Dan Allen explains that IRR on whole life insurance depends on what you compare it to, but the real value is becoming your own banker. He shares a story about buying timberland at $50 an acre with policy cash value, then selling it for $500 an acre, showing how access to capital creates returns an illustration never captures.
Questions this video answers
August 17, 2021.
Dan Allen (Ascendant Financial).
Since 2014.
Since 2017.
Since 1847 in Canada.
Chapters
If you can build your warehouse of wealth using this process, opportunities will seek you out and then you get a return that's even greater than what you could imagine.
What's the internal rate of return when you use the infinite banking concept? Every once in a while I get that question. People are always interested, what is my internal rate of return if I use this, this process and that product? Well, today I'm going to speak to that. I'm going to briefly talk, give you a little information on the product itself and then I'll talk about an example that Nelson taught us in his book Warehouse of Wealth about one case he had in his life where he shows how the process and what that process allowed him to do and the kind of return that he got. Hi, I'm Dan Allen and I'm with Ascendant Financial and I've been helping people implement the process called becoming your own banker in their lives since 2017. And I've been personally practicing it since 2014. So when you talk about internal rate of return related to the product, that's a different discussion than when you talk about the return you can get when you talk about the process. So let's talk about the product briefly. The product can give you a very reasonable internal rate of return over time if you just look at the product and when you compare it to other safe and predictable financial vehicles, it will over time outperform every example I've seen of another type of product that fits that mold. Now if you're comparing it to something where you have to take a risk to get this rate of return, it may not be as good again depending on whether that risk you took worked out or not. So people will talk often about the rate of return they can get with something else. And I'm just going to challenge you to always, when you're looking at things, always compare to the same type of vehicle and dividend paying. Whole life insurance is a financial product and it's been around since 1847 in Canada. And it is very safe and it's very predictable. So I can go look at my cash values and know what they are and I know the next day that value will go up. It's very predictable. So when you compare things, always compare something to something similar. If you're going to compare it to some high risk venture out there, well, that high risk venture may give you a better internal rate of return. But really when we talk about the process called becoming your own banker, the infinite banking concept, it's not about the product, it's about the process. So what I wanted to talk to you about today was just one example that Nelson put in his book, Building youg Warehouse of Wealth. His first one was Becoming youg Own Banker. I suggest you have that one. And I'd also suggest that you read his second book. So when you think about the process, I just wanted to share one of the stories that Nelson shared with us through his book. He had this opportunity when he was part of the National Guard army and one of the other pilots come to him with an opportunity. And this pilot was in need of some cash. And he had this property that was 100 acres of timberland, and he offered it to Nelson for $50 an acre. And he was going to finance it over 10 years for Nelson. So Nelson, being a forester by education and having worked in forestry for 10 years, knew that that was a good deal. So he agreed to the terms and he started to pay that other pilot the money that he owed him to purchase that property. Now, 18 months later, that pilot calls Nelson up again and he said, dave, can we meet? And so Nelson, sure, let's meet. And during that meeting, he realized that things had changed for this guy and he needed money and he needed it quickly. So he made Nelson an offer. And he said, if you can pay me for this property in cash, I'll give you a deal by reducing the cost to 25 cents on the dollar. So originally it's going to be $50 an acre. But with this deal, he reduced what he was left owing by 25 cents on the dollar. Now Nelson realized how good of a deal that was. And because he had cash value in a dividend paying whole life insurance policy, he right away he said, just wait, I'll go get you the money. And where he lived, he could actually go to the home office of that life company and he had them give him a check for the amount that he would owe to buy out that property right away that day. And he was able to close that deal. So he got that 100 acres of timberland for a cost of $38 an acre. Now, as the story goes, and Nelson Hicks, as he expressed it in his book and as he talked about it when he spoke about it, he kept that land for over 10 years. And over that 10 years, he paid. He had that debt outstanding against his policy. And after those years, he decided to sell that property because he could and an opportunity come along for him to sell it for $500 an acre. So that's an example that Nelson used because he had readily access to capital, he could do that deal. Now, he went on to speak about that same policy to use for this one. And he said he did some other deals, never quite as profitable as this one, but still very profitable. So when you think about the process, the teaching point is that if you can build your warehouse of wealth using this process, opportunities will seek you out and then you get a return that's even greater than what you could imagine. So it's about opportunities. And once you weigh those opportunities in over time, that process that we know as becoming your own banker adds much more value than what you're going to see on an illustration or in actual statements from the Life company. It gives you opportunity to make a huge profit. And that's one of the teaching points that Nelson shared with us. So if you really want to look into this process, and I always tell people, it's not about the product, it's about the process. So once you have this process working for you and you recapture the banking function as it relates to your needs, you start to build momentum, financial momentum behind whatever you do. And therein lies the key to this whole process that you control the banking function as it relates to your needs. And when opportunities come along like this one that Nelson shared, you can enjoy those opportunities without having to wonder, could I get that money? Could I get that money in time? Would the bank give it to me? And all the conditions that they would put on you if you did use a bank loan at a commercial bank to do that, because you might be able to. This just gives you control and it gives you freedom that you won't get from dealing with a commercial bank. And you may not be able to get that loan at a commercial bank, which really would have changed the outcome for Nelson. So that's what I wanted to leave you with today. When you think about the internal rate of return as it relates to the infinite banking concept, it's really, really impossible to tell you what you could get. It's something that you will have to live and experience to understand the kind of rate of return this concept and process can give you. Again, it's not about the product. It's about getting control of the banking function as it relates to your needs. I hope this helps. And, you know, if you want to learn more about this process and this concept, take in some more of our videos. They're readily available and I just encourage you to do that. And I hope you found this valuable. Just a short story about how Nelson used it in his life.
