My Bias for Simplicity

Posted August 5, 2025, By Cole Ferrier

In financial planning, I believe in a foundational principle: use the right tool for the right job. A hammer is great for nails, but it’s a poor choice for driving a screw. The best results come from using distinct, efficient tools that each do one job exceptionally well.

I was scrolling through social media the other day when a post from an insurance salesperson stopped me in my tracks. It was full of what, for me, is triggering language, with a call to action that read: "An overfunded whole life policy becomes your tax-free reserve, your leverage tool, your gateway to buy back time." I confess, my reaction was not a good one. It’s this kind of messaging—presenting a complex, high-cost product as a magical solution—that prompted me to write this article.

This philosophy of using the right tool for the job directly informs how I approach building a financial plan. I see a common flaw in the way many people are advised to structure their financial lives. They are sold complex products that attempt to be an all-in-one solution, most notably by bundling insurance with investments. While insurance and investments are both critical tools for your financial well-being, trying to make one product do both jobs often results in a convoluted, high-cost tool that does neither job well.

I want to be upfront about my perspective here. This isn't just a preference; it's a bias, and it's important that I own it. Unlike advisors who are paid based on the amount of investments that they manage or insurance salespeople who earn commissions on products, I'm compensated directly by my clients for my professional opinion. This structure demands that I am acutely aware of my own biases so I can confront them head-on. It forces me to consciously explore paths with a client that I might not naturally gravitate towards, ensuring their unique situation is at the forefront of every recommendation.

That said, my bias towards simplicity and transparency makes me inherently skeptical of products that wrap a critical need—like life insurance—inside a complex and often opaque investment vehicle. To see why, let's unbundle the logic.

The Distinct Roles of Your Financial Tools

First, we need to define the jobs we are trying to do. Financial planning involves both offense and defense.

• Insurance is Defense: The role of insurance is to transfer a catastrophic financial risk that you cannot afford to bear yourself. It protects your family and your financial plan from an unexpected, devastating event. Life insurance provides for your dependents if you die prematurely. Disability insurance protects your income if you are unable to work. These are defensive tools designed to prevent a catastrophic loss.

• Investments are Offense: The role of investments is to grow your capital over the long term to meet future goals. Through a diversified portfolio of assets like stocks and bonds, you are taking calculated risks to generate returns that outpace inflation and build wealth. This is your financial engine, designed to move you forward.

The strategic conflict arises when a single product tries to play both offense and defense simultaneously. Their goals are in direct opposition: one is about preventing loss, the other is about pursuing growth. Forcing them together often means compromising on both, resulting in a tool that serves neither purpose well.

The "All-in-One" Promise and Its Pitfalls

Products like Whole Life, Universal Life, and Variable Universal Life are often presented as the perfect two-in-one solution. The appeal is understandable: they offer a death benefit alongside a "cash value" component that grows on a tax-deferred basis. It feels like forced savings combined with responsible protection.

However, from my perspective as a planner who values clarity, simplicity, and efficiency, these bundled products introduce serious issues into a financial plan.

• Complexity (The Black Box): Permanent life insurance policies are notoriously complex. Their fee structures—including sales commissions, administrative fees, mortality and expense charges, and potential surrender charges—are often opaque. This complexity is often by design; it makes it difficult to compare the product to simpler alternatives and allows for the kind of alluring but misleading claims that prompted me to write this in the first place. This violates my core belief that clients should be empowered through understanding.

• High Costs (The Performance Drag): The bundled fees within these policies create a significant and permanent drag on investment performance. When you can build a globally diversified portfolio using low-cost index funds for an expense ratio under 0.10%, paying 1%, 2%, or more in layered fees inside an insurance product creates a high hurdle that is difficult to overcome. Over decades, these higher costs can consume hundreds of thousands of dollars in potential growth.

• Inflexibility (The Golden Handcuffs): That "tax-free reserve" isn't as free as it sounds. Accessing your cash value often means taking on a policy loan—which accrues interest that can reduce your death benefit—or surrendering the policy, which can come with heavy fees and taxes. This inflexibility can trap you in a strategy that no longer fits your life.

• Hidden Risks (The "Leverage Tool"): While you can borrow against a policy, this "leverage" comes with significant risks. If the loan's interest is not managed carefully, it can grow to the point where it causes the entire policy to lapse, potentially leaving you with a large tax bill and no insurance coverage at all.

A Better Game Plan: Keeping Your Offense and Defense Separate

There is a more modular, transparent, and, for most people, effective approach. It’s a classic for a reason: "Buy term and invest the difference."

1. Deploy Your Defense with Term Life Insurance. Term insurance is pure, unadulterated protection. You buy it for a specific period (the "term"), such as the 20 or 30 years you'll be raising children and paying off a mortgage. It has one job: to pay a death benefit if you die during that term. It is simple to understand and dramatically cheaper than permanent insurance.

2. Build Your Offense by Investing the Difference. With the significant premium savings, you can then invest directly. This allows you to use low-cost, efficient, and transparent tools like your 401(k), a Roth IRA, or a taxable brokerage account to build a diversified portfolio that you fully control.

This unbundled approach is powerful not just because it's more efficient, but because its simplicity gives you clarity and control. It allows you to select the best tool for each job, rather than settling for a compromised product, giving you transparent costs and the flexibility to adjust your strategy as your life evolves.

But What About Forced Savings?

A common argument for permanent life insurance is that it creates a "forced savings" mechanism. The argument goes that since you have to pay the premium to keep the policy active, it forces a level of savings discipline that people might otherwise lack.

This is a valid behavioral concern, but it’s a problem you can solve more effectively without the high costs and complexity of a bundled product. The simpler solution is automation. You can create your own powerful "forced savings" system by setting up automatic, recurring transfers from your checking account to your investment accounts every single month. This achieves the exact same behavioral benefit—making saving effortless and non-negotiable—while keeping you in full control of your money in low-cost, flexible investments.

Acknowledging the Nuance: When Might Bundled Products Fit?

As a fiduciary committed to providing comprehensive advice, I must acknowledge that these products can be a valid tool in very specific, advanced situations. This is where I have to confront my own bias and recognize when a client's needs demand a different tool.

• Complex Estate Planning: For high-net-worth individuals facing significant federal estate taxes, permanent life insurance held in a specialized trust can be a crucial tool for providing the liquidity to pay those taxes. However, it is only one option. Other advanced techniques, such as specific gifting strategies or business succession planning, can also be used to efficiently transfer assets like a family business and should be considered as part of a comprehensive strategy.

• Maximizing All Other Options: For a small subset of high-income earners who have already maxed out every conceivable tax-advantaged savings vehicle (401(k)s, HSAs, Backdoor Roth IRAs and Mega Backdoor Roths), a cash value policy is sometimes presented as the next logical step. However, even in this scenario, many will still prefer the simplicity and flexibility of a standard taxable brokerage account. While a taxable account doesn't offer the same tax-deferred growth, it provides complete liquidity and optionality. If the goal is to use the money during one's lifetime, the lower costs and greater control of a taxable account often make it the more attractive choice, even if it means paying taxes on dividends and capital gains along the way.

• Funding for Special Needs: This is perhaps the most compelling case. Parents of a child with special needs have a life insurance need that is truly permanent, not temporary. Their goal is to ensure funds are available to care for their child for the child's entire lifetime, long after they are gone. For these parents, the "invest the difference" strategy can feel fraught with risk. They may worry about their own discipline to save consistently or fear that market downturns could jeopardize the funds. In this scenario, a guaranteed death benefit from a permanent life insurance policy offers something that a simple investment portfolio cannot: certainty. The policy, often held within a Special Needs Trust, can provide the peace of mind that a specific amount of money will be there, no matter what, to fund their child's future care. This emotional need for a guarantee can absolutely outweigh the higher costs and complexity.

These are niche scenarios, and there are more, but for the vast majority of families, the complexity, cost, and inflexibility of bundled insurance and investment products far outweigh their potential benefits.

Conclusion: The Real Gateway to Buying Back Your Time

Ultimately, my bias for simplicity isn't just about preferring clean solutions; it's about championing client empowerment. The true "gateway to buy back time" isn't found in a complex financial product. It's found in a modular plan you can understand, own, and adapt with confidence. When you trade complexity for clarity, you don't just get a better financial tool—you get the peace of mind that comes from being in control of your own future.

Create Your Financial Compass with Us

Whether you're trying to decide on the right tools for your own financial defense and offense, or want a second opinion on a complex policy you already own, we can help bring clarity. Contact us to unbundle the complexity and build a plan you can understand.