This is How Banks SCAMMED The World
A conversation (YouTube) between Jayson Lowe and Sarblo contrasting stock versus mutual life insurance companies, explaining how life insurers and banks deploy policyholders' capital, and advocating building a 'family banking' system of participating whole-life policies. Emphasis is placed on policy design, policyowner behavior (borrowing and repaying policy loans), guaranteed interest accounts offered by insurers, and long-term control over capital.
Chapters
What is the bank doing with your home equity?
Putting it to work.
For who?
For the benefit of the owners of the banks.
And who are the owners?
Stockholders.
When people are talking to us and saying, hey, what's the big difference between a stock company and a mutual company? When you're dealing with life insurance, what do you think that big difference is?
Sarblo, this stock company has an obligation to make profit for the stock owners, investors and then policy owners. Whereas a mutual company has the obligation of making profit for policy policy owners.
And both companies are good. So is it okay to make a choice between good and good or a choice between good and bad?
Yeah, good and good is good.
It's just recognizing this.
Did you know that life insurance companies offer guaranteed interest accounts? We have clients within our community who say, I'm piling up some additional savings. My existing system of policies can't hold it because all the premiums are paid up. There's no outstanding loan balance. There's no more additional paid up addition room. But I'm building up some extra savings and I want to store it somewhere. And many don't realize that the life insurance company itself offers guaranteed term interest accounts as well. And just as early as a couple of years ago, the interest rate that the insurance company would pay to the saver was 1.1, 1.2%. Not too dissimilar to what the conventional banks were paying. Right. Because they were paying practically nothing on deposits. I just had a client who said, yeah, I'm kind of interested in this guaranteed term interest that you've been talking about. What is the interest rate? One year. I'm not talking about two years. Plus the interest that the insurance company will pay to that saver is 4.95%, no fees. Yeah, I get it. Inflation is up. I understand all that. But you take a client who's got a million bucks and they put it into a guaranteed term interest account and they put that in there at 4.95%. That's, that's a pretty decent return, but that's only part of the equation. So what do you think the life insurance company is doing with that capital?
They're going to put that capital to work for the benefit of the owners of the company.
Right. And who are the owners of the company?
It's folks who have a participating dividend paying whole life insurance contract.
Right. The pundits will say, well, it's not really true ownership in the sense that you receive stock or a share ownership certificate in the company. The way that this is Structured is that the unilateral binding contract, the insurance contract, that contract owner along with every other participating dividend paying whole life insurance contract owner. When you're dealing with a mutual company, they are the sole beneficiaries of the divisible surplus, which means if the insurance company has a million dollars left over after all the bills are paid, that's a surplus. They'll take a portion of that surplus, call it 30%. So you have a million bucks of surplus. You take 30% of that, which is 300,000, and you distribute that to the participating policyholders in the form of dividends. If you take the remaining 700,000 and you need to do something with it, that gets logged on the books as owner's equity. Who are the owners?
Participating dividend paying policy owners.
Right. And what does the insurance company do with all that equity?
Put it to work again.
Now let's contrast this with a bank. What is the bank doing with your home equity?
Putting it to work.
For who?
For the benefit of the owners of the banks.
And who are the owners?
Stockholders.
When people are talking to us and saying, hey, what's the big difference between a stock company and a mutual company? When you're dealing with life insurance, what do you think that big difference is?
Sarblo, this stock company has an obligation to make profit for the stock owners, investors and then policy owners. Whereas a mutual company has the obligation of making profit for policy owners. Because they have no stock owners, they're not pressured by stock owners to produce a financial outcome in this quarter. They can focus on long running successful business.
Right. And both companies are good. So is it okay to make a choice between good and good or a choice between good and bad?
Yeah, good and good is good.
Right? It's just recognizing this. If you had a mutual fund and you put money into that mutual fund and the institution said 100% of the return generated by this mutual fund, we're going to take 100% of the returns and we're going to distribute X percent to everyone and we're going to take the remaining percent. It's going to become everyone's equity. People are going to go, hey, that sounds like a pretty good deal. In the actual mutual fund business, you're getting a portion of the return generated and the remainder of that return is with the institution. It gets paid out. There's fees that get charged. Do you know that fees can erode north of 30 plus percent of the wealth that you accumulate? So if you're dealing with a stock insurance company and you're dealing in theoretical 100 year lifespans and you start chomping a little bit away, gets distributed to the stockholders over that theoretical 100 year lifespan. You got the mutual company where none of that gets chipped away to stockholders over a theoretical lifespan of 100 years. Who do you want to be in a 100 year relationship with?
Ideally speaking with a mutual life insurance company.
Yeah. It's not because one company is better than the other. It's just understanding the attributes, understanding that your money must reside somewhere. There are plenty of great stock companies. We have clients that have to do business with a stock company because they get declined from a mutual company. Like it's a choice between good and good.
Yeah.
And so it's important to clarify that. And the reason I say that is is when you introduce another party to the table to participate in profit, that's one thing. But when you introduce a party to the table that now becomes the primary party that you must be responsive to and they step in front of the line of the participating policyholder. I need to know that so that I can make a good educated decision on where I want my capital flowing to and residing with industry Noise is all around illustrations. One company illustrates better than the other. Who gives a shit? Nobody talks about the policy owner's behavior. Is the policy owner's behavior far more critical than the behavior of the life insurance company?
Yes, 100%.
The insurance companies are all putting their money to work in the same places. But two things that get left out of the equation, the policy owner's behavior and the customer service that that policy owner receives. I have a stock company who sends me a statement after I pay a premium to say, can you double check that we allocated your premium payment properly? And guess what happened? Wasn't allocated properly.
Oh.
Okay. First off, you're asking me to double check your work. Red flag number one. Number two, you didn't allocate it properly. So now I've got to have one of my team members waste their valuable time fixing it. But that doesn't get discussed out there. Yeah. Because if you do business with one company over the other, all you care about Sarblo is your commissions. Like if people want to sell against what you're doing, then you got to get up a little bit earlier in the morning and start comparing customer service, client care, policy owner behavior, coaching, mentoring. To just make a stupid remark like that. It's just amateur night at the arena. Honestly, what's your thinking around that, Sarblo? Around policy owner behavior. The Significance of that.
The policy owner's behavior is vital because they can control themselves, meaning they can control their behavior. They just can't control someone else's behavior, in this case, the insurance company. And that's one of the reasons why we always say the policy design is more important than the dividend payout from the insurance company.
Yeah.
Because dividend payout is someone else's behavior. Policy design is something we can control in terms of how we put, how we structure the designs and how we allocate the premiums to maximize everything. From becoming a banker perspective, going forward, even if there is no dividends from the insurance company, you will still win because your behavior control that outcome more than someone else's behavior. Insurance company is not going to force you to take a policy loan. Your behavior will trigger to take a policy loan, understanding that if you pay cash for things, you're going to lose interest forever on that money. Not just over your lifetime, but for generations to come. And if you're okay doing that, go for it. Yeah. But if you understand the problem, hey, there's a cost of loss opportunity. I'm going to either pay interest or lose interest. No, no. I'm going to tap into my system of policies, take a policy loan, accomplish the objective, and my money still continues, my capital still continues to grow in the policy. And then the second behavior of paying back the policy loans and why do you want to pay by policy loan? Is because you want to replenish the money that you've taken out so you can reuse more of that money in future to do more great things for your family.
That's exactly right.
So it's all based on behavior. Right. So becoming a banker is more behavior related versus numbers or illustration related. Illustration is going to change. You know, things are going to change, economy is going to change, illustrations will change. But if your behavior just gets enhanced every time, then you will overcome the illustration change going forward.
Yeah.
Every year.
Yeah. Because you can literally be the author of that better outcome.
Yes.
Regardless of what's happening in the economy. I don't know. It's just, it's so amazing to see policy owners that have been, you know, with us for years and you look at how much different they are today and how much more control they have and how much more confidence and capability they have, and it's so fulfilling. It's just incredible to see that that's all part of, you know, helping people understand that this is not meant to be achieved through the device of a single policy. It's gradual it's incremental. It's about building a family banking system which is comprised of a number of policies and a number of policy owners and utilizing that system to keep that money in the family to the greatest extent that the money pool will provide for. And the money pool just keeps expanding. And then when death comes, then the money pool is expanded even further and it's replenished with the money that the family had spent on all those things without the family transferring any money away from them because they're using the life insurance company money to go and get those things. And they're taking the family's earned income to the greatest extent possible and sending that to the life insurance company that they co own. And the life insurance company does a far better job at putting that capital to work. Think about, you have clients in a variety of professions, right? Doctors, dentists, anesthesiologists, attorneys, realtors, professionals in a variety of different industries. A life insurance company has very dedicated, very intelligent, very experienced professionals who focus day in and day out on multiplying capital. So who do you think has the better data?
Life insurance companies.
Yeah. And so let them take on all the risk. And in exchange for your money, because money is a medium of exchange. So in exchange for your money, they hand you a unilateral binding contract that is chocked full of guarantees. And the contract is unilateral, meaning one party to that contract is required to make and fulfill promises. Your sole obligation is to pay the premium. Keep sending financial energy to an institution that's never failed to produce a profitable outcome. How much of your financial energy do you not want flowing there? It's meant to be achieved gradually and incrementally over a period of time.
And that's also the behavior. Behavior also includes expanding your system to accommodate more of needs for financing going forward.
Agreed. And from page 28 to page 40 in Nelson's book titled becoming your own banker, he focuses on the human problems. He didn't say the human opportunities. He said, these are the problems that we need to be aware of as human beings that can impact our behavior. And our behavior is far more critical than the behavior of the life insurance company. You had an opportunity to meet Nelson, he repeated over the years. And to this day some people still say, gosh, I really don't understand what he meant by that. He said, most people will never understand that becoming your own banker, the infinite banking concept, has absolutely nothing to do with life insurance. Take some time to really think about that. And while you're thinking about that there's another video that's shown up in the playlist. Continue your journey of learning. We always say there's no destination or landing spot for knowledge, so continue your journey. We've recommended this video for a reason. Click on it. Continue watching. Continue growing.
