We look forward to the Van Mueller newsletter every month. It's chock-full of sound bites, sales tips, and eye-opening statistics. Here are our favorite parts of the August 2022 edition. We're sharing the full introduction, and 2 of the 7 monthly sales ideas. If you like what you read, we encourage you to click here and become a subscriber.
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August 2022 – 7 Ideas and Views Newsletter by Van Mueller
For this month’s newsletter I would like to ask you some questions that I believe will help you with your prospects and clients to navigate this very dangerous time in our economy and the world’s economy. I believe if you ask your prospects and clients about this information, it will inspire them to take action.
Are we about to have a recession / depression or very dangerous inflation or even more dangerous, a combination of both? Isn’t that called stagflation. Let’s examine what is happening and what could possibly happen.
Recession / Depression
Let’s make a list of things that might even show that we are already in a recession, which could get worse.
1. We have already had the first quarter provide negative Gross Domestic Product (GDP).
2. The Federal Reserve is already predicting that we will have negative Gross Domestic Product (GDP) in the second quarter and that it could be as low as the last quarter.
3. Retail sales in the U.S. are declining.
4. Housing sales are beginning to fall more rapidly than expected.
5. The Dow Jones, S&P 500, Nasdaq and Russell 2000 are already long and deep into bear markets.
6. The yield curve has already inverted twice this year and is looking particularly unusual currently and would arrive later than usual because the yield curve is under total Federal Reserve control for the last two years. Everyone should be aware of this circumstance.
The yield curve is under total Federal Reserve control for the last two years. Everyone should be aware of this circumstance.
7. We continue to have many supply chain issues due to past Covid lockdowns.
8. Covid in our country and around the world is on the rise again. This could require new lockdowns, with greatly increased supply issues, especially in China.
9. We are already seeing many increased supply chain issues because of both the Ukraine war and the sanctions that have been put on Russia.
10. All the major banks are reporting tremendous reductions in profitability.
11. Many corporations are also downgrading earnings predictions.
12. While all of this is happening, we are having a major global energy crisis. This crisis is every bit as difficult as the crisis in the 70’s. It might even be worse. Our government was back in the Middle East begging the Arab nations to increase oil production to provide some price relief.
13.We have a relentless shortage of labor. This negatively impacts both production and transportation of goods to the marketplace.
14. The Federal Reserve is just now increasing interest rates and attempting to tighten the money supply.
15. The consumers way of thinking about the economy is already at an all-time low.
The way you would present all of this information should be in the form of a question. “Did you know” about this information or that information? Based on all this information I have asked you about, do you think we are already in a recession? Could it get worse? What do you think a recession / depression would do to your investments and retirement? Do you believe it is better for the government, Wall Street and the banks to have that money or would it be more beneficial for your family and your business and your retirement to have that money. Are you more in love with Wall Street and the government than you are with your family? What if you could create methodologies that would always show financial love for you and your family rather than the government and Wall Street? When would you like to get started with a strategy like that, before or after this next downturn?
Do you believe it is better for the government, Wall Street and the banks to have that money or would it be more beneficial for your family and your business and your retirement to have that money. Are you more in love with Wall Street and the government than you are with your family?
As I am writing this newsletter the consumer price index has risen from 8.6 percent to 9.1 percent. That means if that continued for 8 years, you would need to double your income to maintain your standard of living or said another way, in 8 years you would lose 50 percent of the purchasing power of your money. Did you know the last time serious inflation occurred? It was from 1978 to 1990, it lasted 13 years.
It would take 8 months of 0.0 percent CPI readings to get the consumer price index back to 5 percent. And that was before the Commerce Department just reported that retail sales grew by a greater than expected 1 percent in June.
Additionally, wholesale inflation increased by 11.3 percent in June. Ask your customer if that sounds like the government and the Federal Reserve are getting inflation under control? Could it become even worse in the future?
Here’s a little bit of additional inflation information. If you go to the website “Shadow Government Statics” Shadow Government Statistics - Home Page (shadowstats.com), you would be enlightened using more accurate statistics from the President Carter era, that inflation would measure out at a record setting 17.3 percent. That sounds unbelievable but think of gasoline and food costs.
Isn’t inflation a stealth tax? Doesn’t it impact EVERYONE? Doesn’t it impact the poor, middle class and the upper middle class the most? Ask your customers if they believe this will be gotten under control this year or next. Isn’t it true that even if they reduce inflation to 5 percent, it would require a doubling of our customers’ income every 14 years just to maintain their standard of living?
Isn’t it true that even if they reduce inflation to 5 percent, it would require a doubling of our customers’ income every 14 years just to maintain their standard of living?
So, if we have a recession and inflation at the same time that is really serious. That is called – STAGFLATION.
Explained simply, stagflation defines a period of inflation with no growth or even negative growth. Stagflation is so deeply damaging because you start with a reduction in the value of your assets such as stocks, bonds, real estate and even gold as examples. Then, whatever you have left after that reduction, has dramatically reduced purchasing power. I’m not done. Then, without proper planning what’s left is subject to increased taxation. It is a triple whammy that most Americans will not survive.
I just read an article that shared that Americans’ net worth increased to 150 trillion before the pandemic and recession. It is currently reduced to $130 trillion, and these analysts believe Americans will lose another $30 trillion of asset value, back down to $100 trillion. Then inflation will reduce the purchasing power of that money at current rates in 4 years by 25 percent and in 8 years by 50 percent. So, $150 trillion in purchasing power could easily be reduced to $50 trillion or less in less than a decade. Should our customer be aware that this could happen? Is it possible that our customers really don’t understand the exquisite danger Americans will be confronting with stagflation? Ask them if they understand. If they do understand or begin to understand ask them why they are allowing all their hard work to be destroyed. Ask them if it is possible that they love Wall Street, the government and the banks more than they love themselves, their families and their businesses. It seems ridiculous, however isn’t that exactly what is happening? Stay after your customers with questions. If they don’t take any action, are they not surrendering to the damage that will be caused by recession / depression, inflation and possibly terrible stagflation?
What are some solutions for these economic occurrences? Are there strategies that will keep you safe and still allow you to take advantage of opportunities when they present themselves? Of course, there are. Our industry provides many strategies that can be beneficial to our customers under any and all circumstances. The only major requirement is preparation. The strategies must be in place before the negative economic event occur.
Here are several small examples of strategies and explanations that allow us and our customers to be safe from recession, inflation and stagflation and actually be in a rather wonderful position to take advantage of their occurrences.
First, this is very simple, not complex. Before talking about solutions, have a conversation about the spectacular damage to retirements that inflation can cause. Also, ask what happens to their retirement if they lose 30 or 50 or even 70 percent of the value of their assets because of drops in the stock and bond markets. Ask your customer this question: What if we could minimize the damage caused by recessions and inflation? Wouldn’t it make it easier to recover when the economy turns positive? Here’s the discussion.
What if we could minimize the damage caused by recessions and inflation? Wouldn’t it make it easier to recover when the economy turns positive?
If you currently have your money in safe money investments like CD’s, money markets, savings accounts, short term bond funds or checking accounts, you are losing the purchasing power of that money in a dramatic fashion. As an example, share that the national average for 6-month CD’s is currently less than three tenths of one percent (0.30%). 5-year CD’s average less than seven tenths of one percent (0.70%). Savings accounts, money markets and checking accounts pay even less than a 6-month CD. Ask your customer if they understand that they are losing 8.5 percent to 9 percent of purchasing power every year they keep that money in those accounts. Ask them if they understand that over an eight-year period they could lose half of the purchasing power of that money. Then ask them this question. What if we could minimize the damage inflation is causing so that when and if inflation was controlled again, you could recover? Would you like to see how simple that is? If we could get you a safe money return of four percent, then your money would lose only 5 percent of its purchasing power. Would you like to see a comparison of what you currently have? Mr. & Mrs. Customer may we assume you have $100,000. If they do have $100,000 or more, they won’t say anything. They don’t want you to know yet. If they don’t have $100,000, they will object immediately and tell you how much they do have. Then share this comparison.
If your $100,000 earns 0.30 percent, that is $300 per year and if you keep the money in that CD for ten years it will increase by $3,000. If you put that same $100,000 in a fixed interest or fixed index annuity that earns 4 percent, they will earn $4,000 per year or $40,000 over 10 years. The difference is $37,000. Then ask this question. Is there someone at that bank, savings and loan or credit union that you would prefer to get that $37,000 of your family’s money? And wouldn’t that $37,000 dramatically reduce the damage being caused by this massive inflation? Give more examples if necessary. The difference over 15 years would be $55,000. Isn’t that a lot of your family’s money that you are giving to the banks, savings and loans and credit unions? This is simple, yet very effective.
Here’s a second idea. What if you could use the same $100,000 to show how life insurance can dramatically reduce the damage inflation causes without exposing your customer to risk? You can accomplish this with a single premium life policy or MEC or you can create an annual premium 10 pay. Let’s use both in an example. Mr. & Mrs. Customer, what if we could move that $100,000 out of the left pocket of your pants where it has little or no protection and can be greatly harmed by inflation and we moved that $100,000 to your right pocket where it has leverage and tax benefits and remains as liquid as the money was in your left pocket?
Mr. & Mrs. Customer, what if we could move that $100,000 out of the left pocket of your pants where it has little or no protection and can be greatly harmed by inflation and we moved that $100,000 to your right pocket where it has leverage and tax benefits and remains as liquid as the money was in your left pocket?
Let’s say you need to use $50,000 of the money that is currently in your left pocket to offset inflation so you can maintain your standard of living. When you die, your family would only inherit $50,000 because you needed half of it.
If you transfer that $100,000 to your right pocket and reallocate that money to a single premium life insurance policy, we can make $100,000 look like $150,000 or more when you die. Now, if you need to use $50,000 of the cash value to offset inflation and maintain your standard of living, we won’t subtract the $50,000 you used from the $100,000 you gave us, we will subtract the $50,000 from the $150,000 face amount. That means the customer used 50 percent of the money while they were alive, and the family still inherits the $100,000 they started with. If inflation remains bad, won’t their family members need all the help they can get? And, while this is all occurring our customer will earn the same or higher safe money returns than they were earning. The result can be made more attractive using an annual premium 10-pay life insurance for that $100,000. If they paid $10,000 per year for 10 years, they would pay the first annual premium of $10,000. Then they would buy a $90,000, nine-year period certain annual annuity that would pay $10,000 per year for 9 years so the premium could be paid annually. Now the policy is a real-life insurance policy with access to the cash values free of tax and as an example if our customer died in the 5th year their heirs would receive the $150,000 face amount and four more annual distribution of $10,000. You can be creative with this idea and use it in as many different ways as your mind can think of. Sit down one evening and mess around with this. You will be amazed at the many brilliant strategies you can create.
You can be creative with this idea and use it in as many different ways as your mind can think of. Sit down one evening and mess around with this. You will be amazed at the many brilliant strategies you can create.
Here’s a final idea for this month’s newsletter to deal with market loss and inflation at the same time. It requires you to use a single premium immediate or income annuity and a single premium or annual premium life insurance policy. Let’s use the same $100,000. Why am I doing that? Then it’s easy to share the concept using multiples of that number. If the customer has $500,000 you would use 5 times that number. If they have $50,000 you would use one half of the numbers for $100,000 etc. Here’s the strategy.
Customer has $100,000 in a CD earning 0.30 percent or $300 per year in interest. What if you used $30,000 of that money to buy a single premium immediate annuity. If $100,000 currently buys around $6,500 per year of guaranteed income for life, $30,000 would buy $1,950 per year of income for life. Which would they rather have? $300 per year or $1,950 per year and that $1,950 would have the same income tax liability as the $300. Now, if you then took the other $70,000 and bought a $100,000 single premium life or $7,000 per year annual premium life for 10 years, with a face amount of $100,000 you would be increasing their benefit dramatically. If they are reasonably healthy, you could put $40,000 in the single premium immediate annuity and then have the $60,000 buy $100,000 of face amount. Now, their income increased to $2,500 per year instead of $300 per year.
It also develops an opportunity to offset inflation. Because the income and growth have been separated, when opportunities present themselves, they can use their cash values to take advantage of opportunities without interrupting their cash flow. It allows you to use a two-pronged attack to offset inflation. There is a higher income and there remains opportunity for growth.
Please remember, if you can provide better safe money returns than our customers currently earn you are reducing the damage inflation causes. Next, if you reduce or eliminate income tax liability that also created a reduction in the damage caused by inflation. Finally, if you take advantage of growth opportunities without losing money first, you can successfully build a strategy that provides safety and yet minimizes the damage caused by inflation. Let’s get started with the sales ideas.
Idea #4: Will Taxes Be Higher in the Future? Do You Want to Pay Them?
This is an article from Kiplinger. I am going to quote the very first sentence of the article. “Traditional IRAs are set up in a way that basically incentivizes you (and your heirs) into paying the highest tax bill possible. Don’t fall for it.”
Remember, because of the rules of 49-10, 112-12, 207-22 and 369-24, the effective tax rate Americans pay while they are alive is less than 20 percent. If they wait until they die, their heirs are offered a choice. Receive the money over a 10-year period to minimize the income tax, or heirs could take the money in a lump sum with no regard for taxes. We find overwhelmingly that the heirs take the lump sum. That is what the government is counting on, Then the heirs pay 30, 40 or even 50 percent to inherit taxable money. If paying the income taxes while alive reduces the taxes by 10, 20 or even 30 percent, that means that the $30 trillion about to be inherited by the next generation will put $3 to $9 trillion of inheritance in the hands of Americans rather than the government. Which do you think would be more beneficial?
Title: Don’t be tricked Into Voluntarily Paying Higher Taxes on Your IRA
https://www.kiplinger.com/ (Kiplinger, July 4, 2022)
Don't Be Tricked Into Voluntarily Paying Higher Taxes on Your IRA | Kiplinger
Idea #6: Telling Is Selling, Asking Is Advocating
If you want to show someone you are really interested in them, should you talk about yourself or ask about them?
Do older people, owners of businesses, younger people, minorities and especially women like to be told what to do? If you did an entire presentation perfectly to a prospect who needed what you were offering to do for them and yet, they didn’t buy, could it be that you told them something they didn’t agree with or didn’t like, even if they needed that benefit? You would never know what caused you to lose the sale. In today’s polarized society it is much better and much safer to ask for opinions. It is pretty hard for a customer to disagree with their own opinion.
This article verifies that women prospects appreciate that you are helping them to focus on what’s important to them by asking for their opinion. Asking questions. Asking questions is the secret all agents are looking for to find success in our business. Here is another article that verifies that information.
Title: Want More Women Clients? Stop Telling, Start Asking
https://www.fa-mag.com/ (Financial Advisor, June 22, 2022)
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