Things to Know When Raising Cannabis Capital - Insurance
Dan Humiston: [00:00:00] Today's show is brought to you by a new podcast produced by MJ MJBulls Media called Hemp Barons. It's a weekly show about the hemp company's products and entrepreneurs who are using this amazing plant to change the world. Listen to a new show every Tuesday on iTunes Spotify and Stitcher.
Jon Weir: [00:00:18] And if you like the show please subscribe rate and review so you were able to get him coverage for state purposes as a user of cannabis products. Where that would have never been available to him previously and that's a great thing for his family.
Dan Humiston: [00:00:44] From M.J. MJBulls Media it's the Raising Cannabis Capital show. I'm Dan Humiston. And on today's show we're celebrating Fourth of July with a new installment of things to know when Raising Cannabis Capital.
Dan Humiston: [00:01:11] Today on Raising Cannabis Capital we are doing another installment of a series that we did about six months ago called things to know when Raising Cannabis Capital and with me today is an old friend John Weir from Weir financial services to talk about things too including a deal to protect your personal financial interest. John welcome to the show.
Jon Weir: [00:01:31] Hi Dan thanks for having me.
Jon Weir: [00:01:33] John and I have known each other for a real long time and I know John has some good insight into what we're going to talk about. You know when you're raising capital one very common mistake entrepreneurs make is getting so caught up in the deal that they forget about their personal needs and the personal security you've worked with a lot of entrepreneurs when they get into deals. You've seen some of the mistakes that people make you know as they get into deals maybe you could shed some light on that.
Jon Weir: [00:02:00] Yeah Thanks Again I appreciate being on and it's nice to connect after a period of time and spending time in the past on the ski slopes. So to your question it's pretty fundamental stuff as business owners. I think most people recognize that it's a basic protections in place and there's three basic exits that can happen for a business owner as an ongoing concern which is retirement death or disability. Actually you can access it prior to that and cash out. What I speak to in my work is life insurance and using life insurance for those fundamental protections of key person coverage or if you have a partner situation I sell life insurance is a very effective alternative asset as well that by funding or investments it can provide collateral.
Dan Humiston: [00:02:54] I know the like one thing that blindsided me the first time I worked with investors was how my relationship with my business changed after I took on the investors and explained before the business and I were basically won and it was fine because I owned a hundred percent but that's kind of where the problem isn't until you have an investor the best interests of the business is also most cases best interests for you. But when you have an investor where you take on partners it's not always the same. Your personal best interests aren't always in line with your company's best interests. And if you don't address that in the deal leave yourself having problems down the road. I'm going to kind of lead you into what you started to talk about. I think there are a ton of different ways to do this. But on today's show I think we're gonna focus on the life insurance side of it because it is an option that wasn't available for cannabis companies even a couple of months ago. And you represent a lot of insurance companies. What kind of changes have you seen recently.
Jon Weir: [00:03:57] Yes so we are an independent firm but we do work with I guess maybe 15 to 20 different carriers. What's really interesting and what's happening now with a growing of the cannabis industry is the insurance industry is starting to accept and allow for coverage of those involved. As you probably can imagine insurance companies have the same standards as banks and are required to follow the federal regulations with respect to anti money laundering. And those types of things and so that's where the rub has always been addressing coverage in the cannabis industry. So they really have historically not been able to help anyone whether it's someone who's using cannabis or CBD or if they are involved in investments because a lot of times there is a financial underwriting component to getting coverage. So that's really new. I'd say within 12 to 18 months and it's still evolving just like you can't have this industry. So it is an exciting thing for us to be able to help clients. Can I give you an example. Sure yeah. Okay you have one client is actually not directly involved in the cannabis industry. He's a successful broker in New York City and he's a CBD user and has a finger on the pulse of things kind of going on in the cannabis industry and investing in you know with a deep enough pocket he was able to get into an investment when Canada recently legalized as a result he was able to do very very well with an investment. So we were able to get him coverage for state purposes as a user of cannabis products where that would have never been available to him previously and that's a great thing for his family because now you can mitigate all kinds of things down the line taxes the state taxes that.
Dan Humiston: [00:06:00] Yeah. Like you said if you test when they did the blood test and it came up in your.
Dan Humiston: [00:06:05] It'd be like if you failed. Can't give you insurance but that's good. That's changing.
Dan Humiston: [00:06:10] It should change.
Dan Humiston: [00:06:14] I want to take a quick break to thank all of our Raising Cannabis Capital listeners and to remind you that you can support the show by subscribing to MJBulls premium. It's only four dollars and ninety nine cents per month and you gain access to all previous Raising Cannabis Capital episodes as well as all other MJ bills produced podcast and exclusive content including companies investor pitch decks. Go to MJBulls.com and enter promo code raising to get your first month free.
Dan Humiston: [00:06:44] You know most of the time when you've put your deal together the investors will require you to have a life insurance policy or key man life insurance policy. You own the policy but the company gets the proceeds if you were to die and most people end up just getting a term policy. Some cheap policy then you just give statistic check that box. But. I always say get a whole life policy or I don't know if they come whole life or Universal Life policy one that collects cash company pays for it doesn't really hurt the company. And at the end you walk away with life insurance policy that has value.
Jon Weir: [00:07:22] Yep that's the alternative asset aspect that I've mentioned earlier and just to be broad brush high level on what they're looking for the underwriters. That is really on the medical side. It's interesting CVD is really a non factor in the past I guess they say no coverage or there might be an extra costs in the premium for some type of usage. Now carriers are doing traditional placements and they're not assessing this extra charge for use. What underwriters are looking for from the medical standpoint for users are really just frequency and type. And if there are any related health concerns that may have come from it or maybe being treated by it from the financial underwriting standpoint the underwriters are looking at the difference between a passive investor an active investor owner employees and a big part of it for them still is how much of a concentration of their investment is in the cannabis industry and if there's some type of direct investment there's still some reluctance there. There are a handful of carriers now that will look at that specifically on a case by case basis but the majority of them are really looking trying to look at the whole picture and say OK this person or entity as investors can we separate or carve out the cannabis aspect and underwrite based on a non cannabis finance so very similar to banking very similar to banking where if you're touching the plant you grow or your dispensary.
Dan Humiston: [00:08:54] Those are the ones who really have a hard time as you get a little bit further away in your revenue is derived from companies that do touch the plant. It's not as automatic but there's still a little bit of a risk and I know the insurance companies are the same way because they have to adhere to the same banking rules. But the good news is it's changing. That's I think that's really the message here.
Jon Weir: [00:09:14] Exactly. And I said earlier it's evolving daily.
Dan Humiston: [00:09:19] That's why I said if you're in the middle of a deal I would recommend that you look into this. Touch base with person who handles your finances to see if this is available at the time or if there's some way that you you can carve this into the deal. We've been speaking with John Weir from where Prentiss resources and I'll have all of John's information on the MJBulls website so if anybody wants to talk to him directly you can get it get that contact information there. John I appreciate you being on the show today. This is really helpful stuff.
Jon Weir: [00:09:48] You bet. Dan thank you very much. I appreciate it.
Dan Humiston: [00:09:50] It was fun. Thank.
Dan Humiston: [00:09:54] Thanks for listening to Raising Cannabis Capital to learn more about today's guest to become a guest. Visit our Web site at MJBulls.com. Today's show is produced by MJBulls media for the original music produced in part by Jamie Humiston. I'm Dan Humiston and you've been listening to the Raising Cannabis Capital podcast.
The topics discussed herein are intended as general information only. Securities and Advisory services offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Weir Financial Resources and Cadaret, Grant & Co., Inc. are separate entities.
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