IBC Mailbag: traditional advice, policy loans, hyperinflation

I get a lot of questions about Infinite Banking.  For this post I'm sharing a recent email I responded to from a potential client.  Names have been removed.

Hi ----,

Thank you for your questions.  Definitely a lot of craziness going on.  The life insurance industry is not immune either.  Some age groups are being excluded (over 70) temporarily, scheduling exams is a very tall order, and doctors offices seem to be overwhelmed so getting medical records to underwriters is super slow. 

It doesn’t surprise me your traditional financial advisor is skeptical.  

They’ve been trained and conditioned to think, recommend, and implement Wall Street based portfolio plans.  Life insurance is mostly an afterthought to traditional advisors because they operate on a Wall Street revenue model.

Sadly, Infinite Banking is unknown to the majority of life agents because the life insurance industry doesn't teach this strategy.   Life insurance industry trains agents to sell policies for maximum death benefit protection.  So it’s the proverbial “can’t see the forest thru the trees” for traditional Wall Street advisors and life only agents which is why working with an authorized IBC advisor is the best way to learn and implement the strategy.  Authorized being the key word there.  (The Nelson Nash Institute is where you can go to confirm your advisors status.)

Infinite Banking isn’t even about the death benefit.  It’s not even about having a Whole Life policy.  The Whole Life policy is just the best vehicle for the strategy.  If it wasn’t we’d be using and recommending bank line of credits, mutual funds, and 401ks/IRAs instead.  But none of those options give us control over our money safely and efficiently (…and even tax-free) all in one place.  IBC is about freedom over our money—taking control back from banks and Wall Street.  Traditional advisors (Banks/Wall Street) want that control outsourced to them so IBC is naturally a paradigm shift from mainstream financial planning. Traditional advisors also don’t practice IBC so seeking advice from them is like going to a foot doctor for a chest pain.

I’d be happy to show you options for retirement income using the strategy.  We can do a virtual appointment and I’ll record it so you can share with your wife.  Schedule here:  www.IBC.guru

Regarding loans, there’s more to it than the loan rate...

Loans are simple interest and calculated at the end of your policy year.  Currently, most carriers loan rates are 5% which is fixed for 1 year at a time.  Historically, policy loan rates have been between 5-7% because the borrowing rate is based upon a cost of money index used for the largest AAA rated companies in the world.  Essentially, policyowners get to borrow at rates available to blue chip corporations.  The 5% rate hasn’t budged in 13 years and when they have adjusted up or down, it’s a slow movement.  Life insurance companies tie the borrowing rate to this type of corporate money index because it also happens to be where 90% of their investment portfolio resides. 

So when I request a loan from my policy, they are more or less approximating the same interest return on their investments as they will now eventually receive on the policy loan I take.  Also, keep in mind all the policy loan interest is revenue for the life insurance company.  Since these companies are mutual based (owned by policyowners), this revenue from policy loan interest ends up as part of the surplus profit of the life insurance company and what happens to surplus profit?  It gets returned to policyowners (you and me, not shareholders on Wall Street like with stock based life insurance companies) as a dividend compounding our cash value and death benefit further.

FYI, there are policies that offer a fixed rate policy loan but fixed rates are generally 7.5 to 8%.  My oldest IBC policies are fixed at 7.45%.  I rarely use the cash values in these policies because my other policies are at 5%.  My family (me, my wife and 3 kids) have a total of 11 policies so we have a pretty substantial pool of money that’s always growing and under our control with access at various rates.  I tell people if they are really practicing IBC properly, they will have more than 1 IBC designed Whole Life policy and when that happens you can diversify with policies that have slightly different options depending on what you’d like, including different borrowing rate options.

Another key aspect with policy loans is that because interest isn’t calculated until the end of the policy year, each loan repayment I make goes towards reducing the loan balance dollar for dollar i.e. 100% volume interest.   Super consumer friendly.

This doesn’t happen with a bank loan.   Banks collect a portion of interest from your payment first, then the difference is applied to the outstanding balance.  This effectively delays debt repayment… and don’t forget, all banks are also charging compounding interest while they delay the debt repayment.  Think of a mortgage payment.  How much of a mortgage payment is interest first?  The majority of it.  Car loans, credit cards… same story.  Not with a life insurance policy loan.  Every cent of the loan re-payment directly reduces the policy loan balance.  Policyowners come first.

So nominally you might be charged 5% but your effective interest is lower because you reduce the loan balance dollar for dollar.  Your effective loan rate (percentage of %)is actually lower 

You also determine the loan repayment schedule.   You are the banker.  

Meanwhile the underlying asset (the cash values and eventually the death benefit) securing each policy loan are compounding in value while the money is used elsewhere for any purpose:  pay down debt, invest in other assets, pay taxes, or even for retirement.  😊 

Nothing like it anywhere else. 

With regards to your concern about hyperinflation

Please see visit the Recommended Books page on my website:  https://jlmwealthstrategies.com/recommended-books/

There you will find the book How Privatized Banking Really Works by Robert Murphy, PhD and Carlos Lara.  It's free to download.  Just click on the image.  On page 340 of the book, they will answer your question about what to do with IBC whole life policies in event of hyperinflation.  The entire book is phenomenal.  You have to get to the end of the book to get to their take on IBC but it’s well worth it.  I have this book available on my website for free to download but I’m including it here in this email.  The arguments are all laid out.  There are other great books on my website with links to purchase, too.  The Pirates of Manhattan is another great book that comes to mind which was thoroughly enlightening, too.  The amount of documentation supporting that book in particular against banks and Wall Street is overwhelming and cannot be refuted.

Hope this email helps answer questions you have about IBC.  Let’s keep in the conversation going.  The more you know, the easier it is to make decisions you and your family can benefit from.

Thank you,

John

The Seen & Unseen of Bank on Yourself/Infinite Banking Concept

You'll want to take the time to read the intro and all the discussion thread banter.  Very informative.

http://enjoyyourmoney.blogspot.com/2010/03/infinite-banking-and-bank-on-yourself.html

Reading articles like the above always remind me of the very first conversation I had with Nelson Nash.  He schooled me and I'll never forget it.  In particular, he told me I was majoring in the minors.  Basically getting caught up in all minute details and missing the bigger picture.  It's easy to get caught up in forensics and analysis of a policy but in the end he recommended returning to the WHY (control the flow of your money) and refer to the basics. He calls it the Seen and Unseen of IBC.

1. There is no safer place for money.  No FDIC insurance needed.  Life insurance companies are solvent.  They must have more capital reserves than liabilities at all times.
2. The money is liquid. Access your cash value for any reason, any time.
3. The money is tax-advantaged.  IRS approved section 7702a.

For the most part, these characteristics are the "seen".  It doesn't take much study to know this about a whole life policy.  The "unseen" is how utilizing this very specifically designed policy will move you from a position of being a saver/borrower to saver/borrower and banker.

Banking is the most important business in the world.  All other businesses will come and go, but the business of banking is eternal.  That's why Nelson will instruct people to have two paychecks in life.  One from their job/business and the other from their banking business.  If they maintain only their job/business, they've giving the banker the other paycheck they could be earning.

People get so upset about the fatcats on Wall Street and the banking industry, yet they fail to understand why the fatcats are there in the first place.  It's because we outsource our individual banking function (give up control of the flow of our money to them).  Wall Street banks will never teach us to control the flow of our money (Be our own banker).  Doing so would mean an end to easy money.

Nothing improves in this world until people change the way their think.  The biggest secret is that we are what we think about the most.  When it comes to your money, my hope is you start thinking like a banker.

John Montoya

JLM Wealth Strategies, Inc.

(925) 386-6639 Office

Authorized Advisor-Bank on Yourself®

A Wise Man Builds His House on a Rock

I heard this recently and it made sense right away.

A wise person builds his house on solid rock. A foolish person builds his house on the sand.

This line of thinking works the same with saving money. We've all essentially been tricked into thinking banks and Wall Street. Just think about where you put your own savings.

It's probably sitting in a bank (you don't own or control) earning next to nothing or in the stock market at risk of loss, probably in mutual funds either at a local investment firm or through your employer retirement program like a 401k.

The best foundational place for your money is where it can grow tax-favored safely with contractual guarantees while allowing full access to your money, also tax-free.

Where is the safest place for savings? It's an Infinite Banking designed Whole Life policy through a mutual whole life insurance company. It must be a mutual company because the profits of this type of life insurance company go back to the policyholders, not shareholders on Wall Street! Also, a whole life policy has contractual guarantees to increase in value each year of the contract and it's even tax favored within the IRS tax code.

You probably don't know about Infinite Banking because the bankers and advisors on Wall Street are paid on Assets Under Management (AUM). They get paid to manage assets.   Nothing wrong with that but follow the money trail and it's easy to understand why they don't incorporate life insurance strategies more into their recommendations.

And the life insurance industry would just as soon hope you not learn about Infinite Banking because the large commissions that can be had on traditional Whole Life policies are only available if the industry can get you to buy as much permanent death benefit as you're willing to buy. This is the exact opposite of what authorized Infintie Banking advisors do.

Authorized IBC (Infinite Banking Concept) advisors structure policies for you with the least amount of death benefit to maximize the cash value of each policy. In doing so, we are able to replicate the exact same characteristics you enjoy with your local bank. The difference, however, is that with a Bank on Yourself policy, you control the flow of your money instead of outsourcing the flow of your money to you bank. That's why it's called Bank on Yourself! You are the bank.

Having control over the flow of money means being able to profit from the financing you do in your lifetime. If you think you don't finance anything, then please read my article "The Simple Truth About Money".

We emphasize the safety and contractual growth of a properly structured IBC Whole Life contract because it provides the foundation of wealth building. Simply put, it is the rock that you build your financial house on.

However, if you like building wealth on sand, your traditional Wall Street/Bank advisor probably has a few more mutual funds to offer you.

Interested in learning more? Go to www.IBC.guru


Thank you,


John Montoya

The Infinite Banking Concept (IBC)- The Most Frequently Asked Question

What's the most frequently asked question I get? Without hesitation:

Why haven't I heard about this before? It sounds too good to be true. 

There are many reasons.

First, this financial strategy seems to be given a new name every few years.  It is originally known as the Infinite Banking Concept (IBC).  Bank On Yourself is another popular name thanks to Pamela Yellen who's book by the same name hit multiple best-seller lists in 2009.  It's also been called Becoming Your Own Banker, Income For Life, the 770 Account, the Presidential Account, Private Reserve Strategy… you hopefully get the idea.  Many names for the same thing.

The Infinite Banking Concept/Bank On Yourself is a savings strategy (not an investment strategy) that also includes a death benefit.  This means Wall Street investment firms do not underwrite, market, or promote IBC/Bank On Yourself.

Sadly, the life insurance industry does not put much effort into promoting IBC/Bank On Yourself either.

Part of the reason is because IBC/Bank On Yourself policies strictly use only dividend paying Whole Life insurance policies.  There are only approximately 45 mutual life insurance companies left in the United States out of 1500+ that exist today.   Of those 45 or so mutual (owned by policyholders instead of shareholders as with a stock based company), maybe 10 offer a competitive and flexible Whole Life policy suitable to IBC/Bank On Yourself.

If you are wondering what the difference is between mutual and stock insurance companies, here's a brief explanation:

Any profits earned by a mutual insurance company are rebated to policyholders in the form of a dividend.  In contract, a stock insurance company is owned by investors who have purchased company stock.  Any profits generated by a stock insurance company are distributed to the investors without necessarily benefitting the policyholders.  This is why you want a dividend paying Whole Life policy from a mutual insurance company.


The savings component of a dividend paying Whole Life insurance policy is contractually guaranteed to increase in value every year and the life insurance company is on the hook for those increases regardless of economic conditions.  In comparison, Wall Street cannot offer any guarantees because they do not insure your money against losses.  They are paid to manage assets and you as the investor assume the risk of losses. The death benefit component of the IBC strategy can only be offered by life insurance companies.

Since Wall Street does not profit from the vehicle that best fits Becoming Your Own Banker, they have no incentive to sell it. Wall Street is primarily interested in 1) managing assets from which they can earn an annual management fee and 2) selling products that bear no financial risk to the firm when a clients assets fall in value.

As a better alternative to mutual funds and 401k's, it is Wall Street's worst nightmare come true should the public discover they could re-allocate their savings into accounts that are insured from loss, 100% access to their money without penalty, and provide tax-favored growth, distribution, and transfer including a life long death benefit protection. Think about it for a moment. Would you still choose a risky and tax-disadvantaged 401k for you and your family over what I just described?

Another reason why you may not have heard of Becoming Your Own Banker, while traditional banks can offer this specific type of life insurance product, doing so would eliminate the most profitable department of every bank: the lending department. Americans have been conditioned from one generation to the next to outsource their individual banking function to their traditional bank. These banks have no financial incentive to give their customers the ability to develop their own banking system within their larger banking system.

It wouldn't make any business sense for banks to teach and offer Becoming Your Own Banker because giving people the capacity to save and borrow from themselves would eliminate the need for banks as we know them. The only reason for having a traditional banking relationship would be limited to maintaining a checking account.

Ignorance is indeed bliss for bankers. Sadly, this is so true that not even bank employees know how to set up their own banking system. Ironically, the largest purchasers of cash value life insurance policies are banks.

Banks purchase more high cash value life insurance policies than any other institutions in the world! And they do it for a variety of reasons which any savvy individual would recognize are the same reasons they should be purchasing it for themselves: safety of principal, to enjoy tax benefits, strengthen financial stability, and to have contractually guaranteed growth provided by the most financially secured institutions in the world (life insurance companies).

Due to the volume of high cash value policies bought by banks, the policies they purchase are now known as Bank-Own Life Insurance or BOLI. Corporations do the same thing with policies known as Corporate Owned Life Insurance or COLI.

Also, the mainstream media is largely controlled by the same Wall Street financial institutions that pay for lobbyists to influence members of Congress. If you don't believe me, ask yourself how quickly Congress intervened to approve TARP money for troubled Wall Street investment firms and bank in 2008? It happened in days.

Compare this to how quickly these same elected officials were willing to reach an agreement on a fiscal budget to avoid a government shutdown. The budget shutdown didn't get resolved until the final minutes even though Congress had months to reach an agreement.

The point is Wall Street's advertising and lobbyist dollars have a direct influence on what we hear, read, and watch from our various news outlets. Turn on the evening news and before too long, you'll be updated on how the stock market fared. Tune into your favorite AM radio station for the same news.

Open any financial magazine, you'll find strategies created and recommended by Wall Street for the benefit of Wall Street. Sadly, we've been conditioned for far too long by the Wall Street marketing machine and now believe that the only option for saving money is investing with Wall Street.

You have to ask yourself why this is? Who benefits? Are there alternatives? If what you thought to be true wasn't, when would you like to know? Wall Street lost over 35% of your account values twice in the past decade. Do you really have to be convinced that any other strategy would be better?

Hopefully, you get the idea of why people haven't heard of Becoming Your Own Banker. There are many high power influencing forces (Wall Street, Traditional Banks, and the Corporate Media) that don't want you to know.

Now I'll get to the biggest culprit which may surprise you. Believe it or not, life insurance companies are as much to blame as any other entity previously listed. Life insurance companies offer an incredible product called dividend paying Whole Life insurance yet fail to invest the time and energy to properly train licensed agents how these policies are engineered to be the safest and most superior savings vehicle ever created.

The fact that whole life policies have survived over 150 years with little change should be testament enough to even the most skeptical of doubters. What is particularly interesting is that the sale of dividend paying Whole Life policies has seen a substantial increase in the last 10 years thanks to the many scandals and financial collapse of storied firms like Lehman Brothers and Bear Stearns and the demise of others who only survived by being swallowed by their peers (think Merrill Lynch and Morgan Stanley among others).

My hope is that the trend continues. I can't think of one person who would not benefit from having a safe, tax-free, and guaranteed way to grow their money.

As disappointed as I am in the life insurance industry for the lack of leadership in promoting the Infinite Banking Concept, I understand why life insurance companies choose not to invest the necessary time to train a licensed agent how to design and implement this strategy.

First and foremost, the failure rate for newly licensed agent is extremely high. The majority of new agents fail to make it past their first year. Secondly, any agent trained to sell a policy structured to meet the specific criteria of a Becoming Your Own Banker policy must be willing to take at minimum a 50% pay cut in commission. In some cases, the commission paid on a this type of policy is as great as a 70% cut in commission.

Since the life insurance industry, much like Wall Street advisors, is a sales driven industry, stomaching a 50-70% drop in pay for often what is 5 times the amount of work in educating prospective clients is simply too steep a price to pay.

From the perspective of a life insurance company and any business owner, does it make sense to train an employee who's likely to be doing something else in 12 months how to make 50-70% less on each case? It simply does not.

It's my belief that if insurance companies took the initiative to train a sales force on the Infinite Banking Concept, the length of a career agent would increase dramatically and it would also have the dramatic effect of strengthening the financial foundation of Americans who would benefit and prosper from having a rock solid financial foundation the Infinite Banking Concept provides and 401k/IRA/Mutual Funds simply cannot.


John A. Montoya
(925)386-6639
John@JLMws.com
JLM Wealth Strategies, Inc.
www.CashValueBanking.com