The Pros and Cons of Infinite Banking In Canada

We have to change our thinking from, oh, I have to pay for air quotes, pay for this insurance policy. No, you're not paying for anything. You're already paying the premium. You just don't know it yet.

Hi there. Welcome to the Banker's Vault. My name is Vern McCarty and today myself and my colleague Roman, we're going to be talking to you about the top three pros and cons of the infinite banking concept. We're going to get into some details, we're going to share some specific examples and stick around to the end because Roman has a really, really important pro that he wants to share with you. Roman, talk to me about some of the. What would you consider a con as it relates to the process of becoming your own banker?

The very first con that comes to my mind is that it is not an instant gratification, right? So we live in an era of instant coffee, but instant coffee doesn't exist with the financial world. We cannot use this infinite banking concept as a quick fix, as instant gratification. And anyone who starts his own bank needs to understand that. We need to give it some time to grow. We need to give your capital some time to capitalize and compound, because compound doesn't happen overnight.

Now, I want to make a point about this. Keep in mind that pros and cons are subjective. What Roman is naming right now as a con. And I'm not saying Roman thinks it's a con, but it's not a con to me at all. Nelson taught us in his book, you can see it in Roman's background there as well. Nelson taught us in his book this is the best tool for the job if you want to learn more about the process of becoming your own banker. And there'll be a link in the description below where you can go to our bookstore and purchase a copy of Nelson's book. But he taught us with his five golden rules that we got to think long range. So this is all about rethinking our thinking. So, yeah, for some people, if you're looking for a quick fix, if you're looking for instant gratification and a silver bullet, the process of becoming your own banker, the infinite banking concept is not that. So you could consider that a con. This is a long term process that is all about creating generational wealth.

Sometimes people make financial decisions based on their emotions. Let's say someone wants to buy a house and they want to buy a house now, they want to live in a house now, but then they commit to something very long term, which is like 25 years mortgage and they make financial decisions for long term being in debt much easier than making financial decisions, capitalizing for 25 years. And people sometimes are afraid to capitalize. And one of five Nelson Nash's golden rules is don't be afraid to capitalize. So give your capital some time to grow and be ready to wait and to actually have this money sit in some period of time in your account.

You just triggered a thought in my mind. There's something I'm sure you're familiar with, something called the pareto principle, the 80 20. And I mentioned this on one of our calls yesterday, I think you were on. I said that a lot of times what happens is when we're doing something in life, we start focusing on the 20% of things that are not working very well and we Forget about the 80% of things that are going really well. And a lot of times when you're. You used an example of buying a home. A lot of times when we're renting, I'm not saying that renting is better than buying or buying is better than renting, but a lot of times when you're renting, it's frustrating and you're annoyed by the 20% of things that aren't going good. And maybe 80% is actually pretty darn good. There's a lot less responsibility, maybe lower costs, not as long term. But to your point, if I want to get into a house, I make an emotional decision and then I focus on what I think is 80% better than my renting situation. So that was a really good point.

So the con number two is this is not a product, it is a process. So if you are looking at infinite banking as a tool just to buy something and then put it in a drawer and forget about it, it's not how it works. Right? So anyone in Canada can sell your whole life insurance, but it's not going to be your infinite banking policy. In order to be a banker, the process that you build on top of that product is much more important. So basically your behavior is much more important than the tool itself. It is not an investment. Sometimes people say that I'm looking for places to invest my money. It's great, but it is not an investment. It's just a place where your money resides. And then from there, from the primary residence of your money, you can use that money to take advantage of an opportunity or to invest or to do something else with your money. Maybe an emergency happened in your family or maybe you've been laid off from Work and you are short on money, then you can tap into that account to, to avoid taking out a loan from a conventional bank.

What I'm hearing you're saying is that to the point of this is a process. We are using a tool, a product called permanent Participating Dividend Paying Whole life insurance, ideally with a mutual company. And we have other videos that you can see in the playlist beside us that we talk about the difference between stock companies and mutual companies. I have policies with both. They're both great. But Nelson taught us, wherever possible, we want to place our business and our policies with a mutual insurance company. This isn't like a set it and forget it, hey, here's my fifty or a hundred thousand or a million dollars. Let me put this into this investment and hope that it grows and I'll walk away and one day someday I'll come back and use that money. This is the process of banking. And what we're doing is they call it becoming your own banker. So we're teaching you, we're coaching people how to be more independent versus dependent on someone else's bank, someone else making all those decisions for you or granting you access to capital and all that sort of stuff. Our wealth, our capital has to reside somewhere. It needs a home. We have to deposit money somewhere. It may as well be deposited into a system that you own, that you control, and that it's based on contractual guarantees. The growth is not based on an investment return or the stock market or the economy or any of those sorts of things. So my money's working 24 hours a day and growing, and I can leave it, sit there and wait until an opportunity comes or until I run into a problem. But I'm using my system all of the time. I'm using it for everything from investment opportunities to eliminate debt to personal expenses to business expenses, because money has to be in constant motion, otherwise it's completely useless. And aren't we already recycling all of our money through someone else's bank anyway? Roman. It's all about thinking differently. And to Roman's point, this is about educating you and coaching you and putting the keys into your hands so that you can become your own banker, rather than taking your money in and putting it at risk and putting it into the hands of someone else who thinks they can do better with it than you can.

Comparing to investing into stock market or into Bitcoin or into anything else. Maybe in a real estate property where you put in money and then you can wait till your appreciation goes up and you can use like redeem or realize that asset and take the profit. But this is not working like that. It's an insurance contract in the first place. So which means that you have to put deposits to your bank every single year, at least for 10 years. At some point, yes, you need to talk to your advisor and your advisor will tell you how and when you can stop paying into your insurance policies. But I am not going to put in my money into my insurance policy because if I continue putting in money to my insurance policy then I will have access to much more. Then why even stop? Right?

You got to think about your process, the process becoming your own banker or your family banking system as a business. You're getting into the banking business and businesses need capital in order to grow and thrive. No different in the banking business. The problem with banking today is that you're doing all the work and someone else is getting all of the money. That commercial bank is putting that money to work for the shareholders of the bank. So I want to carve out that capital and I need to deposit money. I'm going to be depositing money for the rest of my life somewhere. I may as well deposit it into a system again that I own and I control. We have to change our thinking from, oh, I have to pay for air quotes, pay for this insurance policy. No, you're not paying for anything. You're already paying the premium. You just don't know it yet. You're paying that premium to someone else's home or someone else's. We want to deposit that premium. It's deposits. It's not paying for anything. It's deposit. And you mentioned 10 years. Now keep in mind, we don't have to make deposits for 10 years. We recommend just in your mind, think about capitalization. Do not plan to deposit premium into your policy system for any less than 10 years. But to Roman's point, well, what about year 11? What about year 20? What about year 40? Well, that money that you're depositing into your policy system today has to reside somewhere. It's got to get deposited somewhere. And if I can, in the 20th or 30th year, if I keep depositing X amount of dollars and I can access two or three or four times that amount, why on earth would I ever stop depositing the money into my own system? So it's not a one time deposit. Set it and forget it. This is an ongoing process where we're continuing to capitalize over a long period of time. I'm actually going to share a quick visual so that People can kind of see what you're referring to. So let me just share my screen quickly here. Let's keep this as simple as possible. The process of becoming your own bank is ridiculously simple. So here's my chicken scratch. Okay, here's your checking account today. So imagine, just like Roman said, I'm earning an income, and it doesn't matter if I'm earning that income from my job or. Or if that income's coming in from CPP or OAS or my RSPs or my pension. So if I'm retired, people think about paying for insurance. They think of it like, oh, a premium. I don't want that premium when I'm 65 or 70 years old. But guess what? Income is coming in anyway. Okay, so now what you're doing today is you're sticking your money, your income into someone else's bank, and then you're pulling that money out to live. It doesn't matter what you're using it for, whether it's paying off debt, whether it's investing, whether it's paying your light bill or getting groceries. That's all has to do, in my mind, with living. So today, you're putting your money into the checking account. You're pulling it out to live, and that money is now being permanently transferred away from your family. That financial energy is gone forever. But what Roman's referring to is, okay, well, we're just going to add one extra tiny step. Okay, so here's what I do with my money, and you can do this in retirement as well. Just like what Roman said, my income comes in, I first deposited into my policy system. So I'm capitalizing my policy system. I'm putting it into a private contract that I own, that I control. I'm isolating that money from creditors and all those sorts of things. And now what I do is I actually access money from my policy system via something we call a policy loan. And then I'm going to deposit that into my commercial bank, because I'm still going to use the commercial bank for the convenience of debit. And now guess what? Now I'm just going to take that money out to live and do the things that I do. So now my money is growing all day, every day, uninterrupted in my policy system. And I'm just going to keep doing that. Just like you're doing today. You're recycling money to the commercial bank, But I just first deposit it into my policy system and keep that circulation going. And my capital continues to grow and grow and compound over time. And I'm not giving up the growth on money, the opportunity cost that we lose every single time we spend our own dollar. So hopefully that helped give a little bit of visual of what Roman's talking about. Just deposit the money in your policy system and then access the cash from the policy, use that for living, and then just keep on recycling that cash.

Talking about pros is much more exciting for me. And the pros are endless. Right. So the first one that comes to my mind is that you don't have to be rich to start your own bank.

Right.

It's kind of misconception that you have to be putting like tens of thousands of dollars into your policy to, you know, start. No, you don't have to. You can start as low as $100 a month, which comes to 1200 a year, or we have clients who put seven or eight figures a year into your policy. It's up to you to decide. It's the same as if you come to a banker and to a teller and tell him, hey, how much money can I put into my checking account? And the answer will be how much you want. Right? It's up to you to decide. The more you put in, the more you can use. And the same applies to the infinite banking concept. The more you put into your banking system, the more you will get to use when it grows and when it capitalizes. Like Vern just shared, regardless of if you take out policy loans or if you don't take out policy, your money is still growing every single day.

See, there's a lot of. What do we call it? What did Nelson teach us? Financial noise. There's a lot of financial noise out there and people focus a lot on the product. Because keep in mind, yeah, we're talking about life insurance here, but we're using the life insurance as a tool. And I'm not taking a shot at anyone in the industry or any of the advisors, any of our colleagues out there. But generally speaking, and I've been in this business for 10 years, and this is literally what I was taught. This is coming from, like trainers and people in the industry. Whole life insurance is way too expensive, Vern. You know, it's really just for wealthy people. You should be focused on selling your clients term insurance and maybe get some small whole life policies on kids, you know, and, you know, generally speaking, maybe that's not bad advice. Obviously there is a place in the market for what's called term life insurance. Absolutely. I even have term life insurance. It's really good for High death benefit and low cost while you're young and while you're healthy. But over time, that term insurance just keeps going up in cost and you're not getting anything unless, God forbid, you die. Okay, So I would recommend, hey, talk, obviously talk to a good coach, talk to an advisor. But if we started putting in place just some tiny whole life policies today, while you're in your 20s, your 30s, your 40s, you can always systematically add more policies to your system, deposit more premium over time, always say to clients, it's more important that you get started than how much you get started with. And just like what Roman said, the more I put in, the better it's going to do. But it's all about just getting started. So our process is like, obviously we're going to look at how you're structured financially, make sure you really understand the problem and the process of becoming your own banker. What are some of your specific objectives? And rather than Roman and I telling you, hey, you have to put X amount of dollars into your policy to get started, you're actually going to be the one who's making that decision. You're going to be the one who decides what's best for you, obviously with our good guidance, but you're going to be the one who decides how much you want to deposit into your system and that's going to tell you how much death benefit you're starting with, rather than us telling you how much death benefit you should start with and what that's going to cost. Now, I should caveat that, Roman, by saying that we are life insurance licensed advisors. We have duty of care to do a full life insurance needs analysis so that you know exactly how much insurance you should have from a death benefit perspective. But ultimately it's going to be your decision of exactly how much you buy and how much you decide to capitalize your system with.

And the best infinite banking policy is the one you started regardless of how much money you don't, you don't need to overthink, you don't need to think very long and figure out how much I need to put in as a deposit to get started because the best policy is the one you've just started. So don't wait too long because you're missing out on opportunity to capitalize your capital.

Speaking of which, Roman, do you mind if I ask, how many policies do you have today?

I have eight policies. I have one policies on my life and I have seven policies on my children.

Well done, Roman. That's great. And I currently have Nine policies in my system. And I don't think either one of us. We didn't start with eight or nine policies, did we?

No, we did not. I started with one.

Yeah, we built them and added them over time as we were able. So really well said. Roman, what about, excuse me, pro number two?

The pro number two, like you just shared, Vernon, you have to have a good coach. And the pro number two is based on that phrase, that you are not alone in this journey. You don't have to be afraid that you will be sold a policy and left alone to figure out everything by yourself. So our role in the relationship is not just to sell you a life insurance contract. And they say, hey, Mr. Client, this is your policy. I hope you'll get there. No, our role is to guide you through your journey so that we make sure you first achieve your objectives and second, you actually implement the process. You take on policy loans, you make the repayments, and then you recycle your money all over and over again so that your money is in constant motion. And the beauty of this is that our goal is to help you, guide you, and then eventually make sure that you become independent banker. So you know how your banking system works, you know how to use it, you practice infinite banking. And the most important thing is you teach your children how to use it because it is a multi generational wealth transfer. So you have to make sure that when you're not here anymore, when you're, when you graduate from this planet, your banking system will continue, when it will not be spent by your heirs and your family, your beneficiaries, and the system will continue growing and expanding from generation to generation.

First one that I'll point out though, is just how you finish that off. You're exactly right a lot of times. Obviously, personally, I value my family very much. I want to do as much as I can to give myself kids a leg up, but that does not mean that I'm sticking a silver spoon in their mouth and they get to sit back and relax and spend all the money. That's not how it works. What I'm doing is setting my kids up such that they don't have to chase necessarily, of course, you know, do good in school, all that stuff, but they get to chase passion, they get to chase humanity plus endeavors in their life. They get to do what they want to do with their life versus what they've been told they have to do with their life. That's what it's all about. Not just leaving money, but leaving a system, a process for them to follow so they'll know exactly what to do with that money so that it doesn't get squandered. You had said another thing about a pro is that you get to work with a good coach. Now, Roman and I would recommend you don't have to come and work with our team at Ascendant Financial. Although, you know, with respect to all of our colleagues, we do hold ourselves out there as the absolute best, the gold standard as it relates to implementing and coaching people to implement the process of becoming your own banker. But we highly recommend that you work with somebody who has been, who is an authorized infinite banking practitioner through the Nelson Nash Institute. You can go to infinite banking.org, you can go to the Practitioner Finder and you can. If somebody tells you, oh yeah, yeah, I'm an infinite banker, great, you can look their name up right on the Nelson Nash Institute. You can look at the Practitioner Finder and see if this person, you know, really is a coach. If this person can.

Certified professional.

Yeah. Can they show you their policy system? Can they show you what they've been able to do? So make sure that you work with somebody just like what Roman said, that is a really good coach. So you're not alone in this process. There's a lot of families and individuals out there practicing personally, and there's a lot of great coaches like myself and Roman who are practicing it in their own lives and coaching people to do the exact same thing.

The most valuable thing that actually attracted me to Infinite Banking and it is liquidity. It is access to liquid capital at the same time as your capital is growing every single day and you're not interrupting this growth by accessing this liquid capital. And for me, it was a mind blowing concept where I used to have money in many different investment types, right? I had RSPs, I had stocks, I had, you know, cash investments and stuff like that. Like, you know, some debts where I borrowed money to someone, but lent money to someone. But for me, having access to that capital while it is being invested is number one. So liquidity is probably the best ever thing that can happen to your capital. So let's say you come across a very good real estate opportunity, real estate deal. You may tap into your policy and access money via policy loans to buy this opportunity and then have the money grow. And as the opportunity finishes, you can replenish your system. And by that time your capital would have grown much more than if you withdrew your cash from your conventional bank account.

We mentioned that kind of as the con earlier. You know, we're capitalizing our system, we're depositing premium into our policy system long term. But we use a very specially designed policy for this process. So again, that's another reason why it's important to work with a good coach to make sure you get the right tool for the job. But we structure the policy such that, yes, I'm putting more in in the early years than what I'm able to access, but that doesn't mean I have to wait one year, five years, 10 years before I can start actually implementing the process and practicing concept of banking. You know, back when Nelson started the process way back in the early 80s, that actually is what he had to do. He had to capitalize for six, seven, eight years before he could even start using his system. But luckily for us, you know, there's been a lot of modifications and a lot of new tools and things that have come out that have allowed us to be able to capitalize the system and start to implement the process right away so that we can get our money working and then be able to take advantage of opportunities. And I'm going to actually share a quick example of that. In fact, I'll expand on the example of how I actually financed my own truck, how I was able to recapture the payments on my Ford F150 five and a half years early. I was able to eliminate that debt payoff, Ford Credit Canada, and now I'm recapturing those payments. So if you look at the video above, there's actually a webinar link there that I was able fortunate enough to lead in August of 2021. We're actually share that truck financing example. But Roman, I'm going to go ahead and share my screen again. Hopefully this visual actually helps. Okay, we'll see how it goes. So here's, here's just an example of the payment that I was making. So what I did In February of 2019, okay, I went, or actually January of 2019, I went to Ford and I said, hey, my family needs a new vehicle. What do I have to do? So I jumped through all their hoops and I was able to acquire a vehicle. And what I did was I financed that vehicle over eight years. Now, Roman, normally that would be really bad advice because now I have to make a payment of $650 per month or 399 or whatever. It was biweekly for eight years. That's a really long time to have that money flowing. My, my family having that money flow to Ford Credit Canada. But the reason why I financed it over eight years is because what I wanted do is keep the payment as low as possible, right? I wanted to have the least amount of money flowing away from my family, but also be able to solve the objective of getting a vehicle that was reliable at the time. But what I was doing, what I knew that. That the Ford guy didn't know, is that I was capitalizing my policy system this entire time with the extra capital that I wasn't sending to the truck. I didn't have enough capital in my system in January of 2019 to finance that vehicle altogether. But every day, while my capital was growing inside my policy system and I continued to capitalize, I made my payments for two and a half years. But eventually I got to the point I added more policies. I wasn't afraid to capitalize. I expanded my system. I got to the point where I had enough cash value where I could take that policy loan. And what I did was I took the policy loan and I paid off Ford Credit Canada two and a half years into this arrangement. And now, Roman, to your point, I didn't stop making these payments. In fact, I bumped my payments up to $700. But now the difference is, Roman, who's getting the money? What am I doing now? I'm taking.

Your banking system is.

Yeah, that's exactly right. I'm taking this $700 per month now, and I'm actually putting it back into my policy system. I took that policy loan. I'm replenishing the cash that I took. But all the while, my capital is continuing to grow, and I'm able to re access every single penny that I pay back to the policy, plus all that daily growth. So to Roman's point, that's how I was able to actually use my money in two different places. It's growing inside my policy. I access that policy loan without interrupting that growth, pay off Ford, solve the objective, and now I'm the one recovering those payments. I just turned that liability into an asset effectively, didn't I?

Roman, the teaching point here is that a stream of payment is an asset to someone who is receiving it. If you're sending a stream of payment to someone else's bank, then your banker gets this asset. And if you're redirecting the stream of payment from conventional bank, from Ford, or from the financing company into your own banking system, then your bank becomes a beneficiary of that stream of payment. He gets all the assets. And the beauty of this is you can re access all this money immediately, right? Like in a day or two after it's been deposited.

Yeah, that's really well said, Roman. Something for you to think about is that assets and liabilities, everything that you call an asset, the bank calls a liability and everything bank calls an asset, that's a liability.

To you, that's an opposite.

That's why you want to become your own banker, turn your liabilities into assets overnight. So. Well, I shouldn't say overnight. It is a long term process. But you're picking up what I'm laying down. Thanks for making this video, Roman. Your comments were amazing. I really appreciate it. And again, just a reminder, don't.

Thank you very much.

Don't forget to check out the playlist beside us and those other links that I mentioned earlier.