MC Stories – Financing Life Insurance . . . with Debt?

America is a society that has become extremely comfortable with financing. It’s rare nowadays for someone to pay cash for large purchases like their home, a car, or education costs. It’s also, however, more popular than ever for people to finance small purchases. Credit cards are used to buy groceries, gas, meals, clothes—pretty much everything.

With such widespread comfort around debt, it’s not a surprise that it’s used to finance life insurance premiums as well. This strategy has, in fact, been around for over 20 years (even longer in the property and casualty marketplace). Life insurance premium financing is where an insured borrows money from a bank to pay their life insurance premiums. The borrower is then responsible for posting collateral for the loan and paying the interest on the debt.

Today, financing represents around 25% of all policy premiums for in-force insurance policies. However, many people still haven’t actually heard of premium financing before and it has to do with the history of the strategy. In the early 2000s, a time known as the “Wild West” in life insurance sales, premium financing was used incorrectly and with limited regulations. Many people lost money and got hurt by taking on investments that they didn’t fully understand. Because of the stigma and reputation of its past, premium financing remains out of the mainstream conversation for many.

Fast forward to today, where the pendulum has swung far in the opposite direction and premium financing is now under strict regulation. The National Association of Insurance Commissioners passed Actuarial Guideline 49 in mid-2015 to protect consumers from misleading illustrations by limiting the growth rate and by limiting the policy design options that advisors are able to use in marketing to their clients. Also, all carriers now require the insured to have skin in the game by posting collateral and/or paying interest on the loans.

With stronger protections in place, the benefits that make financing life insurance special are much more attractive: the guarantees and the flexibility and optionality of the design, both from the onset as well as throughout the life of the policy. Because of these guarantees, financing life insurance can be a lower risk strategy to compound your wealth. That’s why the fastest-growing segment for premium financing is high earners in their 30s–50s. Rather than purchasing insurance for a death benefit, investors are looking to maximize their investment growth and increase their wealth to establish a future tax-free income stream in retirement. With interest rates near all-time lows, the benefits of using debt in a thoughtful way have never been greater.

But, as with any investment strategy, premium financing has additional risks not present when purchasing a policy without financing, such as having enough liquidity to post collateral, interest rate risk, and market risk. Financed life insurance should be considered for someone who has a need for a large-premium life insurance policy or is interested in compounding their wealth. Specifically, for business owners, financing should be considered as a smarter way to protect their company with a buy/sell agreement or key-person policy while keeping more cash available for other ventures within their business. If the business is a C-corp, there are even greater strategies to amplify the benefits. Given the nature of premium financing, it’s recommended that you consult your professional tax and legal advisors before purchasing a financed policy.

In my role as a financial advisor at Morton Capital, I collaborate with our internal financial planning team as well as outside insurance professionals to review and evaluate our clients’ life insurance policies. Although we don’t get paid for selling insurance, reviews are an integral part of ensuring our clients have the appropriate risk coverage and are taking advantage of investment opportunities when they align with their goals and risk tolerance.



This information is presented for educational purposes only, and should not be treated as tax, legal or financial advice. This information should not be taken as a representation that the strategies described are suitable or appropriate for any person. All investments involve risk, including the loss of capital. You should consult with your insurance professional to thoroughly review all information and consider all ramifications before making any decisions regarding your insurance coverage.



MC Stories – 4 days, 450 miles in a 4-wheeler

How often do we get the chance to really get away from it all and unplug? With the stresses of modern-day life—raising two children, my wife, Jen, and I working full-time—I was looking forward to a “guys trip.” Now, mind you, this was not with my friends but rather an L.A.-based group called Wilderness Collective, which runs UTV and motorbike trips in the western United States. I had been thinking about doing one of their adventures for the past two years but the timing never seemed to work out. However, in early August, I decided that it was time to get out and make it happen.

I was fortunate to be able to spend four days over Labor Day weekend traveling from St. George, Utah, through the Northern Arizona desert to the North Rim of the Grand Canyon in my own UTV four-wheeler. I traveled in a caravan of 14 guests, accompanied by four guides, a cook and a photographer.


In reflecting upon my adventure, I was able to take away a few key points that can apply to my role as a wealth advisor.

1. Communication is key. Imagine being alone in the desert for seven hours without a way to communicate with your guide. This is what happened to me on that Saturday. How, you ask? For the prior two days, we were using a “flagging” system where, if the lead guide came to a fork in the road, he would pull over and have the next driver stay and direct traffic in the proper direction. Given the speed at which we were driving (oftentimes 60–70 mph), the distance between vehicles (sometimes hundreds of yards due to the dust or other factors) and the length of our entire caravan, it wasn’t uncommon for the total distance from beginning to end to be 5–10 miles long. Additionally, we had a large truck hauling our food, camping supplies and extra gasoline, among other things, that was oftentimes 20–30 minutes behind. The truck was always the “sweeper,” meaning anyone who acted as a flagger was to remain in position until the truck got to you and that was the signal to move out.

We left camp early on Saturday morning, and after a few miles of winding turns in the pine forest, we reached a fork in the road and the guide positioned me as the flagger. Over the course of the next 15–20 minutes, I performed my duty as four-wheelers passed me, pointing them in the direction ahead along the dirt road. Another 10–15 minutes passed and I began to wonder, Where is the truck? Eventually, it became clear to me that they had left me.

Later, I found out our lead guide had instructed another guide to act as a sweeper instead of the truck. The new sweeper waived as he went by, assuming this was enough for me to follow him. I was still thinking about what the lead guide had said on the first day, which was DO NOT LEAVE YOUR POSITION UNTIL THE SWEEPER RELIEVES YOU. When changes occur, it’s critical that all parties know what the change is.

As you know, we work in teams at Morton Capital to ensure the highest level of client service. To this end, each advisory team meets weekly to thoroughly address all client matters. These recurring weekly meetings are supplemented by morning huddles (brief meetings) throughout the week to address the most pertinent issues of the day so we all know when changes occur.

We are also passionate about proactive communication with your other trusted advisors, like your CPA, insurance advisor and estate attorney.

During the pandemic, we enhanced our communications with our clients even further, all with the purpose of staying connected so you knew we were on top of your finances. Our outreach included robust video content and webinars that covered everything from the economy to investor behavior. Additionally, we created articles and content for social media via platforms like LinkedIn, Facebook and Instagram.

2. Don’t make a bad situation worse. It was about 12:00 or 1:00 pm—the sun was directly overhead and the desert was cooking. I’d been alone for probably two hours and I was getting antsy. I thought to myself, Ok, I can catch up to them. I had a general sense of the direction they were going, and it was just me, so I could go faster than the caravan.I took off down the mountain covered in pine trees, screaming around corners and straightaways for about 10 miles. I hit a T-junction and saw the vast terrain of open desert in front of me. I could see for about 100 miles to my left, 100 miles to my right and 100 miles in front of me—truly like something out of a movie. My caravan was nowhere in sight, so I’d be speculating by picking a direction to try and find them.

Oftentimes, when things don’t go our way, we can feel like we have to “do something.” In this case, I had to evaluate the risks of staying put (playing defense) versus going on the offensive. I decided the smart thing to do was to go back to my original position where I had shade and water and wait it out. I knew the terrain better and it was my best chance of the guide knowing where I was. Also, given that we had experienced four flat tires up until that point and my rig was not outfitted with a spare tire or the necessary tools, it seemed too risky for me to wander off into the desert alone with limited water. In the case of my adventure, access to shade and water were my most basic needs and the most important drivers of my decision.

Markets and investments don’t always go as planned. Our natural inclination might be to sell when asset prices fall. While it might feel good in the moment to “do something,” more often than not, these knee-jerk reactions work against us in the long run.

Focusing on risk management ahead of time and properly evaluating both the upside and downside of a given action or investment is critical. Additionally, focusing on the basics when things get complicated can help. This is why we are so passionate about cash flow in our investments. At the end of the day, we can’t control the price a buyer will give us for an investment but if we focus on the basics of cash flow, that is a universal sign of health and stability in any environment.

3. Always have a backup plan or safety net. At the beginning of our trip, our guide had given us a small black pouch and in it was a device with an SOS button. It was only to be used in extreme emergencies. If you hit the SOS button, it would activate local first responders and they would send in the helicopter to find you. Knowing I had that in my tool chest should I need it gave me the comfort to sit tight.Ultimately, I waited it out and one of the guides returned around 5:00 pm. We raced through the desert for the next few hours as the sun set, trying to cover as much ground as possible before night fell. By around 10:00 pm, we made it to camp just in time for roasted herb chicken with a side of fresh dill potato salad. I sat around the campfire with the guys as they teased me for getting “lost.” It was all in good fun.

As we have added financial planning as a core element of our services. When developing our clients’ cash flow plan, we stress-test the plan for a variety of factors like down markets, long-term healthcare events and lower returns to ensure we have a backup plan in place so you are in the best position possible to adapt to most any circumstance.

Knowing ahead of time that your financial plan can withstand these difficult situations helps to calm the natural anxiety you experience when confronted with a situation beyond your direct control.

How often does someone get to spend the night 50 feet from the edge of the Grand Canyon? Or gaze up at the Milky Way galaxy with no light pollution and see the night sky with an unblemished view? Or watch the sun come up over the North Rim? Life is short. We are a culture of information overload, flooded with constant information on a daily basis about politics, our economy, the civil unrest our nation is currently experiencing, the pandemic, etc. Having four days away from emails, text messages and phone calls was really good for my soul and allowed me to be grateful for the career I have, the clients I serve and the talented people I am blessed to work with on a daily basis, all contributing to our mission of helping our clients get the most life out of their wealth. It also made me eager to get back to Jen and the kids and, yes, to take a shower 🙂

Fourth Quarter 2018 Commentary

What a Difference a Year Makes

While the stock market correction in the fourth quarter dominated headlines, the real news in 2018 was that the vast majority of asset classes produced negative returns. According to a Deutsche Bank study, 90% of the 70 asset classes they track delivered negative returns for 2018—the highest percentage as far back as 1901, when they began tracking the data. This is in stark contrast to the prior year when almost all asset classes had positive returns.

While these extremes in performance are dramatic, the most important takeaway, in our opinion, is that most traditional asset classes moved in the same direction in both years. We have often talked about the ineffective diversification that traditional (i.e., stock and bond only) portfolios have provided in recent years and may potentially provide going forward. This lack of diversification benefit is welcomed by investors in years like 2017, when everything is up, but less so in years like 2018, where everything is down without there really being anywhere to hide.

The Dual Narratives of 2018

Looking more closely at 2018’s performance, two polar opposite narratives dominated the beginning and the end of the year. The U.S. markets began 2018 with high hopes that tax reform and deregulation would drive an acceleration in the rate of capital investment, thus improving productivity and bolstering economic growth and corporate earnings outlooks. According to Bloomberg, while tax reform has been positive on the margin for capital spending, a large share of the tax windfall has been allocated to corporate share repurchases (i.e., financial engineering). While tax cuts contributed to the rally in the first nine months of the year, it was short-lived as earnings slowed as a result of the lack of investment in productivity. Most indices severely corrected in the fourth quarter and ended the year down or flat. The one bright spot for in the quarter was gold, which acted as an effective hedge during this period of market stress. The table below summarizes the fourth quarter and year-to-date (YTD) performance for selected indices.

We have frequently been asked to comment on what caused the U.S. market’s swoon in the fourth quarter. There was certainly no shortage of potential problem areas: the Fed raised interest rates by 25 basis points (0.25%) for the fourth time in the year, trade tensions with China continued, global economies started showing signs of slowing down, the Democrats took control of the House but the Republicans maintained their majority in the Senate, the White House experienced continued personnel turnover, and there was even a partial government shutdown late in December. None of these events, in our opinion, were significant enough to be considered a catalyst for the market downturn, however. Interest rates have been on the rise for the better part of three years, trade tensions dominated headlines for much of the year, and political uncertainty has been evident almost on a daily basis. Rather than pointing to any one event as the cause of the downturn, it seems most likely to us that markets simply got ahead of themselves in 2017 and the first nine months of 2018. Looking forward, we anticipate that there could be further volatility as the stimulus from tax cuts and government spending wanes and both economic and corporate profit growth rates decelerate.

Morton Capital’s Approach

In our year-end communication regarding the recent market volatility, we emphasized our core beliefs as it pertains to developing long-term plans and managing our clients’ portfolios. Undoubtedly, the markets become more difficult to navigate late in the business cycle, as markets search for new equilibrium and more rational valuation levels. Our core beliefs have helped guide us through challenging markets in the past, and we believe will do so again going forward. Our core beliefs encompass the following:

    • Risk Management

    Investors have to take risk to make money, but deciding what type of risk and how much to take given certain environments can be key to long-term success. In the current environment, where we believe valuations are elevated, the key is finding investments where we have conviction that the return potential justifies the risk being taken. Over the last few years, we have been reducing our exposure to traditional asset classes as euphoric investors have bid up prices and chased yields. These allocations have typically gone to more lending-related strategies, where we believe investors can make relatively attractive returns without having to suffer through stock-like volatility. Where appropriate, we have also increased our allocations to private alternative investments, where there can be a premium for taking on illiquidity.

    • True Diversification

    We define a truly diversified portfolio as one with multiple drivers of return. If stocks and bonds have the potential to move in lockstep during a downturn, then a broader and more dynamic alternative approach to diversification is necessary to be effective. While lack of access and due diligence expertise may keep other firms from investing in alternatives, Morton Capital has been at the forefront of incorporating innovative asset classes such as real estate equity, private lending and reinsurance into our clients’ portfolios. These asset classes should not move in lockstep with the market and should better manage risk if we encounter a sustained correction.

    • Cash Flow

    In designing our client portfolios, we have always shown a preference for investments that can generate immediate or reasonably fast cash flow. While long-term buy-and-hold strategies can be successful, we prefer to be paid while we wait. In the current low-interest-rate environment, we have tilted our public stock portfolio to more dividend-paying stocks and have sought higher levels of cash flow in the private lending space as a replacement for traditional low-yielding bonds. We believe these cash flow-focused assets, especially in the private lending space, will generate more attractive and consistent outcomes for our clients while simultaneously supporting their lifestyles.

Follow Your Plan—Reacting Can Hurt Performance

At some point or another, we have all experienced the frustrating gridlock on the 405 or 101 freeways during rush hour. While traffic is slow for everyone, some drivers keep changing lanes hoping to get ahead. We, on the other hand, stay in our lane and end up passing them a little down the road. Given the heightened levels of volatility and the associated uncertainty, it is understandable that emotions may run high, causing investors to make changes to their portfolios. It is widely studied that one of the costliest mistakes investors make is to sell some of their riskier holdings and hope to buy them back later when things get “better.” Dimensional Fund Advisors has performed a study on the returns of the S&P 500 Index from 1990 to the end of 2017 to prove that market timing is a futile practice. As illustrated in the graph below, if investors missed the 25 single best days in the market during this timeframe, their annualized return would have dropped from 9.81% to 4.53%. Such underperformance will undoubtedly have a major adverse impact on an investor’s financial plan.

Forecasting the future path of the markets or the economy is never easy, and we are not in the business of predictions. As your partner and advisor, we can, however, encourage you to stay disciplined and not overreact to short-term volatility in the markets. In developing a plan to meet your financial goals, we have considered your objectives, income, cash flow requirements, and tolerance to assume risk. Maintaining a diversified portfolio and target asset allocations consistent with our philosophy is an important discipline. While there is an urge to want to be active and make changes, the reality is that every decision is an active decision, including a decision not to make changes.

Please do not hesitate to contact your Morton Capital wealth advisory team if you have any questions or would like to review your portfolio or plan in more detail. As always, we appreciate your continued confidence and trust.

Morton Capital Investment Team



Disclosures: This commentary is mailed quarterly to our clients and friends and is for information purposes only. This document should not be taken as a recommendation, offer or solicitation to buy or sell any individual security or asset class, and should not be considered investment advice. This memorandum expresses the views of the author and are subject to change without notice. All information contained herein is current only as of the earlier of the date hereof and the date on which it is delivered by Morton Capital (MC) to the intended recipient, or such other date indicated with respect to specific information. Certain information contained herein is based on or derived from information provided by independent third-party sources. The author believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information. Any performance information contained herein is for illustrative purposes only.

Certain private investment opportunities discussed herein may only be available to eligible clients and can only be made after careful review and completion of applicable offering documents. Private investments are speculative and involve a high degree of risk.

The indices referenced in this document are provided to allow for comparison to well-known and widely recognized asset classes and asset class categories. Q4 returns shown are from 09-28-2018 through 12-31-2018 and the 2018 Year-To-Date returns are from 12-29-2017 through 12-31-2018. Index returns shown do not reflect the deduction of any fees or expenses. The volatility of the benchmarks may be materially different from the performance of MCM. In addition, MCM’s recommendations may differ significantly from the securities that comprise the benchmarks. Indices are unmanaged, and an investment cannot be made directly in an index.

Past performance is not indicative of future results. All investments involve risk including the loss of principal. Details on MCM’s advisory services, fees and investment strategies, including a summary of risks surrounding the strategies, can be found in our Form ADV Part 2A. A copy may be obtained at