The Power of PLI: Planning on Your Plan Not Going According to Plan

Welcome to Fall!

In our last conversation, we discussed the importance of Granum and helping advisors understand business building in general in order to really understand the context of Granum specifically. This topic came from the priorities document of both the MPA and MDA. The MPA priority went a little further than just Granum in their statement: “Conviction in Granum-level client building and core must be woven into all advisor and team member development. This is increasingly critical for G2s, G3s, and team members”. I’d like to pick up on the important ‘and core’ statement today.

In Driving FPP #22, we discussed the importance of advisors having a written planning philosophy to document their beliefs, both to give them a base from which to build their plans and as a touchstone from which, as a good business owner, to measure whether their actions are aligned with their values.

As I’ve continued to evolve our workshops on developing your planning philosophy, I thought of a statement in Morgan Housel’s The Psychology of Money that I wasn’t taking into account: “…the most important part of every plan is planning on your plan not going according to plan”. When we think about comprehensive planning, it becomes easy to focus on all the "CFP stuff” to mitigate known risks in people’s finances - in doing that, PLI can risk becoming just a “non-correlated asset” as opposed to a critical asset in all phases of life. What we don’t always acknowledge is the risk that your life and expectations will be significantly different in the future than they are today. In psychology, this is called the “End of History Illusion”. In short, as humans, we are very aware of how much we’ve changed over the past, but significantly underestimate how much we’ll change in the future. Our future is dynamic, and the products we use to execute on a good plan need to be just as dynamic to account for all that life will inevitably throw at us. Our core products are the most dynamic financial tools clients must have in order to be prepared!

I want to share where my belief in this comes from, a perspective that you may find of value for you and your advisors.

I grew up on a hog farm in the great state of Iowa. Mom, Dad, and 6 kids. In the early 70s, Bob Diekman was the first NM agent to call on my parents to help them understand that if something happened to Dad, there was no way the farm would survive to provide for Mom and 6 little kids, and he needed to plan for that. Luckily, Bob was good at his job, and they took his advice. They bought life insurance to protect their family who was reliant on them to provide for all our financial needs.

Fast forward to the 80s and the farm crisis - 18% interest rates, inflation, and commodity prices squeezing profits out of the farming industry. I remember my Mom sitting the kids down and reading the letter from the bank that they had 60 days to get up to date on loan payments or the farm would be gone. Mom was reading the letter because Dad was firing all his help that he could no longer afford, and she needed to explain to us that the family farm was now just that, a family-run farm. Can you guess the only asset they had with enough cash to satisfy the bank? Yep, their life insurance cash value gave them enough breathing space to cut all spending until the economic environment and their finances could stabilize. Their original plan wasn’t going to plan; thank God for PLI.

The environment recovered, CV loans were repaid, life moved forward, and the farm grew. Now there were new issues. Farmers were “balance sheet rich and cash poor,” and the estate tax exemption was only $500k. Knowing that they wanted the option for any of the kids to eventually run the farm, they needed to think through their planning again. Luckily, they had the flexibility of their life insurance, and with just some cross-ownership and testamentary trusts, they could mitigate the issue they hadn’t planned for.

Eventually, one of my brothers decided he’d like to move his family back, work with Dad, and eventually take over the farm. They expanded so they could support two families and were off and running. But now they had a new issue they hadn’t anticipated. It was important to my parents that the kids were treated equitably, but my brother deserved the farm he was helping grow. Now the PLI that was purchased to protect the family, saved the farm during the farm crisis, then protected the farm against estate tax, now became the estate equalization asset so they could be comfortable they were treating all their kids fairly. Something they hadn’t originally planned for.

My brother’s family decided that the farm life wasn’t for them long-term (which was totally cool), so my Dad was back to FFA - Father Farms Alone. One random Tuesday afternoon in the mid-2000s, a gentleman drove onto the farm to have a conversation with my Dad. He was selling a bunch of property in Missouri and was interested in buying his hog farm and a nearby dairy farm that he and his son could operate. The idea of selling and retiring was nowhere on Dad’s bingo card, but he was in a good place with a successful operation and little debt, so they began exploring the idea. The offer was great and set my parents up for life…his dream was coming true! In the end, the gentleman’s land sale and therefore his offer fell through, so the deal didn’t close. It did, however, put the idea of retirement firmly in their heads, and they decided to liquidate the herd, sell off the land, and set off into retirement. The timing and conditions were perfect…

They sold off all their breeding stock and would, over the next year, feed out the rest of the hogs and, when the last one went to market, sell off the land and be ready to retire. They started the process in 2008, just as we headed into the Great Financial Crisis. Talk about planning for your plan not going to plan! Long story short, they lost money on every hog they sold and went from the prospect of going into retirement with a few million to barely breaking even when they sold their last plot of land in December 2009. It was all gone, just due to timing…

That was a painful experience, but they were both turning 65 and with their Social Security, some investment income, and most importantly, the dividends they could now take in cash every year from their PLI, they could still live a very comfortable life and headed into retirement. In July of 2010, just a few months into retirement, Mom and Dad were in Brainerd, MN, with a couple of my aunts and uncles enjoying time on the lake. They swam and enjoyed lunch on the boat while anchored to a sandbar. Dad wanted to do some slalom skiing to work off the lunch, so they took off to grab a ski and enjoy the rest of the afternoon. One minute Dad was driving the boat and laughing with the wind blowing through his hair, and the next minute, he died. Delayed anaphylactic shock from a bee sting earlier in the day - for a farmer who’d been stung countless times, not something you’d see coming.

Here’s the point: none of their major life events could have been planned for in that initial meeting with Bob. They were all unknown. However, Bob made sure they had a product that was flexible enough to be what they needed it to be when they needed it. The life insurance they bought (and added to over the years) to protect the family if they died, saved the farm in the 80s, protected against estate tax as they grew, became the estate equalization asset when my brother came home to join the farm, then a primary retirement income source when the rest of the world fell apart, and eventually returned to its original purpose: a large tax-free death benefit for my mother who hasn’t had to worry about finances ever again.

The PX couldn’t have predicted any of this, and no other product could have had the flexibility to address every one of these issues as they came up. Permanent Whole Life Insurance is truly the one product that is flexible enough to be what you need it to be when you need it to be, as your life and planning evolve. This takes conviction beyond uni-purpose math. The conviction to see beyond the plan and understand that life will change more in the future than it has in the past, and be the advisor that sets clients up for success early before all of life’s natural evolutions.

[Image from the original email: photo. Add the image here.]

I’ve off-the-cuff talked about this in a few offices over the last decade, and it’s probably the most impactful talk I’ve ever given (there is more to it than just the above, but this message is plenty long already). Let me know if you need a shot of both great education and great conviction in your office leading into 2026, I’d love to provide it!

Think Differently,

Steve