Avoid These 3 Wrong Turns from the Kyle Busch Insurance Lawsuit
"This sounds too good to be true, but you’ve got to believe in those that are looking at it for you and trusting in the people with Pacific Life email addresses that are sending you the documents."
So many stories of financial fraud and mismanagement boil down to statements just like this one. All too often, the folks who are losing large sums of money are hardworking folks working 9-to-5s who don't have a team of professionals looking out for them, and whose finances may never recover.
But, in this case, the quote above is from racecar driver Kyle Busch, a two-time NASCAR Cup Series champion whose net worth is estimated to be around $80 million. Earlier this month, Busch and his wife, Samantha, sued Pacific Life Insurance Company for $8.5 million, alleging that Pacific Life misrepresented how a policy worked and lost almost $10.4 million that the Buschs’ thought they were safely investing for retirement.
On today's show, we draw three important lessons from the Buschs' lawsuit that could help you steer clear of a similar financial crash.
1. Don't accept what's "suitable."
Like many insurance companies, Pacific Life agents reportedly operate under the suitability standard when recommending non-securities insurance products. This standard only requires that an investment, insurance policy, or other financial product be suitable for the buyer's situation.
Legally, there's a lot of wiggle room around what "suitable" can mean. But it usually doesn't mean that a product is in your "best" interest. In many cases, products that are merely suitable may also carry higher compensation or commissions for the seller, which creates a conflict of interest. This appears to be the case with the life insurance policy the Busch’s invested in.
At Keen Wealth, we operate under the fiduciary standard. "Fiduciary" comes from the Latin word "fidere," meaning "to trust." Advisors working under the fiduciary standard are required by law to put their clients' best interests first in every situation. My team members don't recommend any financial products or strategies because they're going to earn a commission. Our advice is solely focused on what's going to benefit you the most.
Before you enter into an agreement with someone you're going to trust to manage your life savings, make sure you're very clear on the terms. Do they operate under the fiduciary standard? Who is the custodian of your money? And what are the "all-in" costs of engagement, such as management fees and trading costs?
2. "Too good to be true" always is.
The Busch’s were investing in an indexed universal life insurance policy, providing life insurance, a death benefit, and cash investment in a market index. The Busch’s allege that they were presented with an illustration showing that if they invested $1 million per year for five years, the cash investment side of the product would grow big enough to offset the cost of the insurance premiums. Once Kyle turned 52, they'd be able to withdraw approximately $800,000 per year, tax-free.
When the Busch’s received a premium bill in year six, alarm bells went off.
Their lawsuit alleges that Pacific Life invested the Buschs' money into a low-earning account that only returned 1.5%, which was much lower than the assumed rate in the illustration. Without that promised growth, the cost of insurance premiums for a guy in Kyle's dangerous line of work, combined with the commissions they paid, had almost emptied their account.
Was any of this illegal? We'll probably find out as the lawsuit unfolds.
But there are many, many financial products, from insurance to mutual funds to "alternative investments," that are technically legal – technically "suitable" – and don't deliver on what they're selling. As the Busch’s experienced, that "too good to be true" payday often gets eaten up by administrative fees, commissions, earnings caps, and other unnecessary complexities.
Or, as Bernie Madoff's victims experienced, the whole bill of sale turns out to be a giant fraud.
3. Assemble your pit crew.
It’s tempting to look at the Buschs' situation and think, "Oh well, they'll be OK." Because they probably will be. They're wealthy, they didn't lose everything, and Kyle will keep earning big paychecks from racing and endorsements.
But if someone with Busch's resources can fall victim to this kind of financial mismanagement, how much more important is it for all of us to be diligent about safeguarding our nest eggs? And how much more dangerous is it for folks who are trying to secure their retirement without professional advice they can rely on?
I believe that, regardless of how wealthy you are, everyone should be working with:
A fiduciary advisor who can "quarterback" your financial planning in a comprehensive way.
An attorney who can help you review agreements, protect your assets, and create a durable legacy plan.
A Certified Public Accountant (CPA) who can help you manage both your annual and your lifetime tax liability.
You can start assembling your own reliable financial team by scheduling a year-in-review meeting with Keen Wealth. Let’s review your plan, your portfolio, and the pros in your pit crew so that you can start 2026 in pole position.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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