A Better Bank

Leaving church last Sunday someone asked the pastor why they have been preaching the same message over the last year. The answer was they’ll keep preaching the same message until the people start to apply the message. Well, that’s me. I’ve been educating people on the many advantages of a great new, although not new, strategy for over a year now.

My role as a financial advisor and financial planner is to keep up with new financial planning strategies and identify the ones that work better than or complementary to conventional financial planning.

One of these new strategies is Infinite Banking® (IBC®), something I’ve called previously “Working Capital Account” or “WCA”. 

Albert Einstein said, “there is nothing that is a more certain sign of insanity than to do the same thing over and over again and expect the result to be different.”

This quote is a perfect lead into discussing some of the shortcomings of conventional financial planning.

My research on IBC® privatized banking indicates it’s much better than relying on commercial banks – and improves on many of the strategies of conventional financial planning.

IBC® is simply a “privatized banking” system.  This system is a grassroots method of avoiding Fractional Reserve Banking and by doing so allows you to recapture control of your money.

“Privatized banking” is not the same as what commercial banks offer as “private banking”.  Their use of “private banking” is simply marketing.

IBC® uses dividend-paying whole life insurance policies as the working capital account to facilitate “privatized banking”.  Why a whole life policy? Because there is no better or safer storehouse of working capital account wealth to use with “privatized banking”.

New and different

“Privatized banking” is not a scary or complex thing.  It’s a good thing that has been done before the formation of central banks.  As with anything, new or different, there is a learning curve.

As with anything new and different, you need to research it and change paradigms.

Change does not always happen quickly. One reason for this may be the 10% rule that states until 10% start to apply an idea it does not get traction. 

One of the best ways to explain how IBC® is different than conventional financial planning is by asking are you, a spender, saver, or wealth creator?

Spender, Saver, or Wealth Creator?

Spender. The spender has no liquid assets and has no other choice than to borrow from a financial institution when making a major capital purchase.

Saver. The saver prefers to save toward a major capital purchase and then pay cash – they cut down the apple tree. The saver must then save again for the next major purchase. While the saver does not pay interest to a financial institution like the spender, the saver forgoes earning future interest on the money consumed by the purchase.

Wealth Creator. The wealth creator saves to build up a continually increasing usable pool of undisturbed compounding capital. When a major purchase is required, the wealth creator is then in a position of strength to choose how to finance the purchase at the most favorable terms and rates.

The “wealth creator” is IBC® – and its not new.  It’s been around for over 150 years. Not previously known as Infinite Banking®, until the year 2000, it is having a resurgence because people are realizing the conventional financial planning model is not working very well.

Comparison – Saver, Spender, Wealth Creator (IBC®)

Putting these charts side-by-side should communicate the significant advantages of IBC®.

Here’s several more reasons why IBC® deserves your attention and implementation complementary to conventional financial planning.

1. Conventional financial planning does not allow you to maintain control of your money. When you make a deposit at the bank its no longer yours.  It now belongs to the bank.  When you deposit money, the bank accepts it based on giving you an IOU. Its only when there is a run on the bank that you realize this – you may have to wait up to 90 days to get it.  This is because of Fractional Reserve Banking which allows the bank to loan out your money and up to another nine times to others.  This means the bank only holds 10% of all the money in the banking system.

2. Conventional financial planning does not recapture “opportunity cost” lost. Opportunity cost lost is what happens when you cut down your apple tree (when you redeem/withdraw money to by something in cash). Cash is the same as financing because you lose all the growth that capital would have earned had you not cut down your apple tree.  Since conventional financial planning offers no solution to recapture opportunity cost lost, IBC® should a no-brainer.

3. Conventional financial planning does not recapture “lost money” (personal and business loan and mortgage payments). Who receives the interest on money you borrow for personal or business loans? The bank. That’s why they’re so profitable. Infinite Banking® is the only way where you can be your own banker, borrow from yourself or your business, and recapture lost money.  This lost money adds up to hundreds of thousands of dollars of loan and mortgage payments over your lifetime.  Since conventional financial planning offers no solution to recapture this lost money, IBC® should a no-brainer for anyone who borrows money. All you need is the discipline to accumulate in advance and borrow from your own working capital.

4. Conventional financial planning does not obtain decent returns with lower risk.

Have you ever noticed when you buy something the advertised price does not include tax and shipping?  You order something say for Christmas and then notice the price you paid is so much more.  Stock market returns are similar.  The media misleads the public by reporting stock market returns before fees and taxes.

While never intended to be an investment, below is an actual case of a dividend-paying whole life policy issued in 1990 by a wise dentist in Ontario.  (You don’t have to be a high-income earning person to have duplicated the following returns.)

I calculated the policy returns from 1990 to 2021.  Its cash value growth was 4.39% annual over that period.  Its estate value (death benefit) growth was 7.14%.

In comparison, the S&P/TSX over the same period was only 4.07%, and that was with eight times more risk than the whole life. 

Assuming returns are the same, and that’s what the evidence shows, why would anyone invest in a  higher risk option? 

Since most investors are “balanced” investors this means lower risk (closer to 5% risk), however, you also receive lower returns. Whole Life risk is only 1.76%.

Back to the above policy, in 2022, the policy grew by a dividend paying 5% during a time the S&P/TSX 2022 year-to-date has lost around 5.85% plus fees. 

Further, the above returns were generated from the traditional whole life policies.  Today’s dividend-paying whole life policies are not your parents or grandparents policies.  Today’s whole life policies offer additional deposits which mean returns have the potential to be even better.  

5. Conventional financial planning does not lock-in investment gains.

Warren Buffett says “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.”

Most investors are not experts and therefore have little to limited knowledge investing in the stock market. Therefore, based on the above, most would do as well or better building wealth in a dividend-paying whole policy and accessing their pool of working capital through the Infinite Banking®.  Certainty is important.  The last thing you want when you want or need access to your money is to find out the value you thought you had dropped due to market volatility.

Let’s consider some possible scenarios where locking in gains is prudent.

• • You’re a leveraged real estate investor real estate values drop – when this happens your bank of line of credit shrinks and may be callable.  Not so with Infinite Banking®.
  • Next 1929 Stock Market Crash – The measure of a good financial security plan is having access to money when you need it. If there was another stock market crash like the 1929 stock market crash, would you be okay? People with dividend-paying whole life insurance policies were okay.  Those with stocks were not as okay. You see, cash is king when it’s needed the most.
  • Next Pandemic – When the next pandemic hits would you be okay? People with dividend-paying whole life insurance policies were.  Those without were not.
  • Next Devastating Inflation – When the next devasting inflation hits will you be okay? People with dividend-paying whole life insurance policies were.  Those without were not. Cash is king when it’s needed the most.
  • You lost your job – When you lose your job will you be okay? People with dividend-paying whole life insurance policies were.  Those without maybe not.

6. Conventional financial planning promotes government tax-infected programs. RRSP, RRIF and RESP plans are tax-infected traps that result in you paying more in taxes than the tax savings provided.

7. Conventional financial planning does not provide a safe withdrawal rate higher than 4%. Do you know why?  Its because of the expectation of stock market losses. Infinite Banking®, due its guarantee of no losses, normally allow you the ability to withdraw significantly more than 4%, making it so much more efficient.

8. Conventional financial planning does not allow you to borrow non-invasively, and privately. With a little patience and discipline, you may be able to never have to borrow from a bank ever! With Infinite Banking® you never need a credit report.

9. Conventional financial planning restricts contribution limits into TFSA (Tax Free Savings Account). The original TFSA was dividend-paying whole life insurance – and it still does not have a contribution limit. Why would anyone want to accumulate money in a TFSA that has contribution limits?

10. Conventional financial planning does not allow you to, or dissuades you from, accessing your working capital to invest in other opportunities. Wouldn’t it make sense for you to have total control over your TFSA, RRSP, RRIF, RESP and pension plans – where you can access them as working capital and use this working capital as you see fit to finance things and opportunities you want or need? Many who have a government defined benefit pension have up to two million dollars of their money inaccessible. IBC® allows you to do this!

11. Conventional financial planning contributes to the devastating inflation problem. Having the ability to use their own capital as opposed to borrowing from the bank is doing something that will decrease inflation by not fueling Fractional Reserve Banking.  Its like doing some thing positive for things like climate change and deforestation. Be part of the solution, not the problem! Stop borrowing from deposit-taking banks and start an IBC® policy!

12. People need and want life insurance anyway. You can’t buy life insurance any cheaper or more tax effectively than bundling with IBC®. More extras include preferred creditor protection, not of public record, faster distribution on death and exempt from probate (estate administration tax).

Summary – Conventional Financial Planning vs IBC®

The chart below, which are the 12 things people want, summarizes the above bullets.  IBC® offers 11 of the 12. Conventional (traditional) financial planning only offers 3.

I’m not suggesting you need to abandon conventional financial planning.  However, I hope you see how IBC® contributes to better financial planning. Many, after learning about IBC®, use it to diversify conventional financial planning.

This article was to communicate how you can improve your financial planning.  It is the only way to recapture hundreds of thousands of dollars in lost money.  That alone is enough of a reason to implement this.

The other reason for this article, is to share with your children. There is no point for them to follow the crowd with conventional financial planning that are not working.

Taxes and inflation will continue meaning its going to toucher for your children and grandchildren. There is no better advice available to share than what is in this article. You need to share this with your children to make a better difference for future generations. 

Next steps

You and your children will greatly benefit from implementing IBC®. 

There are only about 50 licensed financial advisors who are Authorized IBC® Practitioners,  certified to share IBC® out of 136,000 licensed financial advisors in Canada.

Procrastinating researching and implementing this only leads to a further “opportunity cost” loss.

I implore you, at a minimum, to learn more and have a conversation about IBC® now. Its time to stop doing the same thing and expecting different results.