Richard Canfield explains why infinite banking fails: people lack discipline to repay loans, confuse cash value with actual money, and treat policy borrowing as free credit. The concept works only if you run it like a business, not chase a magic bullet.
Chapters
Done wrong. It's definitely a recipe for disappointment.
The language is really important there. And some of the risks are not understanding the right language.
Implementing the infinite banking concept is a process, not a product.
More premium creates more result.
So the risk is the human behavior. Let's be real. Every time you hear the words infinite banking, somebody is either calling it the greatest financial strategy ever invented or the biggest risk you could possibly take. And so which is it? What are the real risks, the ones that most people just don't talk about? And more importantly, how do you overcome them so that the infinite banking concept becomes a long term advantage, not a financial headache? And so in this video, Rich and I, we're going to strip away the hype, we're going to cut through the myths. We're going to show you exactly what you need to watch out for if you really want to succeed in implementing the infinite banking concept, which is a process, not a product. And here's the truth. If you do it right, it's one of the most powerful processes that you can use to control how you finance the things that you need throughout the course of your lifetime to recapture the interest that you would otherwise pay to someone else's bank or to some other finance company. But done wrong, it's definitely a recipe for disappointment. And so, Rich, let's get into it.
You know, one of the risks that I think is, you know, so you have these little blenders that you, every time you get a protein shake and you get the little blender, I think it's called a magic bullet. Maybe some people have seen that before, makes a lot of noise, but it's nice and compact, is a good job. And well, they call it the magic bullet because it's this nice little compact machine that you can do a lot with, but only a certain amount of volume. Well, people are always searching and hunting and you know, keyword typing and YouTube searching and googling and chat, gpting all the things that's going to be the magic bullet for their financial life. This is not that, you know, so one of the risks is making assumptions or trying to constantly seek the perfect thing that's going to solve all your problems magically. If you have financial problems, probabilities, you might have created them to some degree or you're, you're, you know, we all have these issues that we have to deal with. Trying to find the one stop solution to all that is just not reasonable and it's not realistic. So, you know, I think that's a risk, is that people are looking for you know, the, the holy grail of financial solutions to everything in their life. And they want to continually abdicate that responsibility to now this thing that's going to solve all their problems for them without saying, oh, I actually need to step up and be a part of the solution myself.
Yeah, that's a really good point. And I would add to that, you know, if most people that we speak to who share with us, they may say something like, I really, I already understand the infinite banking concept. And then when we look at that, maybe explore that a little bit more to say, okay, well let's expand on that together and let's see if we've got the same understanding of what the infinite banking concept is. And we hear some really interesting things like I want to implement this because I want to get rich buying every future car that I'm going to own and I want to get rich, you know, insert whatever it is here.
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And instantly we know that we've got some work to do to get someone to clarity because before we talk about the real risks, which all boils down to the policy owner's behavior. If you just put premium into a dividend paying whole life insurance contract, if that's all you did was pay the premium and you were consistent at doing that, the insurance company is going to administer that contract all on their own. They don't need any intervention from you, they don't need any guidance from you. They don't need anything other than capital outlay called premium. That has nothing to do with the infinite banking concept at all. That is funding the purchase of a product, ideally from a reputable life insurance company. Now if you now get into the risk, well, the risk is that if you begin borrowing against cash value, which is not money for any of our advisor colleagues in the industry, please develop that understanding and stop saying that it's money. It's not. It's a ledger entry, that's it. The net present value of the future payment of a death benefit, it is not money.
And you're never taking that out. And so for any from the general public or advisors, you're not putting premium in and then taking your quote unquote money out because it's not money and you're not taking it out, you're borrowing against an asset. So the language is really important there. And some of the risks are not understanding the right language precisely.
So if you, because words have meaning, right? And so if the policy owner says, okay, I'm going to, I understand that I'm going to be borrowing against cash value, which is again is not money and I can repay the loan on my schedule. It's an unstructured loan that can represent a significant risk. On one hand it's an advantage. But having total and absolute control without discipline and without a real understanding of what it takes to run this like a business, that represents a significant risk. And Nelson expressed in his book, he said, look, if you find yourself in a situation where you've done that and you haven't repaid your loans, don't you go pointing the dirty end of the stick at anybody else. You're accountable for that. So the risk is the human behavior. And how did Nelson, what did Nelson say is more important?
The behavior of the policy owners? By far more important. And we've, I mean we've, we've got multiple videos and content pieces where we've proven that time and time again. And Nelson proves that in his book. In fact, we did a massive deep dive in Nelson's book. And we went through as an example with twin sisters, we went through the equipment financing section and we, we summarized and iterated the importance of human behavior. Because in the equipment financing example, maybe we can link to that somehow below. But the equipment financing example, he gives us a baseline of when the insurance company is doing all the work. And then he gives us an example of when the insurance company did the same amount of work but the policy owner now started to intersect with the policy and do his own thing. And through that behavior, as long as there's proper guidance and instruction. And the end result is that they're applying more money into premium, you know, so quote, unquote, paying themselves extra interest, which is, which is just a matter of cash flows, financial energy running through their life, being very intentional on how they direct it to the insurance company and then communicating to the insurance company this amount of money goes in as a extra premium, as more premium, more premium equals more capital, more capital accumulation, higher dividends, more future dividends, more compound potential, more death benefit, more tax free advantages. Like the list kind of goes on. But it all starts with that behavior. Clear instruction, application of more premium, more premium creates more results. We have a ton more amazing conversations and great clips just like this. If you go right here, or if you want to watch the rest of this conversation, the full episode, click right here.
