Part 2: The Truth About Whole Life Insurance - Experts Debate

Well, I remember trying to explain it to my wife because she's like, okay, we're putting how much money into this thing? I'm like, no, babe, this is literally the best thing since sliced bread.

Infinite banking, bank on yourself, cash flow banking, all those programs are marketing strategies to sell more whole life insurance.

Insurance is valuable. It has an important use when you use it for the death benefit, and that's what I did.

Welcome back. This is part 2 of our whole life insurance conversation with Caleb Williams of Better Wealth. And Jim Doo of Doo Wealth Management. This was originally one long conversation, and if you haven't listened to part 1 yet, I encourage you to pause here and go back and listen to that so you know exactly where we pick back up in the conversation. And we're going to talk on this episode a lot more about infinite banking and the idea of using whole life insurance policies for quote-unquote infinite banking. I share some of my own experiences, the good, the bad, and the few what was I thinking moments. We talk about why this strategy gets oversold, but also when it can make sense. And at the end, Bob and I have a little debrief and share some of our takeaways. So let's get into it. Let's shift a little bit to the ideas around infinite banking, right? So this is, I'd say, a subset of the whole life community. And Caleb, when you, when you opened up the, the conversation here, you went straight to the jugular and said, you know, people in my space, um, oversell this. You mentioned 3 things. And as you're saying that, I'm sitting here thinking, oh man, that's exactly what I was sold on the product that I ended up doing when I was probably 26 years old. And it was a massive stretch of my budget at that point. I'm still paying that thing. I don't know if I should keep paying it or not. It's okay. Let's talk after this. But the guy sold it as an investment. He showed me that guaranteed number. He's like, I have 15 policies on myself, my wife, and all my kids. And it's the best thing since sliced bread. And then I found out literally like 6 months afterwards that he was banned from that company to ever sell again. Probably later, a new guy reached out to me. So I literally was stuck holding this policy. I can't talk to this guy anymore because he can't— he got banned. I don't know why. I mean, I don't think it was good.

I think I know why.

So talk about that. Talk about like, this is where I think it's really oversold. Yeah. And in our space, especially in real estate, the number of people that talk about this as the ultimate magic, you know, silver bullet of this solves all your problems, you can arbitrage it, it's— you get two streams of income, and it gets so fuzzy so quickly. So let's break down a little bit of the one, the concept of infinite banking. And Nelson Nash is kind of the creator of this concept. And then talk about how it's oversold and then we'll kind of go from there.

Yeah. So the concept of infinite banking, let's take insurance out of it. All the concept is, is it's pooling your money in a place and you— and then any time you purchase, utilizing your capital, making that purchase instead of using other, other things and then paying yourself back. That's, that's the concept of infinite banking around your— over time, you'll be able to pool money in a place use, use that capital to acquire other things. And then instead of paying the banks back, pay yourself back. Now, I think that alone, there's a lot of people that teach infinite banking that are anti-banks. They're the ones that are showing you how to pay off your 3% mortgage with an insurance policy. That's like, should be malpractice. So there's, there's like crazy things that are being done. And there's some people, Nelson himself is like, this is how we overthrow the Fed. The Federal Reserve is this evil organization that's printing money. And and that might be a pure idea, but we all know that we're not going to overthrow the Fed by putting money into a life insurance policy. I think that in itself can be extreme. So where I think of this as is, is I take the concept of infinite banking and just be like, we all have a desire for an emergency fund and an opportunity fund. And some people might put their money into savings and checking and then they deploy it into some investments. I personally like to put a large chunk of my money. Uh, even though Jim does not agree, I like to put it into life insurance with lots of flexibility. I get the benefits of insurance and then I can borrow against that capital to acquire other businesses, other alternative investments. Yes, you do have to, you have to factor in everything, risk included. Um, which Jim and I would both agree on deploying money, doing due diligence on things is really important. Um, and so, oh, over time, I'm getting all the benefits of my money being in life insurance because my capital is still there. You're borrowing against it. So I'm getting the benefits of life insurance over, over my time and I'm getting to use that capital to acquire other things. And that's the premise.

You can have your cake and eat it too.

But there's a cost to it. There's a borrowing cost. Another common thing will be like, yes, Caleb, but you have to pay interest to use your own money, which You're using the insurance company's money. That's why it's important to say, like, it would be dumb if I was pitching you an account that only earned 4% but said you could, you could use your borrow against it for 5%. Well, if I'm only earning 4% and it's costing me 5%, I'm equivalently putting my money in a -1% savings account. That's, that's dumb.

Well, can I hit that real quick? Because I've seen proponents of the strategy say, well, let me show you how you actually still make money because they're wrong. I'm confident they're using bad math.

I just debated someone. I agree.

It's shocking to me that people go out and say with those types of numbers and say this still—

that what they're saying is compound interest versus amortized interest, which is not factoring in opportunity cost. It's misleading. It makes us all look bad. And yet majority of people that teach infinite banking are talking about that.

Yeah.

I just want to go back to the addressing the 4%, 5%.

Yeah.

You're an idiot if you're putting your money in a 4% account, borrowing at 5% and thinking you're ahead long term. My, my belief is over time, if set up and used properly, which I know is a big if, Jim, is that there's other benefits to that 4% that are not being factored in. You could just look at the cost of insurance and the tax, tax-deferred benefit, because in a savings account you have to pay ordinary income tax. And so just factoring those two alone gets you over in that equation more than 5%. But I'm saying all the other benefits that I listed are things that we need to factor in. And you could look at them as maybe liabilities, as extra costs. I see them as, as, as an amazing asset that's only going to get more valuable in the future. But again, like, I, like in my permanent policies, if I didn't want to fund, I could reduce, pay up my policies and never have to pay again. And it doesn't blow up in my face. So again, I maybe I might be talking because of a segment, but I think overall on TikTok and all these people that are like pitching infinite banking, they're like— statistics will say that they won't be in the space. Over 90% of people will fail. And so they're selling these things. They're over-obligating in these policies that are not well designed. Their agent's not going to be around. And even if they were, they weren't going to be that helpful because they don't know what they're talking about. And people are then buying cars and like they think they're getting rich by going on vacation, which is bad math. And so overall, infinite banking has been pitched really, really poorly. But that doesn't— it goes back to the credit card example that I mentioned. It doesn't mean all credit cards are a scam, but overall, if we could go without credit cards, I think America would be better off.

I mean, I agree with a lot of what Caleb's saying. Let me just make a couple distinctions here because Infinite Banking, Bank on Yourself, Cashflow Banking, all those programs are marketing strategies to sell more whole life insurance. And Mimi and I— here's another perspective I have. Mimi and I were significant shareholders of a community bank for, let's see, I do the math, 6 years. And owning life insurance, doing a contract with a life insurance company to buy whole life insurance is nothing like owning a bank because we owned a bank for a while. They are totally different. The concept is great for a sales and marketing strategy, but it's nothing like owning your own bank, right? Because we have owned our own bank, and I can tell you those are very, very different animals. Uh, the other thing that you have to remember is, and let me just take the other side because I agree so much with Caleb on this stuff, is yes, you can do all those things. You can also do those things with a money market account. Yes, you pay tax on the interest, but total flexibility. You're not in a contract with a life insurance company and it's super simple. You don't have to worry about taking loans and paying the money back and all that kind of stuff. And let's say you took a ton of money out of your whole life insurance to make a real estate investment, and that was going really well. And you go, that money's going to stay there for 20 years. Now you're creating a problem because if you pull, suck money out of these policies and then you never put money back, you can get yourself in a danger zone. And you can't pull it all out. You know, you could pull it all out of your checking and savings account and then put it back in. And there are other alternatives, right? Laddered muni bond portfolios that are tax-free and stuff like that. So, as far as keeping your life simple and as far as complete flexibility, there are better options. That being said—

Can I respond to that, Jim? And then—

Let me just finish this one thought and you can respond. And that's, aside from that, overfunding a policy, the infinite banking, it can work. Have I seen it work? Virtually never. I've seen people buy it with all these good intentions. They never actually use it the way it's intended. And then it becomes—

And it's just because of the effort to do that. It's just kind of a lifestyle thing of the way you do your bills.

Here's what I see with successful entrepreneurs. If it's more than one step, like if you have to do 2 or 3 steps, they just don't do it. And so, that's why you try to simplify it, set it and forget it when it comes to investing because they should be focusing their time on their business. So, if you don't do infinite banking right and you just plow a ton of money into a whole life insurance policy, The opportunity cost if you're young is enormous. And that's my concern.

And Ben, that was kind of your experience, right? It was like, you know, you were sold this thing and it's super good on paper, and you're a sophisticated guy. You still never implemented it like it was intended to be implemented and never got the money.

I remember trying to explain it to my wife because she's like, "Okay, we're putting how much money into this thing?" I'm like, "No, babe, this is literally the best thing since sliced bread." And I'm talking through it. I'm trying to dive into why this is actually so good. And I actually couldn't get to it. And she just still was confused. And I was kind of confused after I talked to her about it. And then so I read the book again, Nelson Nash, and I'm like, okay, so I got to go pay myself the interest. But okay, a guy who's a finance degree, I know numbers, I know spreadsheets, I'm a pretty disciplined guy. I've never once taken a policy loan out and paid myself back from paying myself the interest that I would've paid to an auto lender or my mortgage company. And so the practice of it is very difficult because it requires one extreme discipline and some sophistication. And I'm moderate on both of those, but still, I've had it 12, 14 years at this point. I just use— I pull the cash out and just use it for whatever. And I'm not a great case study, but it has been very difficult for me to implement it.

But that's an example. That's a good example of the opportunity cost of not using your policy because now you're earning maybe an equivalent of 2% or 3%. I'm not sure how it's structured versus what the S&P did just alone. Not that we're all S&P fans. There's a, there's a big opportunity cost there. What I just want to mention, Jim, you're totally right. You can take lines of credit off of lots of different things. The difference, though, is insurance. Like, really, if you had to compare, you have to compare it to a money market or like a very safe muni bond strategy. And if we want to give us a hard time about lending against— like, those are— you could make it— how many people do you actually know lending against their high yield savings account. Most people are not doing that. And then when you also look at the benefits that you're getting in a muni bond, you're getting maybe a, maybe a greater yield, but it's not, doesn't come with the death benefit, which we're not, we, you mentioned early on that death benefit's important. Having a permanent death benefit, that's going to happen. Like what are the two guarantees? Death and taxes. Like having a permanent death benefit on upon your life is a tool that you can use when it comes to planning. It is a tool that potentially you could be more aggressive spending down other assets. Maybe you could— there's other things that you could do, but maybe you could take different annuity options because you have this permanent death benefit. God forbid, maybe you could do a reverse mortgage and give your kids the option to do death benefit or keep the house. It's like there's other things that you could do by having that permanent death benefit. And so you're totally right. It could maybe be simpler to lend against other things, but that's where insurance does give you those benefits if done properly. But I think we would all agree that if not done— and this is not a pitch for me, but I'm just saying like overall it's not organized well. A lot of cases it's not done properly. And as a result, you'd be better off just not doing it because of going back to your question, Bob Fraser Fraser Fraser, how do I know if it's done properly? It's not going to sound good to say like, well, do work with us. But that ultimately is why we have a YouTube channel and why we do certain things, because most of the people that don't like our content are insurance people because they are feeling exposed and they don't want their clients watching our content because they're like, I'm with the same company. Why does this— why are what they're telling me look so radically different than what I have?

And so now you're saying there's— you're saying there's death benefit, you know, that's the difference. But then you're saying, you're saying, okay, if you're overfund a policy and use infinite banking, it doesn't have enough death benefits, you've got to do term to get your— so, so you're talking on both sides of the No, no, no, no, no.

Let me, let me— it's— we're talking about human life value. So if I want $20 million worth of life insurance, that's, that's going to be a lot of premium that I need to get from a permanent life insurance standpoint. So it's a lot easier to get some term. But over— and again, we're not going to show illustrations, but on the illustrations that we— I shared with you guys, the, the initial death benefits started at $1 to $2 million and over 30 years was almost $7 million. And the example that I just want to use is why did it grow over that time? It's because we're optimally funding. But to make it all tax advantaged, the death benefit has to go because it cannot be considered an investment. It's insurance. And so that when your likelihood of dying is highest, i.e., you're old, your death benefit is going in a, in an overfunded policy is going to be at the highest. Now, we could argue $6 million might not be much, but it's $4 million more than what you initially started. And if you started with $6 million, most of the money that you'd be putting in would be eaten up in commissions and cost of insurance.

Here's the counter I would make to the death benefit argument. First of all, 80% of policies are canceled before the death.

I hear you.

Yeah, so that doesn't really apply. And the other thing is, if the death benefit's important, there's a lot less expensive ways to get that death benefit. If you look at guaranteed universal life, where you can guarantee these death benefits to $120,000 or maybe more. That's a much less expensive way to get the death benefit if you want it so that you have other options in the future. So, for those two reasons, I would say the death benefit isn't as valuable as maybe you're saying.

So, Jim, I'm glad you mentioned guaranteed universal life. Just in full disclosure, we've done this for clients. And second-to-die policies as well also can be really used, which by the way is a UL chassis, not a whole life chassis in a lot of cases. Just to be clear, I'm— I, we see both sides. Guaranteed universal life that you also have to factor in the opportunity cost because just like term, it's anywhere from 5 to 15% of what you would be paying in a whole life. So it's a lot cheaper than whole life, but the opportunity cost of not like that money hopefully is not being redeemed in universal life or in a guaranteed universal life. It is going to have— it's going to pay out until the day that you die. But the premiums because of that are going to be much higher. They're equivalent of 25 to 35%. And so I would actually disagree with what you're saying. If you looked at whole life versus, uh, guaranteed universal life, whole life is going to be more expensive, but you're also gonna have a cash component side that you don't get in guaranteed universal life. And when you combine both of those, I think you could make an argument that it's not always a black and white. It's obviously gonna be cheaper from a pure cost standpoint, but a value standpoint could be different if you're utilizing the cash value. Now, if you're not utilizing the cash value, then you're right. But if you're utilizing the cash value, you could very much make the argument that yes, you're going to be paying more for the same death benefit, but you're also going to have a cash value component, whereas guaranteed universal life, you're not.

I'm confident if you took the difference in the premiums and invested in growth assets, that wouldn't be— you wouldn't come out better off with the whole life.

But if you, if you took the cash value in a whole life and invested the same, that's where, that's where we could maybe have part 2 because—

Right.

Yeah.

You're right. Like I said, I think that's a fantasy in most worlds because people just don't do it. But academically, we could argue that and you might have a good point there.

I think part of this thing is coming down to most of the time, it's not done properly. And so, I think both Jim and I would agree, don't do permanent life insurance or infinite banking. Like, everyone's happy. And then I think I become a big hypocrite because we're most known for that. And so that's where it's like, that's where it's challenging. But I appreciate this conversation because if someone sees me as the insurance guy, I'm not winning many friends in the finance industry because fee-only people, like, they just, there's like a hatred for insurance, at least I feel. And so I'm not winning any status games by being the insurance guy. And then in the insurance space, I'm not necessarily people's favorite because of some of the messages that I'm sharing. I'm just saying I agree with a lot of the points, and yet we have made it a whole business to try to do the life insurance thing well because of all the things that you're talking about.

So Caleb, talk about in practice. So you said you have personally put a lot of cash into these overfunded whole life policies and then utilize the cash for opportunistic investments. And so can you talk about, I mean, We're making the argument that this works if you do it in practice. And maybe give us an example because there's not a lot of examples of people like you, but maybe it could be implemented easier if you use your framework or how you think about utilizing the cash there against maybe just keeping it in cash or leveraging other assets, other portfolios and investing it.

Yep. Uh, the framework is pretty simple. You, you, you have an emergency fund and an opportunity fund. You can do that. With wherever, savings account, bonds, whatever, I choose a big portion of that to be in life insurance. So I have a year plus of emergency, actually closer to 2 years because that just makes me feel better. And then above that, I see it as opportunity. And opportunity essentially means is this is capital that I need to deploy somewhere. Now, not all my money's in whole life, just for all the reasons why Jim said. So probably if you look at my portfolio, about 30 to of my cash flow, of free cash flow goes into whole life. So I'm still investing outside of whole life directly into investments, into premiums of whole life policy. Yes. So premiums. Yes. So now let's, let's say I have a couple hundred thousand dollars of cash value that's above the emergency fund. Now it's as simple as, okay, what's the cost of borrowing against that? Let's say it's 6%. Well, I'm going to make sure that if it costs me 6% to access capital, I'm going to make sure whatever I can invest in or deploy, when you factor in risk, is far greater than the cost of the 6%. And then you also have to factor in opportunity cost of putting all your money into something and not saying yes to something that's maybe a greater opportunity. And so that's, that's the simple deal is I'm getting the benefits of insurance, which are great, in my opinion, are greater than the cost of 6%. If it wasn't, I wouldn't be doing it. But then, but then I'm being able to deploy the insurance company's money at 6% to do whatever. And I have all kinds of investments. Not all of them are turning out great. So don't get— I don't give investment advice. Don't follow my investments. But a lot of them, because I'm an entrepreneur in business, I'm using to deploy in different business opportunities. And my goal is if I can't earn at least 12%, I'm not even going to think about borrowing at 6% because you do take on some hassle. And like Jim said, like extra control cost as it relates to that.

So, um, and then do you structure repayment plans back to your policy based on the cash flow of the assets or not necessarily?

Yes. And I don't get into the whole Nelson Nash pay yourself more. Like, it's just, it's very simple. If the insurance company is giving me a 6% loan, or if I'm getting a third-party loan at 6%, and it's, it, I'm going to at least pay interest only, even though you don't have to. I think it's smart to. And then eventually you need to be able to get You want— I want to repay that principal. And so for personally, because of every dollar that I pay in principal back is freeing up another dollar that I have access to. I'm putting all that money back into the insurance contract because I have access to it because it's a revolving line. But some people don't, don't do that. They reinvest in their, their investment. So if the investments are continuing to compound at 12%, 13%, I feel good about it. Then I'm just going to keep it compounding and just either pay out of pocket for the interest. And so I, you know, it's a lot of people have different ways of going about it, but I'm a fan that you at least should pay back the interest even though you're not required. It can be very damaging to take loans out against all your life insurance, not pay back the interest. Then you're, then you're working with a ticking time bomb. And as Jim said, if there's increase of basis, then you're going to have to pay ordinary income tax if that thing blows up or you cancel it.

Yeah. And by the way, if you cancel a policy and you have a loss, you can't use that loss. If you have a loss in stocks or real estate or private equity, you can use that loss in other parts of the tax return, but you can't use a loss in whole life insurance. And remember, in the early years too, you're borrowing your own money back and paying interest on your own money. It's years later when it actually can compound more. And everything that Caleb just said, which is absolutely true, doesn't that sound like a pain in the neck to try to navigate all that stuff?

I'm a simple guy and I'm thinking, okay, you can open up an account at Schwab or wherever and take a margin account with a cash bond portfolio that's your emergency fund. I'm thinking it's a whole lot simpler to do it outside of an insurance product and maybe less drag. Less financial drag.

But Bob, you just mentioned early on you bought some type of insurance. I'm not sure what that is, how it's structured, but you could do that. But you have money going to some type of insurance. Not sure how that's structured. And that— so the idea is you're totally right. You could do that or you could combine it together. And again, not, not saying that's the right way, but that's the whole pitch. You're totally right. But if someone has a desire for permanent life insurance, gotcha. That's where you potentially could have efficiency by potentially combining it together versus separating it.

So, it goes back to what Jim said. If you want to get life insurance, make sure you want life insurance, right? Get the death benefit first and don't think about it as your bank, right?

If all you care about is the cash, cash on cash, if that's the only thing you care about, permanent life insurance is a really dumb thing. You can take that to the bank. You can clip that. It is. Mathematically, Does not. And if someone does show you that they're going to have arbitrage, give it 30 years. They will be proven wrong.

I appreciate you saying that because I've asked straight up to other providers of this and they won't admit it. But it's so clear because, you know, when I was trying to figure this out, I'd run these different simulations on my own in Excel and I'm like, I cannot find a scenario where just using cash and investing it doesn't outperform. So there has to be this other, other idea, right? And, you know, I think we tease a lot of that out.

Also, it's, it's really easy to get an insurance license. And just because you have an insurance license doesn't make you that smart of a human. And that's the other issue is there's me that I'm trying to do the right thing. And then you got multi-level marketing companies that are signing up their, their mother-in-law to, to peddle this thing. And you're like, yeah, that's not ever going to end well. You know what I'm saying? So it's like And unfortunately, and Jim, I'm shocked that you didn't bring this up. A lot of insurance people make themselves feel like they're the advisor, and so they're trying to like help you on it. And that, that also a lot of times they're not qualified and a lot of times they're fully incentivized to advise you, but it ends up in selling you an insurance product, which that also is problematic. On the flip side, you have a lot of fee-only fiduciaries that don't understand insurance, and so their default is just going to be to badmouth it. Not even that there's an incentive. Sometimes their incentive is to gather assets, but sometimes they just don't understand it. And what we don't understand, we say scary and we come to— so that also is like the challenge. But again, in default, the multilevel marketing people getting insurance license, pitching these things are doing more damage than the fee-only fiduciaries that I think are trying to do the right thing. They might get it wrong, but I think overall they're going to be way more better off over here than over here. So, that's kind of like my conclusion of the whole convo.

And I agree 100% with that, Caleb. And I see the only planners and CPAs also sometimes who just beat up on insurance. They just, you should only buy term and all that kind of stuff. And there are times when you want to have a death benefit that lasts forever. And there are times when an overfunded whole life or even an IUL policy. I know you don't like those, but there's situations where if you structure these right, they can be valuable. And then, of course, billionaires, they use private placement life insurance where you strip out all these costs, you make it transparent, there's no surrender charges, and they can invest. They can't invest. You have to have someone do it for you, but they can invest in hedge funds and all these different things that create tax problems that get kept in that envelope. So, there's a purpose for life insurance. It's a tool that can be used and used well. And you're right, I see on the one side, you got salespeople just trying to pad their pocket, and often they don't understand the policies.

They don't.

They drank the Kool-Aid. They'll argue with you, but they really don't understand them. And they also don't have experience in seeing how this works over 10, 20, 30 years and how a lot of the stuff that they're saying actually doesn't come to fruition in reality. And then on the other side, experts in other fields who don't understand it, just shooting it down without looking at it. And it's a case-by-case basis. Bob, your situation lended itself to a certain type of policy, and other people who might look and sound like you, it wouldn't lend itself to that policy or even that type of insurance.

So, going back to finding a representative, how do you do that? Is there law firms you can hire to do this? I mean, if you're saying most financial advisors aren't even qualified, you know, I mean, I never bought a policy until, you know, I had you guys, you know, Jim, your firm, you know, come advise me to help me because I didn't feel confident. Is that— should we just avoid it altogether because there's no way to find good reps? Or, you know, does everybody just need to become your client?

Well, what a loaded question. No, not only should not everyone become our client, we don't want everyone as our client as well. It's a super— it's a big challenge because it is true that you've got these dichotomies that that Caleb just spoke about. And I think it's, you know, there are people out there who do understand these policies or will take the time to understand these policies better that can be at your side. I don't think I have a great answer for this because I do think representation is critical. And maybe Caleb, you have a better answer than I do. I just want to make sure that people are being careful in understanding these things. And I know some very decent, wonderful, amazing people who sell life insurance, who oversell it because they believe it. But just because someone believes something doesn't make it true. And we've all known with every investment, really, yeah, with every investment, right? There's people who believe too much in multifamily, and that's where they think all their money shouldn't go. There's people who do believe too much in the stock market. And then there's people who don't believe enough in those things, right, who don't actually get exposure in those areas. So, Caleb, maybe you have a better answer than me. I know it's critical.

I think it's The, the important question needs to come down to, is this actually gonna better my life? Is this actually gonna better me personally? Like, i.e., doing this thing. And so at, in the, at minimum, you should have a second opinion just from someone, whether you're paying them for that opinion or not, just to get like, to make sure you're not going to the cleaners. But overall, you should be working with someone that has your whole situation in mind. And then, and then figure out, answer the question, does insurance, when set up and used properly, make it better? And if the answer is yes, then you should understand it. If the answer is no, then you shouldn't do it. Doesn't matter how many benefits there are if it actually doesn't make it better. And so, um, for if you have the means, paying someone to be objective, um, someone like Jim or companies like that, great. Most people aren't gonna do that. And so then, then if you have a CPA, which I wanna throw up in my mouth sometimes, I love CPAs, but they, they'll, a lot of times they'll just, shoot it down just to shoot it down, or a different advisor or a different insurance person. Like, again, like, you can talk to different people, get different ideas, but at the end of the day, you, you need to— it's not just, is this insurance a good idea? It's, is this insurance a good idea in light of everything else going on? You have to be able to answer that question. And if not, you're better off not making a decision in a, in a vacuum because you could have a great insurance company with a great contract that might not be right suited for, for you. We try to do our best, but obviously we are one-sided. So we're trying not to do anything that would screw somebody. We're trying to be objective, but you can only be so objective if someone's coming to you wanting insurance. We want to say all the right things, but you know, it's, it would be wise for people to have second opinions.

And I would take it back to the beginning of the call, which is Number one, what death benefit do you need for what period of time? What's the most efficient way to get that? And then move to the other because the other problem I see is people look at these policies, they get confused, they're trying to be— someone's trying to sell them something and then they don't do anything. And now, they have this huge risk for their family. There's nothing that breaks my heart more than a police officer gets killed in the line of duty and they're doing a car wash that Saturday to try to pay to bury the person. It's tragic. And life insurance for the death benefit alone is critical. So, for most everyone listening needs a death benefit at some juncture in their life for some period of time. Figure out what that is and how much that is the most efficient way to get it. And then move on to some of these more advanced strategies that could involve things like infinite banking or— I hate to say that term because it's so misused— but a whole life insurance policy or a permanent life insurance policy that builds cash. Do it in that order. Don't forget the first step. Or you may go flying uncovered and God forbid something happens to you and you leave your family in destitute.

I love that. I think it's a great way to end. And Jim, I just want you to know I'm not anti-IUL. Just when we're talking about infinite banking, I think IULs have more problems. But very sophisticated people when it comes to estate planning, there are a lot of arguments to be said that IUL chassis could be a more efficient That just goes back to overarching what is the goal and then what product, what design, what company is going to be best fit. Even your implementation, we do the same thing. Make sure underwriting is in place before you make a decision on a company because not all insurance carriers are going to insure people the right way or at the same risk. So everything that you're saying is, is, I appreciate and I really appreciate this conversation. I want to hats off to Ben and Bob Fraser Fraser Fraser for facilitating this. There's very few people that could facilitate this well, and I'm very grateful that I got to be part of this convo.

So fun, guys. Thanks so much for coming on. And wow, over an hour. I mean, do we figure it out? Do we solve this big question?

I mean, my takeaway is go to Jim Do.

Let's go. I appreciate Bob Fraser and Ben Fraser too, for so many reasons, way more than this call. And Caleb, I've always seen you as such a great person and someone that I've always appreciated your willingness to be open and to learn and to get better. And I know you do care deeply about the people you serve. So, that matters a lot.

Thanks.

All right. Well, that was a fun episode. We love— That was a lot.

I felt like that was super interesting.

Yeah. I mean, it's so much to digest and I just wanted to just have a little debrief here because There's a lot of things we talked about, and there's a lot of things in the industry that we kind of hit on that make it very confusing. I think for you and I, this has always been, you know, in other conversations on the podcast, but just trying to understand it more. I think there was some definite points of clarity for me through this conversation. I'd love to hear from you.

Yeah. So I think, you know, it was really good just to visit with these guys and get their input. I mean, I think I think for me, one of the realizations is that I think that one, I was kind of right about infinite banking, that it's not necessarily, it's not the ultimate vehicle that doesn't have some supercharged kind of benefit to wealth-building strategy, that it can be okay if it's used well. So, I think that was an interesting takeaway. I think the other interesting takeaway for me was that there's not these these horrible misdesigned policies that a normal person could figure out, right? That you really need representation. So I thought there were certain things like the indexed universal life that you should always avoid or something, and they're saying no, there really isn't. And I really appreciate Jim's takeaway. Look, if you need life insurance, get life insurance, and you know that they're really separate from an investment vehicle.

Goal.

And that first get the death benefit and focus on how much you need and when you need it, and then the most efficient way to buy that. So, those are some of my main takeaways. But yeah, I'd love to hear yours because you've actually bought some policies and you've heard the pitches. And we've had guys on our show that are pitching this stuff. And so, you've been on both sides of this.

I've been on both sides and it's been a long time of just processing and really trying to distill down like what is the real benefit. And I love that Caleb kind of bifurcated the idea of whole life insurance as a standalone product and use, and then infinite banking, because a lot of times, you know, infinite banking, they utilize whole life policies and they're kind of become commingled. But the concept that Nelson Nash created, you know, was this kind of bank on yourself idea. And what I appreciate about Caleb is he really doesn't oversell it. And he went like right out of the gate to talk about the 3 things that, you know, happen in this space with his, you know, guys that he's right alongside that are selling this. And we've heard this and it always bugs me because it just, it doesn't make sense. It doesn't serve people to, um, uh, to oversell it in this way as an investment or, you know, use it utilizing arbitrage with you know, compounded interest versus amortized interest. And these things always just have bugged me because, you know, I'm a pretty smart guy and it's like, it doesn't make sense to me. It doesn't, it doesn't make sense.

Okay, can you summarize what is the pitch and what's the oversell and then what's the reality? So just, just summarize and make it clear.

Yeah, so the idea in the infinite banking concept is you go utilize a policy, whole life policy, You get a lot of cash value in it. Then you take loans against that cash value and you go and make investments that then pay back your loans at a higher interest rate than what you're borrowing. Meanwhile, your cash value is growing at a 4% to 5% rate of return, um, uh, that which are being paid by the insurance companies.

So, so you have the cash value growing at this return, plus you have your— you borrow and you've got your investments from the borrowing that they're making the returns.

Yeah, and so this is like a very common thing that a lot of these folks sell, is that you get two streams of income from the same pile of cash. And to me, it's always, uh, it's not truly honest because you have to pay interest to borrow the cash. So it's not two streams of income, it's, it's utilizing the cash in the policy to go make an investment. You have to usually pay 5-6% which is usually greater than what you're earning on the rate of return of the policy, which, um, is always kind of overlooked or not really focused on.

Because the policy's cash value are growing at less than that. They're growing at, you know, what, 4, maybe 5% or something, right?

Yes. Um, so I, I understand the idea of arbitrage. I think there is a place to, to utilize that. And I appreciate that Caleb also said, well, you can do that in other vehicles. Whole life isn't the only vehicle you can do that in. And a lot of times that becomes the end-all be-all of whole life is the holy grail because you can do this. But it's not true. You can arbitrage a line of credit against the stock portfolio or bond portfolio or a line of credit, you know, against a home equity line of credit. There's lots of different loans you can arbitrage to go and invest in higher, but that obviously comes with additional risk. And then going to what Jim was saying, I think, you know, he's a very balanced, neutral perspective because he doesn't have that dog in the fight. And he's also seen a lot of things from his time in this industry, you know, both good, bad, and ugly. And but he's not a hard, hardline whole life is evil. It's, you know, whole life is the devil according to Waterboy. And, you know, he advised you to get a whole life policy because it's solving for the goals that you're setting. You know, for your financial picture. And I think that's the missing piece here. A lot of the peddlers of whole life insurance policies to do the infinite banking idea, they're one-trick ponies. All they do is life insurance. All they do are these policies, and they've drank the Kool-Aid, and they're not taking into account the whole picture of what you're trying to accomplish financially and what other assets you have and what other goals you're trying to solve for. And I think that's a big missing piece that Caleb does utilize in his approach. And he's not saying this is the holy grail, but it does have a use. I think we kind of got to that at the end of the conversation, which I appreciate it, right?

It's—

there is a place for insurance and it is important. And, um, but you have to understand like, like Jim said, 80% of these policies are not enforced by the time people pass. And that's a— that's always to me been the biggest detractor on this is it's not realistic. It's not practical. And I even kind of mentioned that with like the loans. Like, I read the Nelson Nash book multiple times. I understand the concept, but it's really hard in practice. It's really complicated. And I'll mention too, Life insurance companies, they're not the easiest to work with. For me to go get a loan on my policy, it's a pain in the butt. I can't do it online. I have to go call somebody. I sit on, sit on the phone for 20 minutes to talk with someone that is not helpful. They're not, they're not an advisor. They're just an admin. And it's very cumbersome. So there's just a lot of friction that can be to get the benefit that, um, you can also get in other ways, right?

So, yeah, you know, it seems like the guys that are, you know, so here's my kind of takeaway is that insurance is valuable. It has an important use when you use it for the death benefit. And that's what I did. I wanted to take care of my family and I wanted to have some long-term care kind of provision. So, I'm not burdening someone if I end up going to, you know, a nursing home for a long time. And I got what I needed and I feel really good. Really good about it, and it's forever and ever, right? I don't have to think about it no matter what happens to me, you know, my health. And that's good. But then I think about it as an investment vehicle, and it feels very cumbersome, and it feels like it's not going to accelerate anything, but it's going to be more of a drag, more of a minus than a plus. And I think that, you know, I love what Jim said. He said anybody that's selling you these things is selling you these things because it's a marketing program for insurance. And so, I think there's better ways than infinite banking to actually do this. If you want to do that, set up a— go open up an account with Schwab or get a HELOC or whatever, and you don't have the same issues and the same challenges.

I think one of the things that honestly left me with after the conversation, and it's kind of a little bit of a downer, you kind of mentioned it, is these, these policies are so flipping complicated, and the person selling them to you does not have your best interest in mind. No matter how nice they seem or how much they believe in it, they have a conflict of interest. They have a conflict of interest. So you have to have representation on your side, but that's difficult to get because the advisors generally don't understand these products, and the ones that are selling you the product—

nor do CPAs, you know.

So that, that is, it's a bummer in some ways. It's like, I think there's a use for it. But if I'm going to go buy more policies, I have no idea how to determine if this is structured right or not. Right. And, and, you know, I'm no dummy. And so that's the challenge here is it's just this big black box. And I think my recommendation, encouragement to people listening who are kind of buying into this idea of infinite banking is go talk with a lot of people. Do not pull the trigger. Knowing what we've talked about today, go and try and find, you know, folks like Jim Du, like, like Caleb that can give you a more consultative approach that don't have a conflict of interest and can really help you do the right structure with your interest in mind.

And I mean, if nothing else, get 2 or 3 separate agents and show them each other's policies. And, you know, you'll probably create a war. But, you know, but, you know, and who wants to do that, right? Getting 2 and 3 opinions, it's just so much effort. But as, as Jim said, you know, you really need life insurance. I think everybody should have some kind of life insurance, you know, you know, just to take care of the family in the worst-case scenarios.

It's a pain in the butt, but if you think about the fact that this is a huge financial decision, because if 80% of the policies aren't enforced by the end of life, then that's a very costly financial burden if, if you don't structure it right and end up being one of those statistics that the odds are you will be unless on the front end you do it right. I think what you're saying is with the way you're structuring this thing is there's no real risk of it not being enforced by the time I pass because of the way I'm, I'm structuring that pain into it right out the gate. And it was utilizing, you know, a neutral third party that can help you go and solve the needs you wanted and go and get the best, uh, provider, insurance provider to, to give you the best, uh, cost and, uh, cost-effective way to do that. So I think that's the right approach, right? And that's a wrap on part 2 of our whole life and infinite baking conversation/debate. If you want to go deeper, encourage you to join our free online community where you'll get extra resources, educational content, and a chance to connect with other investors, discussing these topics. So just head over to investlikeabillionaire.org.