I have a friend who's in middle of getting suckered into a whole life policy by his CFP (yeah, I know). He is straight middle class, lives in HCOL, and makes around 450k and is financially sound but not savvy. Anyone have a resource I can provide him that breaks down why it's a bad idea? To be clear I'm not looking for a one liner (i.e don't mix insurance and investments etc), I need a good article that breaks it down slowly for a non savvy person on why it's a bad idea.

Would he be willing to have a call? I can show him the numbers clearly.

Potentially, I did refer him here first but he wasn't interested in joining

Idk of the perfect article to response to whatever they might be tricking him with. I’d want to hear why he is currently thinking it’s a good idea so I could custom tailor a response and walk him through the data. It’s hard to argue against something when there are so many different tactics they use to trick people.

That makes sense, I'm going to push him a bit more to join here

he can also schedule something https://calendly.com/niebloom or whatsapp me (business whatsapp me button is on the website https://frum.finance/)

Tell him to do the math of paying the whole life premium and the benefits of that against a term life policy while investing the difference in premiums.

Your premise that whole life is clearly a bad idea is very shallow (as is your equally stubborn dogma that CFPs are the problem in the industry). If someone cannot access a retirement plan at work or has large enough of an overall portfolio that their fixed income allocation can’t fit in what they do have access to, the tax deferral provided by the insurance policy creates a benefit - especially for those in high tax brackets. Furthermore, the full amount of the insurance premiums are added to the cost basis of the policy even though a portion of each premium isn’t really going to the cash value but rather to pay for the net amount at risk. Distributions could then be taken on a first in, first out basis such that you get back that entire cost basis without any tax ramifications and even the earnings are never subject to a 10% penalty unlike with annuities that are LIFO and subject to penalties. For a pre-59.5 expense in particular (other than education), it’s definitely not easy to refute replacing fixed income with whole life. Not to mention the permanent death benefit. Overcoming these arguments is doable, but you need to be able to demonstrate certain nuances of a given investor’s profile that would render the above obsolete. In short, you might very well be misleading your friend.

@eager-smartphone-39564 at what net worth and or salary would you start thinking, for someone who has access to a 401k, that a whole life policy might be a valid option to run the numbers against to consider?

The way I look at it, is that simpler is better - a term life policy is simple and does what it says: premium paid in return for insurance without any gimmicks. If someone has special circumstances, they can consult someone and get a more complex policy. But I usually start with a term and then figure out if they need something more complicated.

https://frumfinance.slack.com/archives/C04FDN85LE4/p1724291738121189?thread_ts=1724289298.825689&cid=C04FDN85LE4 At 450k income, I'd think running through the numbers for things like utilizing whole life for inheritance or tax optimization might be a legitimate contender.

@eager-smartphone-39564 spoken like a true CFP

Let's agree to disagree @gorgeous-author-37828 and @eager-smartphone-39564 and not have this thread spin out of control again please 🙏 I think it's really great that we have a space here where people have different opinions and we can all respect each other! 😊🙏 And I so appreciate every message in here from both of you.

I asked for an article, so all good by me, just hoping I can get one and not have the thread derailed by a whole life pitch

All good. I hope so too.

Presumably, it would depend mostly on asset allocation decisions, tax brackets, and liquidity considerations. I’m not sure that net worth would have as much significance here.

Some interesting points here for when whole life is appropriate: https://www.whitecoatinvestor.com/appropriate-uses-of-permanent-life-insurance/

450k is middle class now?

@fresh-waitress-48467 Depends on family size, but yeah, I'm with your surprise. Certainly not middle as in median.