New Lecture Series: Whole Life Insurance Mechanics from the Perspective of Nelson Nash’s Infinite Banking Concept
The elephant in the room is the question: “what does it mean to ‘properly design’ an IBC-style whole life policy. This series lays the necessary groundwork in systematic fashion to help answer that question.
As you may or may not know by now, my mentor James Neathery and I co-host a podcast called Banking with Life. March 2022 marked the show’s three-year anniversary. In it, we very often refer to a “properly designed” whole life policy, and we frequently juxtapose that to the sort of assertions and recommendations for policy and premium design that you might find on other internet platforms.
If you’re researching the IBC, you’ve heard the term “10–90” or “90–10,” for instance. You’ve heard phrases like “The Big Four” in reference to four well-known, old, mutual life insurance companies — Guardian, MassMutual, New York Life, and Northwestern. You’ve heard about term riders; direct recognition and non-direct recognition; cash value lines of credit; and Home Equity Lines of Credit (HELOCs). You’ve encountered Facebook groups (both private and public), Reddit threads, and the Nelson Nash Institute Authorized Practitioner Finder. You know you’ve really gone down a rabbit hole if social media ads pushing online term insurance quote-engines now stalk you as you scroll Facebook, YouTube, or Google. And of course, you’ve read every possible variation of the word “banking” in the many, many different company and website names.
Amidst this chaos of financial terminology and click funnels lies an even more troubling phenomenon: conflicting if not outright contradictory claims and assertions about what it means to do IBC “correctly.”
I’ve encountered a few clients who — quite frankly — are exasperated. They’re intelligent men and women who have given a good faith effort (more than ought to be required in many cases) to figure out just what the hell is going on here. It’s painful to hear. Nelson Nash is near and dear to my heart. Applying what he taught me and thousands of others should not be that difficult to understand and implement. Like he himself used to say, this is “ridiculously simple.”
Against this chaotic back-drop, since day one, I’ve encouraged people to go to the source. Read Becoming Your Own Banker and Building Your Warehouse of Wealth. James and I do our best to remind people of that on our podcast. In a talk at the Nelson Nash Institute annual Think Tank a few years back, James came up with the point that Becoming Your Own Banker is like a set of those blue and red decoder glasses that you’d find stuffed in the cereal box.
That does work. And it remains the first and primary method for learning to identify Noise online and to isolate the truth of the matter. It’s a bit like reading the great economist Ludwig von Mises. If you read him, then whether you like it or not, you start to see the nonsense in other economic writings, and there’s no shortage of it (pun intended…).
But there are some things that don’t appear in Nelson’s books. For example: direct and non-direct recognition, the three types of term riders, examples of or explanation of the various degrees of restrictions on PUA riders, and discussion of how to think about choosing one premium structure over another for your own circumstances.
I get the feeling that some people get frustrated by this fact. It’s as though some — not all, but some — expected a blueprint for how to implement the IBC in their own life by reading Nelson.
But — and hear me on this — that is not what Nelson was doing in his two books. The subtitle of Becoming Your Own Banker is “Unlocking the Infinite Banking Concept.” The book was meant to teach an idea, to convey a concept — not to teach people specifically how to apply it in their own lives.
That is why Nelson formed relationships with various life insurance agents — this is before the advent of the Nelson Nash Institute (NNI), and, before that, the Infinite Banking Concepts organization (the predecessor to NNI). The idea was that the individual who wanted to implement Nelson’s ideas needed a competent coach to not only help the individual understand how to apply the IBC, but to also apply for one or more life insurance policies. This evolved into the idea of the Authorized IBC Practitioner program where life insurance agents who wanted to advocate for and teach the IBC to clients could come get a minimum level of training. For example, one of the early ideas was, if you wanted to be a Practitioner and a client came to you and said he or she wanted an “IBC policy” or “a policy like Nelson Nash talked about” or something to that effect, then the agent had to agree to provide a bonafide dividend-paying whole life policy with a PUA rider on the policy.
Now look, that might sound simple to you, but understand that you’re probably ahead of the curve compared to the state of the industry fifteen years ago. Back then (and still to this day!) there were plenty of guys out there advertising in the language of IBC but who, at the end of the day, were selling universal life policies! That is, there absolutely was a need to introduce some basic threshold of screening, so that, in the very least, the interested consumer could work with someone from whom they could be confident they were at least going to get an actual whole life policy from a mutual company.
Fast forward to today.
The pace of online video and audio marketing has exploded. Sometimes it seems like everyone and their proverbial mother has a podcast. And may God have mercy on the average person poking around online who is trying to sift between who to trust and who to side-eye, who to listen to, and who needs a solid swipe to the left. We end up with the sort of disorienting array of conflicting assertions that I started with up above.
So what’s the solution?
One idea is that some centralized entity — the NNI for instance — ought to more rigorously define what an “IBC-style” policy really is. And isn’t that the natural human proclivity! If only some central authority would just make it easier on us.
And hey, that may very well be part of the answer. If it’s something the NNI wanted to do, I’d have suggestions!
But I retain a default skepticism of institutional rule-making. What if that (any!) organizing body gets it wrong? Maybe they listen to me and make some rule, and maybe it turns out that I’m wrong! And by the way, the man who came up with the IBC, the one who truly had the authority to say what counts and what doesn’t count as an “IBC”-style policy is no longer with us. Frankly, I think Nelson would be nervous, to say the least, about any centralized proclamations in the first place, critical as he was of “top-down thinking” as he called it, in all other contexts.
No, I think the answer has something to do with plurality — meaning, many approaches, many views. On the one hand, this will frustrate some people who just want the answer given to them. But on the other hand, it eliminates the possibility of the unintentional inculcation of bad thinking. It’s the same reason the free market just works better than the government. Sure, the state can hand down some single policy rule from on high, but there’s always the possibility of unintended consequences (and intended ones…).
October of this year will mark five years in the business for me. That’s quite the thing, too. I remember way back when I first got started all of these statistical warnings about how “90% of life insurance agents quit in the first three years, and of those who make it, 90% of them will quit before they get to five years.” I don’t know how true those numbers are, but ultra-high turnover is absolutely real in this business.
Over these nearly five years, and especially in the last two and one-half or so, I’ve noticed something.
I’ve basically thrown off all so-called “best practices” for conventional life insurance sales. Whoever came up with “prospecting” and “cold-calling” and “click-funnels” and “CRMs” can go fly a kite, quite frankly. Maybe that works for other people but it’s hard “no thanks” for me.
Instead, I try to apply what Nelson taught me in all aspects of my life, not just in how I build a life insurance policy, and this includes my business practices. My clients have heard me quote the following from Nelson, and probably more often than they care to hear it, but it’s: “if you know what’s going on, you’ll know what to do.”
When I get in touch with a new client, I figure that my job is to help them understand why things work the way they do in the industry, within companies, and within particular policies. If that understanding is truly clear, then, I believe, the direction will be clear. The number of policies, the company from which the policy should be purchased, the structure of the policy (which riders to use and which not to use), the premium level, the premium design (how much of the annual outlay should go to the various premiums on the contract), the funding strategy, when to expand the system, and how to manage the system if things go wrong should all become clear.
And though I did not plan things this way, it turns out that there’s a general format and structure to the material that I found myself sharing with clients in order to accomplish that goal of clarification.
This new lecture series is that material.
Of course, with online video, I can expand further, so there may be some information here that even current clients haven’t heard before. But the essential structure will align well with what they’ve heard from me already.
Something like this would never have been possible were it not for my mentor James Neathery. Nelson taught me IBC, but James taught me life insurance. Yall who are outside the industry don’t see this, so I’ll just share with you that within the industry — among agents and among the executives running these life insurance companies — he’s extremely well-respected. And for good reason. He’s got that level of understanding that’s so deep that it’s as though it’s apart of who he is. I’m no schmuck and since meeting him in October 2017 I have yet to present a financial strategy question of any kind to him on which he did not have an original, insightful, practically applicable perspective. It’s really something to behold. So if when you watch this series you think “oh wow, this guy knows what he’s talking about,” you should instead think “wow, this guy has an amazing teacher.” If it is the case that the former is true, it’s only because of the latter.
Look, I think this is what financial advisors of any kind should be doing. And I get it, not everyone wants to get in front of a camera or a microphone. I know. What I mean is that we should be explaining to the public how we view the industry and why, regardless of the particular medium. Then let the consumer decide for themselves if they agree or not.
Conventional financial planning is a great counter-example. It’s one giant monolith, the marketing strategy for which boils down to “take my word for it.” Will that stock market portfolio feature the necessary accumulation value to provide for distributions from retirement to mortality? “I don’t know but take my word for it.” Will you be in a lower tax bracket when you’re 70 years old? “I don’t know but take my word for it.” Will this indexed universal life policy accumulate value at the assumed, hypothetical rate of return? “I don’t know but take my word for it.” You get the idea.
And for what it’s worth, I think this sort of systematic presentation of philosophy and strategic orientation is the solution to the Noise I talk about at the outset of this essay.
Yes, Nelson’s books are where one’s IBC education should begin.
And I understand that “IBC is a process, not a product.” I too lament the prevalence of a severe over-reliance on policy structure and premium design in online marketing. It’s led people to believe that all IBC is, is the purchase of a creatively designed life insurance contract. Nothing could be further from the truth.
However, the fact of the matter is that Pandora’s box is open. The genie is out of the bottle. People want to know about technical components of these policies that simply are not to be found in Nelson’s books. And look! If you’re going to pay a substantial percentage of your annual cash flows into some asset class, wouldn’t you want to know the ins-and-outs of it? Of course you would.
Before I close, a few caveats are in order.
Many agents will disagree with what I teach in this series. That’s to be expected. Look y’all, we have got to remember how to have disagreements. I’ve been accused of being a commission hound (lol) for things I’ve written on this very blog. If what I’ve written in this forum has triggered you, do yourself a favor and skip clean over this lecture series, because it’s liable to send you clear through the roof. What this means for you — the member of the public and current or prospective policy owner — is that you should expect this.
Maybe I’m wrong and everyone will agree with me, but I don’t think I am. If you encounter disagreement in some capacity, understand that that’s OK. My much broader goal here is that you come away with a better, more nuanced understanding of why you believe what you believe with respect to life insurance policy design, regardless of whether you agree with me or not. If you come away disagreeing, but with a better, more keen and exact understanding as to why, then I’ve done my job.
Putting things out for Literally Free comes with risks. Notice that I’m not asking you for your identifying information. I’m not charging some nominal fee to gain access. Virtually everyone in this business does something like this, and I’m not here to tell them they’re wrong! I just know how I feel about that kind of business practice from my perspective as a consumer in other aspects of life, and I know deep down in my soul that I literally couldn’t desire any less to manage the back-end operation necessary to coordinate all that (nor could I be bothered to manage a person who would manage it; in fact, that’s arguably a more terrifying proposition). Me and God had a little heart-to-heart a while back and we decided that there are just some things I’m not going to do in the context of business marketing, at least at this point in my life, and the coordinated “lead generation” email and click-funnel approach is one of them.
This means, inevitably, that unscrupulous agents will rip some of the things I say and put it out there as if it were their own. So understand that I do not endorse any advisor or agent, other than those who are contracted with me (they’ll tell you who they are and I’ll be happy to verify when necessary). If you’re an agent and some of this material resonates with you such that you decide to incorporate it into your business, great! Proper attribution is appropriate and appreciated. There’s this idea out in the industry where some advisors — innocently enough, I assume — think it’s cute to “steal” (they literally use that word) the ideas of others and repeat them as if they were their own without attribution. It’s a strange world, folks.
Next up: life insurance companies didn’t come up with the Infinite Banking Concept and they do not endorse or sponsor any of the material I teach in this course, nor were they asked to. The information is presented for educational purposes only and should not be considered, and in fact is not, legal, tax, or investment advice. Consult a competent, licensed professional in those areas before doing anything with your money.
Finally, I sincerely hope that this material helps you. I know the series is long. You wouldn’t believe how often James and I hear how Banking with Life episodes are “too long.” But you also might not believe how many tell us that they’re not long enough. Each lecture is as long as I think it needs to be to get the job I had in mind for that subject done. Even then, there’s plenty I leave out, as I mention in the final lecture.
I truly can’t stand the constant admonitions to “like and subscribe” with these online video things. We’re all adults. At this stage in the development of the internet, you know what the little thumbs-up icon means. If you want alerts for future lectures, I’m willing to bet you know how to cause that to happen.
Ultimately, I just prefer you learn something. That, for me, is sufficient validation.
Comments are held for review, but don’t be shy! If you have a question, please ask! I’ll do my best to get to as many as I can, perhaps with future videos.