New product launches often fail, with poor marketing strategy frequently being the cause. So Samuel B Watson, founder and chief executive of Tennessee-based Cool Springs Life Equity, tapped a renowned international marketing authority to ensure the company’s life insurance product strategy was correct.
The marketer Watson chose has 36-plus years of experience, having created one of the world’s most recognized brands in the mid-70s. To this day, the marketer continues to successfully extend the brand into multiple lines of business. The marketer has also arguably cornered the market on glamour and sex appeal, winning loyal fans/consumers spanning several generations.
This may be an unusual way to describe Gene Simmons, bassist/singer for and mastermind behind the band KISS, but it is accurate. Simmons, 60, has developed a reputation for business sense that rivals his reputation for showmanship, consistently earning millions year after year on KISS music sales, concerts, merchandising and other ventures.
This is only natural to Simmons - he points out he is “in show business, not just show.” Eschewing drugs and alcohol and learning to manage his own money have empowered him to avoid the usual rock star pitfalls of addiction and inept or thieving management.
Life insurance may seem a mundane concern for a rock and roll legend, but as a high net worth individual, Simmons says it made sense to him to take a policy utilizing the Cool Springs Equity strategy.
“I hate paying for things. I go out and work every day, and I’m in a high tax bracket, almost 50 per cent. When I spend a dollar I have to make almost two dollars to replace it. I don’t like that,” Simmons said in an interview with Family Wealth Report. “Taking a Cool Springs Life policy means I don’t have to write a check or go out of pocket to ensure my family is protected. I like that a lot.”
“Look, we are all going to die. I want to make sure my family, charities, whomever I choose benefit from my hard work when I’m gone, not the government, which is about to raise the estate tax to 55 per cent.”
Simmons says the Cool Springs Life offering strikes a chord with him from a business perspective as well, which is why he decided to accept Watson’s offer to join the company and serve as the face on the tin, so to speak.
He and Watson had a chance meeting almost four years ago and became friends. Simmons, meticulously protective of his name and the KISS organization, says he checked out Watson and the company, including the other executives, thoroughly before getting involved.
“All kinds of people ask me to do all kinds of things,” Simmons said. “The world is shark-infested waters, and I don’t want to be involved with bad guys. Sam has been involved in billions of dollars of transactions and never been sued and never defaulted. As you say, that’s amazing.”
Watson, a 29-year veteran of the insurance business, formed the company ten years ago. His partners include fellow insurance veteran Simon Baitler, former Transamerica CEO David Carpenter, attorney William Randolph and entertainment industry veteran Richard Abramson.
One of the firm’s first clients was a recent retiree from a Fortune 100 company who wanted life insurance but balked at paying the high premiums, which at the level of coverage the retiree wanted was indeed a large check to write. The issue for high net worth clients, Watson explains, is that the way the insurance business works - the selling agent pockets the lion’s share of the first year’s premiums.
“For the jumbo policies, it can be a $1 million premium the first year… of which up to 100 per cent can go directly into the agent’s pocket and yield zero – yes, zero – cash value for the policy holder,” Watson said in the interview with this publication. “A lot of people just can’t stomach that and will not buy insurance or will under-insure.”
Cool Springs Life allows clients to finance their policy premiums and employs “High Cash Value Policies,” which means the policy shows high cash value much faster and the cash value is used as collateral for the financing. This is not a new concept – what is new is they can get financing at flat LIBOR, which Watson says he has not found anyone else doing. Furthermore, he says, the rate is capped at 10 per cent, so if the interest rate were to climb into double digits, as it did in the early 80s, the client would not have unlimited exposure.
Both Watson and Simmons are clear on what segment of the high net worth client base they can serve, and they emphasize that the Cool Springs offering is not right for everyone. The client must do more than simply be unwilling to write a premium check. A trust must be formed to take the loan to buy the policy, which keeps the policy out of the client’s personal estate. Also, a legal advisor for the client must sign off to certify the client understands the policy and has a genuine need for it.
The client is required to stump up cash or cash equivalent collateral to get a loan from a bank on 20 to 30 per cent of the total borrowing, and the maximum policy protection available is $300 million.
“The ideal person has a net worth of at least $20 million and needs a policy of at least $10 million,” Watson says. “It is not appropriate for someone who is highly leveraged without high liquidity. If we have someone apply whom we believe may struggle to meet the collateral requirements later, we will not sign them up. We do not want to be the cause of someone’s financial ruin. We take the high road, which is why we do not have defaults or lawsuits.”
“I encourage people to have a look at us and kick the tires hard. I did,” said Simmons. “Ignore what we say. Check it all out. Look around at all your options and talk to other companies. If this is the best deal, take it. If not, take whatever deal suits you better.”