Thomas Kann Life of the Southwest Freedom Equity Group Tom Kann Whatever it Takes to Get a Sale Phoenix AZ Arizona

First and foremost I gave every opportunity for Mr. Kann to make this situation right privately through email, but he choose to ignore my emails and press for a face to face meeting to avoid a paper trail since the question I asked did not have a logical answer.

My original question: Why do you feel that these were good investments for my parents before they started the policies?  

His answer days later: Because it fit their needs.

My immediate follow question which over a week later has not been answered: How does/did an IUL fit my parents needs?

So what went wrong and what is the complaint?

Tom's late wife was good at medicare supplements, so I referred my Dad who was turning 65 Mr. Kann's late wife for guidance in choosing the right medicare supplement.  Tom showed up unannounced with his Freedom Equity Group materials ready to make a pitch for an Indexed Universal Life (IUL) policy with the Life of the Southwest.  Oh those living benefits that you get because these pathetic IUL's dont even have a guarantee!!!  Many of you can see where this is going, but let me expand.

Once the medicare supplement was done in 10 minutes, Tom was onto his pitch.  He was pitching a 65 and 63 year old with zero disposable income an IUL.

Everyone, who knows anything about IUL's know that they are only good (and even good is debatable because caps and participation rates are never part of the illustrations) if the policy has a long funding period so that it can build up cash value. 

For my Dad's 1st policy he was going to pay in $6,000/year for 12 years ($69,300) and pull $4,400 a year assuming 6.8% returns every year in that short 12 year window.  In this utopian illustration if he lived to 85 he finally would have got his investment back and made some tax free retirement.  Thankfully due to actuary law 49 the life of the soutwest illustration also had to present a more conservative illustration at 3.5%.  In this illustration he would again pay in that $69,300, but this time it lapses at age 85 with a planned annual income of $4,405 for 8 years and just  like that Dad loses $34,060.  Currently he has paid in over $11,000 but the policy didnt make 3.5% in year one and has zero surrender value.

But he wasn't done yet.  He asked my Mom what she was doing and he also recommended pulling money from an annuity and making the annual premium payments by taking social security at 63 which is beyond nuts.  He advised that it would not be disposable income, but it was so at the expense of the sale, he lied.  That was my Mum's non negotiable.  She could not have anymore disposable income, but she believed him and had to pay back over $10k in taxes to the affordable care act for a subsidy she would have legitimitely qualified for had it not been for Tom Kann's piss poor advice.

My Mum's policy was even more of a rip off.  Her illustration paid entirely through penalized social security distributions at $7,700/year over 12 years totalling $90,000 in.  He cranked up the multipliers on this on though because the numbers he used for my Dad may raise a question (probably wouldnt though because my parents have zero financial literacy).  So in the utopian or aggressive estimate Tom projected at 6.92% didn't have my Mum making her money back until 88 years old.  The more conservative estimate had her taking loans in year 13 at $4,445/year.  The conservative estimate was not too conservative at 4.0% year, lapsing at age 84 after taking $40,000 in loans.  Potentially a net loss of $50,000 with the assumption that the market doesn't have one modest or down year which is absolutely junk!

However, Tom wasn't done yet.  He knew my Dad could reasonable ask for an early draw on his social security who was now 66 and get him into a second IUL.  This one was a cash cow for Tom who had already made almost $10,000 in commission off the 2 policies previously mentioned.  He was about to double down.  So he contacted my Dad and had him come to the office, already knowing how financially illiterate he was and how easily my Dad was to manipulate.  The office meeting with just my Dad was also a calculated move by Mr. Kann.  He knew that if he wasn't going to make a $10,000 commission, my Mum would have too many questions.

So my Dad, as he always does, trusted Mr. Kann with more piss poor advice.  Take an early withdraw penalty on your social security and put it all into this IUL he suggested. It is this 3rd IUL that is the exact reason you need to RUN if Mr. Kann ever wants to sit down and discuss an IUL.  So how bad was this policy, let me explain.

The 3rd IUL Tom sold my Dad was the wet dream of every insurance sales man.  $20,400/year for 12 years totalling $244,800 paid in.  The utopian illuatration averaged 7.0%.  At 87 years old is when this IUL would be an asset and not a liability.  That is when he would have met the amount he invested into the account.  The more conservative estimate was even more ridiculous.  At 3.25% the conservative estimate lapses at age 84 with a net loss of -$125,742.

This was the entire social security check.  Now my Dad is a hard worker, but to think he would never need this money ever is a big deal.  To sell an IUL, the agent ethically should protect the client for the what if situation not on a utopian illustration trying to get a signature on the bottom and a completed app.  Why, LSW would underwrite any life insurace for people in their mid 60's is beyond me.

My parents were prayed on by Tom Kann.  He is an older gentlemen, so I don't think my parents were the only ones.  Now luckily we were able to stop the bleeding at $35,000, but it was only stopped because my Mum mentioned it in passing last month at brunch at which point I knew they were victims of an agressive sales man that cares about his pockets 1st and his title 2nd.  

YOU HAVE BEEN WARNED!