By Josh Gottlieb
While The Gottlieb Organization was established seven years ago, our roots were planted seven decades ago when my father began selling life insurance and rapidly moved into high net worth planning. This early interdisciplinary approach has shaped TGO as we know it today.
By the 1960s, my dad used this concept to create a company incorporating expertise from a vast knowledge base: accounting, legal, insurance, investments and more — a pooled expert approach. He built a remarkable team to guide wealth building. The strategy was creating an interdisciplinary approach to planning and assessing options to meet objectives — not simply selling products as was the model in those days. All based on the question, “What are the ‘footprints in the sand’ the client wants?” This culture of articulating objectives first echoed in the hallways of who we are today.
In 1969, six months after the first known corporate-owned life insurance (COLI) program was put in place, Allyne Gottlieb implemented the second COLI program. Within six months the client’s chairman and president both died. Life insurance was a prescient topic in the hallways of that client at the time. With income tax rates in Corporate America at 50 percent, these two innovators saw the power in using life insurance as an asset class. The equivalent of a pre-tax income of 10 percent-plus per year, cash value growth was a, “Wow!”
This was a milestone achievement in our long history of innovation in financial engineering.
In 1980, I returned to Cleveland and was fascinated by COLI. It wasn't about the money; it was about how the math worked. Learning about the leverage and tax management I could put to work with life insurance was fascinating. Being involved in this work planted seeds for a deep understanding of insurance as a financial instrument. Early on, I learned the value of “stress testing” and discovering the financial acrobatics I could create was exciting. Desktop computers allowing for never-ending solutions (combined with no sleep) allowed me to master financial design with insurance and fueled my problem-solving skills, leading to our foray into intellectual property.
In 1983, we implemented a modification to the client’s plan saving the company from its first losing year to a small gain by redesigning the program and creating intentional realized — but untaxed — profits. By updating the plan and concurrently implementing a Rabbi Trust, then a new strategy that protected the executive benefits in the event of a takeover, we were once again innovating in the financial arena. Wall Street was going wild with mergers and these trusts put a “Star Wars Defense Shield” around the assets.
At this same time the work my father had pioneered and innovation with insurance was drawing attention. People around the country — other insurance brokers and financial professionals — began seeking us out to address problems they couldn’t fix — we developed solutions. The world of what had become known as non-qualified benefits (benefits engineered for senior executives, versus qualified plans covering all employees with low limits) was rising. Public companies were growing through M&A and a focus on COLI-funded executive benefits was rampant.
COLI was recognized to be the financial instrument of choice and our timing and expertise were perfect.
In 1987, I returned from my honeymoon and I called my father to learn that our client with that first Rabbi Trust was being taken over and, in turn, our work tested. Happily for all, it worked. This takeover was momentous as the first big Rabbi Trust in the U.S. to trigger; a very cool moment to see how our planning had played out. It was a landmark milestone in the world of benefits finance, and we were driving it right down the middle of the fairway.
In 1992, the U.S. Patent & Trademark Office awarded our first patent on a financial program we created using life insurance to address a $2 trillion benefit liability being recognized on the books of the Fortune 1000. Our patented process was the only tax-deductible way to fund these liabilities. We licensed that IP to four of the largest insurance companies, an early lesson in earning income from other people using our ideas and the power of IP. Nearly three decades later this cauldron of innovation continues at Gottlieb. Developing unique solutions to financial problems, building companies around intellectual property and leading the way is just what we do.
The history of The Gottlieb Organization is marked by innovative approaches developed to push beyond ordinary results.
We were responsible for meaningful milestones in the world of insurance, pensions and benefits finance. What we did, how we thought and our process — while we may have used similar instruments and talked about similar subject matter — was increasingly different. Not different to be different, but different because we have this relentless drive to find an extraordinary solution. We continue to re-invent the industry, driven by our dedication to the convergence of knowledge, creativity and solving problems — punctuated with distinct intellectual property.
Thanks for joining us today. Stay tuned for our next blog where we'll talk about the vision for the future of The Gottlieb Organization.
Joshua A. Gottlieb is the Chairman and Chief Executive Officer of The Gottlieb Organization.