Mark Willis/Louis Goodman – Transcript

Mark Willis – Transcript

Louis Goodman 00:03
Welcome to Love Thy Lawyer. I’m Louis Goodman. Today I’m going to talk with someone who is not a lawyer. Mark Willis is a Certified Financial Planner with some very unorthodox ideas and strategies for creating wealth. As attorneys, we make money, but we have a tendency to not be very competent when it comes to building wealth. I thought Mark might give us some insight. Mark Willis, welcome to Love Thy Lawyer.

Mark Willis 00:34
Thanks Louis. Glad to be on the show.

Louis Goodman 00:37
Nice to have you here. Where are you speaking to us from right now?

Mark Willis 00:41
Well, we are right outside the beautiful metroplex of Chicago and right on the beautiful Fox River. So we’ve had an enjoyable summer and now we’re getting into those several, three or four weeks out of the year where it really feels nice to live here.

Louis Goodman 00:54
Well, thank you for being inside during the few minutes of great weather that you get in Chicago.

Mark Willis 01:00
That’s right. Yeah. Well, hey, we’ve been to your neck of the woods too, and it’s always beautiful. It’s basically paradise all year round.

Louis Goodman 01:07
Yeah. It kind of is. Mark, what does a Certified Financial Planner do?

Mark Willis 01:13
That’s a great question. I think the same answer that a lawyer hopefully would answer would be, it depends. So, when I’m sitting down with one couple, it might be a totally different conversation than another person or business owner or client of any sort, pre-retiree and someone may be in their final years. But all of it relates down to listening. Which is what I think all of us can agree on, share as part of our skill set as being a good listener first, and then making some important decisions that are on our client’s side of the table and working in their best interest.

Louis Goodman 01:47
How long have you been doing this type of work?

Mark Willis 01:50
We started in the aftermath of the great recession about 2010, and I’d worked in, before that I had worked for a CPA, helping her with some tax returns, and watched the market meltdown of 2008 at that time, and I never wanted to be a part of that. To be quite candid with you, I almost got out of the financial business altogether as a result of hearing her make those calls, the calls that went something like this, Louis, she said, I’m sorry, Mr. Client, Mrs. Client, you’re 62, you’re 64 years old, whatever. I just lost you a third of your life savings, and I’m sorry about that.

Well, I didn’t want anything to do with that, Louis, to be quite candid with you and I almost left the business entirely. And that’s where things got started. And amidst of all that, I stumbled across some strategies that I could feel confident recommending to my clients that would never leave them with those kinds of phone calls and only give them good news.

Louis Goodman 02:44
I’m always interested in people’s backgrounds. Where are you from originally?

Mark Willis 02:50
Well, I grew up in the Midwest, Indiana specifically, and went to school down in Texas. I spent seven years down in the desert, you might say. Loved it. And so that’s been my background all along the way. Good Midwestern kid, I guess.

Louis Goodman 03:05
And so what sort of degrees or educational experience have you had?

Mark Willis 03:11
Well, I went to college, like I said, down in Texas, and they held me back after my undergrad degree, Bachelor of Arts. I ended up staying back for a grad school degree and I got a Master’s of Divinity, of all things. Loved the idea of getting my feet grounded in theology, philosophy and just overall just getting my head screwed on straight before starting out life. Louis, I never thought to myself, I’m gonna be a preacher or a minister, or a pastor or priest or whatever. I never had that inclination on a traditional sense, but I did really love the idea of having good, thoughtful conversations with people about things that matter in the long run.

I had always, even as a kid, had the long range in my mind somehow. And so, these long term conversations really meant a lot to me. But I also, in the midst of that, accumulated a ton of student loan debt and I had no plan to pay that off. And funny enough, Sallie Mae seemed to think I needed to at that time. And so, I ended up getting these letters and these calls saying, you better pay us back. And I had never really put my head around this thing called money. Don’t know why. Never really put two and two together that maybe I should think so about it too. And that’s sort of where things started. And after that after I got my Master’s of Divinity, which my wife says just means I can make really great chocolate, I ended up going through the Certified Financial Planner designation to really understand numbers and math and finance, and more importantly, how it impacts people’s personal financial lives.

Louis Goodman 04:41
You talk about something called banking on yourself versus dealing with the banking system as it’s more traditionally out there. Can you explain how money works when someone deposits money into a bank account and how the banks deal with that?

Mark Willis 05:02
Well, if you put $10,000 in your shoebox under your bed and open it up the next day, there are hopefully gonna be $10,000 in there. But when you put $10,000 into a bank account, how much of that money does the bank literally keep in the vaults, so to speak, on their books? Turns out it’s about 10% of what we put into our bank deposits. The other 90% of our money gets loaned out to the guy behind you in line.

So Louis, if you’re walking in the bank and you got $10,000 and deposit that 10 grand in the bank account at your local bank, and then I walk in behind you in line, first of all, they’re going to pay you 0.1% interest for your hard earned savings, and then they’re gonna turn right around and lend me 9,000 of your dollars to borrow that money and they’re gonna charge me 10% or 18% or whatever that is. Now that is, that is an unbelievable business model. If we like being in the, you know, law, business or financial business, that’s fine. But selling money and specifically selling debt is the most profitable business ever devised by mankind.

And this is how banks have become the biggest industry in the world and why they have the biggest buildings in our towns and cities. It’s because of this very clear phenomenon, known as fractional reserve banking. It’s been around for a long time.

Banking is so fundamental to our human experience. It’s as core to humanity as is artwork or music or friendship. It’s about as old as it comes in terms of, you know, human institutions, right? So, yeah, to your question, banks don’t keep our money. There is no big vault with all of our cash laying in the back. It’s being lent out. And that’s where banks make their money.

Louis Goodman 06:55
Right. And then that’s why we have Federal Reserve Deposit Insurance, because if something happens to the bank, the federal government will still give us back our full $10,000, even if that other 9,000 has never been paid back to the bank. Is that correct?

Mark Willis 07:13
Well, that’s true, except let’s do a little digging. You’re right. FDIC insurance is there to protect us since the 1930s before it runs on the bank, and bank defaults, et cetera, et cetera. But let’s just kind of take a little closer look at that. How much does the FDIC keep on reserves? Well, less than 1% of all deposits are kept on reserve at FDIC, less than 1% of bank deposits. So how often have banks defaulted more than half a percent? Well, It’s more common than you realize, and 2008 is one example.

What happened in 2008? FDIC had to go to Congress with hat in hand and got a taxpayer bailout. That means you and me covered the default of many of the banks. There were 437 banks that went bankrupt in 2008, which strikes me as not a very safe place to put my money, although I have a checking account, I have a savings account, et cetera, et cetera. I just don’t see that as a “safe” place anymore.

Louis Goodman 08:11
Well, my issue with putting money in the bank is, as you pointed out, the interest rate of return is terrible. And so really if you count in inflation, if you put money in the bank, you’re really ultimately losing money. So, you have talked about building wealth, and I’m wondering if you could talk a little bit about how one goes about building wealth as opposed to simply just trying to preserve a little bit of money in a savings account.

Mark Willis 08:43
Well, that’s true. If we just let that money sit, soak and sour in a savings account, it’s gonna lose certainly to inflation. But I’ve also found from a human psychology standpoint, if you’ve got 50 grand, a hundred grand, 300 grand or whatever in a savings account, that’s just more likely to spend. It’s so accessible and earning so little that you’re very tempted to buy that, you know, extra flashy sports car with cash, for example, or whatever else your needs might be.

So, building wealth is categorically different than just merely saving. But I’d like to also make a distinction between saving and investing. So, most of us have been told that investing is the pathway to wealth and that by putting money into things that can go down that you will no doubt get a reward, no risk, no reward, as the old saying goes. But I would actually kind of push back on that. If there is risk, it’s not that there is a proportion to reward. If there’s risk, there’s a likelihood of loss. That’s what risk means. Risk does not equal reward risk equals possibility of loss. So I want the reward. I don’t want the loss. So, but why do I put money into things that have risk? Where is it written that I have to risk my money just to build wealth? That’s not written on any stones of tablet that I can find, Louis.

So, how do we build wealth? Well, here’s the good news, as many people who study law contracts have a form of wealth generation that have been around for thousands of years. But before I get into contracts, let me kind of explain most of the places that we all park our cash, if it’s not in a checking or savings account. So as a Certified Financial Planner, I studied 400 plus places people can park money, myself included. I was needing a place to park my own money. I was needing a way to pay off my student loans. And so looking at a number, dozens, hundreds of different places to park money, a very simple truth kind of dawned on me, Louis, and that is that wherever you put your money will make it act different. So where you put your money makes it do different things…

Louis Goodman 10:52
Can you be a little bit more specific about that and kind of explain like if you wanted to come up with a perfect financial strategy for one’s life, what would that be like?

Mark Willis 11:02
Well, yeah, that’s, that’s a great question because so few of us ever stopped to ask that question. And you’re right, where we put our money makes it act different, putting your money into various instruments will make it act differently. So, here’s the question, what do I want, what do you want your money doing for you? So, a 401k is gonna act different than a savings account, which will act different than a real estate property, which will act different than an annuity or a dynastic trust or anything else.

So, first getting clear on what is it that would be the perfect financial instrument for me, for you, for each one of us. We might all have different answers to this, but if you don’t take anything else from this episode, take five, ten minutes of your time, pull the car over at a red light or whatever, and just start writing your own list of characteristics down of what you would want your money doing for you if you had the magic wand.

Louis Goodman 11:57
Okay, well you’ve got the magic wand, so what are we gonna get?

Mark Willis 12:01
Okay, well there are obviously thousands of ways we could take this conversation. I’ll tell you about one particular tool that has been remarkably compelling to me both as an individual person, but also as a Certified Financial Planner. And I think it’s mostly overlooked by typical investment gurus, stock jockeys, you know, financial infotainers, et cetera. And of all things, Louis, it’s a modernized form of dividend-paying whole life insurance.

This is a more specially designed form of life insurance. Maybe I’ll just take a minute or two and sort of explain what it is.

Louis Goodman 12:40
Yeah. Also, I think that you should define term life insurance versus whole life insurance, because those are different products.

Mark Willis 12:48
Great point, yeah. The best way I can define both is to distinguish between renting an apartment and owning a house. When I rent an apartment, I keep it for a term, or lease or a period of time, and then the landlord can raise the rent on me every time I renew that lease, okay? I also build up no equity in the apartment that I’m renting, and at the end of the term, I can get kicked out.

So that’s how it works with term life insurance. I’m renting it. I build up no wealth or equity. I have a higher expense as I get older and I can be denied or kicked out at the end of a term because I didn’t match some perfect picture of, you know, of health. So that would be my, my first piece to that.

As far as whole life insurance is concerned, I do have a kind of another metaphor with, which is sort of purchasing a home and you’re building up equity as you add wealth to the cash value of that life insurance policy. But literally, that’s what it’s called, cash value, and it’s sort of like building up equity in your house.

You pay a flat level premium, sort of like your mortgages level for 10 years, 20 years, 30 years, but now you’re building up a wealth asset inside the life insurance policy, the cash value is sort of like home equity, and if it’s designed correctly, the death benefit even will appreciate and grow over time. Kinda like our houses hopefully get more valuable over time.

The difference between owning a house and owning one of these policies is that the cash value grows guaranteed. Houses don’t grow guaranteed. See, this year, for example, or 2008 for example, also I can get access to the equity in my policy for any reason, with no taxes, no prohibited transactions, no red tape. I don’t have to beg a banker to get the money.

When I need access to the equity in my house. It’s not like I can just go grab some outta the kitchen drawers. There’s not just a bunch of money in the drywall. I gotta ask a banker very politely, I gotta kiss his ring if I want to get the money outta my house, get a HeLOCK or, or a, a new mortgage or whatever.

So in many ways it’s sort of like that, but maybe I’ve gone on too long. Does that help distinguish between term insurance and whole life insurance?

Louis Goodman 15:08
Yeah. I mean, whole life is something that you essentially deposit money into and If you should die in the interim, it will make a payment, but it’s also something that at a certain age you can start withdrawing money from, like almost like an annuity.

Mark Willis 15:30
You’ve built up a reserve and old fashioned whole life insurance, it might take you 10, 20, 30 years to really build up any significant wealth in that policy. The way we designed the policies, and we refer to these as Bank On Yourself designed whole life insurance. If we design ’em correctly, that cash value would be available within 30 days, and we can begin to use it like a financial management tool, even in the first few months to be able to use for whatever you might want to use the money for. Paying off your debts, sending your kid to college, investing in your business. But then ultimately, you’re right, Louis, at some point we’ll probably start to draw on that as a stream of income, which would be under the tax law, we can access it without taxes due. We can stream it out as a stream of income in our retirement years.

Louis Goodman 16:19
So if I have a small law firm and I have some financial need comes up that’s a little out of the ordinary, money that I would ordinarily need to go to a bank and borrow money for, how could I do that through this life insurance policy instead of going to a bank?

Mark Willis 16:39
Well, that’s just it. That’s where the whole banking on yourself piece comes into play. When it’s a whole life policy, I’m gonna give a mouthful answer, then I’ll try to consolidate it. So, if it’s designed correctly, and I cannot overemphasize that part of it, if it’s designed correctly, this contract, which is what life insurance is, and we’re all pretty good as lawyers and as financial professionals, we’re pretty good with contracts. But the contract itself, how it’s written, really makes a difference.

You know, there are no contracts with mutual funds, exchange traded funds, but there are contracts with things like real estate and insurance contracts. Both of those are forms of contractual wealth, and if it’s designed correctly, if the contract was written properly and if it was issued by the correct institution, we get some really cool things happening for us.
In fact, let me kind of summarize it into just four.

Number one, the contract says your cash value will grow on a guaranteed basis every single year. Number two, I have liquid access to that money with no tax due to access the cash if I’ve designed it a specific way, and that’s a nice feature whenever I need to access that money in retirement, especially if I think taxes are gonna go up in the future. So, that’s number two is that it’s accessible liquid money for any reason. Number three, it is life insurance. So, the contract says I’ll always leave my family more than I’ve saved in the contract, which is pretty cool. If I think about how that would work in conjunction with, say, a savings account, if I put a hundred bucks in my savings account and die, my family’s getting a hundred bucks. If I put a hundred dollars into a life insurance contract, my family would get a lot more than a hundred dollars, depending on my age and health. It might be 400, it might be 600 bucks, depending on a number of health factors there. And then the last piece is to your point about banking.

I can access the cash as a withdrawal, like I said earlier, or as a loan from my own policy. And this is where things get really interesting. So, I can borrow against the cash value of this policy, but the policy itself is not diminished, it still continues to grow with a compound growth rate as if I hadn’t borrowed against the cash.

So let’s say, let me say that another way. Let’s say I have a hundred thousand dollars of cash value in this policy that I’ve been packing in there, and it’s been growing with guarantees and dividends on top of those. And let’s say it’s accumulated a hundred grand and let’s say I wanna buy a rental property to add to my portfolio, and it’s gonna be 70 grand, let’s say, to get the down payment for that rental property.

I’ll borrow against my life insurance cash value, and if it’s designed the Bank On Yourself way, the policy will still give me growth on all of the $100,000, even the 70 grand I had used to buy that rental property and then I get to choose my own repayment schedule. I can go at a fast pace, I can be aggressive to repay that policy loan, or I can skip a few payments, or I can go several years and not repay the loan. But meanwhile, the policy’s cash value continues to grow. Not to mention, I’ve got my rental property doing what it’s doing over there with rent and appreciation as well.

Louis Goodman 19:51
Well, there must be some interest on the $70,000 that you’ve taken out against the policy.

Mark Willis 19:58
That’s right. It’s a true loan and that’s why we’re able to get the loans out tax free because loans are not considered income by the IRS, so there is an interest rate. That’s true. So let’s talk about it.

In the event, and I’ll, and in fact we’ve probably got some folks that would like some numbers, so I’ll just give a few. I realize we’re on a podcast, so it’s always dangerous to do numbers over audio here, but I’ll see what I can come up with here.

If you were to borrow out $70,000 and let’s say it took you four years to put that back into the policy. Maybe you did a cash out refinance on that rental, or maybe you had a renter helping you support that repayment. Let’s say it took you four years. The way the loan interest works is it’s a simple interest rate. So, bottom line, and just to keep the math real simple over podcasts, simple interest, all year long is good. You know, that’s way better than compound interest. And so over a four year period, my calculator here says that you’d pay about 5,300 bucks of interest to borrow 70,000 bucks.

And now that works out, Louis, to about 1.9% over four years. Is that a pretty good deal?

Louis Goodman 21:06
So, isn’t there going to have to be an interest payment? How is that interest rate calculated against that whole life policy?

Mark Willis 21:16
Yeah, it’s a, it’s considered a simple interest loan and they only compound it once a year in arrears. So, if that’s a mouthful, I’ll kind of summarize it and say it’s usually below market rates. So, at this point, at this recording date, when we’re recording this, and it’s been this way for 10 plus years, the interest rate would be, as I said, about 1.9% to repay that loan over a four year period.

Now that’s still some real money. I mean, what I say 5,300 bucks on my calculator here. So that is a real expense to borrow that 70 grand. And some people tell me, well, Mark, why don’t I just pay cash for that renter rental property or that sports car? Why would I scratch together an extra $5,300 of interest? What benefit is it to borrow and then pay interest on my own money? That’s what they asked me.

So we’d do the math and we say, Well, what was that $70,000 doing for you? While you had the money borrowed out and spending it on the rental property or the sports car, the kids’ college or whatever you used it for? So, the policy was continuing to compound and grow over that same four year period, and again on 70 grand rough numbers, again, these policies have done a fairly decent return. These are gonna be boring, middle, single digit returns over time, nothing fancy. We’re talking somewhere around four to five, five and a half percent. Now mind you, that is a tax free return. So, what would our 401k have to do to equal a 5% after tax return?

But regardless if it was doing that over a four year period, the interest earned on 70 grand says would make about $16,900 over that same four year period. So wait a minute. We paid 5,300 bucks, but we made 16,900 bucks in that policy. So we call that arbitrage. That’s where you made more than you spent.

You know, Louis, if you gave me 5,300 bucks and I gave you back 16,900 bucks, well that’s a pretty good deal. Meanwhile, your policy money was over there in that rental property. Hopefully doing some good over there too, giving you passive income and appreciation and more.

So was it free? No. Are there downsides? Yes. Should you just jump into the next whole life insurance that you see on the street? Definitely not. These things can be designed.

Louis Goodman 23:46
Other than yourself are there other Bank On Yourself professionals around the country that people can go to?

Mark Willis 23:55
Well, yes there are, and I’d be happy to introduce you to anybody around the country. As far as I can find I’m a part of a cohort of about 200 financial advisors, insurance agents, attorneys, accountants, all of whom have been certified and authorized by Bank On Yourself.

Louis Goodman 24:13
Well, I’d like to ask you a few other questions, just kind of about you. And one is. this career that you’ve embarked on as a Certified Financial Planner, is this something that you would recommend to people who were just getting out of college and looking for a career?

Mark Willis 24:33
Boy, I wouldn’t have it any other way. It’s difficult in the first few years, I’m sure just like any law practice to just figure out your voice. to figure who you’re there to serve. But I love the opportunity to make a tangible difference. much like I’m sure many of your listeners.

Louis Goodman 24:51
I’ve heard it said that wealth is essentially being in a situation where you are spending less money than you earn. And I think that it’s important, at least I’ve always thought it’s important in my own life to not live beyond my means and not have my head turned too much by, I don’t know, material things that you could spend money on. Because I think that there’s just a certain, I don’t know, sort of priceless peace of mind that comes from not owing anybody else a lot of money.

Mark Willis 25:31
Well, that’s exactly right. I don’t want to be beholden to anybody else. I’d rather bank on myself.

Louis Goodman 25:37
How do you define success?

Mark Willis 25:40
You know, I’d say that it’s the achieving at close as possible, it’s sort of like the speed of light. You never really get there, but you try to get as close as possible and you feel good when you feel a little bit closer to that speed. No one’s gonna get there, ultimately. But I’d say it’s sort of like achieving your greatest potential. Potential is a powerful word, because it’s such an inspiring word, but it’s also a very scary word at the same time.

When you’re a young kid and someone says he has such potential, that’s a compliment.
But if it’s written on your gravestone, he had such potential. Boy, that’s a terrifying thought, right? So success is just inching toward that potential as best as you can with whatever it is, whatever resources available to you at, at any time.

Louis Goodman 26:31
Let’s say you came into some real money, three or four billion dollars. What, if anything, would you do differently in your life?

Mark Willis 26:38
Hmm, boy. Well, I, you know, you probably have heard this before, but I believe that money just makes you more of who you already are. So, I’d probably find and hire the very smartest and best, and most integral people, like people with integrity to surround me, to give me hopefully the best advice possible and give all of us the best chance at making a difference.

Louis Goodman 27:00
You’ve written a book called How to Be an Amazon Legend and Fire Your Banker! Is that book available on Amazon, for example?

Mark Willis 27:12
So far Anyway, yeah, they haven’t kicked us off yet. Yeah, the book is available anywhere and for folks that want to, you can reach out to me at kickstartwithmark.com and we’ll get you a free PDF copy of the book anywhere in the world. And we’ll send you a physical copy if you’d like, anywhere in the United States.

Louis Goodman 27:30
Well, I have to say that you were kind enough to send me a PDF copy of your book, and I did have an opportunity to read it, and I can’t say that I understood everything in it, but that’s not my subject area. But I did find it very interesting. And if your offer is to send a PDF copy to anybody who requests one, I would say there’s no downside to someone sending you an email and asking you for a copy of that book.

So with that, what is the best way for someone who’s listening to this podcast to get in touch with you to get a PDF copy of the book or otherwise, what’s the best way to get in touch with you?

Louis Goodman 28:15
Well, you know, if you’d like to build real wealth outside of Wall Street and create a tax free legacy for your family to build up some liquidity for your own business needs. Your personal needs, again, our website, best way to reach out is to go to kickstartwithmark.com. That’s, again, that’s kickstartwithmark.com.

We do a 15 minute quick introductory strategy session to figure out if this is even the right fit for you, this strategy we’ve been discussing today. If it’s not, you know, as a CFP, we’d tell you that honestly and up front, and then we’d look at other strategies that made more sense. But we’d be happy to discuss this and answer any questions you have at kickstartwithmark.com.

Louis Goodman 28:55
Mark Willis, thank you so much for joining me today on The Love Thy Lawyer podcast. It’s been a pleasure to talk to you and I’ve certainly learned some things and had some things to think about.

Mark Willis 29:07
My pleasure. Thank you for having me on, Louis. I appreciate it.

Louis Goodman 29:10
That’s it for today’s episode of Love Thy Lawyer. If you enjoyed listening, please share it with a friend and follow the podcast. If you have comments or suggestions, send me an email. Take a look at our website at lovethylawyer.com, where you can find all of our episodes, transcripts, photographs and information.

Thanks to my guests and to Joel Katz from music, Bryan Matheson for technical support, Paul Robert for social media and Tracy Harvey. I’m Louis Goodman.

Mark Willis 29:50
Funny enough, I mean, you know, I mentioned I went to a seminary. I always thought, well, wow, Jesus seems to talk a lot about money.