Episode Transcript
[00:00:00] Speaker A: You are listening to the wealth without Bay street podcast, a canadian guide to building dependable wealth. Join your hosts, Richard Canfield and Jason Lowe, as they unlock the secrets to creating financial peace of mind in an uncertain world. Discover the strategies and mindsets to a financial future that you can bank on.
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So just why exactly is it that the infinite banking concept isn't an investment? It's something that comes up frequently. People try to compare whole life policy s or the infinite banking concept in some way to an investment structure. I'm joined today with my good friend Henry Wong. We're going to talk a little bit about that, we're going to unpack some things, and we're going to talk about some of the fundamentals of the currency system that we operate in today, as well as we set up that discussion. So thanks for being with me again today, Henry, and let's have a little bit of fun talking about some of the fallacies of people making rash judgments on what an investment is when it comes to this particular topic.
[00:01:19] Speaker B: Yeah, thanks for having me here, Richard. And just to jump on that, really, when it comes to what we're going to talk about today, is I just want to highlight a logical fallacy of when people are looking at something new, like IBC, especially when it comes to, you'll hear us use the terminology, practicing the process of banking. People will normally use things that they think they know, like an investment, and they try to take the attributes of an investment into something they don't know, which is the process of banking or IBC, and try to compare the two. And so I thought it would be really good for us to really revisit at a holistic level, even at a societal level, the concept of how our general money flows and how it works and the distribution of that money and the concept of banking so that it's explained in this way. So then, now, from that vantage point, you can see when we talk about the process of banking, when we talk about investments, you'll really clearly see why they are two different things or different.
[00:02:27] Speaker A: Yeah, absolutely. And one thing I like to quantify is something that Nelson Nash himself said frequently, and he believed that the proper definition of an investment, when you're making an investment in something, it should only be in something that you know a great deal about. He said everything else was speculation. And today, in the product centric world that we live in, we are offered or bombarded with on a regular basis, even on our Facebook feeds these days, for different types of products or services that would allow the average consumer to go and place their capital, their money voluntarily, into a product or a fund or some form of investment vehicle, but they don't really know anything about that vehicle. And so really what they're doing is they're making a choice to speculate on the success of that outcome rather than actually getting down to the fundamentals. And now that's not across the board. There are some people that do a tremendous amount of research, whether they're day traders or whatever it is, they're tied into a system. They're being very methodical and meticulous about their investment methodologies. There's many real estate investors who, they'll focus on a niche area, geographically, a market, a strategy, and they'll dial that in so that when an opportunity comes up, they can strike, because they know that that's a good deal for them. In that case, they're actually making investments from the vantage point of having a great deal of advanced knowledge, but just going out and randomly throwing a dart at a dartboard and picking ABC fund as your investment vehicle, or how often do we speak to folks who, they've got a plan set up with their employer, they're on a regular contribution, and they don't even know what it's in. They don't even know the company that it's in, let alone how to log in and find out the values. So they're very misinformed in relationship to their participation level of their investment performance and understanding as they move through time in their life.
[00:04:33] Speaker B: Absolutely, I agree with you. And I just want to add into the concept here that I'm going to introduce is also something called behavioral finance. And when it comes to people's money, just from a general perspective of what I'm sharing, is that they for sure tell you that they want to make money, but they do not want to lose money. And what they're generally aware of is investments. So you know that when you're putting money in investment, there is a risk of loss. However, there's also a risk or opportunity of the money going up. But the actual discrepancy, mentally, people acknowledge that intellectually in their mind, but emotionally, they may not have connected or resonated with that because they know they can't tolerate any loss. However, they still want that upside. So really, when we look at the whole equation of when it comes to their money, we look at whether or not what their actions and what they do in the product of what they're looking for, which is kind of what is offered in the consumer marketplace, in the financial industry, is products. And they're looking for those products that make sure they don't lose their principal. But at the same time, they can potentially get that upside. And it's important to also look at the cost along the way of what that does when you go into these type of products or with that type of mindset. So the first part I wanted to really just dive into also is related to and highlight an element of really, you'll hear us talk about this concept about control, and how much of the equation do you really control. And what I want to share is go back to just on a very high level, simplistic perspective of how the flow of money actually generally is coming from in our economy. Again, it's oversimplified, but it's meant to really illustrate a few points of our discussion. So I'm just going to share my screen and put together some show a very simple diagram of what I mean by this. So the first part you will see is that there's a divide in what I have with a black line here. And then there's another phased divide that is gray, and then another phased divide that is yellow. And I'll explain a lot of that as I go through that. And then there's another dotted line, divide that. Again, I'll explain a little bit as we go through. But the first part I want to talk about is money. So money can take into many forms, and there's always these different definitions as it comes to money. Let's say, is it a store of value or is it a medium of exchange? Whatever things that people want to define that. But what's important for us in Canada to understand and know is that the money that we receive, that is either in the form of printed bills or on the screen in your bank account, there is some element of control that someone is controlling the general distribution of that money, whatever form it is in the paper form or in the electronic form that you see it digitally, is still controlled in some way, shape or form by some authority. And in Canada, that authority I would just first put in this terminology about, sorry, that authority. Before I talk about the authority, the first part I also want to talk about is on this left side that I'm sharing is I'm introducing this terminology, fiat currency.
And people may have general different definitions of what they consider fiat currency. However, if I use the definition that fiat currency is provided as legal tender, and more specifically, if we go into a legal tender, it is tender backed by the government and or a central authority. And if we look at from this vantage point, the one who's issuing the dollars or the organization responsible for issuing the dollars is coming from the central bank. And who actually controls the central bank? It's the government of Canada.
So the money is being created and coming from the central bank. I can't create money in the role of what we do generally. Overall, I don't create money. The central bank does create money, and they create it in the form of debt, but they're really issuing that money in the mechanisms that they have. And when they created that money, I'm again oversimplifying this, but they're taking that money and they're issuing it to different institutions. And that institution, as an example, is what most people are familiar with is like those chartered banks, those big banks that we all know the names of, and even also potentially credit unions or including credit unions, all of those operate on some form of the Canadian Banking act, and they will have their way of issuing money and bringing that to the civilians or canadian citizens.
[00:09:52] Speaker A: One thing that's important to isolate here, Henry, and I just want to hit this home again. When it comes to fiat currency, you identified that it's the legal tender utilized and issued by the central banking institution. In this case, we're talking about the bank of Canada, but it's not backed by anything. So one of the key things that ties into the understanding of fiat currency is that it's only backed by the promise of that centralized institution and their credit worthiness, basically. So it's not backed like in the past, there used to be a gold backed standard. And if we go back to the 70s, early seventy s, that was the case where every dollar could have been exchanged for some measurement in gold if you wanted to do that. And that just hasn't been the way since basically the much of the known world, as far as my understanding is concerned. So really, the fiat model of currency is what exists in Canada today and certainly in most westernized cultures and nations, including the United States and the Federal Reserve, operating under the similar premise.
[00:10:58] Speaker B: Yeah, I appreciate you highlighting that too, Richard, because what's really important to recognize is that money that is being printed by the central bank is they've assigned it as legal tender between, let's say, if I want something from Richard, he has a microphone that I really love. I will take that legal tender because it's also, and what's important to separate is legal tender is also different than generally accepted. Maybe I have another keyboard that Richard really loves. I can exchange the keyboard for the microphone, but it's not generally accepted because if I went to Jason as an example to give him a keyboard for his microphone, he could be to me, I don't want that keyboard.
I have no exchange between you. However, legally, what's allowed is that we can use that cash to exchange and he can accept that and he can redistribute that money in another way to go buy things that he may want to use with that money. So there has to be a separation between legal tender and also general acceptance. There has to be confidence in it. Right now, for some people, there is a lot of confidence behind, let's say, our canadian dollar as the medium of exchange. So it allows us to facilitate the legal tender and do things that we need to do because there's confidence in the central authority that has issued that, which is the bank. Now, if you're listening to what I'm saying, I kind of am saying that tongue in cheek. And as Richard has shared, it depends on the credit worthiness of the bank. So part of why I'm saying what I'm saying is that when there is a lack of confidence on that central authority or the government, in other words, also the credit worthiness of it, it might be some things to think about whether you want to have that confidence in that form of tender and tying.
[00:12:58] Speaker A: Back into your concept of exchanging microphones and keyboards. I mean, ultimately, that's a barter discussion. And that's where, when we talk about money as a medium of exchange, if that is a negotiated medium that we are willing to participate in, then we have created money. In that scenario. We've turned a microphone and a keyboard into money because it's a monetary exchange of value. It's a value proposition, but it becomes difficult. And so what legal tender, what currency in a format of canadian dollars or american dollars allows us to do is to expediate and put speed on the methodology and the ability to make those transactions happen. And that transactional environment is where we start getting into a banking conversation.
[00:13:46] Speaker B: Exactly. And so that's what I was actually going to dive into next. So when we look at that money is now created by the central bank, and then it's been issued in the form of debt into the chartered banks or the credit unions in that operated in the guidelines of the Banking Regulation act, it's now coming out to individuals of the individual citizens. And so they are going to participate in the economic activity of whatever they're going to do.
If you want to renovate a basement, then you're going to exchange the person who's going to purchase the materials and their labor, their skills and attributes for that legal tender, which is the canadian dollar, to facilitate that exchange so that they fulfill those services. And when they receive that money, this is where we're going to talk about that process of banking. So in the terms of the process of banking, again, you'll hear us say that often when you interact with us, what is the process of banking? Well, there is something called deposit lending. I've used a very clear term here, deposit lending. People think that if I'm putting money into a bank, I'm depositing my store of value into the bank. But actually, legally, how things have been set up. When you deposit that legal tender into the bank, you are returning the currency back to that institution, and they owe you money, which is why they must be charged interest, which they set whatever they set that interest rate to pay you for, which is generally a lot less than what they charge you to facilitate the ability to return currency and then reissue currency back out to someone else who needs it. So it's not a deposit in the circumstance of a deposit that you actually have. You actually have surrendered the currency, and you now have become an unsecured lender to the bank because you have no security.
You have surrendered that money to the bank.
[00:15:56] Speaker A: Yeah. You've exchanged the legal authority of those dollars to the banking institution, and they have an iOu. So when you log in your online banking and you see your checking and your savings account balance of whatever's in there, that's actually a representation of an iou that the bank owes you, quote unquote, on demand. However, these days, if you want to demand more than, say, $5,000 of your money, they seem to make it much more difficult for you to get your money out. That's interesting. We probably won't go into that today.
The key thing is, although it looks like deposits for you and it looks like your checking account, your savings account, that's the value that you have. That's a value of money that you've lent to the institution, and they owe you on demand, however, they seem to be restricting your ability to demand over the last decades or so, at least in my personal experience as a consumer.
[00:16:57] Speaker B: I echo and share the same frustrations when even though on terms, it says on demand. But if I ask for too much cash, they will restrict me in the amount of cash they will provide me. Their rules that they will deliver that cash at seven to ten business days. If it's too much and you have.
[00:17:21] Speaker A: To go in and pick it up, and they don't even want to give it to you in canadian currency. They want to give it to you in a bank draft.
[00:17:30] Speaker B: Correct.
[00:17:31] Speaker A: Which is interesting.
[00:17:33] Speaker B: And they will also just overall even start asking questions, why do you need so much cash for?
And so they have controls over how they will reissue cash to you. But however, if I did it through an e transfer or a wire transfer, they're still going to approve things on that back end.
There's really, in my opinion, very limited control when we're talking about operating on the framework of the central bank system and the flow of money. Even though we've been brought to believe that that money that we've earned is ours system, how the system has been designed doesn't actually, in fact, represent that way. There is some form of authority controlling what you are able to do with that money that you believe is yours. So that then talks about that withdrawal. So if you're doing that withdrawal, we've kind of already touched upon that. You are practicing the process of banking through the activity or action that you're taking of withdrawal. And then the other function is also including lending. If you don't have enough money and you want to buy a house or you want to buy a car or you want to buy some other element that you actually don't have the money, you're going to borrow the money. And there's a slight confusion, actually, the difference between borrowing on debt and borrowing with credit. And most people get confused when they're borrowing with credit versus borrowing with debt. And when you're borrowing with credit.
I mean, the process for a lot of people, when they're borrowing money will go through a very sophisticated process of providing an inordinate amount of information just to potentially qualify for that amount, which you're not in control of how much you want and also when you want it, and also other schedules of how you want to repay it. And everything along those lines comes back.
[00:19:46] Speaker A: Down to the word control.
[00:19:48] Speaker B: So just highlighting back the concept and theme about control. So all of the economics of how all of that is happening is all in this gray area that I'm talking about. The process of banking, those actions that you are using with your money is following this process of banking. And we've now already established it's using the form of currency. Again, sometimes I was interchangeably talking about cash versus electronic money. So I was kind of talking between both of those. But I just want to positionally show, with cash as an example, it's going to be issued by that central authority, and that central authority will provide that cash. So that's money legal tender that is outside of the system. And let's just say, as you can see in the arrow that I'm sharing with you, if you want to utilize the money, know, Richard, you're located in BC, I'm located in Ontario, and I wanted to send you money. I can't really ship you cash, but if I wanted to give you the cash, I would introduce it into the system through the process of banking and deposit lending, and then take that money into my account and then issue you an e transfer that will magically, through bits and bytes in the electronics, get recognized into your bank account to say that it was there. So we've overcome physical or geographical limitations of money through introducing it back into the system of the central bank authority.
[00:21:27] Speaker A: And that convenience factor, which I would agree, and I think everyone would agree, that that's extremely convenient, is part of why the banking system and the process of banking is to the degree of implementation throughout our lives, that it is because it is very difficult to function at anything in your life without being connected to this process of banking. Your life would come to a grinding halt if you weren't able to conduct this process of banking for the major things that you need to do on a daily basis.
[00:22:01] Speaker B: Yeah, absolutely. I mean, you would be limited to a lot of things that you can do locally.
There would be generally a lot more limitations, too. That depends on which is the benefit of it. So we're not here to debate the validity and the process of banking. And what we can highlight as a concern is actually who's in control of the system of banking so that you can execute the process of banking. And that's where I'm going to introduce that term, which people may recognize where this is a concept or an idea called centralization, just on a very broad scope. Some organizations work on a flatter, less bureaucratic level, because decisions are given to those who generally demonstrate the ability to make those decisions. And at some point, for reasons that some people may share, is for efficiency, they may decide to consolidate, organize, and centralize the activities to an overall level. So it's bringing the bureaucratic chain up to the very few will make decisions for the much more larger scale down that chain. And the decisions and primary decisions are being focused all the way in an easier way to say to the top. And that's where centralization. And now you can see why I use the particular, I mean, I don't use this term, but it's the central bank. The central bank is the one who controls how much sets the monetary policy, how much money they feel will need to be available to all of the citizens, that they will need to participate in the economic activity that they need. So the decisions are being centralized to that location, and they can control your behavior through the quantity of money that they are putting in place, which, not.
[00:24:02] Speaker A: That we want to dive into that, but that has an overlapping effect to how they set interest rate policy as.
[00:24:07] Speaker B: Well, which we will look to dive into when it comes to interest rates and inflation.
So the next part I want to highlight is another process, which is called the investment process. And just like the investment process, there is a deposit function that goes into it. And now when you are depositing money into what is labeled as an investment account, that just generally means you can participate in different activities to do things that are different than what you could do in a traditional product, like a checking or savings account. Those are products of banking. You can have a registered account or an unregistered account. So that's, again, a different type of product suite that is being offered by that institution. And within that product suite envelope, they will provide you the ability to purchase either their own sourced design products, like their own brand named etfs, or they can potentially use other products of other etfs from other financial institutions. Either way, there's some set rules defined on how that money needs to operate within the unregistered account or a registered account, and what products you're allowed to buy and use that money for. But the intention that most people now will understand is those products is what is encapsulating the belief that there is some return or opportunity that they're wanting to put that money to work for. And also, there's a risk, depending on your selection, on what you choose and that product for that return, become your.
[00:25:53] Speaker A: Own banker and take back control over your financial life. Hey, is this even possible? You may be asking, can I even do this? Well, you better believe it. In fact, it's easy to get going. So easy that we put together a free report. Seven simple steps to becoming your own banker. Download it right now. Go to Sevensteps ca. That's seven steps ca. Now let's get back to the episode.
In other words, you fill in the little form that says, what's your risk tolerance? And then based on how you fill it in. They give you the three or four options that fit that bubble, and they say, pick one and then you put your money in there. That's what tends to happen. And if you want to choose one that's outside of that bubble, you have to convince them that you can accept one of the other options. That's not on the list, he said, having gone through that experience himself in the past.
Anyway, again, we're not trying to knock any of these products or services. That's not the thing. It's just understanding that we're talking about a different environment and the methodology and the thing that we're doing is different. So banking being one thing, investments being another, just because they're offered by the same institution is irrelevant. The process between the two functions is slightly different, and they're not the same. And so trying to compare these two things as the same is basically silly.
[00:27:18] Speaker B: Absolutely.
Process they go through to help you and help support you achieve those products that you want, for the goals and objectives that you want, generally, that is going to be an exposure to risk and return. Whereas the process of banking, there is not the same attributes of holding a product or holding of anything for that risk and return. The last function that I'll just kind of simplify when it comes to investments is then that withdrawal function. So just like the process of banking, you can also withdraw out of your investment account. And you will hear some of the conversations when we talk about is when you are withdrawing money, you are interrupting the compounding of that money, because as you are wanting investments, you are continually capitalizing and adding more money to the mountain that you're trying to build. It is earning a good amount of potential of whatever environment that you put it into. But the instant you withdraw that money, you bring that balance down. And the only way to exit the money is you have to sell the security or sell the product that you have, and then take that out in the form of the legal tender into your account and then reintroduce it back into the process of banking. But going back to the balance goes down. So if the balance goes down compared to what it initially was, and if the earning potential was what it said it was before, well, the actual volume of dollars of what you've earned has gone down because you've cut your balance mountain that was higher before, down because you have to withdraw it. So you've given up the earning potential of that money because you had to withdraw it. And most people have already gradually accepted the fact that if you need the money, you have to, quote unquote, I'm using the term liquidate that investment and then to take it out, in order to get it in your hands, you have to withdraw it out of the investment account and then put it through back into the process of banking. And then if you want it in cash, then you withdraw it out in cash and do as your merry way.
[00:29:32] Speaker A: Yeah, absolutely. So I like the mountain example. You're trying to build up a mountain for your own, whether it's your retirement or what have you, and then you're depleting the mountain, it's coming down and you're going up for a large part of your life, and then in your later years, it's coming down and you're just hoping that there's enough in there that it can maintain to get you through the remaining years of your life. And every time that the balance of the account drops, the earning potential of that account drops with it.
[00:30:05] Speaker B: Absolutely.
So what I've just kind of very, on a simplistic standpoint, highlighted the general circle of how most Canadians will interact with the current financial system as it pertains to their money and where they decide to locate and reside that money. Now, one thing that we kind of talked about, all those processes and those steps of withdrawing money and keeping the money in the said institution of the chartered banks or the credit unions or putting it into investments to participate in those risk and activities at a higher level, when I talk about the system, if I say it in this way, there is essentially an architecture built to capture the flow of money to achieve said of those objectives. So there's an infrastructure or framework, just like the roads that we have in Canada that have been built, that you can travel upon and use.
However, those roads, believe it or not, are not free. I mean, we have to pay taxes on those roads as we believe the government taxes us to spend and maintain those roads.
The same happens in the infrastructure as it pertains to the flow of the fiat currency. There's an infrastructure that goes. That's why if you issue a wire transfer as an example, there is someone actually on the other side of the screen who is going to review that request to ensure under their judgment and their rules, it is a legitimate source for you to send that wire transfer. There's an infrastructure built in where there's toll takers and every step in that way. So that infrastructure in the banking world comes in the form, and I'm going to use that term network. There's a network built for that. And of course, since there's pieces of, sorry, there's individuals or other investments that are involved in building that network. Whoever's building that network wants to make sure that it's not really at the goodness of their heart that they built that network.
They're trying to either depending on their objective, which I can speculate what it is, but they will want to make sure they are at least reimbursed for their network that they've built, that you are transacting and flowing that money. So that's why you will see when you are doing things of money, moving money around through wire transfers or e transfers or account balances. That's why you end up going crossing into elements of fees.
I will start introducing also potential and even taxes. But before I talk about taxes, I'll just kind of introduce just fees. Everywhere you are moving that money, that money is being transacted for that convenience. For me to send the money cash to Richard, it would cost me postage fees, it would cost me envelope fees or whatever. And then it would cost the time for it to be physically sent there, as opposed to digitally sending it across the screen.
There may or may not be a lower cost, and that will to increase the adoption of the usage of it. That will change. If it's cheaper for me to send it electronically and more convenient for me, then I will prefer to send the money to Richard, especially if it needs to be in a timely manner. I will send it via e transfer as an and on.
[00:33:38] Speaker A: That mean you can keep sending me e transfers, Henry, I'm perfectly ok with that.
What's interesting about this is similar. You mentioned infrastructure.
Utilities like for power know some areas of the country call it hydro, whatever. So your electricity, there's transmission lines that bring electricity to you, or natural gas. There's pipes in the ground that bring that to your house to have your furnace heat your home and your hot water tank. So those transmission lines cost a lot of money to put together, install, connect to the power generating station, et cetera, so that they can deliver those things to your property. And so part of a lot of what you pay for on your utility bills is the cost of transmission, and that's the amortized cost of putting that infrastructure together. So the idea of a dollar or dollar 50 e transfer fee is basically paying for the cost of building that technology and making it available on a mass basis with some oversight by some pencil pushers that keep an eye on it, all to make sure that those transactions, for the most part, go together at relative fluidity.
[00:34:51] Speaker B: So what I wanted to now, as everyone has listened and gone through what I'm sharing on screen, that is encompassing at a very simplistic perspective, the system. And what you can now see is the system, the authorities making this decision is all centralized to somewhere up at the top, and that is where the control of where more of those impacts of the system will come into. So if now, as you can see, the circumstances of where all that control is coming from is someone at the top, or some series of people at the top who make those decisions that have the authority to issue what you are generally going to be able to use, have in the form of money in your hands. I mean, you can earn and work for that money. Essentially, you're exchanging service or product for that legal tender. But that quantity of that legal tender that's available has been, at a policy level, has been decided what is going to be available for distribution.
So now, hopefully, that has very much ironed out that the process of banking involves these series of steps, and then there's a process of investment that involves these series of steps, and those processes are very different. And now I want to introduce the concept of becoming your own banker, the infinite banking concept. And the first thing that I will just kind of caveat is that the process of banking is still going to work, no matter what. But right now, from what we work with and the overall concept of what we're helping our clients with, the best tool to do the job that we have the opinion for is through a participating whole life insurance company, preferably with a mutual insurance company contract. Insurance contract, preferably with a mutual insurance company. So now we've crossed territory into an insurance contract which is also regulated by who can issue those insurance contracts and who is licensed to support issuing those contracts. As in insurance advisors. Richard, you're an insurance advisor. I am also an insurance advisor. And so we have the license that allows us to issue those contracts.
Sorry, not issue those contracts, but participating in brokering those contracts with the insurance carrier.
[00:37:39] Speaker A: Yeah. The way I would look at it is we're the distribution force, or as an example, they used to have people that would go to door to door to help sell you new utility contracts or whatever for different utility companies. Well, that's a distribution force to help get the utility's product out to market. And ultimately, that's really what insurance advisors are to some degree. I mean, they're more than that, but we're the distribution force that allow the insurance company's products to be able to get out to the marketplace in broad scope.
[00:38:15] Speaker B: Yeah, and just to kind of parallel, the insurance company is kind of the central authority for their business to issue those contracts. And we are the distribution force, whether you want to consider us as chartered banks or mgas, or individual advisors who have licensed advisors who have the license to issue those who have the ability to work with issuing those insurance contracts. So it's still a central distribution of those contracts now, because it's under the scope now of a professional, of an insurance advisor.
When we introduce the term becoming your own banker, the, the infinite banking concept is where, I'm going back to our initial opening, where there's a logical fallacy when people use things they think they know into something they don't know, and they try to compare the two. This is where things get really muddy, because we have individuals who are responsible for the distribution and sale of the investment products, and then we have individuals who are in the distribution and sale of insurance contracts.
And we're kind of using the insurance product in the way that we best know, as in terms of being an authorized infinite banking practitioner. With the Nelson Nash Institute, we are in general trained in terms of understanding the process of banking and utilizing the policy and constructing policies in the way that can help facilitate that. So creating the policies that still, as authorized independent banking practitioners, we will still design an insurance policy looking at insurable needs and the reasons behind it, but because we can engineer the contract in a particular way to help facilitate the process of banking, so we're actually accomplishing a lot more objectives when doing that.
[00:40:18] Speaker A: And just to speak to that 1 second, I think it's really important to identify that the insurance itself has to have merit. So, although there might be a goal and intention on getting an insurance contract so that you can implement this process in your life, there also has to be clear validation that the insurance also makes sense. So from an insurance company's perspective, we have to make sure that there's a viable reason for that insurance to exist, and the amount of coverage is sensible, given the circumstance for the person. So there's overarching things that need to happen from that vantage point. But setting those aside and just focusing on now the process of using that contract for facilitating the process of banking, that's really what we want to focus our energy on.
[00:41:06] Speaker B: Yeah, I mean, it often is overlooked that when we're meeting with clients, Richard, we are very much evaluating the merits of the individual's goals and objectives, and also their need for insurance. We can't just blindly write whatever the client wants in terms of their insurance. We actually have to be able to fundamentally support it, because if we get audited, we would be in trouble. And if we can't support the reasons and the merits for that insurance, now that insurance is broken down in multiple kind of products, let's say a whole life product, a universal life product or term product, they have their merits on their usage and in alignment with the client's goals and objectives. But even a whole life insurance is still broad as it is broad as saying, I drive a car and you can create the policy and design the policy in particular mechanisms, either in the parameters provided by the insurance company or the parameters that are offered, or from the experience that individually I have attained, or we as a collective have attained. There's ways that we can again, add particular riders for things, or adjust certain amounts or certain things to match the construct of the policy to meet certain things. But again, as an authorized infinite banking practitioner, our focus is specifically to help with facilitating the process of banking, which is not the same as when an insurance advisor, as a standalone, without being an authorized infinite banking practitioner, does not have that same objective or intention or discussion with clients to do that. It's not as mere, as simple as creating the policy. Like we can create the same policy, but how the rest of the process carries through will come down to the coach and the individual that you're working with, and it's still very much an individualized process.
[00:43:05] Speaker A: Yeah, the only thing I was going to add to that, Henry, is that the key thing to be aware of is your learning journey. If you decide to go down this process, it's constant, it's always expanding and changing as you grow. There's no such thing as having arrived in knowledge. And so your exposure and understanding of how you can utilize the policy once you get one that's put together in an appropriate manner, will just expand and grow from there. And so what we find with people that are actively engaged in the process and practicing on a regular basis in their day to day lives, they have the most success because they're getting the actual practice. It's no different than going to the gym and lifting the weights. Well, if you might go to the gym and not get out of your car, you're not going to get any benefit. But if you actually get out of your car and go to the gym and lift the weights, you're going to start to see the benefit.
[00:44:06] Speaker B: Yeah, the gym membership doesn't make you fit. It's what you use the gym members ship for is what will make you fit. So we're very much in that same mindset. The insurance contract is not going to be the one to practice the process of banking for you. It's you who owns the contract will facilitate and be able to use it. We're just the coach on the side. No different than if you go to the gym. You find a coach to work with to help you achieve your fitness goals. We're going to help you achieve your financial goals using the process of banking to get there.
[00:44:38] Speaker A: The fitness coach doesn't lift the weights for you.
[00:44:40] Speaker B: No, no one can lift the weights for you other than you. And so that's where the family banking system is inserted. And notice where I particularly inserted it in terms of the process of banking. And I'll just talk about that again, because we're using a contract, an insurance contract, a regulated product, there is a premium that needs to be paid. There's rules that you have to follow related to the premium. It's not something that you can make up that makes best sense for you, but because of just the tools and the environment that is there, you're going to take the best of what you can in the situation that is given to you. Now, there is something called that cash value dollars. It's a monetary value for what your contract is today as it relates to your death benefit. And there's other attributes like a dividend, if it's with.
And dividends are not always guaranteed. Depending on certain insurance companies, they've been paying dividends ever since they've put their whole life insurance policies in place every single year. And then the last attribute is a death benefit. So an insurance contract for the merits of an insurance contract is an insurance contract. It has all of those elements and features related to insurance contract. But what's important to now separate is can you actually use the insurance contract to facilitate the process of banking, which is bringing in your premium, bringing in withdrawals. You can withdraw your money out of the policy. In other words, surrender the policy. And you can also participate in the function of lending, depending on the terms of the insurance company that you use with. Or maybe you decide to collateralize the value of your policy, which is usually the cash value. With a third party institution, you're still participating in those three, let's say in the simplified expression, you're able to participate in those three functions of banking. Using the insurance product and in relation.
[00:46:49] Speaker A: To the cash value, which is the equity of an insurance contract, you identified that it has a relationship to the death benefit. And that relationship is whatever the cash value is on any given day, is the present value of a future death benefit. So the cash value and the death benefit are linked. They are really the same thing, just at two different points in time. And so it's fundamentally, when you take a policy loan as an example, you mentioned the lending process. Really what you're doing is you're taking an advance on the future death benefit at today's present value.
[00:47:25] Speaker B: Exactly. And so now I just want to lay out that positionally on the board that you see right now, we're still in the centralized framework that is issued and managed by the monetary system, by the central bank and the government. However, we're just changing the location of where we're flowing our money.
Now. The attributes that exist in the banking system with the chartered banks or the credit unions offer different attributes to what is available in the insurance contract and what's already there. Now, if you kind of look into the circumstances of what an insurance contract offers, it offers insurance and tax exemptions, especially during the construction of the policy.
And it also provides a contractual guarantee where as soon as you enter into the contract, I'm speaking specifically for a whole life policy. There is a requirement from the insurance company's end where the cash value must grow to match the death benefit by age 100. It is a contractually binding arrangement that the insurance company has set up with the individual of the life insured. So if we look at kind of the holistic circumstance of the contract, that allows a better facilitative medium to practice the process of banking, compared to practicing the process of banking with a third party banking institution, because it doesn't offer me those same benefits. Just as a similar simple example, it doesn't offer me a death benefit. If I were to put in $1,000 into a bank and I were to pass away tomorrow, I do not get, all my family member will get would be the beneficiary, would get would be the $1,000 that's in my bank. And even then, assigning and going through the process of bringing that money over to the next person of my beneficiary is going to be a pretty detailed step process. But aside from that, this is the example where when people are trying to compare the process of banking, sorry, the, the, the, the infinite banking concept, the product, and they're trying to compare the product. What it should be compared to is the process of banking from IBC to compare to the process of banking in form of a different environment. That is what should be properly looked at in that lens and scope.
[00:50:01] Speaker A: And as an example, if you're doing your business with a regular brick and mortar bank, you don't generally earn dividends from that bank. You could if you invested in the bank and you are a stockholder, but then that moves you into the investment category. So now you're participating at two different levels. So normally you wouldn't earn dividends unless you are a stockholder. Whereas with the insurance company, when you have participating insurance, you participate in the profitability. And so that happens automatically just by the virtue of ownership of the proper contract.
[00:50:36] Speaker B: Correct. And then now, diving into what you were mentioning, Richard, earlier, is people who are uninformed, I don't know the reasons of where their knowledge base is from, but if they don't understand the process of banking, as we've already outlined here today, they're going to take a product to compare a product. So that logical fallacy, take something that they know into something that they don't know, and they're going to take that process of investment and try to compare it to the process of IBC or the banking in IBC. And then they will look at the attributes of, let's say, the risk and rate of return.
The amount of risk in an insurance contract is significantly less than the risk that would be exposed to when you are participating in the actual term, an investment. You will lose money in an investment. I'm not saying you can't lose money in an insurance contract. I'm just saying that there's a possibility you can lose money in an investment and the likelihood is generally much higher. Just using very simple terms to explain. I'm not giving an opinion on that perspective. So using those two comparisons is not even the same comparison, because you're not comparing two of the same processes together. You're trying to take two different products and different processes to compare them together. And that's not the appropriate way to evaluate it.
[00:52:04] Speaker A: Yeah, it's not even an apple and an orange comparison, because apples and oranges are both fruits. It's more like an orange and a carrot, because one's a fruit and one's the vegetable. They're very different in how they might both be orange, but they're both very different.
[00:52:24] Speaker B: That's pretty good. So then, from the standpoint then, is what actually should be compared is the process of banking from IBC and the process of banking, as you know, that exists right now in the financial institutions that you use it with.
Now, the part that people also neglect is when they're trying to compare the investment, they assume that you have dollars that you earn and you participate in the process of banking, you take your paycheck, you put it in, you have some savings. And instead of savings, let's just say that savings amount is $100,000. Well, when you take that $100,000 and you move all of that to the investment phase or the process, now this has the $100,000, and then this has zero.
So it's a very different process. You've moved from one process to another. It's kind of a one or another type of thing. And if you need to move it back, then this will become zero, and then this becomes 100 again. And then now when you moved it away from the process of investment, you've given up the risk of loss, but you've also given up the unearned potential on that money that is in the future.
[00:53:36] Speaker A: And it's not just a one time. That unearned money is for the remaining period of your lifespan and then potentially the generational impact. So that decision to move the 100 away from the investment, to give up its potential, doesn't just impact you, it impacts everyone who follows you, because that's less potential wealth that could be left behind for your children and your children's children.
[00:54:03] Speaker B: And now, if you were to practice the process of banking through the infinite banking concept using your family banking system, you will have a banking system set up, and you will flow the money into your family banking system.
And now, because of the attributes that exist with, let's say, in the particular insurance company that we use, a mutual insurance company, they offer the ability to keep your money. And because there's a contractual guarantee where the cash value must grow to match the death benefit, your money gets to reside at the insurance company, and they offer you the attribute with the ability to access what's called a policy loan. I mean, if I don't own a policy, I don't have the availability to access a policy loan or money from the insurance company, the insurance company will lend me money. And because of how we construct things, the insurance company, I would be a co owner of the insurance company, and I would follow the process that they would need to fill out a loan. And I will tell you, the process of me filling out a loan with the insurance company is drastically, much better than what I would do if I would participate in the third party banking credit environment where I don't have to surrender information of my income, my reasons of why I'm using the money, I can decide how I want to pay it back. I'm the one in control when you are moving into this realm. Here you are bringing more control into your life. And that is just one primary example. And now I've accessed a policy loan, no questions asked, and that money is provided to me. I can take that money while my money and cash value is still increasing as part of the contractual guarantee, I can deploy that money into the investment. So now I get two things out of my money compared to the one.
[00:56:10] Speaker A: Yes. The key thing that you're identifying here that I think is important is that at all times, the death benefit exists. At all times, you're participating in the profitability of the insurance company. And if you had the exact same dollars in the exact same investment, you would get the same risk or reward of that investment that another person would get who doesn't have the insurance. So from that vantage point, you have the exact same outcome plus the advantage of the insurance.
[00:56:43] Speaker B: I completely agree with you, Richard. And I would just say that if we were to really do a real comparison, not by product to product, but process to process, what most people should be comparing when they're talking about becoming your own banker is the environment you're doing becoming your own banker. If the funds that you had here was $100,000, and for you to participate in the investment would be $100,000, that becomes zero. And then you get that rate of return of whatever that $100,000 does. That is the overall process of environment in terms of the flow and movement of your money. Now, if we were to do a very fair comparison, then what should actually be happening is the first same amount of the money that you flow into your family banking system, whatever the cash value is, whatever the dividends you get, whatever the death benefit you have still exists at whatever the value you have in your system to be also participating. So, again, you get two for one. And this is now showing that if we were to compare the process just at a very high level, without any numerical values, you can see this is zero and this is 100, whereas this has some value. And then this also can still generally be able to participate in the same 100,000. So, arbitrarily, just throwing a number out there, you can have 120,000 in your policy, cash values, or whatever in there, and you can still participate in the same investment phase. And now you're getting still the same attributes of participation, while still benefiting with the same attributes and participation in the phase. So when people are just comparing, they're comparing the wrong phases, and they're not comparing the whole picture together.
[00:58:38] Speaker A: And so the summary of this is that banking is a process, and it is relatively transactional money has to move from one place to another in a relatively short period of time.
Money also needs to be stored or stockpiled someplace. You need to warehouse capital because eventually you're going to need it. Probabilities. You need it every day for something, and on a regular semiregular basis you need it. Larger amounts for bigger ticket items, things like your vacations, your large purchases, major investments that you do want to make, and you want to be able to store that capital in a place where you have the most amount of possible control, the highest potential for it to consistently grow without interruption. You probably want to have some protection for your family and or your business so that if something does happen to you, a boatload of tax free money shows up and you want to be able to have the highest amount of influence over the future potential of your capital as it grows in a tax preferential environment. So if that is true, then you want to be in a position where you are shifting capital from, I'll call it the old world of the regular banking institution level and transitioning that into private contract, which is what a dividend paying, participating whole life insurance contract is. It's a private contract relationship between the policy owner and the insurance carrier. Assuming that there's a merit for the death benefit and the insurance carrier is willing to bind that contract, then you have a contract with them. So the insurance carrier does not manipulate the money supply or manufacture new money using fractional reserve banking or any of those things. We didn't even get into that today, but we have other videos to speak to that topic. So when you are working with say policy, loan and premiums which buy death benefit and then death benefit creates the result of cash value, you're creating this ever increasing method of growing equity that is accessible for your own utilization at your discretion, as a policy owner, for anything you want to use it for, no different than when you put money into your savings or your checking account, you might withdraw that to go and do something at your discretion. We just want to maximize and optimize your level of control and utilization over your lifelong earning potential. And from my understanding, especially based on everything you cover with us today, Henry, the utilization of participating dividend paying whole life insurance as a financial instrument where you can maximize that level of control. I mean, the quality of the control is extreme in comparison to some of the other options that exist out in the marketplace.
[01:01:42] Speaker B: I completely agree with you, and that was such a really great summary that you went through related to describing what I've put together and what I wanted to share with all of the listeners, and one of the other part that I went through that thoroughness of detail earlier. And the reason for doing all of that is because it is important that after you've watched this part, we're going to talk about another new evolving stream of the way currencies are moving. And I've already kind of very much hinted around the terminology centralization, and there's also confusion around and lack of clarity around what that centralization is. And so part two of this whole conversation will start diving into currency in the form of cryptocurrency. And there's always confusion on what cryptocurrency is. It either is taking the same terminology as something like bitcoin or Shiba, Inu coin or CBdcs. So all of that will help for us to take the next conversations in that direction, provided now you have a better understanding of the economics of how generally money is flowing in our economy as it relates to you. And we are living in a circumstance right now.
And right now everyone generally accepts fiat currency and generally accepts the way that banking is because that is the legal tender of how it's working right now. Is there a big challenge to how it will come or evolve in the future? My general opinion is it can be, and that's where I definitely want to dive into that next conversation, to share some insights for people or information for people to learn, not to draw the conclusions, but to share some insights for them.
[01:03:43] Speaker A: Yeah, a lot of this is about opening up doorways to get people to be curious, to learn more, do some of their own research in some of these areas. And that's really going to be part of our next part of this conversation. So stay tuned for that. And just to summarize, again, when it comes to looking at the process of banking versus investing money in something, they're fundamentally very different. There's nothing wrong with either. In fact, you're probably doing both of them in your life at all times throughout your life anyway. But recognizing that they are very different, both processes, and that we should understand them differently is what's critically the big takeaway that we want you to have in our recording today. So with that in mind, Henry, I really appreciate you going through this with the fine tooth comb and giving people a really good systematic look at how all these pieces kind of overlap with one another and really framing it to help people understand the power and potential of having a heightened level of control over your financial circumstance. Using the tool of participating insurance as a method and a vehicle to harness banking processes slightly different in your life to optimize capital over the long term and potentially over generations. So this has been a ton of fun. There's going to be another link to an episode popping up down below right here. Go ahead and continue your journey of learning, and stay tuned for the next part of this conversation that will be coming out soon. Thanks for listening to the wealth without Bay street podcast where your wealth matters. Be sure to check out our social media channels for more great content. Hit subscribe on your favorite podcast player and be sure to rate the show. We definitely appreciate it. And don't forget to share this episode with someone you care about. Join us on the next episode where we continue to uncover the financial tools, strategies, and.
