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“Buy Term & Invest the Difference” (BTID) sounds logical, doesn’t it? Lower your premiums and you can multiply your returns in the stock market.

But BTID has a sinister background. The phrase was coined in the 1970s by a sneaky billionaire who sold… you guessed it, stocks and term life insurance.

Following BTID has ruined many financial futures while making these behind-the-scenes brokers rich. If you want to buy life insurance, you need to know all your options to make a choice you’ll be happy with years from now.

In this episode, you’ll find out how to buy life insurance that’s right for you, not just for some broker. Want to abandon the bad advice and create a sustainable financial future for yourself? Listen now!

Show highlights include:

  • How the original BTID firm became a questionable MLM company you should think twice about. (4:47)
  • Why term insurance is not your only (or even your best) life insurance option. (6:14)
  • Why a Harvard professor says BTID almost never works (and the alternative that actually pays out) (7:12)
  • Why “investing the difference” could do as much good for your wealth as a night out in Vegas. (8:07)

Check out the Tale of 2 Grandmas: https://grandmaswealthwisdom.com/podcast/a-tale-of-2-grandmas-part-1/

Remember to download Grandma’s Top Tips for an Independent Financial Future by dropping into https://grandmaswealthwisdom.com/free/. It's time for YOU to break through to a smart, stable, financial future.

If you’d like to see how Grandma’s timeless wealth strategies can work in your life, schedule your free 15-minute coffee chat with us by visiting www.grandmaswealthwisdom.com/call …just like Grandma would want us to do.

Claim your complimentary Financial Analysis and find out is Whole Life is right for you and how it could fit into your portfolio here: https://grandma.as.me/FA.

Read Full Transcript

A hearty welcome to “Grandma’s Wealth Wisdom” with your neighborly hosts, Brandon and Amanda Neely. This is the only podcast that helps you take charge of your cash flow and leverage your assets, simply and sustainably, the way Grandma used to.

Brandon: Hey, I'm Brandon and welcome to Grandma's Wealth Wisdom, where we help you break through to a smart, stable, financial future, with the tried and true wisdom Grandma used.

Amanda: And, howdy. I'm Amanda. This is Episode 66 and we're going to tell the origin story of the phrase “buy term and invest the difference.” You've probably heard that phrase, but you probably haven't heard the harrowing tale that created a billionaire. As you listen to this story, decide for yourself which side you'd like to be on. Many people have heard the phrase, but they don't know where the phrase comes from, so we're going to tell that tale. [01:02.8]

Brandon: Yeah, when I talk to people all the time, they say it, but they don't actually know any of that. The origin story of “buy term and invest the difference” goes back to a man named Arthur L. Williams, Jr. He's known as A.L. or Art. For today, we're just going to call him Art.

Amanda: Now, Art was born in 1942 and a major moment in his life was around the age of 23 in 1965 when Art's dad passed away suddenly of a heart attack. The family had whole life insurance, but Art didn't believe the death benefit was enough to provide for the family, that the death benefit of that whole life insurance policy was actually too low in his opinion. [01:53.5]

Brandon: When Art was around 28, a cousin introduced him to term life insurance. Interesting that it wasn't sold very much at the time and, in 1970, whole life was still considered normal and term life was almost never talked about outside of, of course, the insurance industry.

Amanda: That year, 1970, Art joined his cousin and started selling term insurance. The company that they were with actually went out of business, but six months before then Art had left and gone on the board of another company. But then, at some point, Art realized that there were limits to the growth of that company, so in 1977, Art and 85 associates founded a company called A.L. Williams & Associates.

Brandon: That sounds really familiar. A.L. Williams coined the phrase, “buy term and invest the difference.” It was him who said it. He and his associates went meeting with people, typically middle income families who had whole life insurance and had it for decades. [03:08.1]

He'd convinced them they were overpaying for life insurance and they could get a better return in the stock market. He'd get them to cash up their policies, buy term insurance instead and, of course, invest the remaining cash value and future premiums into the stock market. Here's another thing, of course. He had a life insurance company and an investment company that could do both for them, conveniently enough.

Amanda: Yeah. If you're not familiar, a whole life insurance has a cash value that he would get them to cash out their policies and invest that, and buy the term insurance and invest whatever the difference in premium was in the old whole life that they had, and the term insurance that they now had, they'd invest that, too. By doing this, A.L. Williams & Associates grew very rapidly to become the largest seller of life insurance in the United States of America. [04:08.9]

Then Art was able to leverage that success. In 1980, they entered a contract with a large underwriter of life insurance and together established a corporation that was a holding company for both a life insurance company and a securities firm, so they could do both the term insurance side and the investing side.

That company was very successful. It did its public stock offering in 1982, became listed on the NASDAQ in 1983. There's a whole history of series of mergers, acquisitions, being bought out by a big corporation and all kinds of things, but in 1987, that company became known as Primerica, which still exists today. That's what most people are familiar as the kind of where this A.L. Williams & Associates company, the end result is Primerica. [05:01.4]

If you've not heard of Primerica, it's an 11-tiered multilevel marketing system that is very much in this sphere of buy term and invest the difference. You can do that all with Primerica and their 11-tiered MLM.

Grandma always said, “Eat your vegetables. Look both ways before crossing the road. And never risk your financial future on elements of the market you can’t control.” That Grandma, always good for some tried-and-true advice. And although some of her wisdom seems to have skipped a generation, you don't have to be left behind.

Download “Grandma's Top Tips for an Independent Financial Future” absolutely free, when you visit Grandma’sWealthWisdom.com. Don't wait. Get Grandma's best tips today.

Brandon: Meanwhile, Art has gone on to be in the ranks of the Forbes list of the world’s billionaires and owns professional sports teams as well, and the life insurance industry has forever been changed because of him, which is interesting and good. [06:11.3]

Amanda: Yeah, just remember, in 1970, when he was learning about term insurance, it was not common for people to even know that that was an option and today people think that's the only option, and that was in large part because of the work that Art did.

For the record, we talked about where Art is now, I don't know anyone who's started as a whole life insurance salesperson who's now a billionaire or a sports team owner, and I have to wonder, did Art get to where he is by profiting off the middle-income Americans that he was serving or was it maybe the associates who worked for him? How did he make all that money and where did that come from, especially when I don't hear about any whole life insurance salespeople being in that place?

Brandon: Yep, but there are a few big dangers here as we think about this idea of buy term and invest the difference. [07:06.0]

First, as Dr. David Babbel, a professor at the Wharton school at the University of Pennsylvania puts it, people don't buy term and invest the difference. They most likely rent the term, lapse it and spend the difference. That's what he said.

Amanda: Yep, so that's kind of what he's noticed as what's happened since the eighties and beyond. People will buy term. They'll say they're going to invest the difference, but instead they spend the difference. They might miss a payment on that term or maybe a few payments and it lapses, or they just get to the end of the term. It's gone. They're not really doing the phrase, even though that's what they say they plan to do.

In 2020 as well, I don't know a single person that's quoted a whole life insurance policy, gotten a quote, and instead bought a term policy and invested the exact difference in premium. If you know anyone who actually does that, please let us know. [08:07.7]

Brandon: Second, the stock market throughout the eighties and into the nineties was a very different animal than it is today. A friend of ours actually calls that time in the stock market history the roaring 20 between the eighties and nineties because, man, it was awesome then.

Amanda: Yeah, and in 2020, we can look back over the last 20 years, see the dotcom crash, the great recession, whatever it is that they're going to call 2020 with COVID-19 and the volatility of the market that we've experienced. We have to ask ourselves going into the future, the next 10, 20, 30 years, do we really think the market will always go up 12 percent like some people still teach and is that a good place to put our money the long term?

Brandon: Wait, are you serious? People still teach that it's 12 percent?

Amanda: Yes. [09:00.6]

Brandon: I mean, we’ve done the math. I don't know.

Third, term is just that, temporary coverage. What happens when the term expires? Don't you leave your family more vulnerable than if you had permanent coverage that lasted your entire life?

Amanda: Just consider the average 60 year old, who would have been in their twenties and the 1980s when Mr. Williams was doing all of this, right? Now they've gotten 40 years under their belt. They've seen what's happened. We have to ask, are they better off than their parents were, who had whole life insurance, right? Are they better off because our parents bought term and invested the difference, or were our grandparents better who had whole life? We have to look at that and, more importantly, we have to look at, do we want to be where our parents are in 20, 30 or 40 years and the existence that they have because they tried this experiment of buy term and invest the difference? [10:04.0]

Brandon: Yeah, and only you can answer that. I think that's a big deal and really ask yourself, Where do I want to be?

Now, for more information of that story, check out a podcast that we did called the “Tale of Two Grandmas,” where we kind of went through these story of one that went down one road and one that went down the other road, and how that played out for them. It was released back in January 2019 before all this craziness happened in our world.

Amanda: But we'll put that link in the show notes. For now, thank you so much for listening to the story behind this phrase, “buy term and invest the difference.” I hope you can see that buy term and invest the difference truly is just a marketing scheme. It's a clever and effective one, but it is just a marketing scheme. [10:56.0]

If you'd like to maybe try building a financial strategy, that's built on time-tested wisdom that was not invented in the seventies in order to make one man rich, that's what we specialize in, going beyond the smoke and mirrors, beyond just the marketing schemes to that time-tested wisdom of our grandparents' generation that has been around for actually millennia, right? It's been around for hundreds of years and even thousands of years, some of the things that we use, and we think that's a better perspective to take.

You can decide if you think you agree with us, and if you do, we'd love to help you take that kind of perspective for your finances. All you’ve got to do is go to Grandma’sWealthWisdom.com. You'll see a button there says, “Request a Meeting.” Click on that. Schedule an exploratory conversation with us, and we'd love to get to know you a little bit, see if we'd be a good fit and working together and, frankly, answer questions that you have, too.

Brandon: And also don't worry. Next time, we're going to give our take on a much wider known figure in the financial sector that you might've thought actually coined the term “buy term and invest the difference.” We'll give you a hint. His name starts with “R” and ends with “amsey”, so you could guess who that is. [12:13.5]

Amanda: Until next time, keep building your wealth simply and sustainably, so you can break through to a smart, stable, financial future.

The topics presented in this podcast are for general information only and not for the purposes of providing legal, accounting or investment advice. On such matters, please consult a professional who knows your specific situation.

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