Infinite Banking Concept

But Larry, what a great prospecting concept he had... "go read this 150 page, $15 book I bought you, that is about insurance taxes 7 retirement and call me when you have seen the light".... lol
Yeah. The only person who's ever made money on that deal is Patrick Kelly.
 
I don't have time to post today but I promise I will write at length when I have an hour or so.

There are some really good points made and some points that are very inaccurate. However, I'm glad that I got the conversation off the ground.
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I have heard Nelson Nash speak before (in a small interactive setting) and it was very interesting. He does take the concept to the extreme at times. He does say to put as much of your paycheck as you can... lol.

But the overall concept is sound if you use it for larger purposes (or to supplement retirement income).


The main advantage is the arbitrage on the loan and the flexibility.

Back when WL dividends were a lot higher (because interest rates were a lot higher), the concept worked a lot better using WL. If it wasnt an arbitrage it was at least a wash.


These days a UL policy is the best to use.

FT,
You say that you can get a lower personal loan.... ULs often have loan rates of 3%-5%... If you are getting lower rates than that you must have an 800 credit score...

The loan feature is made available for a reason. That reason is to keep your access to the CV tax-free. If it wasnt classified as a Loan all you could do is withdraw the Basis tax-free.

Many UL/IUL policies have a "wash loan" option. So you have a net 0% loan if you dont want to try to arbitrage.


You say that you can do the same thing with a collateralized personal loan. But there is nothing else really that has the flexibility that a life policy has. You could use a CD or Bonds, but they are not liquid like a life policy is. And forget arbitrage using a CD (or even a wash). And home equity is not liquid like a life policy is.

Even if there is something, the process is not as easy and seamless (and guaranteed) like a permanent life policy is.


Its about creating a bucket of money that you can access on a tax-free basis. You can choose a wash loan or take a chance at arbitrage. You can choose to pay back the loan or you can choose not to. You can choose to loan out more if its available.

Its an asset that guarantees you choices and flexibility like no other financial product or combination of financial products can.
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So you can find a short term personal loan for under 5%??

How about for 0%?????

Because a UL/IUL can guarantee that for the rest of your life....


The part about using a UL contract as a banking policy is not true for 98% of people because 98% of agents don't truly understand all the moving parts. If the agent can explain the inherent risks of the UL or IUL and the client understands that they are taking much more RISK then I would agree it's a suitable sale.

Dividends from WL contracts issued by Mutual companies are the least non correlated type of policy from the market. Yes, interest rates ( reinvestment from premiums) drive 1/3 of the dividend which will have an effect on the performance, however most UL polices are DIRECTLY affected by the market. Everything is relative in the financial world. Nelson Nash preaches whole life for many reasons. One of the biggest reasons, is because he is anti stock market and WL aligns with this position well.
 
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Dividends from WL contracts issued by Mutual companies are the least non correlated type of policy from the market. Yes, interest rates ( reinvestment from premiums) drive 1/3 of the dividend which will have an effect on the performance, however most UL polices are DIRECTLY affected by the market. Everything is relative in the financial world. Nelson Nash preaches whole life for many reasons. One of the biggest reasons, is because he is anti stock market and WL aligns with this position well.

Can you share your supporting evidence that allows you to assert the UL is directly effected by the stock market?

Also, since whole life dividends are based on GA yield, can we not point out that there is a relationship no matter what the product? In other words, you aren't cutting out the asset class, just changing the exposure.
 
Indexed Universal Life( IUL) is tied to the performance of a stock index, usually the S&P 500. There are participation rates, caps etc.. The performance of the index has a DIRECT effect on the cash value you can use to finance purchases.

99.5 of agents that sell UL for banking purposes use the IUL product. They usually show an aggressive/ unrealistic assumption number( higher than 7%) ,don't understand variable loans or the effect on the illustration when you are showing positive arbitrage every year. Additionally, participation rates and caps aren't guaranteed and can change every policy year. If the company does guarantee 100% participation for the life of the contract, then they have a minimum guaranteed cap of 3%. The cap annually resets. The carrier can pull one of two levers.

Agents NEVER show the client the DRAMATIC difference in supplemental income if the policy performs at 5% and not at 7%. I would invite you to run a supplemental retirement illustration, where you minimize the death benefit, and max the withdrawals at retirement age. Say 65-80 or 65-85.

The upside potential of IUL, causes most agents to oversell the product. That's a fact. I think agents should be much more conservative when they position IUL for Banking purposes. What happens if the index goes down the first two years, while you have been paying COI? What are you gonna finance then? Nothing! If the client was going to start pulling out money in year 3 to finance a car, you have a completely different conversation on your first policy review!

Unless a client totally understands the risk in using IUL for banking purposes then they shouldn't buy it. Another variable that has to be given special consideration is the relationship between the cash value and the item being financed.
 
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Agents NEVER show the client the dramatic difference if the policy performs at 5% and not at 7%.

I illustrated a Midland IUL last week (and sold the policy) comparing the difference of, and in between 5.5% all the way to 8.3%.

1. Some agents will only illustrate the 8%. Is this
possible...yes. Is this misleading...I don't believe so, it is just
not my style.

2. I prefer to illustrate 6.5% because this is my "Comfort Level
Target.

I also like to illustrate around 2-2% above the guarantee because I was listening to Sheryl Moore interview from several years ago and she made the statement that these types of policies were designed to return a 2% to 2-1/2% better than the guarantee. I believe Sheryl Moore to be an industry expert and since she is/was in the business of designing these types of products that she knew a little more than me.

One of my GA's who is no longer in the business always illustrated the 8% and told me I was plain wrong for not doing the same. Again, just not my style.

Lastly, I also illustrated 5.5% and explained to my client that I would prefer to under estimate and over perform than the reverse.

Never say Never.
 
The part about using a UL contract as a banking policy is not true for 98% of people because 98% of agents don't truly understand all the moving parts. If the agent can explain the inherent risks of the UL or IUL and the client understands that they are taking much more RISK then I would agree it's a suitable sale.

Dividends from WL contracts issued by Mutual companies are the least non correlated type of policy from the market. Yes, interest rates ( reinvestment from premiums) drive 1/3 of the dividend which will have an effect on the performance, however most UL polices are DIRECTLY affected by the market. Everything is relative in the financial world. Nelson Nash preaches whole life for many reasons. One of the biggest reasons, is because he is anti stock market and WL aligns with this position well.


An IUL takes on the risk of bad market years. But a regular UL does not. The same thing that drive WL dividends drive UL rates.
Also, there are UL contracts with guaranteed rates as strong as WL.

Also, UL based products, because of the moving parts you see as a disadvantage, is actually better suited (if properly designed) for cash value growth and access.
This is because you can use GPT testing on UL and WL only uses CVAT.

A UL is only "dangerous" if the agent doesnt overfund the policy correctly.
Of course if a WL is not overfunded correctly it wont lapse, but it also will not serve the main need of the purchase either.
 
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Indexed Universal Life( IUL) is tied to the performance of a stock index, usually the S&P 500. There are participation rates, caps etc.. The performance of the index has a DIRECT effect on the cash value you can use to finance purchases.

99.5 of agents that sell UL for banking purposes use the IUL product. They usually show an aggressive/ unrealistic assumption number( higher than 7%) ,don't understand variable loans or the effect on the illustration when you are showing positive arbitrage every year. Additionally, participation rates and caps aren't guaranteed and can change every policy year. If the company does guarantee 100% participation for the life of the contract, then they have a minimum guaranteed cap of 3%. The cap annually resets. The carrier can pull one of two levers.

Agents NEVER show the client the DRAMATIC difference in supplemental income if the policy performs at 5% and not at 7%. I would invite you to run a supplemental retirement illustration, where you minimize the death benefit, and max the withdrawals at retirement age. Say 65-80 or 65-85.

The upside potential of IUL, causes most agents to oversell the product. That's a fact. I think agents should be much more conservative when they position IUL for Banking purposes. What happens if the index goes down the first two years, while you have been paying COI? What are you gonna finance then? Nothing! If the client was going to start pulling out money in year 3 to finance a car, you have a completely different conversation on your first policy review!

Unless a client totally understands the risk in using IUL for banking purposes then they shouldn't buy it. Another variable that has to be given special consideration is the relationship between the cash value and the item being financed.

Yes, a lecture on what indexed universal life insurance is. That's precisely what I need.:dull:
 
I am not familiar with the Infinate Banking System. The posts are interesting and I will check this out as the concept sounds good. However what is the difference in this and the LEAP system that was very popular some years ago? The concepts sound very similar to LEAP though the (LOC) Lost opportunity cost is not mentioned in the posts. I do know that many people were sold on the leap concept but continuous followup was needed from the agent to put in the money moves.
 
I try to refrain from using terms that most people can't understand.

The main difference is that LEAP focuses more on the permanent death benefit first... and then the cash value accumulation.

The death benefit 'activates' the other drawers in the PS&G model so you can spend down principal because you have a mechanism to replace those values upon your passing. You also have the accessibility to the cash values while you have deflated investment balances and can avoid reverse-dollar-cost-averaging with distributions during down markets.

I agree with you on the continuous follow-up and the multiple meeting format being rather cost/time prohibitive. Six meetings were recommended/required:
1 - Intro using various LEAP booklets
2 - Fact-Find
3 - Protection Component
4 - Savings Component
5 - Growth Component
6 - Referrals

Very time intensive.

Looking back, I wish I could've charged planning fees for those sessions... but LEAP wasn't allowed for use under the Corporate RIA of MassMutual, so it had to be a 'free service' as part of the life insurance selling system.

LEAP is still relatively popular, as is Circle of Wealth. I know Larry Tew uses Circle of Wealth. Both have about 5,000 users.
 
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