you actually have to physically facilitate the transfer of accounts, which means it's a more proactive process. With insurance agents, if all somebody has is insurance policies, they just stop calling you, may or may not return your calls, and just move on with their life.

And so people have this perspective that insurance agents, and I was reading in an online personal forum the other day, and someone was talking about how, can't believe insurance agents selling insurance. And I look at it and I say, well, that's true. But there's a whole other side of it, where a good insurance agent is worth a whole lot of money.

And at the end of the day, it's the consumer who writes the checks, but most insurance agents are not suffering for business. And so there are two sides to it, and both sides need to win in order for the whole thing to work. Jacob in Wisconsin, welcome sir. How can I serve you today, sir?

Jacob in Wisconsin. - Can you hear me now? - Now I can hear you, you're on. Welcome to Radical Personal Finance. How can I serve you today, sir? - Call me this time. Well, as I was trying to say before, thanks for taking the time to do all the stuff.

Sorry about the technical difficulties, I guess you'll have that from time to time. So I'm calling in, I've listened kind of on and off for a while. And one thing that I don't think I've really heard you talk much about is land contracts. Bringing that up because I guess the possibility has been presented for my wife and myself to purchase a family home through a land contract.

And so I'm trying to kind of work through maybe the possible pitfalls of that, or the benefits, and that sort of stuff on a land contract and get your thoughts on that, sort of get that outside opinion. I've talked to a lot of family about it and that sort of thing.

But sort of see what you have to say and maybe get into even the specifics of it as we kind of break that down a little bit. But yeah, I guess I kind of want to start with your thoughts on sort of the land contract process and if you have much experience in that sort of thing.

- Short answer, I don't have any experience. I've never done one. I've never provided very much advice and I'm not an expert in the area. So about the most I can do is help you with a couple of intelligent questions, but I don't have any insight to effectively help you in that area.

So let's start here. What are you concerned about? You've got a deal that you think is a good deal. You think about doing a land contract. Why is there a voice in the back of your head saying maybe I shouldn't do this? - Well, so I guess to give a little bit of a background on it, it's an older house.

It's been in my wife's family since it was built and I want to say that was in the late 1800s. And it's her parents that are wanting to do the land contract with us. I guess terms of that deal are pretty good and they're talking about like $100,000 over 15 years.

And since they're with land contract, they're technically like the financer. So that means that they set the interest rate, which they're doing 0%. And it's all stemming out of my wife's grandfather passed away earlier this summer. And so some shifting around happened to who was living where, that sort of thing.

But we had, in a normal, I guess, getting a mortgage thing, right? There's always like the inspection and stuff like that with land contract that's not required. But we did that anyway, 'cause this would be our first house. We're both in our late 20s. And so we brought in an inspector and there's a few things, given the age of the house, right?

That are there that need to get addressed. But he also kind of made comments that he would actually like to come back and see it again. And that's not something that is difficult. He'd almost want to do a second inspection. I guess some background, like my father-in-law is sort of a handyman and he does a lot of the work around there.

And it passes for a lot of things. And he's definitely skilled in what he does. He's done a lot of stuff there. So a lot of stuff there, I think that was sort of a red flag from the inspector's standpoint. And so I think it's some of those things with the age of the house and that sort of thing.

And in hearing what the inspector kind of recommended that has me specifically kind of on the, how good of a deal would this be? Is this maybe too risky, even with the terms of the deal being precedingly good? - Okay, so let's describe as I understand, your father-in-law, your grandfather had an older house.

This is an older house, you said built in 1880? - It's somewhere around there, it was late 1800s, yeah. - Okay, so this is a very old family house that your grandfather owned, passed it on to your father-in-law, or sorry, your wife's grandfather owned and then he passed it on to your father-in-law when he died?

- Yeah. - Okay, so now-- - Well, yeah, sorry. - Okay, so-- - They moved into his old house and then we'd be moving into theirs and that's where the land contract comes in. - And this house, the house in question, previously your parents-in-law were living in it? - Correct.

- Okay. So now they would like to get rid of the house, they don't need it, they're not living in it, they would like to get rid of the house and it's a family property and so they could put it on the open market but they're looking at it and saying, hey, this would be a good house for you guys to own, we'll give you a good deal on it and we'll sell it to you in the form of a land contract.

And the idea is this way, we'll sell it to you, you'll make payments to us and when the full payments are made, then you'll have the full title of the property but that will assume, that will mean that you don't have to go and get a mortgage, you can just simply make us payments.

We're gonna sell the house to you for $100,000 at a 0% interest rate and so we're gonna take $100,000, divide that into, what would that be, 180 months, 15 years and that's gonna be your monthly payment and at the end of this 15 years, you'll own the house. Is that right?

- Yeah. - Okay. So the basic risks both ways, the risk number one is if you, if you enter into this contract with them, the biggest risk I guess, if you stop paying, you don't own anything. So if you go 10 years into it and then you stop paying on the house and then you leave, you don't actually own anything.

It's not like you can sell the house and then pay off the balance of the mortgage. The contract is that you pay it off for 15 years and in this situation, they would be legally entitled to keep your 10 years worth of payments in that situation because you don't own anything until the contract is fulfilled.

On the other hand, you know, even though it seems like a good deal and it was a house, it's 100, it's a very old house and you don't wanna get in over your head and overpay for something, et cetera. Is that a good summary of kind of your concerns?

- Yeah, I think it's that. I mean, the hard part too is really the way that they got the house was through sort of the same manner. And so, you know, they're basically trying to pass on some equity that they have in it, which is roughly 50,000 according to like tax records.

But I also don't know when the last time, you know, the house actually had an assessment to know, you know, given its condition, what it's actually worth. So there's sort of that risk there that has me concerned, especially after getting sort of the inspector's report and that sort of thing.

And so like, at the beginning, it seemed very much like this is a great deal, obviously, if everything is kind of as it looks, but then kind of getting into it, there's just some of those concerns on it. - So do you have any reason to believe that your wife's parents are not working with you in good faith?

Do you have any reason to think that they're concealing anything from you, that they're trying to cheat you in some way? Is there anything, any reason you have to doubt their integrity in the situation? - No, I wouldn't say so. I think they're definitely more on the really excited at the opportunity and I think kind of pressuring us to make the decision to do it simply to kind of get us in a house and other things.

They know that we've been on that market. - Yeah, they want you to, this is something that they think is a very good thing for you, and so they're pressuring you to do something that they think is good for you, which is understandable. Now, as you observe your father-in-law's skills as a handyman, do you respect that he does things well, that he does things properly, or is he the kind of person that you have the impression that he cuts corners in some way and just doesn't do things well?

Or does he do things with excellence? - You know, at times I probably put it kind of in between. You know, I wouldn't say it's like the best stuff ever 'cause his primary job, he's actually a pastor, so this is something that he kind of does to help pay the bills sort of thing 'cause it's a very small town.

So he's definitely very skilled for the area and stuff like that, but the inspector really noted on some things that definitely, it's apparent that he's more of a handyman rather than like an actual general contractor. So just me, I'd probably put him at a little more skilled, but kind of I think from the outside perspective, that it seems more apparent that it's more in that sort of handyman level.

- Do you and your wife like the house? Do you wanna live in the house? - I'm kind of in between on it. My wife definitely does. It's the house that she grew up in, so there's some of that, right? It's been in the family, so I think there's some pressures there that are different than what would be on a normal house.

So that's sort of a component. - If you didn't do this deal, if you didn't buy the house, what would you do? - We'd be staying where we are. We're currently renting in a town probably 30 minutes away from there, so not really anything would change drastically. - Do you think that's a better course of action in some way?

- I think it keeps more of the options out, or options on the table moving forward. Simply, I mean, the land contract, like you said, the terms are over a certain amount of years and you don't really have actual ownership until the very end. So there's some concerns with that, just if life decides, like, hey, we need to move somewhere else that's not the same.

If it was a normal mortgage, right, then it's like, okay, you sell it and you take what equity you had and you move, right? So there's some aspects of that. - How much money do you and your wife have saved right now? - Saved, we probably have 20,000 or so in readily accessible cash and then probably another 10 or 15 for, like, retirement accounts.

- Great, great. Do you think you could get a mortgage on the house? Have you looked into that or thought about that? - I have thought about that. And really the thing sort of keeping me from that, some of it is for the terms of it, right? Like having sort of the 0% thing and just looking at that from like a pure number standpoint, it's kind of hard to rationalize like, oh yeah, I do the mortgage just for the added protection thing.

So I haven't looked to get, you know, like pre-approved or anything like that for something like that. We have in the past for more than what that mortgage would be, so it's not like an issue there. I know that, I don't know, something I had sort of talked about with, my mom works for a bank and so I talked with her about it early on.

And there, there's some, I guess, more like tax implications, right? 'Cause my in-laws would have to sort of write, I can't remember, like a gift of equity sort of letter with the bank and to offset the difference between what the value is versus what we'd actually be paying and so I think there was some extra complications there.

- Hmm. I guess here's my, here's my instinct and you can filter this through the actual details but I think if I woke up in your shoes, here's how I think I would approach it. The first thing that I would think about is do I wanna live in the house?

And think about what that would mean in terms of your lifestyle. One thing that is challenging is that if this is your wife's family home and this is your wife's parents that would be, that are trying to do something nice for you and give, give, you know, give her a gift, you know, and allow her to live in that house and do something to get you guys established in a positive scenario, that can be a wonderful thing, right, it's nice to receive nice gifts.

It's wonderful when your in-laws are generous with you. That can also be a very difficult thing if there are somehow strings attached. And so I would assess that, is this the kind of thing, are these the kind of people who in doing this for us and in trying to give us something, are they the kind of people who are simply giving us a gift and they're excited for us or are they the kind of people who are gonna give us something, give me a gift and then there's gonna be strings attached to it?

I personally, just as a husband, I personally would rather walk away from almost anything, no matter how nice the gift that had strings attached, then take it. But I will take any gifts that's an actual gift but I'm not gonna do anything with strings attached with my in-laws. Not, you know, that's just a bad recipe for disaster in my marriage and a really difficult thing to handle.

The second thing that you need to think about with regard to that specific house is, will that put you in a difficult situation in some way? Is that gonna be, is it gonna affect your wife in some negative way where she's living in this childhood house? Or is it gonna be the kind of thing where she's gonna be so attached to the house that if you believed that, you know, eight years from now you should move somewhere?

No, I can't, this is my house that I've lived in. Again, not a right or wrong, but think through it before you put yourself in that situation automatically. It can be difficult for you as a husband if you're living in the same town as your in-laws are and your wife is in the same town that she grew up.

And not only that, but it's the gift of the house from the in-laws. Well, now that puts in a situation where if there's a time of difficulty in your marriage or if she's unhappy in some way or you're unhappy, well, all of a sudden now you didn't leave and cleave, right, you didn't take her away and you guys start your own life.

Rather, you were kind of the hanger on in the family that wound up taking advantage of the family largesse and then that turns out to bite you in some way in your marriage down the road. Now, hopefully none of those are the case, but if you have any suspicion or concern that they might be the case, then it might not be a good thing to do.

And so consider that with as much objectivity as you can. How long have you guys been married? - We've been married five years now. - Okay, so five years, you should have had enough time to make sure that there's a clear separation from her parents, from your parents. You should have had enough time now to judge your marriage and say, could our marriage handle being this much closer to mom and dad, et cetera.

So five years is good. If it were five months, I would discourage you against it. Five years at this point, you have enough left life as a married couple to be able to assess those things. The next thing that I would do is for my own sake is I would get an appraisal done of the house.

Hire an appraiser, pay the fee out of my pocket to get an actual appraisal done of the house so that you have an idea of what the house would appraise at and get it professionally done. Because that appraisal number would be important for you to know from a mortgage perspective and also just from your own personal perspective.

Now, it's up to you whether you wanna share that with anybody else. Maybe the house appraises at being worth $250,000. Well, probably you should share it, right? And it may give her father and mother just tremendous joy to say, look, we're giving you this awesome thing. Or you might say, guys, you should sell this house and just take the money.

Or like figure that out. But I think you should at least know the number. You should know that if this house were put on the open market, here's the appraisal number that a mortgage company would use, here's probably what it would sell for. Now, most of the handyman stuff, I don't think that would bother me.

If you've got an inspection, you've got an inspection, but at the end of the day, the house is old, which means that you're gonna be fixing stuff and updating stuff regardless. And so it's gonna have its idiosyncrasies and you can probably fix most of that stuff just fine. I would say that if he was living in it and if he's got decent skills as a handyman, most of the stuff is probably fine.

And if he's genuinely done something that was wrong, then you can change it or redo it. But it may have just been a matter of a difference of style or a difference of the materials that we would use now versus what was available eight years ago. But a guy who's a handyman, who's fixing up his own house, he's not gonna do anything.

He's not gonna intentionally do bad work on his own house. He's gonna do the best work that he can with what he's got at the time. So I would probably take advantage of it. And I think the land contract, as long as you understand the terms of it, and then I would talk with my in-laws.

And even if it's not in the contract, I would say, "Listen, what would we do if we bought this house from you "using the land contract, and then seven years from now, "we decided we needed to move?" Or if he's a pastor, right? "The Lord called us away seven years from now.

"What would we do in that situation?" Well, then talk about it now, and it won't hurt anything to talk about it. But it sounds to me, from what you're saying, like a great opportunity for you guys to have a nice house, to have a gift of a little bit of equity.

If you like the area, if you think you'll be there, then 15 years, 0% interest on $100,000 house, that could be a real blessing for you. - I think that's, thanks for the input, I guess. I don't know if this is what I'm trying to say there. But there's a few things there I think I have, I can think a little bit more on that I haven't yet, and some of the stuff I have sort of covered.

So, yeah, I appreciate your input and thoughts on that. - One thought. What I would look at, and maybe talk with a real estate attorney about, or a friend of yours who does land contracts, or something that you can find some expert advice. I've never done a land contract, so I don't know what the normal language is.

But I would certainly look at it, and I would see if at all possible, I would put an early buyout clause in there. So, to give you the option of buying the house out at an earlier date. Because I think that if you could put in some kind of early buyout clause, and again, I don't know if this is normal or not, so we're up against the limits of my knowledge.

But there's no reason, I don't know of any reason why you couldn't put one in there, to say that you could buy out the property, we're gonna sell the property for $100,000, which is basically $555 a month, right? 100,000 divided by 180. But at any point in time, you have the option to prepay the contract.

And so then, if you're five years into it, and you've paid off $30,000 of the contract, but you still have $70,000 and you wanna move, then you would have the option to simply finish buying the contract out, so you hold the title, and then sell the house yourself. So maybe you at that time have $40,000 saved, and you go to another friend of yours, and you borrow $30,000 from a friend, or a mortgage company, whatever, and you buy the contract out, and then now you own the house free and clear.

And so that might be something that I would do, is that they're trying to be nice to you. They don't need the cash right now, so they're trying to be nice to you, and say, you can pay this off in 15 years. But once you start it, then there's no reason for you not to pay it off in seven, and then the whole thing goes away.

Because if it were a shorter term contract, and you knew that you could buy the house right out, then it would be a simpler thing to do. And I guess the final thing that, it would be clearly a really good move for you. And again, maybe that's just a standard part of a land contract, but if not, I would put that in there.

The last thing that I would do, is I would have a real straight heart to heart, and I would say, listen, if we buy this house, it's our house. So I don't want you coming in, when we're coming in for Thanksgiving dinner, and you come into the dining room, that was decorated in your father's, in your mother's 1960s wallpaper, and you find out that we've stripped out the wallpaper, we've put shiplap on the walls, and we put a farmhouse sink in, I don't want you coming in and crying and saying, oh, but where's the rooster wallpaper that was here?

This is our house. Because those things matter. And so you gotta make sure that when you buy it, that they're not gonna have the strings attached. They gotta make sure that they understand that this is gonna be our house. So if we want shiplap and a farmhouse sink, then we're gonna do that, and don't give us little comments about how it was better before, et cetera.

Don't cross those lines. I think there are a lot of families where they're very healthy, and the parents understand, like this is my daughter, she's married to you now. She's not, yes, she's our daughter, but she's married to you now, and if this is your house, it's your house now, and we'll be glad to come over, but we're not gonna make comments.

But then there's also people who are super controlling, and they wanna come in and cross those boundaries. And so I would address it in a direct way before the fact, and I would look him in the eye, I would look her in the eye, and I'd say, listen, we're excited about this, we appreciate your gift, but I wanna be clear that if we do this, this is gonna be our house.

Are you gonna be upset if we take out the wall that was housing great-granddad's china collection or something like that? Like this is gonna be our house. Are you okay with that? Are we genuinely gonna sever your ownership of it, and it's gonna be our house, or are you gonna be frustrated that we're doing something wrong to the family property?

So as long as you've got good, clear boundaries up front and good, clear lines, I think it sounds like a great deal to me. - Awesome, thanks so much for the advice. - And with that, we wrap up today's Q&A show. Only two callers today. I thought there would be more, but we had a good conversation with those two callers.

Thank you all so much for being here, for listening to today's show. I hope you enjoyed it. And I guess in closing, I would just say that if you are a parent, especially a parent of adult children, think very carefully about your relationship with your children, and think about how you can bless them.

And one important component of that is going to be can you bless them with respecting their independence and their autonomy? In my experience doing financial planning with people, I've seen wonderful situations and really catastrophic situations. And the catastrophic situations do often involve excessive controllingness by parents of adult children.

And a lot of times the parents don't realize what they're doing. They don't mean to make their children's lives difficult. If my mom walks into my house, and if it was a family property and she said, oh, you took off the wallpaper. She doesn't mean to mean that as a negative comment, but a lot of times it does come across as that kind of negative comment.

And so one of the most valuable gifts you can give your children as they get older is simply respecting their autonomy, their independence, and respecting those boundary lines. And then when you give a gift, it can be a really wonderful scenario. But you know as well as I know, right?

You give your 17 year old a car, but then you expect him to drive you everywhere. Well, there's a degree to which maybe that's legitimate, but those kinds of fuzzy boundaries often make for a lot of tension in relationships. And tension in relationships has a way of ruining finances over time.

Thank you for listening to today's show. If you'd like again to join me on next week's Q&A show, go to patreon.com/radicalpersonalfinance. Sign up to support the show on Patreon, and I would love to have you on next week's Q&A show.