So today we are going to address
a very debated topic
around cash value life insurance
which is how to maximize the cash value
but specifically
when it has to do with infinite banking.
Our company IBC Global
represents insurance business concepts
as we discuss
a variety of different concepts
in the insurance business
specifically referring to
whole life insurance
and how to maximize the cash value
whether the concept
is cash accumulation
retirement planning
business planning
being SERPs
non-qualified deferred comp plans
whatever it might be
we go over a number of concepts
specifically around
whole life insurance
and the idea of the banking concept
is one of them.
Now with that said
around the idea of the banking concept
a heavily debated topic
and where so many
so many consumers
have vented so much frustration
just over the years
is around the cash value
but the number one objection
that I have heard for years is
I am interested
in the maximum cash value
I do not care about the death benefit
this is exactly what consumers express
how do I maximize the cash value?
And then in the infinite banking world
what people often hear is
well this isn't about
maximum cash value
this is not about maximizing
the internal rate of return
it's about much more
it's about taking control
of the banking function in your life
and you can use a dividend-paying
whole life insurance policy to do that
because you can.
But the thing is
when it comes to a high cash value
life insurance policy
if I want to practice
the banking function or not
why not maximize the cash value first?
That has always been our
number one go-to
regardless of what concept
someone is practicing
how do I maximize the cash value
just like banks do
just like corporations do
just like the wealthy do?
Why do I have to have
something different
if I want to practice this?
So not about the cash value
I should use a small
to medium-sized company
with a little bit higher base premium
than I could typically go
so if I can lower the base premium
which reduces
or I'm sorry
the higher the base premium is
that reduces the cash value upfront
commits me to a larger amount
as a consumer
and it does not maximize
the cash value.
So if my goal is maximum cash value
and I'm being recommended to go
with a small to medium-sized company
that has not provided
any proof of performance in the past
and go with a higher base premium
which sacrifices upfront cash value
no matter how you spin it
the translation
being in the industry is this
don't look at the cash value
because it impacts my commission.
Speaking completely straight
that is my opinion on it
whether you like my opinion or not
that's my opinion on it
but at the end of the day
when you look at cash value
life insurance products
regardless of what your goal is
with the concept
what concepts you want to practice
small to medium-sized companies
high-based premiums
do not give you maximum cash value
when you look at the data
which if you've watched
any of our videos you know that.
So here's my encouragement
before we move on to some data
is anytime you're interested
in a whole life insurance policy
specifically for maximum cash value
you've got to remove this.
Our company
insurance business concepts
works with engineers
I.T professionals
data analysts
more than anyone else
very technical minded individuals
when we work with those individuals
what I've found is
if you're going to share a story
or something with them
they appreciate it
but they don't care
they're very data-driven
what do the numbers look like
is everything optimized
and then they're going to make their decision
based on the numbers
and this is often why engineers
are very good at what they do
they're very focused on the transaction
making sure things are
systematically in place
and I'm not going to
get into what an engineer does
because they can explain it
better than me
they don't put emotion
into their decision-making process
it's all factual it's data.
So whenever you're looking at
a whole life insurance policy
designed for maximum cash value
my encouragement
would be to do the exact same thing
always dig into it
remove emotion from the decision
when it comes to numbers
because at the end of the day
it is your money going into the product
you have to be careful here.
Getting into some data
when we work with banks
so our largest client is a bank
there between $700,000,000
to $800,000,000 in assets
that's the size of their bank
not mega-bank
like Bank of America or anything like that
but when I first had the privilege
to meet with them to really present
high cash value life insurance
as a BOLI [Bank-Owned Life Insurance] product
I met with the CFO
and the examiner there.
So if you don't know what an examiner is
very very technical individual
his name's Mark
he's a really nice guy
but with numbers
like you're not going to pull anything over him
I don't care who you are
it's not going to happen
but you've got to know your stuff
going in there.
If I go in there
and try to use some kind of pitch
as far as using a
small to medium-sized company
or go with a higher base premium
because you'll have more money long term
I'm going to get thrown out
of that board room so quickly
they're going to go with the competitor
they're not going to do it
they're not
like it's not going to happen
I know that going into it
everyone knows it too.
But with these guys
they have maximum cash value upfront
yet over here
we hear and see different things
like come on
like if we want to copy what the wealthy
and corporations are doing
see exactly what they do
and then emulate it
to the closest degree possible.
Why I say like that
not exact degree
or not copied exact
is you and I individuals
cannot acquire what banks have
bank-owned life insurance
is a different product
that is available to the general public
and even small
to medium-sized businesses.
When you look at tax
and estate planning attorneys
that know cash value life insurance
in and out
they know how a policy should be set up
and they will make that recommendation.
You know there's a couple we work with
I admire them very very much
just they're in business
they're younger than me
and I've learned a ton from them
but when I met with them
they're interested in cash value life insurance
they pulled an attorney in
just to qualify me
to vet me if you could call it that
and this attorney
knew cash value life insurance
better than most agents I know
I was extremely impressed
and she was really defending them
so that you ever want to hear the story
at first it was kind of like whoa
I'm on your side
but it worked out very very well
where I actually hired her
we've had her on some podcasts
she's one of my good friends
I like to refer to her as well.
But she knows how cash value products
should be set up
uses it in her international tax planning
maximum cash value
try and pull something over
like it's not going to go well
like they know what to look for
they know their stuff inside and out.
When you look at actuaries
Scott Witt
is one of the top actuaries I know
he knows cash value life insurance
that is his thing
he knows it inside out.
The inside joke with him
and his fellow actuaries
when it comes to high cash value
life insurance policies
is he would say blended policies
with term Riders
minimum premiums
maximum cash accumulation
with the actuary's choice.
He's actually discussed policies
where he's seen strong
internal rates of return
disclose the exact numbers
you have to reach out to him
if you actually want to see the numbers
or hear about them from him
but he's provided proof of performance
one of the few people I know
because we dig into historical performance
he does as well.
But here's what
all 3 of those have in common
company selection
performance analysis
is what they look at
this is exactly what the wealthy
exactly what corporations do
company selection
performance analysis.
Specifically what companies
have a track record of delivering
the strongest cash values to consumers
regardless if I want to practice
the banking concept or not?
I just want maximum cash value
that's my goal
and then I intend to use the policy
however I intend to use it.
What companies have delivered
the strongest cash values?
MassMutual
Guardian
New York Life
and Northwestern Mutual
in particular
when the policies are designed properly
when they're not designed properly
it's a different story.
Performance analysis
what do these guys look at?
These guys
guess where their eyes went straight to?
What's the guaranteed rates?
What are the guarantees look like?
Internal rate of return.
You know when I met with the bank
the CFO
I was actually asking him questions
because I wanted to see
how much research he had done
or what our competitors
people were up against
had educated him on
and I asked him hey
when you looked at the illustration
did you notice that the
internal rate of return
went down each year?
Even though the crediting rate
advertised on the illustration
was the same that didn't change
he immediately went
yeah I did notice that
like why are the returns
going down on our money?
Well the reason why
is how that BOLI product works
is you've got an increasing insurance expense
with a constant rate of return
associated with it
so what happens
is when those expenses come up
because the returns not going up with it
they actually gradually come down
they were always cash positive
and they were very attracted to it still
but that was something
he wanted more information on
but that's the stuff they look at
he was interested in that.
The break-even point
upfront cash value
individuals
wealthy individuals
wealthy couples
opportunity cost
that is what they value
more than anything else.
Top companies
maximum cash value
like that is where people's interest are
at the end of the day.
So we talk about data all the time
our company IBC Global
having historical performance
on cash value life insurance policies
if you have a policy with us
you've seen that data
you have access to the full data
in our client user package
now I'm going to touch on some of it.
So this is actually from a blease report
which anyone can search right online
for the full report
we just took the data here and simplified it
and I categorized it the way I wanted to
so we have a 20-year study here
it's a little dated
we've got some more
but this is based on a 45-year-old male
a $250,000 policy
it's not an apples-to-apples comparison
meaning this does not show policies
where the individual paid
the same dollar amount in
with the products designed
in the exact same way
which would be
an apples-to-apples comparison
but what it does show
is the actual cash value
the actual IRR
the full blease report actually shows
what was illustrated
then compared to what actually happened
but here we go
what do you notice?
I'm going to draw a red line here
and with that red line
what do you notice above it?
Company selection.
Sound familiar?
There's your internal rates of return
the only companies I've seen
consistently deliver
IRRs of 4% or greater
have been these 4
now with that said
I'm gonna see other companies making moves
it would be these guys
just for full transparency
they've got a good business model
and it seems like they do know
what they're doing
they made a dedicated effort
toward whole life insurance
I haven't seen the 4% IRR yet
but I think that we will in the near future
for full transparency
again that's my opinion.
So there is a historical performance report
now personally
I like the independent policies
side-by-side comparison
properly designed
fully transparent.
So to look at some examples here
which we've got examples
from different time periods
here's a policy issued in 1980
on a 50-year-old male
this study here
was a 10-Pay policy with MassMutual
is based on actual performance
on the far right
you know I should provide
a little bit more detail to this
this is available to the public as well
annual IRR
and then the dividend interest rate.
So we always talk about
the dividend rate being a gross rate
that's credited after the company's
insurance expenses
mortality charges
all that good stuff
and this policy
also happened to live through
a very attractive dividend
interest rate period
with double-digit dividends
however
you know what happened
during that period of time
interest rates were much higher
than those dividend interest rates were
but again this is based on
the actual cash value performance.
And this one actually runs
I've got to update this through 2015
the IRR through 2015
was about the average IRR
that's the annual
but what it averaged out
over this period of time was 6.19%
however as the years have passed
as we run this study through 2021
this individual is older now
he's in his 90s
the actual IRR
is closer to 5.6%, 5.7%
I'm going to run the exact
but as you grow older that IRR
will gradually come down
as it has been
but has still produced
a phenomenal cash value.
Here's a New York Life policy
where the IRR to date
through 17 years just over 4%
and then what we also ran
was the projections moving forward.
How we got the 4.07%
is we took the individual's
total payments each year
his total cash value
based on a statement at the time
and that's where the 4.07% IRR came from
but this is the kind of stuff
that has to be disclosed upfront
critical
no one wants to do that though
because it's the fear of hey
if it doesn't deliver this
or if it's a small company
where I can't get that information
not saying they don't have it
so I'm not disparaging small companies
any way shape or form
but if we can't get that information
it's like where is it then?
Like we need that.
So let's look at another policy here
actually let's look at this one
one more over
this was a policy
we put in force right after I got married
and we've measured
the performance each year
this is one of my favorite things to do
when it comes to high cash value
life insurance policies
seeing what was originally illustrated
and then what actually happened
as we tracked the performance
year-over-year.
So original illustration
plan funding was $150,000 for 3 years
then $125,000 for 3
and then $50,000 through policy year 10
for a total of $1,025,000 in.
Now the original illustration
assumed a 7.1% dividend
all the way through
obviously that hasn't happened
it would be nice
but it has not happened.
So when we look at the actual performance
here we go
it starts out less in the 1st year
because we backdated the policy
but typically what happens
when you do that
2nd year
hit just about what was projected
however
dividend has come down a little bit.
Now what I want to add is
on the in-force illustration
so the in-force
is from year 6 moving forward
this is based on what actually happened
each year years 1 through 6
how we obtain this data
is each year
I run an in-force illustration from him
but then what I'll also do
is pull the annual statements
that's where I get the actual dividend from
and the actual year-end cash value
this way we can track
the real numbers
match it up with his online account
to make sure hey
is it performing as it should.
I mentioned earlier
we work with a lot of engineers
very technical minded individuals
he's one of them
but I like him a lot
he's actually become a good friend.
So dividend rate moving forward is 6%
we've got to track the performance
year over year
we've got the annualized IRR
in our full historical performance study
we do disclose the average as well
as this will easily do north of 4%
it's getting close already
but very very strong
in terms of actual performance
and this is the data we look for
and these are minimum premium policies
if a policy is designed in that matter
we see it actually deliver
and this is the key objection
like this is people's pain point
that they have
where they are attracted to the idea
of the banking concept
but then they do not get answers
around how to maximize
the cash value of a product
or some weird objection is thrown at them
like it'll MEC [Modified Endowment Contract]
or something like that
or you can't pay into it
for a long period of time.
My thing is
just provide clarity to someone
in the same manner
you would want clarity provided to you.
So I hope this video was helpful
if you're interested in a maximum
cash value life insurance policy
feel free to reach out anytime
and as always
I hope this helps.
Enjoy.
Hey guys Steve Parisi here
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