- I've taught people how to become their own banker
for nearly five decades.
In this educational episode I'm going to address
the question, is the banking concept explained
in my various books, legitimate?
Absolutely; get ready, I'll explain why.
(upbeat chiming music)
So, I'm Doug Andrew, I've been a financial strategist
and a retirement planning specialist now
for nearly five decades, helping people optimize assets,
minimize taxes, and empower what I call
their authentic wealth.
And I've been very blessed in the 48 and a half years
as of the recording of this episode to have authored
12 books so far, these are some of the 12.
And many of them have become not only best sellers,
but my third book, called The Last Chance Millionaire,
actually became a New York Times and Wall Street Journal
number one best seller the second week
it was released in 2007.
And even though, in my previous books,
and ever since the mid-1970s, I've been teaching
how money works, and how you can actually become
your own banker, in that New York Times bestselling book,
the seventh chapter actually was titled,
Learn How to Become Your Own Banker.
So, I'm not claiming to be the original thought leader
of this concept, in fact it's as old as the Bible,
if you really understand the parable of the talents
in Mathew chapter 25 in the New Testament,
or the parable of the pounds in Luke 19,
it's been around for centuries.
But I've been teaching this since the mid 1970s,
and I have been teaching how to become
your own bank, so to speak, now I call it
the laser bank concept.
Ever since of course these books were released.
Now, I need to make sure you understand
that I am not affiliated with Pamela Yellin,
Bank on Yourself, she has asked me to make it
absolutely clear in my episodes that I'm not affiliated
with Bank on Yourself, I think she came out
with her first edition of that in 2009,
if I'm not mistaken, I know that Nelson Nash,
who is the originator of the infinite banking concept
came out with a book in 2008, I believe,
how to become your own banker, or becoming your own banker,
so there's a lot of people that use similar terminology,
and I have been using this ever since the mid 1970s,
but, all of these concepts talk about how money works.
Now I do not endorse the infinite banking concept,
or Bank on Yourself, and I want you to know,
do they work?
Yeah, they can work, the way that I teach in my books
is how to be able to apply the concepts of banks
and credit unions where you can actually become
your own bank, so to speak, I call it a family bank,
but many times I called it a laser bank.
So in this episode let me give you a few examples
of what I've been talking about now for nearly five decades.
So I've been talking about how money works,
why banks and credit unions pay interest, for example,
and they deem interest as their friend, not their foe.
In other words, they borrow OPM, other people's money,
and they pay interest, and they pay one, two,
three, four, five percent, for a long time
recently they've been paying a measly
one percent interest, so I simplified that,
and say every million dollars that banks and credit unions
pay one percent interest on, they pay
$10,000 a year in interest.
Now, are they just a benevolent
institutions paying interest?
Do they just keep your money in their vault?
And somehow they can afford to do that?
No; what are they doing with that money they're borrowing
from us, that deposit money into their institution?
They're putting it to work.
Now I prove that during critical times like 2008,
when 400 banks actually went under, 900 more banks
were on the brink, they were on the watch list
of going under, and so the federal government
of the United States asked the five major banks
in America in 2008, to disclose where they had
their tier one assets for liquidity and safety.
And guess where they had 30 to 40% of their tier one assets.
For liquidity and safety.
In insurance companies.
In other words, banks and credit unions were borrowing
our money at one percent, every million,
they paid 10,000 a year in interest to borrow our money,
they turned around and put 30 to 40% of their tier one
assets into the multi-trillion dollar insurance industry,
because that's the backbone of America,
it's the backbone of the world, and they're some of the best
money managers in the world, and they were just
fine with the general account portfolio rate of five percent
let's say from 2000 to 2010, during the Great Recession.
So, if you do the math, they were paying 10,000 a year
in interest, but they were making 50,000 in interest
by taking your money and putting it into insurance companies
and increasing actually the liquidity and the safety,
'cause most of these insurance companies are rated
double A and triple A, where a lot of these banks
are only rated triple B.
Triple B is like six notches down.
So banks borrow your money, increase the safety,
the liquidity, and the rate of return by five times,
that's a 500% return.
If they're borrowing and paying 10,000, but they're making
50,000, how much more is 50,000 than 10,000?
It's 500% more, it's five times.
Would you hire an employee for 10,000 that made you
an extra 50,000?
Would you buy a widget machine for 10,000
that made you an extra 50,000?
That's called a 500% return on employment cost
or equipment cost, that's the banking concept.
And so that's what banks do, and so for years
I've been teaching how I have by doing this
my entire adult life, and this is why many times
even though if I have the money, and why savvy
real estate investors who have the money,
they choose not to pay cash for their house
or their real estate, they have the money
but they go in and they borrow money,
because they can borrow money cheaper.
They can borrow money at 4.5%, tax deductible interest,
in their business, or on their real estate properties,
because in a 33% tax bracket, borrowing at 4.5%
on a million dollar loan, that's 45,000 a year,
but they get to write that off, which offsets 45,000
of taxable income, in a 33% tax bracket,
they saved 15,000 in tax.
So the net cost, borrowing at 4.5% tax deductible interest
is only three percent, or 30,000.
And they, like me, I can earn nine percent
in my laser funds, my max funded indexed universal
life insurance policies.
How much more is nine than three?
Don't say six, it's 300% more.
There have been times where I have borrowed money
at 3% tax deductible interest,
in a 33% bracket, that's a net cost of two,
and have earned 10%, I've earned 11 and netted 10
on my indexed universal life.
How much more is 10 than two?
It's five times, it's 500%.
At the same time banks were borrowing money at one percent,
they were putting it into insurance companies
and earning five.
They were making 500%, I was making 500%.
Now, the reason why I do this is because
with indexed universal life, this banking concept,
which is legitimate, this is what people have been doing
for centuries, this is what makes the world go around,
you borrow money at a lower rate than you're earning,
that's called arbitrage, you're earning a spread.
Yeah, you could borrow money at four percent
and earn six, and have a two percent spread
and come out ahead, but golly, if you can borrow money
at four and earn eight, or 12,
you come out way ahead, that's why my preferred
instrument to use a banking concept is max funded
indexed universal life.
So let me give you an example here.
I, have a client, who's a very sophisticated
real estate investor.
Now he doesn't like to be a landlord.
He likes to buy big, multimillion dollar
apartment complexes and fix them up, and then flip them.
So in 2017, he called me,
and said, hey Doug, I need a million dollars
out of my indexed universal life insurance policy.
Well he has done this many times, he said,
would you please email me that form?
Well he knows it's a one page form.
So I emailed him the form and sure enough
he puts his name and his policy number,
it's like an account number, to his indexed
universal life insurance policy, and the form said,
how much do you want to withdraw or borrow,
and he says, I wanna borrow a million.
Now, he actually had the option to withdraw a million
if he checked that box, but he checked the box borrow; why?
Because if he borrows he can borrow a million
out of his policy, and he can do it with a zero wash loan,
he can borrow from the insurance company,
because they will loan him a million 'cause they have
his money in their company, in his policy, as collateral.
So, if you had a million dollars in a bank,
and you went in, you could withdraw the million
or you could borrow from the bank because they have
your money as collateral.
But, with the insurance company he could borrow
his million and they would charge him two percent,
and then they would credit the collateral,
the million that they're keeping of his money,
two percent, that's called a zero wash loan,
it doesn't cost him anything, but why does he do that?
Because it's tax free.
If he did it the dumb way he may trigger
unnecessary tax if he takes out more than what he has
in basis in the policy.
That's another topic, but see the smart way
is to borrow out the money, 'cause that's not deemed
earned, passive, or portfolio income, it's tax free.
But he is super savvy, so he does what I do.
He borrowed at a higher rate, that's called
an indexed loan, so in 2017 he borrowed a million
out of his policy, he checked borrow,
and at the indexed rate that year it was five percent.
And sometimes people go, why would he borrow
his own money at five percent when he could borrow it
at two percent, or just withdraw it,
it doesn't cost him anything?
Because he understands the true cost,
the opportunity cost, if he did it any other way.
So he borrowed at five percent; why?
Because they won't just credit him the same rate
that he's borrowing at,
they will credit that million, plus the rest
of the cash value he had, but on the million
that was collateralizing the loan, the insurance company
credits him the indexed rate.
Do you know what they credited him in 2017?
25%, that year he capped out at 25%.
Now, 25% is 250,000, so they credited 250,000 tax free,
so he had 1,250,000 at the end of the year,
'cause he made a quarter of a million in tax free interest,
and they deducted the 50,000 loan
from the 250,000, so he netted 200,000,
he had 1,200,000, and so he netted 20% or 200,000
tax free, on the million that he left in the company
as collateral for the loan, and he took that million dollar
loan and he flipped a piece of property,
that he borrowed the million for an earnest money,
it was a multi-million dollar property, and he flipped it,
and he made about $3,000,000.
So wait a minute here.
He made 3,000,000 in one year, by tying up
this piece of property, fixing it up and flipping it,
he made 3,000,000,
but he did that while he was still making
25% on the million that he technically did not withdraw
out of his IUL policy, he left it there as collateral,
he earned 250 minus the five percent loan,
he netted 20%, he made 200 grand, tax free,
on his money, while he was using his money in his business.
Now think about it, that's what savvy people do.
He does that with his indexed universal life,
because the only way he could do that with any other type
of an instrument, another type of insurance,
like whole life insurance, would be to put it at risk
in a variable whole life policy, and he didn't wanna risk it
if the market went down, so he used indexed universal life
where he has been able to earn 25%,
and even in 2020 to 2021, many people locked in gains
of 61.33% on their IUL policies.
How would you like to borrow at five percent and earn 61%?
You're netting 56.33% when you use the banking concept
employing indexed universal life.
So, that is what I've been teaching people to do
for more than five decades, and I'm not the first one
to do it, it's been around for centuries.
If you wanna learn more about this concept
I would recommend that you read and study my most recent
best selling book that's been flying off
of our warehouse shelves, we send out about 150
to 250 of these a week, don't miss out,
you don't have to pay $20 on Amazon,
I will gift you a free copy, you simply claim your free copy
of this 300 page book by going to laser fund,
L-A-S-E-R fund dot com, and you contribute a nominal amount
towards the shipping and handling,
I'll cover the rest of that cost,
and I will pay for the book.
I'll fire out a hard copy to you, it's actually two books
in one, this side is 200 pages, 14 chapters,
all the charts and graphs if you're a left brained learner,
if you're a right brained learner you flip it over
and read this one, this is about 100 pages, 12 chapters,
with 62 actual stories of how clients
have used maximum funded IUL, when it's structured correctly
and funded properly, it is called a laser fund,
and they use it for these kinds of concepts
and to create tax free income, that will help you
not outlive your money.
If you want to use your whole brain, your right brain
and your left brain, I would read both of these,
but while you're in there if you like to listen and learn,
or watch and learn, there's audio, there's video,
and check out our educational webinars
that we teach on a regular basis, they're free,
you can even put your name in a slot to have a free
consultation and analysis with one of the top
specialists in America that understands how to apply
these concepts in your particular set of circumstances,
and they will not charge you for their time to do that.
So, this is about you and your brighter future,
I want you to understand that yes, this banking concept
that I've been teaching for decades,
is absolutely legitimate, and you oughta check it out,
and you can learn about it by studying, watching,
listening, and you'll be blown away when you understand
how you can do what banks and credit unions do,
(soft rock music)
and have interest work for you instead of against you.