Jayson Lowe and Dan Allen break down seven drawbacks of Infinite Banking, from the long capitalization phase to social skepticism. They pair each con with practical workarounds and argue the real mistake is waiting to start.
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Crying out loud, do be. You do your thing and don't let anyone else tell you otherwise because that's a bunch of baloney. You should be in control. Nobody should be in control of your financial life except you. No advisor, no stupid marketplace, no government agency. You have the only keys to your financial success and it's in what you do and it's in how this thing is thinking about what you do.
Okay, we've been hearing all kinds of wonderful, glorious things about the infinite banking concept you've been researching. You've been looking at this and you're just, enough is enough. You just want to know, okay, fine, what are the fricking cons of this thing? Like what are the downsides of this? Enough about all the smoke and mirrors and why is it so wonderful and glorious? Tell me what the downsides are. So my main man, Dan Allen and I today are going to talk a little bit about that with you and we're going to list a few of them off. We're going to be talking about seven of the ones that we've isolated that we think are important to identify. And so we're going to speak to those and we're just kind of have a good discussion about it. Sound good, Dan?
Sounds great. I love having this conversation because I think people want to know, so let's just give it to them.
And inquiring minds want to know. So here's the first one we're going to look at. I think I'm ranking this personally number one. And the number one, I think, con or thing about infinite banking concept is that it requires discipline. You have to be in a position where you're ready to make a commitment, you're ready to follow through on things. It's not a, there's no get rich quick. It's not a, you know, I just drop money in and I take money out the next day kind of thing necessarily. You know, there's a lot of noise out there in the marketplace where people seem to think that it's this, you know, magic bullet of some kind for your financial life. It is not that there's no, no, you're not going to, there's no investment magic. There's no like underhanded CD things going on by the insurance company. It's a very basic, very pretty much simple foundational financial savings strategy to build capital and deploy capital in your life. But it requires discipline and long range thinking. Now. And you got to know Nelson Nash. You learned from him. You got to see him a couple of times when he talked about long range thinking. Tell me what comes up for you when you think about that in relation to this con of discipline.
Yeah, so that's a great point and I love how you brought that up as one of the key ones for us to think about is discipline. When I thought about what Nelson always said, he was a forester and he was always thinking multi generational and he knew that to do this well, you got to be thinking about the long range, not the short range and anything you're going to do like that. So if you think about planting a tree like you would plant a tree, not for tomorrow, but for the future. And this process works great because it's simple and it can help you in the short term, but it's really about having the discipline to make this part of your life because your need for money is never going to go away. And it's really about how do you solve for your need for money. And I love that one. Discipline. That's what people will look at as a downside. I think anything worthwhile doing in life takes discipline.
Yeah. And Nelson speaks about it in the book. So if you haven't got the copy of the book, make sure you get becoming your own banker. But he talks about it in the human factors segment of the book and he's speaking specifically, he correlates that to Parkinson's law. And so Parkinson's law talks about a variety of things. One is that expenses rise to equal income. Well, people see that happen, they get a little pay raise, but they don't end up having any more money in the bank account. It finds a way to disappear. That's a discipline feature. You know, a person who thinks in an infinite banking mindset, once they are aware of the concept and they have the knowledge of it, they would sort of, oh, hey, I got a bonus at work, or I got this extra income. Rather than having that just immediately walk out the door to some stuff that I want to go get or buy. What if I paid myself that capital so that myself and my family have more run rate on that over multiple generations? And we're harnessing that raised potential now for a much longer period of time with a compound effect that's a change in thinking plus implementing discipline, which no advisor can do for you, you can only do for you. And so as an advisor person, Dan and I, our role and the role of, I think anyone who's an authorized practitioner is to try to get themselves out of the way, just become an information source for the people that are a sponge. So that they can do for themselves. And we want to empower people to become their own banker. So love that. So now let's. Let's flip into. This is the one that you. You brought up. Danish, I really liked is a secondary con. I get. I think we kind of. I don't know if we really rank them, but we'll say in our list today is ranked, I guess is number two we had is insurability. So walk through why you would say that that's a possible disadvantage or con.
Yeah, that's a. You know, it's one of the ones that always comes to mind when someone asks me this question. And it's like, so it's, you know, people really were wired in a way that we always want to be successful. And if you find out from, you know, a life company that you're not insurable, well, that can put people into a bad headspace. That's what I've noticed. They can lose a lot of their interest in this process, even though they can't still can do this. If they have someone that they have an insurable interest in that is insurable. This concept is still available to you. And I know Nelson talks about that in his book, too. He's like, what happens if you're not insurable? But I do know how it impacts someone. Just when they start to realize that, hey, the life company doesn't think I'm a reasonable risk, and they don't want to take that on. So that's why I thought that's just something it's worthwhile to share with people. If you're going to go through this, you know, that's going to be a question. Either, you know, or you might not know if you're insurable. So that's why I put it out there. Richard, do you have anything more to add about that?
Oh, yeah, totally. Because, I mean, we see this happen and it's, you know, as an. And someone is, from an advisory standpoint, like, when you're working with someone, you build a great relationship with people. You just desperately want to help them. They're really engaged in the process. And then it is a letdown moment. Like, it sucks. And it also sucks to be the bearer of that news. The reality is every policy is rated. Some people get a standard rating, some people get a rating that has an extra attachment to it. And often, sometimes those policies are even better, by the way.
But additionally, sometimes we have people who are rated as uninsurable. And when that does happen, sometimes it's temporary. Maybe we can Reactivate it later. It really depends on the circumstance. But here's one of the key things that as much as this is a possible disadvantage for people, there's also an advantage. And the advantage is this. If you're running through life right now and you need to set up protection for your family or for your business, and you don't even know if you're insurable, at least you'll know. Like sometimes just the sake of knowing something is off the table for you can have a little bit of liberation to it. It may not feel like that way right away, but when you have time to reflect upon it, I think people will come around and realize, okay, hey, at least I knew that. And you're right, Dan. It can be a bit of take the wind out of your sails a little. But here's the thing, people that. It goes back to discipline. People that are disciplined and committed to the process, they've been learning and engaging in information. They really want to implement this because they understand the power of taking control back of their financial life in some way, then it's not a matter of you being the only body. Who's another body in your life that can be the insured person? Is it a child? Is it a grandchild? Is it a business partner? I'll give you an example. I have clients of mine who are in real estate and they will even look to go and start up a joint venture partnership with a real estate, another real estate partner, either a money partner or whatever, a qualifier or something. So just so that they have an insurable interest in another human being's life because they want another body to insure.
Exactly. Well said. And both of us, for example, we own policies on our children because that's someone other than ourselves for the purpose of banking. And I always have to say this, Richard, I'm sorry, but, you know, as I got into this, you know, industry and I got into it to teach people about becoming your own banker, I also got have a great respect for the protection it puts in people's lives. And I always want to mention that that's huge. Like when I. When I get somebody with and they have something they didn't have before, which can make a big difference for them and for their family, that makes me feel good that they've taken that step. So again, I digress a little, but that's just, to me, just a huge thing of what we do.
I have to agree with you because I know I often said to people, look, if you would have told me whatever, 11, 12 years ago that I would be getting an insurance, insurance license, being the insurance industry, I said I would have laughed you out of the room. Like, there's no way that that's going to happen for me. And then Nelson's book arrives. Life changing event. Life precipitously changes every year thereafter. And, and knowing that getting into this industry for the principles of teaching, becoming your own banker, but then actually being able to realize just how wonderful an industry it is and how you have a way to show up and help people in an environment, that's just uncanny. As we're recording this, very recently in our office, we actually received another notice of one of the clients passing away. And that means there's a process that takes place where we have to look at getting things processed for a claim and eventually having a check delivered to that family. Now, now that sucks. That's a rough day. But at least we're able to be involved in that process to try to facilitate bringing a big fat check to the family that needs it. And I would much rather be on that side of the equation, on the other side of the equation looking for the check.
Yeah, I agree. That's huge. So great.
One number three that we have here is the capitalization phase. I'm going to use my air quotes. I haven't done air quotes yet in the video. So let's talk a little bit about capitalization phase, which. So again, here's one thing I want to do before we do that. Everyone, if you're thinking about this and you're thinking about this as a negative, we're talking about cons. Every con has a corresponding pro attached to it with everything that we do in our life and our financial life. And so capitalization phase, in my opinion, is actually a pro. But we can understand how people will perceive it as a con.
Exactly. That's well said, Richard, because when some people look at, okay, well, I'm going to be putting in X amount of money into my system, which is a premium. They're paying annually or monthly, and it takes them X amount of years so that they're 100% liquid or they could access the amount they put in. Some people look at that as a bit of a con and we understand anything worthwhile doing in life. And I love your analogy about university, I'm going to get you to share that because that's just a great example, I think, of anything worthwhile doing usually takes an investment or time energy before you actually get the result. So could you share that story with us, Richard?
Yeah, and I'd love to take credit for the answer. The reality is it's Nelson's story. So I just, I'll just, I'll just channel my inner Nelson today. And ultimately just, just, just consider if you yourself have a university education, university degree, or, you know, you have friends and family that do, and you, whatever it is you do for your work or your day job or the thing that brings in revenue in your household today, you had to learn a skill, develop knowledge, work hard in some, you know, reading books, taking exams or, or on the job training to get to some kind of a skill level to proficiently do the job that you're in so that you can get compensated for it. Now, when you look at a university education, so what do you do? You, you put in a, you know, couple thousands of dollars, you know, tens of thousands of dollars for a year of books and tuition and education, maybe some for parties and, and you go for four years just to get your basic, you know, I think it's called a graduate degree or whatever you like your basic degree. And now at that point in time, how much money have you earned for the thing that you're getting trained to do?
Exactly.
Big fat goose egg, right? You got nothing. You had to put up all the money, all the cash, all the time, all the effort, all the energy. That is all capitalization. It comes in time, it comes in effort, it comes in energy, it comes in opportunity cost. You're doing all that for the privilege to get a piece of paper that now says out in the marketplace, ideally in the world, that in theory that will produce a larger long term income for you. That's exactly what capitalization is. And so in my opinion, a university degree is the biggest correlation point to what capitalization is. You put in all the capital, but you had nothing available well inside of an insurance contract. The good news is you can put in all the capital, but you don't have to wait to have access to a portion of it. You're going to have access to quite a bit of it in the first year, even more in the second year, even more in the third year, even more in the fourth, you know, and until you're at a point where you have access to every dollar that you've contributed, and you now have a machine that every time you put fuel into that machine, that that machine operates more efficiently, each and every year you literally, hey, I put $10,000 in, and then the year that I get 10,000, I get 11,000 back. That's a pretty smoking year. The very next year I put in 10, now I get 12 back. Then I put in 10, I get 13 back. I don't know anyone who wouldn't want to own a machine that did that. The reality is it can't do that unless you go through the first capitalization phase. There's no other way. That's how it operates.
That's so well said. And it's just a factor, and people just need to know about it. And people that understand it, they get it, they see, they know. Yeah, that's just part of doing this whole process. And capitalization is key, and it ties.
Into our first con that we covered today, which is on discipline. Again, if you don't have the discipline to be willing to wait or to park some capital away that you won't be able to touch for a period of time to get this operational, then it'll never happen for you. And that's fine. That's a choice that you can make. But understand that there's certain mindsets that have to go in place in order to be successful at this process. The insurance contract is the insurance contract. But what matters most in the process is how this thing, this squishy mass between your ears is actually, you know, working for your benefit or for someone else's benefit. Now, the next one we've got on our little list is willingness to learn. Number four.
Yep. Yeah, that's a great one, Richard. And when I speak to people about that, and, you know, you're thinking about that one, for example, it's like, well, it takes energy to really learn something. And, you know, when we use the, you know, our brain, and I think we've all been in a session at some point where we're planning for something or doing some brainstorming. Well, after a while, you start to feel tired. And you, you know, I even know people that say, my head's starting to hurt because you're learning something. So it's going to require some effort. It is about becoming your own banker. So we want you to learn, you know, the why and the how and just put it into practice. So it's going to require education. And I tell people, if you're not willing to learn, this is probably not for you.
Yeah, and I, I love that statement. That's a solid statement because. And I think, you know, if you're watching this, you're. You're an active learner. You wouldn't be here watching this video if you weren't someone who's willing to invest in your own education, your own knowledge. And so, so you're probably demonstrating the necessary traits to, to become successful at this process. But that's like a natural curiosity that never, should never go away. So I always suggest to people if you have a mindset or you can develop a mindset like Curious George, that little monkey who was always getting into trouble. Well, the reason he was such a good cartoon, such a character is because of the lessons he taught because he learned so much by actively doing things. That's our best way of learning. And so the more you cultivate that and incorporate into your financial life, in all aspects of your financial life, the better off you are. Infinite banking concept is no different.
I think the other part I'd add there too is like for some of maybe you, if you're out there and you've got to a place in life.
Where.
You'Ve been conditioned to think a certain way and it's really going to, this concept is going to require you to think differently. So open mindedness being, you know, I always like to quote about, you know, the, it wasn't ignorance that you know, caused the continents, the oceans, the shape of the earth not to be known. It was the illusion of knowledge. And so really it's just like we got to be open minded. We've got to be willing to look at this and think, you know, how do I, what do I need to learn about it? And that's just what I wanted to add around that one.
Yeah, I'm glad that you mentioned that because that quote actually is. Nelson used to have that in his slides. It also appears in Nelson's book and I believe it's Daniel Boorstein who is a historian who said that. And it's a perfect analogy because the world was believed to be flat forever for a huge amount of human history. And then the reality sunk in that it's actually round and we have all the science to back and prove it. But to go mentally at the stage that they were having those conversations, you know, they would have thought that people said that the earth was round, were heretics, they were lunatics and you know, some of them probably found an untimely demise, I'm sure during that period of time. And so recognize that that leads us perfectly into our next con. Now Dan, I love this con. And so Dan's going to tell us about con number five, which is the whack a mole con. So explain to people what does whack a mole have to do with a con for infinite banking?
Yeah, so that's a great one. And most people are familiar with the game called Whack a Mole. And so why I bring that up when we talk about the downsides of this is that as you get to know about this concept, you get excited about it and maybe you're starting to implement it in your life and you're thinking about implementing your life and you get brave enough to talk to someone else about it and you start, hey, guess what I'm going to do? I'm going to use this, this is this. And they just go, whack, you idiot. Like, what are you doing that for? Because they come from a place where they know nothing about this and they're just, people are really good about just whacking you when you come up with something that they're unfamiliar with. So that's why I call it Whack a Mole. You get your head up there saying, hey, I can teach you something about this. And whack. They hit you over the head. And it's just a great one to be aware of. I love it personally, you know, I like to be that one person that's out there doing something a little different than everybody else. But not everybody is comfortable that way. I don't mind getting whacked every once in a while.
Yeah, I love that. And it's, it's such a good, like visual too, because as you say that I'm sure you could, you can just imagine the experience of you've tried to indicate something to a person, whatever it's a podcast or whatever it is, and you know, the look on someone's face, whether it's your spouse or a family member or a friend at work or something, just like you're, like you're doing what? And in my opinion, that's an indication that you're probably on the right track of something. There's something more to explore there. Because your infinite banking concept, it's been around for a long time. The tool that underpins it's been around for as long, 200 years. It's one of the oldest financial products on the planet, has a tremendous history, but the utilization of it and how Infinite banking isn't about the product, it's about the way that you think about applying the principles and using it in your own life is the differential. And so that type of thinking is totally contradictory to what the rest of the financial world is trying to get you to do, which is take money away from you, park it in things where you lack control, tax qualified plans and GICs and all these kinds of things that lock away your money. Car loans and leases and vehicles and all these things that take money away from you and outside of your ability to access and control them, and we're trying to say, no, why don't you capitalize, create access and control so that you never have to go do this thing over here again? And that's a fundamental, you know, disconnect from what the rest of the financial world's been teaching for the last 40 to 50, 60 years. So because of that, you will be up against a barrier of a mental barrier of people not prepared to accept that what you want to do in your own financial life is up to a. It's up to you. And, baby, you've done your research. Like, you know, there was this old. There was. I got to tell you this, Dan. There was this real estate guy I went and saw many, many years ago, and I remember this clear as day. He was on stage and he was talking about. He would say. He said this thing, swswswsw. Some will, some won't. So what? Someone's waiting. And then he. He did one of these moves. It was like, from stage with, like, the. Like, he bumped his mic. It was super loud. And I just. It always stuck with me because, you know, stand up for the crowd, for crying out loud. Do be. You do your thing and don't let anyone else tell you otherwise, because that's a bunch of baloney. You should be in control. Nobody should be in control of your financial life except you. No advisor, no stupid marketplace, no government agency. You have the only keys to your financial success, and it's in what you do, and it's in how this thing is thinking about what you do. So that's my soapbox moment. I'll get off my soapbox. All right, onto our next one here, Dan. We've got. The next one we have is the potential, again, con, is that there's a possible limit on how much you can deposit in a single contract. Now, quantify that, because if you're new to this, you may not know what I mean. So it doesn't mean that there's a limit on how much you can deposit. You might be able to deposit a lot of premium or premium dollars and do contracts. But if you set one up, and I'll give you an example, I'll use myself as a guinea pig here. The very first policy I got for myself, the annual premium, I want to think is about $4200, give or take $4219 or something like that. And that was the first policy I ever got for myself. Now out of that, the minimum premium I think I have to pay is 1,900 bucks, give or take. So all park about half, give or take. Great policy, working well, got outstanding loans, very happy. But that policy, if I wanted to put a dollar more than $4,200 into it, insurance company will not accept it. That policy had a minimum set and a maximum cap at the time. And most policies will have that because that maximum cap that's there, that ceiling is put in place so that the insurance contract itself maintains what's referred to as tax exempt status. If I five point put more dollars in there and the insurance company allowed me to do that, well, just imagine I'll use my little water jug as an example here, everyone. Hopefully you can see my little water jug. So high quality H2O. Just imagine this was the maximum of my contract. And let's say down here is the minimum. Well, if I try to put more than what this container will hold in it, all the stuff will spill out over on the sides. It literally won't fill in the side of the container. So an insurance contract is kind of like a container. It has a set parameter to it and that parameter is designed based on the tax exempt rules in the country that you reside. In Canada, we have very clear tax exempt rules. And so the reason that you're not able to put more into is because if they allowed you to do that, it no longer is an insurance contract. It's now an investment vehicle, which insurance is not an investment vehicle, by the way. So that means that it's going to be tax treatment will be different. It will no longer be tax exempt on any growth that happens inside of that contract and it could impact some other things as well. So the insurance companies, at least in Canada, they, for lack of better terms, I won't say across the board, they dummy proof it, but they simplify that. So it's very difficult to effectively break a contract from that standpoint. So there you go. That's my take on the limits.
Yeah, no, I like that. And it's real. People need to know that. But there's ways around it and it's just like, you know, you can start another policy and that gives you the ability to do more. And it's just again, so yeah, we've all experienced that on, that's the cap, that's as much as we can put into it. And there's very good reasons for that. So we want that thing to be tax exempt, trust me.
And on that note, that's a perfect way to Pick up the game ball there is that that first contract was $4,200 or whatever a year. The next one I did was 200 bucks a month, which is $2,400 a year. Then the next one I did shortly after that, like six months later was $6,000 a year. And then the next one I did after that I think was 300 bucks a month. And then, or whatever the annual equivalent. And then we just keep adding and adding. And so each individual contract has a limiter of cap, which could be considered a con to some people who are uninitiated about what the process is. But if you really understand, you know, Nelson would say if you know what's really going on, you'll know what to do. And the other thing that one of my colleagues, James says is that if you, if you don't understand the problem, then the details don't matter. But if you, but if you understand the problem, you understand what's going on, then the details don't matter matter because you understand fundamentally what needs to happen is you need to capitalize the system. The only way you do that is through premium. You create control, access, liquidity, and compounding over a lifespan wrapped around a barrier of family protection, tax free. That's a beautiful thing.
So it is.
Which, which leads us to our last thing we've got on our little list here of the cons, the dreaded cons of the infinite banking concept. Dad. Oh my. They're so dreaded, they're so horrid. I can't believe anybody does it. And that is basically, it's not starting with ibc.
Oh, that's just. And again, that one always makes me smile, Richard. And you know why? I think it's because when, because I heard Nelson get asked that question and that was his answer and he came from a place of anticity. Like that's really the biggest downside is not starting. Because once you understand the value that you get out of controlling the banking function as it relates to your needs, then yeah, one of the greatest cons out there is just not starting. Because every day that you leave it is another day that you don't gain the advantage of have uninterrupted compound interest working for you and access to capital that you control. And so I get that some people may not really appreciate what Nelson had said back in the day when he said just not starting, but I do, because I get that. And yeah, there is a downside that's called not starting.
Well, Dan, I think it's relevant again we're not trying to be like jerks here saying like, oh yeah, there's a big problem with packaging is not getting started. But we're being serious, we're trying to be comical about it because we want to have a little bit of fun. But the reality is, Dan, there's a small age gap between you and I. I don't believe that it's, it's there mathematically, but I don't think it's there in every other aspect, although I do consider you a very wise individual, is that we, there's a, that time differential I'm pointing out because I simply will. My policies depend regardless of the size. If we were putting the same premium in, ours will perform very similar over a period of time, but mine will be able to outperform yours because I'll have likely more time. Now I'm not trying to throw anyone under the bus. It's simply a measurement in time. Time tense has a correlation to your financial life. There's nothing that you can do in your financial life that doesn't have a relevance to time. It's literally impossible. So if you recognize that the most efficient year of a policy, an insurance policy, a cash value insurance policy, at least the way that, you know, we would design it for infinite banking purposes, the most efficient year is the very last year. That's the year that you kick the bucket or that the insured person, you know, the grim reaper comes, Colin, they're out the door. So that insured individual is gone. That was the most efficient year. Well, we don't know what year that's going to be necessarily. But if I started this year and then a guy that looks exactly like Richard, maybe with a yellow shirt, started last year, pre COVID pandemic or whatever, like in 2020, and we died in the same point, his policy was more efficient, his family got more money than mine did simply because of that one added year. The year that we lost wasn't the first year, it wasn't the pandemic year. The year that we lost was the year on the back end which is the biggest growth. And so the only person that you're hurting and punishing is you, your family members and every member of your generational line that could receive the advantage of tax free capital because that's, that can become a perpetual impact. And so not trying to throw anyone under the bus or say like, oh my God, you're silly if you don't do this. That's not it at all. We're simply just trying to make the point that your life will happen and someone's life that comes after yours will happen. Now, if you have no kids or no grandkids and you, you're not worried about leaving anything behind, I would venture to guess you're not living on planet Earth today without a passion of some kind. So whether it's the arts or it's, you know, the spca, or it's the Ms. Society, or it's the Cancer foundation or it's, you know, a nature conservatory, like I don't care what it is. There's something that you care about and if you're, if you're gonna, you're gonna have the use of working capital throughout your lifespan and the ability to leave a tax free benefit behind by doing the same process. Can't you choose who you can leave it to that's going to leave an impact that's beyond you. To not do that is just totally. I almost think it's irrational. Personally, I'm biased. I'll speak to my bias. But like, seriously, don't tell me that there's not someone you wouldn't want to leave money to because there's something you don't care about. Like you have to care about something. Otherwise what are you even doing here? Why are you watching this?
Exactly. Why are you watching this? And yeah, no, that's so good, Richard. And I always think about one thing I've heard, I don't know how many times since I started this. And I said it myself, I wish I'd heard about this 20 years ago. And you just explained why people go to there. Because I started when I was 55. Well, if I could have started when I was 35, you know, just the efficiency of the tools would be so much better for me when I at the age I'm at. But still, I'm a real believer. And you know, best time to plant a tree was 20 years ago. And the second best time for you, if you're listening, is today. And that's really the reality. And I started that way. I just go, yeah, I wish I'd heard about this thing years ago. But now I know, so I'm going to start. And it's really. Yeah, you, you did such a great job of explaining it. It's the efficiency just gets better the longer you do this process. And so that's why we wanted to bring that up for you. I think it's just important for you to know starting the sooner the better.
Awesome. Love it. Dan. This was great. I hope people got a ton of value. Make some comments in the in the chat. We'd love to hear what con you thought was the best or maybe the most entertaining based on how we delivered it today. And make sure to, you know, reach over here and subscribe to the channel and check out the next video coming up. Tons more great content to learn and keep, keep growing. Keep growing yourself, growing your financial life, because you're the only one in the driver's seat of your life and it's all up to you.
