How Diversification Works in Canada

I personally have experienced loss and I recognize that a lot of that loss actually had to do with how diversified I was. I was so diversified that I had stuff in so many different buckets and categories that, you know, not a lot of them actually ended up working well and most of them became impacted. Impacted by one market occurrence. The diversification is your ability to access capital and get another investment, but your need to have it is automatically reduced because you have stability of that foundational contract.

I also have critical illness insurance in place, which is also the diversification in my mind because I'm diversified from the standpoint of risks that I have. For me, getting terminally ill or disabled, permanently disabled.

Is putting all of your eggs in one basket something that you do if you put all of your money through an insurance contract. We've heard that you don't want to put all your eggs in one basket. You want to diversify. This is a common term that's very popular in the financial industry. What exactly does it mean to diversify and are you truly diversified if you're embracing the infinite banking concept, becoming your own banker and you're trying to put all of your capital, all your resources into high cash value insurance policies? Well, that's a really good question. It came up recently from one of our, I think, our YouTube chats. And so I'm joined today with my good friend Roman, an authorized infinite banking practitioner. And we're going to talk a little bit about how Canadians can understand the power of diversification and how they can create that. But also why do they need to, or why do they need to even consider it when they're talking about participating dividend paying, whole life insurance? So, so Roman, thanks for bringing this up today. What a great topic. And I want to kick it off with you, looking at your experience. You are Canadian because you moved here from another country. You come from, you know, that Soviet era background, basically now coming to Canada. And so the perspective of this I think is a little bit different. And I suspect anyone who maybe is an immigrant to Canada and has made their home here and they come from a different, you know, financial culture, they would have a question very much like this. So I'd like to get your perspective from that, you know, that, that growing up stage of your life before you.

Joined us in Canada, you know, indeed when I lived in, in Russia and Ukraine, you know, we tried to diversify our savings as much as possible because, you know, there's so much, so much instability, so much uncertainty and we had to deal with it. And then we Always were told to make sure you diversify your savings. Don't put your money in one basket, don't put your money in one currency because we even saved up in US dollar, right? So we would just buy US dollar and then we will keep it in a safe place and it would diversify between the euro and US dollar and maybe even Swiss franc or any other currency. And if it comes to investment, we would buy different asset classes, right? So we would buy real estate and then rent it out and we would buy something else, maybe stock, maybe crypto didn't exist back then when I, when I lived there, but yeah, so we would buy something else else, which could be.

Like anything, right? Businesses could be investments into some joint ventures or could be something else.

So whatever.

When one class.

Underperforms or doesn't perform as expected or fails or there's ups and downs in the market, right? Maybe you bought silver and silver went down or maybe you bought something else and then it didn't perform as expected. Or someone actually, maybe someone didn't pay you for something that you expected to get some profit because when there's uncertainty, there's so many things that can go wrong. And then you at least have another asset classes which will smooth out all the ups and downs and then your portfolio, investment portfolio will perform just well or at least you will not be left without any money, without any investments, without nest egg. And yeah, this, this question is really, it was really bothering me when I, when I, you know, was.

Reading about infinite banking and I was thinking, how is that not putting one, one, one eggs in one basket? How am I protected against, you know, losing everything just overnight? Right? And this is, this is what I just wanted to share and now I have an answer and I'm absolutely satisfied with an answer.

And that perspective really matters because as you're watching this, you could be, you could have a different set of circumstances than somebody who's sitting right next to you or in the next room who's watching this. And their perspective on understanding risk and risk management or their, where they've been exposed to risk in their life will be different. There's some people that have never really experienced financial risk.

Everything they do turns to gold. They have the Midas touch. And then there's others where they consistently fall flat on their face and they have, you know, they managed to pick the bad investment every time, et cetera. And so I've met people in both categories of life and I've experienced, myself, I've experienced financial loss in many areas. I'VE had investments go sideways in land development projects. I've had investments go sideways in some real estate deals that I've done more on a private basis. I had a private lend second mortgage on a piece of property which I used to own. I sold, yeah, a creative fashion to some investor friends of mine so I could pull that property off my debt service ratio so I could go purchase another one, which was another asset that actually did very well. But I maintained some of my equity as now a second mortgage in that previous property. Shooting forward about five or six years later, There was a problem with that, that that group of investors where they had taken on so many properties, they'd gotten so big and then the market shifted and then rents came down. And because they pulled equity out all these properties, they weren't cash flowing and their business ended up crumbling around them. They had three corporations and two of the corporations had to get folded up. That property was in one of those corporations. And so that mortgage was at risk. And in fact, it was at a point now because the real estate values had come down where now the value of what my protected equity in that second mortgage was, was almost wasn't gone, but it was, it was infringing on our values. It turned out that I actually had that as a joint mortgage with another. Another partner is actually the brother of one of the owners of this company. And you know, we used to be very close. We used to be good friends. In fact, I was at the wedding of one of these individuals. We don't communicate anymore because they kind of stopped communicating when this all went down. It's funny how that works. And the end result was that mortgage. And I think my portion of it was around 20 or $25,000. It was 100% at risk. There was a primary lender. They had initiated foreclosure proceedings because they weren't getting paid. Now I found out about this because I received.

Notice, like a registered mail notice that the first mortgage holder was going into foreclosure. And because I had a listed interest as a second mortgage holder, they had to notify everyone on the title of the property. Okay. A lot of people aren't aware that this happens. So they had to notify everyone on the title of the property. So I got the notification. I'm like, oh, geez, this isn't good. Probably not the best way for me to find this out, rather than finding out from my friends who are the investors that were involved in this deal. And so I contacted my lawyer and because I had, I was blessed and lucky enough that from the day that I created that mortgage instrument to the day that I got this notice, it was roughly a good five years of time. I had developed a higher level of knowledge of the real estate industry. In fact, I was licensed as a Realtor at that time. And I had a pretty good insight into what I might be able to do to solve that problem. I didn't fully get to solve the problem. There was another problem I found out afterwards is there was additional liens on top of that on the property from other investors that were also losing money on a bunch of other properties. So they put a blanket lien on several other properties, including this one. So it made it very difficult for that property to sell and to do a variety of other things. So I had to get very creative. The end result was we were able to get most of our capital back. I believe I got my full principal back and a very small amount of interest that I would have earned over that five year period, but not at all what I was entitled to. We had to discount the value of that second mortgage to get that property sold to a new buyer so that the first mortgage holder could be paid, we could be paid, and everyone had to sign off on the deal. It was very complicated and it was, it was scary because it was a good chunk of money that could have been lost that I had already worked pretty hard for. And there's been other circumstances in my life where were things not quite like that, but other, certainly other things, investments that I've made that haven't gone well. So I personally have experienced loss and I recognize that a lot of that loss actually had to do with how diversified I was. I was so diversified that I had stuff in so many different buckets and categories that, you know, not a lot of them actually ended up working well. And most of them became impacted. Impacted by one market occurrence. It was 2008 financial crisis, coupled with the real estate market shift that happened in the Edmonton, Alberta, you know, Alberta economy in 2007, 2008. So those two things just kind of interacted at the same time frame, caused a pretty huge impact for me, some of which I'm really still recovering from on some other properties that I still own today. So why do I share that story? I think it's important for people to hear real life stories. And you yourself, you have the ability to control your financial destiny a little bit more when you have knowledge and understanding. In fact, a great way to go get that knowledge, understanding as a Canadian is to head on over to watchibc.com if you go to watchibc.com you can register for a very simple 90 minute webinar.

There.

It's going to teach you a whole bunch about the foundational principles. Now you can protect, preserve and profit with your money by becoming your own banker. So we'd encourage you to do that. Now, talking about this diversification, Roman, and the concerns that you had when you first looked at to become your own banker was, okay, I want to get all my money into an insurance policy that doesn't seem very diversified. So why, why would I want to do that? Well, here's one of the things that you identified when you were back in your, you know, back in Ukraine and stuff where you lived before, you would, you would test out these different currencies and you know, gold and silver and this, it would have spread everything out because the concern was, the thing that you identified, the biggest concern was what if, you know, it's like, it's like if you have a four legged table and you kick out a leg and the whole thing falls over, there's no support for the table. Right. So you're trying to create extra legs to support your financial life. The end result is you just hope that you don't lose everything. You have something left over and something does well so that there is profitability, but you're basically walking in knowing there is a good chance something isn't going to do well. So some things go up and some things go down and you're hoping that you can have some stability in between.

What's really, really cool about becoming your own banker, when you implement the tool, the tool not being the process, the tool of the insurance. Because Roman, the way that we design these policies, you automatically create that peace of mind. The insurance company is on the hook to make sure they grow your money and they are contractually obligated to grow the money so you don't have to diversify to prevent against the risks that other investments have anymore instead.

Exactly.

You can be empowered to grow capital inside of an insurance contract guaranteed to accumulate because of its structure and its design, well protected by regulation, at least in the country of Canada. We have a whole separate video that we can point you to on the power of the assurance. It's a, it's the insurance company for insurance companies. We have a whole topic on that. But you're protected and then you're protected from your protection on top of that, basically. And so as you're building up capital resources now you want to go find an opportunity of Investment that works for you that you know a great deal about. Nelson Nash would say, our mentor Nelson Nash would say an investment isn't just in, you know, 401k and RSP TF, tax receiving account. These are not investments. An investment should be something that you, you know, a great deal about everything else is speculation. Okay? And he, he would advise people to be mindful of that. And so now you're building up a reservoir of capital, you want to access the money, boom, you go do the investment that you were going to do anyway. But your, your reservoir of capital is always growing in motion. You have that safety net of protection and you have consistency and peace of mind. So I think that the diversification is your ability to access capital and get another investment, but your, your need to have it is automatically reduced because you have stability of that foundational contract.

When people invest in, especially when I, when I lived in a different country, you know, people always talk about the relationship between the risk you're taking on and a level of profit you're expecting from this particular investment, right? So the higher the risk, so the higher the expected profit is, generally speaking, the higher is the risk.

And in order to find the perfect solution, perfect investment, which has potentially very high profit or expectation of profit or return.

And low to zero risk is pretty much impossible where with this particular residence for the money. What can happen to my money? Even if it's like super liquid in a bank, what can happen? Well, a bank can fail, bank can fail, and your money can be basically vanished. And in fact, in Russia and Ukraine when I lived, it happened many, many times and it happened to my parents where people would wake up and they have no more savings in bank accounts. And this is the worst that can happen. And there was no cure for that, there was no treatment, so people would just be left with that. And there's no level of protection that can be added for any cost. No, it's impossible. But what happens when you put all of your money into one place, like a participating dividend paying whole life insurance, is that even if the insurance company fails, like you mentioned, Richard.

You are protected as a Canadian policyholder, you're protected by insurers which in the worst case scenario, you can potentially lose up to 15% of your investments and that's it. Talking about death benefit and cash values, it can be less, but the maximum is 15% because 85% of your assets, the cash value and the debt benefit is protected.

In fact, the only times that Assurus has needed to step in and solve any Problems in Canadian history, policyholders got, virtually every policyholder got a hundred percent of their benefits with the exception of one instance where it was the lowest amount they received was 90, I believe it was 94, 4% of their benefits. And you can, you can read right on the assurance website, it's easy to find. So and again, because the regulation in Canada is so high and there's annual testing and measuring that's done on the strength and capital reserves requirements of insurance companies in Canada and they, they operate within a non profit organization that is there to step in to assist if there's a problem. It is a very, very well designed system to protect Canadians, specifically Canadian policyholders and it mitigates risk in there. I don't believe, and I, I mean I'm happy to be wrong, but I don't think I am that there's anything like it really in the world. I do think the Canadian system is probably one of the best in, in all, in all the entire globe in how well protected Canadians are. And if we just look at Canada specifically as financial instruments go financial vehicles, it's far better protected than even any bank account or GIC that you can get. Even though they're called guaranteed at a, at a regular banking institution because those are only protected by the Canada deposit Insurance Corporation CDIC and they will only guarantee up to $100,000 like per bank, basically like per account. There's a mitigation there of where you're really protected. Now we can believe everything's good. Our banks have been strong even through the, you know, 2008 financial crisis, but nothing matches the level of protection that you can get in a whole life insurance contract. And so that, that's the key differential. Now the other thing I think is really important. Roman, I'm really glad that you're sharing your story of again your parents, they, they experienced bank failures. They, many people even in the States have experienced that. I don't think too many people in Canada can think about bank failures too much. So it's harder for us to recognize when this can happen. But out in the world it's happening all over the place. It's happened lots of times and in recent history. So we're a little bit jaded here in Canada to not, we haven't felt that pressure and that pain in the same way that I think other people in other countries have. So I think you have a distinct advantage coming here to Canada as an, as an immigrant and making this your home and that you have a perspective. And I don't Think it's limited to you. I find that of most people that come to live in Canada that I meet, they have a unique perspective. It gives me a great opportunity to learn because things I wouldn't have thought about I can now. Oh wow, that's really good context for me to, to receive and diversification. Nelson Nash at one time he had 49 policies. I was sharing with somebody earlier on another call when Nelson Nash passed away at age 88. 88 revolutions around the sun. Nelson would say there were 17 death benefits paid out. 17 policies on Nelson's life paid a death claim tax free. Nelson didn't have any money on outstanding policy loans when he died. And 28 policies, 28 policies that Nelson had a hand in creating, in owning at one time or starting up are still in force to this day. After Nelson passed away, you know, that'll be on his wife Mary, on his children, his grandchildren, his great grandchildren and three ex business partners on top of that, while Nelson was alive, he had two death claims on two policies, two business partners that passed away and those two death claims alone. Nelson would say they canceled out a lot of mistakes that he made in life. You know, I think the sum total would have been around 250 to $300,000 of tax free money he received off those two death claims.

Wow.

He didn't buy those policies for a death claim. He bought them for cash value. He used that cash value and then later on the death claims came in. So Nelson put all of his eggs in one basket, participating whole life insurance. However, from that basket, when opportunity came up, he could go buy real estate. He could go buy land. He would sit on, on strategic land. And there was one story I remember he told where he had a big chunk of land just outside of town in the path of development. He got an offer on that land, he sold that land at a very good price point. And then, you know, later there's a shopping center on that land. Now he doesn't own the land anymore, but he already got his money back out and he owed money on policy loans to go and acquire the deal. So what if the money sat there for three, four or five or seven years and then he had the exit on his deal. Boom. Pays off the policy loan. All of his eggs weren't in one basket. His eggs were in the insurance contracts. And, and then he was able to go really what he did, he didn't have eggs. He had chickens. His insurance contracts were chickens that were laying eggs every day. And then he could take those eggs and he could go, he could go and get another farm and another chicken coop so he could go create some more, you know, more eggs. So his mindset was very different and he diversified less in asset class, more so in lives, in bodies. And because we don't know our best before date, I don't know what day I'm going to leave planet Earth, but I know what's going to happen. So I have policies on my wife and my two children and a whole bunch on me, and I'm going to have to get some more. I'm going to get some more, hopefully on some business partners. And so that diversification happens by hedging our bet a little bit, but also because we know there's a financial loss that we're going to receive if this person, this individual is no longer in our life. So you can control, I think you can control your diversification in a totally different way when you recognize one fundamental truth, we're all going to die. Great. Let's solve for that problem in the most profitable way. And the most profitable way while you're alive is through dividend paying, whole life insurance.

And usually diversification means that if one egg or one asset doesn't or fails or doesn't perform, then the other will help out in your case or not in your case. In Nelson's case, what I see is there's no underperformed assets. All of them were growing guaranteed. And you know, he was, his capital, his total capital was growing every single day. But what it helped them, what it helped Nelson do is to gain from the debt benefits. So there's pretty much no downs, but there's ups in form of windfalls. Would you not agree?

Oh, I would agree. And if we think, you know, I mean.

I like to think I'm still a young man, I'm now in the 40 club. But if I were to look back at my history in planet Earth, it's limited. Nelson had more than twice the amount of human life existence and experience than I did, more than double my existence and experience. He lived through the second World War, you know, the Korean War, the Vietnam, Vietnam War and numerous other ones. Nine, 11, the great financial crisis of 2008, probably about, oh, I don't know, 12 or 14 recessions. He lived through the high interest rate peaks of the early 80s. He lived through high inflationary periods. He lived through all of that. And through all of that time, the asset class that performed the best for him was dividend paying, participating, whole life insurance. And the proof is in the pudding. When we talk to family members of Nelson's that recognize what his legacy has created for them in their. The, the generational impact that Nelson learned to think beyond his own lifespan. He says, you got to learn how to think long range, start thinking 1, 2, 3 generations down the road. And if your brain is attuned to that, the, the, the level of thought process that you have to implement to even be able to go there, how you start to interact with your financial life does shift and it does change. It's, it's unavoidable because you have a bigger vision about what's possible. And as your vision expands, what you recognize you can do expands with it. And so Nelson had, he demonstrated to us through his life, his actions and even through his death and the actions that preceded that how you can live in a powerful way, how you can do more with $1 and you can expand it. He also demonstrated that his policies, his system of policies perfectly kept pace with the inflation that existed over his entire human existence. So from this very first policy all the way until his death, his policies perfectly kept pace with all the inflation that happened. Which, you know, he has a great video on that is talking about a state farm policy that's available on the Nelson Nash Institute YouTube channel. And that is really powerful because people are scared about inflation right now, but that's because they don't recognize, realize what's already worked and demonstrated to work by people just like Nelson who have lived that experience. And that's a tremendous power to anybody that is watching our channel, watching our show. People that head over to watchIBC.com, they get a chance to go through that information, see about implementing the strategy for their own life and what a wealth of knowledge we have that Nelson has left us. In this great book, Becoming youg Own.

Banker, I also wanted to share that. Diversification also also means that, you know, in my family, I have older lives and I have younger lives, right? And there is, there's benefits for both, there's benefits for, you know, being, being insurable, insured myself with my, with my wife, with my children. So my policy is growing way faster than their policy is growing. But for them, I know I'm. I'm creating this long time, long term.

Growth and I'm creating something very meaningful for them. At the same time, I know I'm well diversified and also in terms of product diversification. So I also have critical illness insurance in place which, which is also the diversification in my mind because I'm diversified from the standpoint of risks that I have for me, getting terminally ill or disabled, permanently disabled. Right. So we also need to factor those, those risks in and make sure that all of those risks are taken.

Into the equation. And we need to think about critical illness, disability coverage, and also protecting everyone in the family and your extended family as well.

You know, if more people took your mindset, Roman, it would be a better place because if you could mitigate risk, then the biggest risk to you is probably your risk of earning an income. Whether it's while you're, you're injured, disabled, critically ill or dead. Either one of those things will have an impact on your income. If you really manage those risks first, before you try to do any other kind of investing in things of the world, you would be so much better protected. You'd have better sleep filled nights and so would your spouse and your family because you have that foundation. And that's really the power of what insurance does for us. Yes, there's lots of other cool things it can do, but if we get down to some of the root level stuff and we recognize the power of peace of mind, that's where you can get your ultimate diversification is, you know, how diversified do you want to be? Do you want to have a whole bunch of sleepless nights and sleep filled nights, or would you rather more sleep filled nights? You don't want to diversify your sleep. You want consistent, good quality sleep. Well, if that's true of your sleep, wouldn't you want the same idea in your financial life? We'll get consistent, good quality, always growing cash value. Then if you want to have some excitement, you want to go out for a night in the town, Cool. Go buy some cryptocurrency with a policy loan. Right. That's where you can kind of get your, your excitement factor if that's really what you need to need to do. But make sure you have your foundation in place first. You wouldn't build a skyscraper on a weak foundation. And we don't think you should do that in your financial life. Set a proper foundation in place. You can start learning how to do that very simply. Head ON over to watchIBC.com Canadians all over the country are embracing this concept and they're learning how to have more protection and more control over their financial foundation. And we think you should too. Now, we've had a ton of fun in this video. We're going to recommend that you click on one of the videos that showed up on the screen. Look at that great content. Go ahead, keep your journey of learning going and thanks for spending some time with Roman and I today.