Q. Why would anybody who is not borrowing now, enter into this complicated scheme?
A. First rule of finance is that everything is financed. Pay cash and the interest that otherwise would have been earned on that cash is lost forever. Finance the purchase with a bank/finance company and interest is paid to a 3rd party and then of course, any future interest on the money once paid in full is also lost forever. So even if one is not borrowing in the traditional sense right now, they are paying cash and succumbing to opportunity cost. IBC eliminates opportunity cost because your pool of money is always working for you earning interest and dividends even if you use it to pay cash elsewhere.
I don't know if it's complicated more so than it's just not widely understood by the masses yet. We all grow up outsourcing our individual banking function to the local bank so that becomes our norm. What happens when the banks control the flow of money? They get to call the shots. The idea of doing something different always seems complicated at first. IBC puts the individual in the driver's seat by allowing them to create a reservoir of money that they control. This reservoir of money becomes a cash-in system vs. the cash-out system that our local banks operate for their benefit, not ours.
Q. Why do we need to pay interest to our own bank?
A. Additional interest further capitalizes your bank for future opportunities. The interest becomes capital that not only benefits the family with an increased death benefit and increased cash value but the money is also safe, liquid, and growing contractually in a tax-deferred environment. The question I ask: in the final analysis, where is the best place for your cash? Mutual funds, real estate, bonds, stocks, etc.? There isn't another option that provides the benefits and safety IBC does. Not only that, an IBC policy allows the cash value to be used for any purpose including the purchase of mutual funds, real estate, bonds, stocks, etc. It doesn't restrict options. It safeguards them.
Q. Why do we need an insurance company to make our own bank a reality?
A. None of the other options for our cash can recreate the banking process. Banking is a process, not a product. Additionally, we use a life insurance company because it is a financially solvent institution unlike a bank which operates by lending more money than it carries in reserves (Fractional Reserve Banking). We need our money to be safe and liquid at all times. (Banking secret: banks purchase more cash value life insurance with their assets than any other corporation in the world!)
I think to best understand the answer to this question, we should think of traditional banking as if it were a Shakespearean play with four main characters:
1. Shareholders - them - owners of the bank business looking to make a profit
2. Employees - them - operators of the bank there to earn a living
3. Savers - possibly you - the banks aren't going to lend their own money so they pay interest to the savers for the use of their money.
4. Borrowers - definitely you - banks make their money from lending and so it needs borrowers like you to take out loans for cars, mortgages, college tuition, etc.
The borrower is the most important character in the play (banking process). Without the borrower, the savers wouldn't earn interest on their money, employees couldn't earn a wage, and shareholders couldn't turn a profit.
With a mutual based life insurance company (mutual meaning owned by policyholders), the borrower is not only the saver (each whole life contract is contractually guaranteed to grow each year) but the borrower/saver also participates in the profit of the company because dividends are paid to policyholders, not shareholders. Now instead of the traditional bank cast of players, we have an IBC cast of players that looks like this:
3. Savers- you
A mutual based life insurance company replicates the banking process that happens at a traditional bank. We just need to adjust our thinking to recognize the players in the play. We don't want the responsibility of running the business so instead we'll hire the employees. As with all businesses, there are expenses. Employees symbolize the expenses one pays in the whole life policy but like any expertly run business, the employees are necessary and help maintain and grow profitability. The same thing happens with an IBC policy. Each year, the policy (banking business) becomes more profitable and is in fact contractually guaranteed to become profitable. There is no other business that can offer the same guarantee and no other business in the world as important as the business of banking. If we don't control our flow of money by creating a family banking system, the banks will always be there to profit from the use of our money. It should be no wonder to anyone what happens in this world when bankers position people in a corner.
"Businesses come and go, but the business of banking is eternal." - R. Nelson Nash, author of Becoming Your Own Banker
Q. Is the desire to do better than banks the right rationale for embarking into something so complicated and not free from expenses?
A. I believe the proper perspective or rationale is to replace your cash-out banking system with a cash-in banking system. Cash out means gone forever. The traditional banking system wants us to subscribe to their way of banking because they profit from lending our own money back to us. It is very parasitic in nature. I have to argue that a traditional banking system is far more expensive because the lost interest we lose by not controlling our money can literally add up to hundreds of thousands of dollars in person's lifetime. Ever checked the amount of interest paid on a mortgage or a car. How many homes do we buy in our lifetime? How many cars do we purchase in our lifetime? How many kids do we send off to college? How many major purchases do we pay for with cash?
Nothing in life that is worth having is free. Traditional banking is certainly not free. We just think it is or complain when we have to pay any sort of fee. The truth is traditional banking is far more expensive than starting an IBC policy which is contractually guaranteed to break even and become profitable. Every dollar of premium is eventually accounted for. What is the cost of the much larger death benefit and all the living IBC benefits at that point?
There is no better business to begin and participate in, especially considering that banking is a fundamental process of our economic lives. Once understanding this truth, a person should want to start learning how to profit from the banking process they are already are utilizing anyway. If you don't, your traditional bank is very happy to profit from you and make no apologies for doing so.
Q. How might IBC appeal to different age groups and family circumstances?
A. Each IBC policy is customized for every individual. No two policies are alike. At the end of the day, this is a savings vehicle. It's how the majority of people saved money before mutual funds offered mom and pop an entry into the world of speculation.
People once faithfully paid into their whole life policies when insurance salesman went door to door collecting premium. Nowadays the idea of saving money is foreign because speculation rules the street. People now invest with their savings. Investing to save is not saving. It's still just speculation.
Most age groups and those from all circumstances I have encountered can and have benefited by having money saved for future use. Retirees are the one group that have posed a challenge with IBC because they are no longer producing income to capitalize a policy. However, they have more assets than any other group and could capitalize a policy over a set number of years by re-directing non-incoming producing assets into an IBC policy. This would be done to safeguard their assets from exposure to stock market loss while creating a greater legacy for heirs and providing the living benefits of IBC. All our worthy benefits. An insurance contract also does what Wall Street cannot do which is guarantee income for life. That perhaps is the greatest scam Wall Street gets away with...
John A. Montoya
JLM Wealth Strategies, Inc.
(925) 386-6639 Office
Authorized Advisor-Bank on Yourself®