Private placement life insurance (PPLI) is a variable universal life insurance policy that provides cash value appreciation based on a segregated investment account and a life insurance benefit. The objective is to maximize investment returns by being more tax efficient and minimize the death benefit.
According to John Bowen, co-founder of BSW Inner Circle and co-author of Elite Wealth Planning: Lessons from the Super Rich, âThroughout the world, the rich and super-rich are finding PPLI to be increasingly appealing. The benefits of the product itself and very often as part of various wealth planning strategies is driving its demand. However, we are seeing that in some situations PPLI is not the best solution for the very wealthy. Making sure the rich and super-rich understand all the implications â good and less good of PPLI is the responsibility of their advisors. The complication is that relatively few of the advisors claiming to be experts when it comes to PPLI are really knowledgeable and experienced.â
As with many wealth management solutions, there are many Pretenders who â while they mean well and are striving to do a great job for their clients â are just not up to the task in some cases. When it comes to private placement life insurance, you need to be working with consummate professionals who are expert in the product and the way it can be used in wealth planning.
âWhen it comes to more sophisticated financial products and planning strategies such as PPLI, Iâm regularly consulted on its appropriateness and whether there are better options,â says Jim Dew, president of Dew Wealth Management, a leading advisory boutique. âWith respect to PPLI or other complex financial products, whatâs most important is that they are appropriate in every way and can achieve the clientâs goals. All too often, many professionals get so wrapped up in technical and tax wizardry they lose sight of what their clients aim to achieve. We always make sure suitable technical expertise is properly matched up to our clientsâ needs and wants.â
Private placement life insurance is a very powerful solution for the right wealthy clients in the right circumstances. It has many advantages, but it also has limitations. Only by working with a high-caliber financial or legal professional can you determine if private placement life insurance is right for you.