Latest / Wealth On Main Street / 192. Debunking Dave Ramsey’s Misconceptions About Infinite Banking and Whole Life Insurance

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192. Debunking Dave Ramsey’s Misconceptions About Infinite Banking and Whole Life Insurance · Wealth On Main Street

• 0:00
  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.
• 0:08
  Speaker B: Lowe, as they unlock the secrets to creating financial peace of mind in an uncertain world.
• 0:13
  Speaker A: Discover the strategies and mindsets to a financial future that you can bank on. Get our simple seven step guide to becoming your own banker. It's easy. Head over to Sevensteps CA and learn exactly the learning process required for you to implement this amazing strategy into your financial life. That's Sevensteps ca.
• 0:39
  Speaker C: Okay, we're going to do a reaction video. I know our audience has been eagerly anticipating this reaction video, so Dave Ramsey has been contacted by people periodically who inquire or have some comment about the process of becoming your own banker. The, the, the infinite banking concept conversation always shifts to or is always focused on the product, not the process, which is really interesting. But this most recent video, rich and I want to do a reaction. We've done nothing to prepare for this reaction. So this is coming right from our subject matter expertise and awareness of this process and our subject matter expertise and awareness of the tool, the product that's used to implement the process. And so, rich, I'm going to share my screen. Just hop in initially, let me know when you want me to pause. And we can just have a little bit of fun with this. The video itself is just under nine minutes, and we'll share some really good, valuable dialogue to help the viewer understand what's really going on.
• 1:52
  Speaker A: Okay, I'll raise my hand when you want to pause. And for anyone who's listening on the audio and not watching the video, this is definitely one you're probably going to want to come back and watch the video, especially because you can see the ridiculously smug look on the radio show program host's face, which always kind of, I always find particularly interesting.
• 2:16
  Speaker C: So here we go.
• 2:18
  Speaker A: Let's do it.
• 2:22
  Speaker B: Quite pissed off about it. So I do not agree with that point that you made in that video. I have set up a policy for my son when he was one years old. He's five now. I'm sorry.
• 2:41
  Speaker C: I'm going to stop it right there. So the caller said, I set up a policy for my son when he was a year old. He's now five years old. And Dave Ramsey says I'm sorry in his charismatic manner. What a ridiculous thing to say to someone who has done something for their child that their child could not do for themselves. Dave should be ashamed of himself for saying that. I had a client, the Olsen family, their son, teenager who had been life insured for several years, pass away suddenly and unexpectedly due to a horrible accident. And that family thanked me because they were able to celebrate their son's life. They were able to take care of what had been a few difficult years. And to hear Dave Ramsey say what he just said is absolutely deplorable.
• 3:46
  Speaker A: I agree. And I want to add to that, Jay, before you hit play. So this caller called in, and he's calling because of previous content that Dave has done, saying, stating, making bold statements and claims that the infinite banking concept is a scam. And so the caller starts off saying, I disagree with you on that, Dave. I've got a policy.
• 4:08
  Speaker C: I'm really pissed off.
• 4:09
  Speaker A: Yeah, exactly. He's upset, and he's calling in to register his level of being upset. And additionally to your comment, know, insuring your child, both of us having our children insured. You've got your children insured multiple times. I have my children insured multiple times. One of the number one things that really bugs me and gets me is when we make an application for insurance on a child and we're not able to get that child covered. It's one of the number one things that I still struggle with in doing this business. I get emotionally charged about it because, oh, my God, if that was my kid, I would be so upset. And this does happen. It's happened to me probably three or four times this year where we've submitted an application on a young child between the ages of, like, one and, let's say seven, and they're unable to get covered due to certain reasons. We might be able to reapply maybe at 18 or 16 or something. But man, oh, man, it's like a knife into the heart when that happens. So to hear him saying, I'm sorry that you got your kid covered, man, I just want to jump through the freaking screen and slap this guy when I hear stuff like that.
• 5:24
  Speaker C: That's the effect that he wants to have. That's how he engages his tribe, and he does that by belittling and demeaning people. And he is absolutely, acutely aware of the effect that it has and it's engineered. Okay, let's continue.
• 5:46
  Speaker B: I said I'm sorry. Yeah, sometimes I set that policy up for him. He's one years old. It's a $500,000 base value. We pay $5,373 a year for 13 years, and it's paid up. At that point. There's a few points I wanted to. I didn't agree with. You wanted to kind of take one thing at a time. That's fine. Okay. One of the main things was that you claimed that the cash value guides you and you only get the face value paid out.
• 6:37
  Speaker C: That is absolutely so remarkably stupid to say that's true, that when you die, the cash value dies with you. What somebody may not have informed Dave of is that the cash value, two components. One, it isn't money, and secondly, it is the net present value of the future payment of a death benefit. And so for Dave to say that is just another sharp example of how well he's compensated to not understand the anatomy of a participating whole life insurance contract.
• 7:22
  Speaker A: Well, additionally, I mean, this gentleman's mentioning that he's putting whatever, $5,700 a year into his kids policy. It has a certain starting face amount. And so I appreciate this gentleman's calling, but there's also probably some, there's definitively a lack of maybe clarity and awareness, understanding of the process of becoming a vendor. So he's talking about the tool and the anatomy of the tool that he has set up, but not necessarily a lot more about that. The fact that he's going to stop paying for it in 13 years. Well, the reality is, if he really truly understood the concept, he probably wouldn't want to stop paying it. He'd probably want to keep paying it or pay more or get a new one. So there's a disconnect, a little bit between the caller and the conversation, you know, glad that the caller is calling in, but there's also probably some work that the caller needs to do. And if they don't have Nelson's book, they probably need to open it up and look at it again, would be a comment, I'd say as well.
• 8:17
  Speaker C: Very good point.
• 8:19
  Speaker B: Well, it's not true. If you reinvest the dividend back into the dividend, reinvestment is not cash value.
• 8:27
  Speaker C: Dividend reinvestment is not cash value. Dave. Dividend reinvestment back into a policy. Purchases paid up additions which are contractually guaranteed to accumulate their equivalent in cash value.
• 8:41
  Speaker A: So he's not wrong saying that dividend is not cash value, but dividend creates the thing which causes cash value to grow, which is the impetus in the whole structure of our book. Cash falls a leader. The dividends purchase, death benefit. Death benefit causes the result of cash value to accumulate, and that happens on an ever increasing basis. And I don't like also that it says dividend reinvestment. You're not reinvesting the dividend, you're telling the dividend to buy to be a premium. The dividend is now a premium in this scenario, and that premium is purchasing more death benefit. And then the result of that is death benefit creates more cash value, and it causes continuity, absolute continuity on the growth of cash value. And it also causes the advantage of increased future dividends, which are not guaranteed and may fluctuate, but the potential for you to achieve them is a direct result of the behavior of telling the dividend to go do that job.
• 9:47
  Speaker C: For absolute clarity for viewers and listeners, it's not a dividend reinvestment, it's a dividend election. You're electing to do something with the dividend, and reinvestment is not one of those things. And second, when you think about everything that we just shared around the impact of electing to have the dividend by paid up additions, which create cash value accumulation, if the policy owner is informed, the policy owner is likely going to choose that election. But there are other things that you could do. You could elect to have the dividend paid to you in cash. You could use it to offset some or all of your premium. You can leave it on deposit to earn interest. So in that case it becomes cash. But again, we got to make the distinction. Cash value is not money. And again, that's something that just Dave simply is not indicating that he has any understanding of investment is because you.
• 10:55
  Speaker B: Have a mutual company and the policyholders are the owners of the company and the profits from the company come to the policyholder and they use that to buy paid up additions.
• 11:08
  Speaker C: I give him credit. He said some good things there.
• 11:11
  Speaker A: He did? Yeah, he did also indicate that. So the fact that dividends are being paid on the policy because you were the mutual company. So that's not exclusive to a mutual company. Any company that offers participating dividend paying whole life insurance, whether they're stock owned or mutually owned or what have you, or they're a cooperative of some kind, or a fraternal organization which also offers similar products, the same methodology applies that the dividend can be used to buy paid up additions. So he's accurate that it's buying paid up additions. Once we turn the playback button back on here, I'm pretty confident he's going to say some other gobbly gook that indicates that that doesn't help you to some benefit. But let's find out.
• 11:53
  Speaker B: Okay, that is not the same as keeping your cash value. That's buying extra insurance with your overpayment.
• 11:59
  Speaker C: Okay, this is going to take a while, obviously. So Davis is saying correctly, that when you're receiving a dividend from the life insurance company. He's saying that the dividend is an overpayment, and he's correct to a degree. So a portion of that dividend represents what's called a return of capital, and a portion of that dividend represents your share of the Divisible surplus generated, something that he just mentioned prior to that. And what he's saying is he's saying it based on his own agenda. He's not really painting an accurate picture.
• 12:48
  Speaker A: Yeah, and he mentions that again, I think he said that it's not cash value, if that is what he said, and I don't recall, but that would be accurate. It's not cash value, but in the spirit of how he indicated that it was, to indicate that it's like you're not going to be able to get or utilize that dividend's value in some way. So the methodology by which he described it is to a degree misleading because the intent of which it's stated is to allude that this is a bad idea for you to do so. That might be his opinion and his perspective, and he's entitled to his opinion. So that's fine, you're welcome to your opinion. But to a degree, my opinion is that there's something nefarious to a large extent about how he's stating this in the discussion.
• 13:41
  Speaker C: Well, and the other thing that would be important, and the caller could have asked him. So, Dave, if I understand you correctly, the dividend being an overpayment. So once the policy is paid up after the, I believe it was 13 years, he said he was going to pay premium for.
• 13:59
  Speaker A: He said 13.
• 14:00
  Speaker C: So will there be any year in which the life insurance company declares a dividend that I won't receive one for my son's policy after year 13 for the rest of his lifetime? Because I'm not paying anymore. The premium is being paid. The policy is, in this case, if it's fully paid up, there's no additional premium required. And so every year after year 13 that the life insurance company declares a dividend, that policy owner is going to receive the dividend. And so if Dave's comment is true, which it's not, then logically it would be safe to assume that after the 13th year, because you're not overpaying anything, that you're never going to receive another dividend. And that's just simply not true.
• 14:50
  Speaker A: How can the dividend be an overpayment of premium that wasn't paid in year 14 if we understand that it doesn't make sense.
• 14:57
  Speaker B: All right, but it still works out to be having a cash value much greater than the $59,849 we put into them. The actual cash value, not the paid up additions. The actual cash value dies with you.
• 15:15
  Speaker C: We already addressed that, Dave. You're wrong.
• 15:20
  Speaker B: No, because. Okay, but your death benefit is larger than your cash value. For me, I looked at it. Because you bought more insurance. You know what a paid up addition is? A paid up addition is buying additional insurance, getting more at debt, not because you got your cash value, but because you used your policy dividends to buy additional insurance. Right, but that's different than getting your cash value. If you took those policy dividends and went and bought a term insurance policy for 100,000, well, you'd get 100,000. That's not your cash value. Well, I have a term policy, but you missed my point. You're talking about you use the policy dividends. You use the money they send to you because you're in a mutual company to buy additional insurance. Yes. If you buy a term policy on the side for $100,000 instead with that same money, you would get $100,000 more than your face value. But that's.
• 16:26
  Speaker C: You go ahead first.
• 16:29
  Speaker B: Oh, my God.
• 16:29
  Speaker A: I just want to shake my head. So his statement about the dividends buying paid up insurance, he's correct that that is what it's doing, and that is increasing the death benefit. That is also correct. What he's saying, again, is that you don't get the cash value. So upon death, you get the death benefit. What he's not saying and what's being left out is that the cash value in a whole life policy is today's present value representation of the same death benefit. So he's separating these two components, and they're not separate. They are actually the same thing. The cash value and the death benefit are the same. They're just being represented at two different points of time. Cash value is today's amount of death benefit. Essentially, that is available in a cash component. Because the insurance company knows they're on the hook to pay that death benefit, they have to grow a cash pile so that they can pay the eventual claim when it's most expected. They have to be able to pay it at all times, but the mortality expectation is out into the future. And so when you are accessing. We don't get into policy loans here, but when you're accessing a policy loan, you are essentially using your cash value as collateral, which is today's value representation of that future death benefit. So it's a way of looking at it, and this wouldn't be completely accurate, but just a way of thinking about this would be, that's like you're taking an advance on your future death. It's like you're taking a credit card advance on a future death benefit that will be payable. So again, and in this scenario, he's suggesting that this guy. Well, what if you just took that dividend and want about $100,000 of term insurance? What is he getting at? Why would you. $100,000 of term insurance? For what reason? So that you have a permanent policy and the dividend is buying you permanent insurance. That's always going to be there. Why would you take some of that money and go buy something temporary? What on earth would be the point of doing that? You have permanence. You know you're going to die. Why would you go take the same amount of money that's going to go buy future death benefit anyway? That's always going to be there. And create a guaranteed increasing potential of more dividends. Not the guarantee of dividends, but the increased potential thereof. Well, to go and buy something that you know is temporary, especially on a child. First of all, you can't get that on a child, at least not to my knowledge. The whole thing is almost at a loss for words.
• 18:58
  Speaker C: Let's be sure, though, that we're also being clear, right? The only dividend that is not guaranteed is the one that hasn't been declared yet. And so when people use that language, oh, well, dividends are not guaranteed. Well, let's be clear. The only dividend that isn't guaranteed is the one that hasn't yet been declared. And what Dave doesn't explain, because he may not be aware, but I presume he's aware that when the dividend buys paid up additions, each paid up addition receives its own dividend. Every single year that dividends are declared. That's why the dividend yield continues to rise. The dividend yield in dollars. I'm not talking about the dividend scale interest rate. Every paid up addition to that policy receives its own dividend. The insurance company represents the summary of the dividend, the total sum as the dividend that's declared and paid based on the original face value of the policy, and all the dividend yields for all the paid up additions every single year that dividends are declared. That creates this amazing compounding factor in the policy. And Dave says he's sorry that this gentleman put this policy in place for his child.
• 20:14
  Speaker A: I'm sorry that that policy is five years old and your kid is going to be blessed beyond good fortune to have it with him for the rest of his life. To have basically an ever growing compound machine where you locked in the premium dollar at age one. And it sounds like he's not even allowed to pay a 14th premium, which is a little odd, but I mean, my word, you can't get any more of. His son can't go back in time and get it for himself at age one, like when he's 18, he can't go back and get one. It's too late at that point.
• 20:45
  Speaker C: You could never create a policy that's more efficient because you can't go back in time. And the other thing that Dave fails to say in this scenario with this guy is that you can never pay in what the insurance company is going to pay out. You can never pay in what the insurance company is going to pay out. And so again, a lot of important facts that are being left out here.
• 21:10
  Speaker A: Funny that you said that, that last statement, Jay. It is true that in the whole life insurance contract that is the case. However, in a term policy, if you kept it like what Dave is promoting, you could pay in more than that. Term policy will pay out. That's right, if you kept and maintained it. And at least in Canada, there are very few term policies that go past age 85, unless it's a term to 100 contract, which is a little bit different. But if you have like a term ten or a term 20 and every ten or 20 years it renews, most of them end at age 85. So if you lived 86 and you kept that thing, the cost that you pay will exceed the total payout of the death benefit that you would receive. But if you live to 86, it's over and all the money is gone. You don't get to keep anything because you rented the benefit and you outlive the benefits potential.
• 22:03
  Speaker C: Yes, very good point.
• 22:06
  Speaker B: Not your cash value, that's additional insurance. They're different, right? They are different in term. You don't have cash value to borrow from. I'm aware of that. But your point was that you don't lose the cash value. And my point is 100% of the time, by definition, you lose the cash value.
• 22:26
  Speaker C: Dave, you're wrong. And it bears repeating. Cash value is not money. It is the net present value of the future payment of a death benefit, period.
• 22:40
  Speaker A: If you've taken policy loan against the policy and you've used them for a bunch of things in your life, and you pass away the death benefit extinguishes those loans. Ergo, one way of looking at it would be that you utilize the cash values, resources, the collateralization of that cash value throughout your life's needs. And because you were borrowed against it to do whatever you wanted to do, the death benefit comes out, it pays out the policy loan. There's still tax free money left over. In essence, you didn't lose anything because you used everything, becoming your 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.
• 23:48
  Speaker B: Okay, so, as I said, tip for Pat. If he lives to be 80, I'm looking at the readout here. You'll be worth about $2 million, but the payout for the death benefit will be 2.6 million. Okay. Technically, you're taking your policy dividends and go buy term insurance with it. And you would have more than you're talking about because you get a better buy on the insurance than you're getting with this rip off, whole life crap.
• 24:24
  Speaker C: I don't know if there's any sharper example of demonstrating to the world how stupid you are, but this is right up there in the top ten.
• 24:33
  Speaker A: I would love to get some comments on this video, but just think about that. Just go take the dividends you're getting from the whole life policy and go buy chunks of term insurance every year with it, and you're going to end up with more insurance. Okay, but at age 80, and then what? You're still buying term insurance and then who's granting it to you? How are you getting it? What's the chance that it's still going to be there when you actually die? This is recorded this year. Like, this is very recent that this came out. This guy's got a five year old kid. What's the probability based on mortality, age, and the advances in medical technology that he's going to live past 80? I would say it's legitimately very high. It's so irrational and illogical what he's telling this guy to do. If this guy did what Dave is suggesting, my word, I would be so sad for that family for have taken in this 32nd sound bite of advice.
• 25:33
  Speaker B: Yes, you would get a hot, but you wouldn't be able to use it throughout your life as your own bank. Okay, but here's the big thing. That's a side issue. That's a side issue. But your first issue was he's going to have all this money at retirement. Well, let's just do a little present value calculation on what you put in for a baby. $5,000 a year for 13 years. Do you know what that would be in a mutual fund?
• 25:58
  Speaker C: I knew that one was coming. Here we go.
• 26:03
  Speaker B: At age 88, it would be $25 million. Dude.
• 26:12
  Speaker A: It'll just magically be $25 million, Jay, don't worry. Just in there, the market will always give you that 1011 percent that Dave's so fond of talking about.
• 26:23
  Speaker C: Yeah, you know what Dave doesn't talk about is the fact that the market doesn't care about this fellow's son's retirement.
• 26:31
  Speaker A: It also doesn't care if this fellow's son is alive or dead.
• 26:34
  Speaker C: The market doesn't care. The market's not going to be aligned with your dates around retirement. And so if you put money into a mutual fund, you're assuming some degree of risk. You're exposing that capital. You have no control all of the things that we describe and talk about. But again, there's been no discussion about what Dave says is a scam. There's been no discussion about the process of becoming your own banker. The infinite banking concept. This is all centered around where money is residing and financial products. So Dave, again, understandably so, based on the fact that he's very well compensated to not understand this stuff, is dancing around the topic saying, oh, well, that's a side issue. That's entirely a side issue. You were talking about your son's retirement. I can't recall the guy mentioning his son's retirement. So he's got to find a way to get his foot in the door to say, what you need to be doing is putting your money into mutual funds. Again, something Dave is very well compensated to endorse and to promote.
• 27:51
  Speaker B: Instead of putting it into this rip off thing and making 4% on your money. And when he dies, he loses his cash value. If you put this in a good mutual fund, you'd have 100 x ten x the amount of money. And that's your infinite freaking bank.
• 28:06
  Speaker C: Here's the deal. Nelson said it best in his book. He said, this process is not about addressing the yield of an investment. It's all about how you finance the things in your life which can certainly include investments. So if this gentleman's son woke up one morning and said, I really want to invest in the stock market? Could the policy owner access proceeds from the life insurance, the very company that Dave despises, and use the life insurance company's money to go invest in a mutual fund? Is that something that could be done?
• 28:48
  Speaker A: Absolutely be done. And the family would be protected? Heaven forbid something should happen.
• 28:53
  Speaker C: Precisely. Precisely.
• 28:55
  Speaker A: And here's the other thing. So let's assume that he didn't do that, and he went and took Dave's advice and he put all this money into the mutual fund or whatever the funds are the bag of funds. What happens when his son needs to go to college? Or what happens when his son needs to go buy his first, know what happens when his son gets married? What happens when his son needs a down payment for his first home? What happens when his son gets into a car accident and they need some medical assistance? What are they going to do? Are they going to sell some of the mutual funds in the big stack? And if that happens at various times in life, what is the result of that? To the $25 million number at the magical 910 11% annual compounded rate that the market is just going to magically provide for his son every single year to age 80? Well, it's going to kill it instantly. His first car is 16. Let's say it's $10,000. Cool. Let's take that out of the fund and then let's see how that impacts the compound effect. He's going to go to college, and let's say he gets some loans and government grants or whatever, and this is in the state, so college is really expensive. But let's just say it's 50 grand, and he takes that out at age 24 to go pay off of the student loans or whatever. Cool. How does that impact the compound potential every time that you do that? Because he's not going to be able to borrow against those funds. No bank is going to go give him borrowed money. Hey, maybe you can get a margin account or whatever, but they're not going to lend against something that's risky and volatile, a crap ton of money, and he's going to have to beg, borrow and steal to even get it. Just doesn't make sense. He won't control the repayment terms. He will have no control. Man, oh, man. It's just very, you know what? Let's put all of the risk on you. Let's take all of the risk, let's place the risk on your family's future generations that you might, if you live a really long time, that there won't be any insurance, tax free to pay out. And everything that you have is in taxable accounts. And let's take on all that market risk for an entire 80 year period of time. And let's just assume that we have a stress free life by doing that. I don't think that's the way it works. I don't know anyone that we've met that feels that way.
• 31:09
  Speaker C: There's nothing wrong with investing in the market. If that's what you want to do, go and do that. But again, what's being completely ignored here is who's controlling the function of banking as it relates to this gentleman and his son's needs. The fact is, someone has to control it. And so he hasn't even remotely touched the scope of the process of becoming your own bank. The infinite banking concept concept to any degree whatsoever. It's all comparison of product. What if he did this instead of that? In other words, what if he purchased this financial product versus the one that he categorizes as being crap like Dave, you missed the whole topic of the conversation.
• 31:52
  Speaker A: How would that $60,000 a month in repayments from the family system that you have coming back, how would that ever get accomplished if you put all your money in a mutual fund?
• 32:01
  Speaker C: It just wouldn't have.
• 32:05
  Speaker B: We're only putting in 70,000 and he's going to be. That's how present value formula works in finance. Okay, take the same. Let's intellectually deal with this for a second. Take the same amount of money when you get off the air and put it in a financial calculator at 11%. Pretend it was invested in mutual funds and see what it is. When he's 88 years old, it'll be more and he'll have that too. But this to me is a way to. No, he doesn't have anything to borrow. Again, that's called opportunity cost on your money. You put it into something that's going to make him at 88, have two and a half million and he should have had 25 million because you screwed up and put it in the wrong thing.
• 32:59
  Speaker A: You screwed up, dude. Hey, thanks for calling into my show and being a listener and appreciate having this great conversation with you, but you screwed up, dude. And man, just stating numbers, 11%, that's just going to happen for everybody. Like clockwork. I'm still waiting. I'm still waiting to meet the person that's getting that 11%. I know people getting it on real estate deals and getting it in certain deals or certain things. Absolutely. But I don't know anyone who's just put money into ABC fund anything or stock market anything, and received like clockwork, that type of return. I don't know anyone who's gotten 8% consecutively for a long period of time. I'm sure they're out there. I believe they exist. I'm quite certain there's many people who have accomplished that. I don't see it very often. And all I see is people moaning and complaining about how much their market stuff's gone down. And they look at the values and say, you know, man, I did a quick calculation.
• 34:09
  Speaker C: It looks like all that's in here.
• 34:10
  Speaker A: Is what I've put in.
• 34:12
  Speaker C: Well, Dave is quite confident and quite adamant that over the course of 88 years, he keeps going to age 88 for some reason, which is quite interesting, over the period of 88 years, that this guy can get 11% each and every year without interruption inside of a mutual fund. And when you're dealing with, just call it rates of return. Let's just say that that's what he's talking about. Would you agree? Yes, he's saying that it's a rate of return. I had a note here that I was speaking to on a different deal. And when you're dealing with that conversation that he's talking about 11% a year, that's your rate of return. It's really intended to be compared within a very narrow strategy. Do you know what I'm saying? You have to implicitly condition the risk profile of the strategy. So you can't just talk about rate of return without implicitly conditioning the risk profile of that strategy. Do you follow what I'm saying? The insurance policy is contractually guaranteed to grow cash value every single day, and it cannot go backward. So we are implicitly conditioning the risk profile of that product. When you specifically condition or implicitly condition the risk profile of mutual funds, those mutual funds can and will absolutely go backward. It's not a matter of if, it's when you're not getting 11%, you're not getting a percent guarantee, period. When you are putting that money to work in that basket of mutual funds, there are no contractual guarantees there. So let's just be sure that we're being implicit in conditioning the risk profile. And that's something that Dave, again, he's an intelligent guy and he knows this, but he'll never tell you.
• 36:35
  Speaker B: Real estate too. He's going to get real estate. Put the money in real estate, but don't put it in this crowd. I have to respectfully disagree on what basis. He's getting more money if you put it somewhere else, but he's able to borrow against it. If you've got 25 million in mutual funds, you can borrow against it, but he's going to have to wait until he get that amount of money. Okay, so you're going to teach him that the way he becomes wealthy is borrowing against money that his father invested for him. That's how he builds wealth.
• 37:16
  Speaker A: Yeah.
• 37:19
  Speaker C: And this is not an either or conversation. This is an as well as. And the process of becoming your own banker is all about how you finance the things that you'll absolutely need throughout your lifetime. His son is going to need cars, property, appliances, you name it. Insert whatever it is his son's going to need.
• 37:40
  Speaker A: Probably going to want to invest some money as well, so that once he's knowledgeable enough and he chooses a path of where he wants to spend his time, getting educated about certain investment vehicles and structures, when he's ready and an opportunity presents itself, he will have ready access to capital to go and do that. Meanwhile, in the background, like clockwork, policy will be churning along growing capital all day long. The statement of, if you have $25 million worth of mutual funds, you can borrow against it. Like Dave, are you borrowing against your mutual funds right now? How much is a bank going to give you on that? Maybe if you're absolute lucky, 50%. And what kind of terms are you going to get? And they can call it due and then you're riding on a razor. So what happens if the market value drops 30, 40%? They're going to call the loan due and you don't have any money to pay the amount that you got borrowed out, because now you're in this situation where you put yourself back against the wall and if that's what you're banking your whole life on. I don't mean to use the word bank there, but I mean, if that's what your strategy is, man, oh, man, talk about being on a razor thin platform. If that's what happened. Otherwise you have to withdraw and spend it and spend it down or whatever, and then if you want to go, then you kick the bucket, you die.
• 39:04
  Speaker D: It's going to happen.
• 39:05
  Speaker A: Sorry, don't mean to be the bearer of bad news. Well, how much that 25 million is taxable? Probably most or all of it. In which case in the states they have inheritance tax.
• 39:16
  Speaker C: Like how much money is just going.
• 39:18
  Speaker A: To disappear and you're just going to make Uncle Sam rich? I just can't fathom the understanding of this logic. It doesn't seem like it makes a lot of sense to me.
• 39:29
  Speaker C: Oh, it gets worse.
• 39:35
  Speaker B: Banks use this product too. No, they are not.
• 39:39
  Speaker C: That's wrong. So if you Google bank owned life insurance banks, they pay significant sums of premium in participating whole life insurance contracts. Now a bank, a commercial bank, cannot utilize the policy the way that you and I can. There's guidelines around why they need to maintain bank owned life insurance as part of their tier one capital and a restricted scope of utilization. But they do that primarily. One element is to bolster the bank's balance sheet and the commercial banks will tell you that it's one of the best performing assets on their balance sheet. And so what Dave is saying here is just, without diving into the bank owned life insurance rat hole, what Dave just said, there is 1000% wrong.
• 40:45
  Speaker B: You've been watching too much TikTok. Banks do not use whole life, not ever. Banks nowhere. No bank sell. I would respectfully disagree. No they don't. They do not use whole life life insurance. Let me tell you what banks do. They put it in bonds. They're required to. They wouldn't be allowed by federal regulations to put it in whole life.
• 41:07
  Speaker C: Again, he is so wrong.
• 41:12
  Speaker A: You can look at the annual reports of a bank. It's listed there.
• 41:15
  Speaker C: You can look at their balance sheet.
• 41:18
  Speaker A: Was it DBSR reports? There's several Dalbar reports. You can go on and you can look at these companies and you can order their report to see how much they own of this stuff.
• 41:31
  Speaker C: It's not little amounts, it's billions.
• 41:35
  Speaker A: It must be really bad for them banks to own it. Jay. Jeez.
• 41:40
  Speaker C: Again, I've never seen Dave visit a commercial bank and tell the executives how stupid they are for warehousing all this capital.
• 41:53
  Speaker A: I bet you the bank puts all their money in those 11% mutual funds, eh?
• 41:57
  Speaker C: Yeah, I'm sure they do. And not one dime.
• 41:59
  Speaker A: If it's so good for the consumer, they must put all their money in that product that they created for the consumer.
• 42:05
  Speaker C: Unbelievable. All right.
• 42:08
  Speaker B: It's not a place to invest money because it's a horrible investment.
• 42:13
  Speaker C: It is not an investment. It is a unilateral, binding contract. It never has been an investment and never will be an investment. The contract has two parties, the policy owner and the life insurance company. The life insurance company is the only party to that contract that's required to make and fulfill contractual guarantees. And so to even indicate that this is some form of investment again is just not a correct representation of what a participating, dividend paying whole life insurance contract is it's not an investment.
• 42:54
  Speaker B: The rate of return sucks, and when you die, you lose your cash value. I know, but you're making it sound like I'm losing money. On the whole, you are. You're making it sound.
• 43:14
  Speaker A: The person in the back, I don't know who that person is, chimes in, you're leaving money on the table. And then how about when somebody dies? How much money got left on the table then?
• 43:28
  Speaker B: Not me, but my son. When he died, he's only going to be able to get him. He's going to have $22 million less than he should have. If you would put this in a good investment. You had mentioned that the cash value dies and you only get the paid value, correct? That is true. I just thought that with you for the last ten minutes, paid off additions are the only way that cash value increases. Unless you're using a universal life program b, where you pay extra to get the extra insurance, which is another form of paid up additions.
• 44:02
  Speaker C: He's absolutely wrong.
• 44:04
  Speaker A: He's just wrong. No paid up additions in universal life at all. And he said the only way that cash value grows is if you have more paid up additions.
• 44:13
  Speaker C: That's wrong.
• 44:14
  Speaker A: That's not true. Cash value has got to grow to eat the contractual benefit, the contractual arrangement with the life company, which is the total face value at age 100 in Canada, 121 in the states presently, and the original face value has got to grow to equal that. So it's always accumulating. If you have dividend paying, participating whole life, there is whole life that is non participating. So that's not what we're talking about or referencing here, but in a dividend paying, participating whole life insurance contract, paid up additions is one of the things that causes cash value to accumulate and again, enhances dividends in the future, should they be granted by the life company, which is pretty damn common. But the guaranteed cash value is growing also at the same time. And most of the contracts we have in Canada, that's every day. Last time I checked j my family system right now, it's on twelve policies. 13th one is going to be added here shortly, is growing. I think it's $158 a day.
• 45:09
  Speaker C: That's great. I really, truly believe that he knows the truth and that again, people need to understand he's renumerated very well to ensure that that never comes out of his mouth.
• 45:28
  Speaker B: Isn't coming out of my pocket, though. I put out of your pocket. It's coming out of the policy's pocket. I know the policy. You put the money in, dude. And then it paid you a dividend, and you chose to buy more of this crap with a dividend, and you're calling that I kept my cash value. No, you didn't. You bought more insurance. Well, I know that I put in 70,000, and at a certain age, it's going to be when he's 15 years old, that's going to be paid up. And you understand what paid up is if you're alive, that there's a probability of your death. And so 100% of the time that a life insurance program is paid up, it means that you prepaid it. That's all it means, because as long as there's a probability of death, there's a cost. So the insurance company has always got a cost as long as you're alive. So there's no such thing as a paid up. That's an industry term that gets suckers like you.
• 46:27
  Speaker C: I don't even.
• 46:27
  Speaker A: I don't even. I'm almost.
• 46:32
  Speaker C: Again, the. The demonstration of, you know, how. How wrong he is. And again, you have to pay very close attention to what he just said. Now, why would a life insurance company offer a paid up additions if there's no such thing as a paid up anything? Why would the insurance company offer a paid up additions? Do you have to?
• 47:14
  Speaker A: The insurance company's legal contract. Binding documents must be dead wrong. I'm sure their lawyers failed at every insurance carrier in North America when they wrote those contracts. That says the paid up additions and what happens with them? That must be completely inaccurate.
• 47:31
  Speaker C: Yeah.
• 47:33
  Speaker A: Everyone who owns one of those contracts with the. What did we say earlier? Like 50 some odd billion dollars worth of participating account value. Just in Canada. Man, oh, man, they got to be suckers.
• 47:45
  Speaker C: Like Dave said, he's talking out of both sides of his face. He described what a paid up addition is to this fellow and then said, out of one side of his mouth, and then the other side of his mouth, he says there's no such thing as a paid up policy. And so he's, again, just so evidently wrong. That kind of makes you wonder what his agenda is. Let's hear what he has to say to end the.
• 48:17
  Speaker B: That's what it is. Now, paid up means prepaid. You paid all of the premiums for 13 years for his whole freaking life in advance. That's why it's paid up. Hey, man, I think you ought to keep it. It's perfect for you, but thanks for the call.
• 48:37
  Speaker A: He's so pleasant with people when he ends his calls.
• 48:40
  Speaker C: How do I do that? Oh, there we go.
• 48:42
  Speaker B: Okay.
• 48:43
  Speaker C: Yeah, it just went on to the next video there. But I think you had a question for me. You said earlier you wanted to ask me something.
• 48:52
  Speaker A: Well, the question I have for you, Jay, I mean, it's real simple. I just want to know, and I think you should, in your own voice, just tell us what are your thoughts on Dave?
• 49:03
  Speaker C: You want to know in my own voice what my thoughts are on Dave Ramsey.
• 49:06
  Speaker A: I think everybody does.
• 49:08
  Speaker C: Oh, boy. Here they are.
• 49:09
  Speaker D: With an unparalleled understanding of participating dividend paying whole life insurance, Dave Ramsey stands as a beacon in the world of personal finance. As a renowned financial professional, he's been a guiding light for millions, offering straightforward, actionable advice. In recommending participating whole life insurance, he's equipped countless individuals with the knowledge to make informed decisions. With decades of experience and a passion for helping others achieve financial freedom, Dave's insights have transformed the way people think about money, debt and the infinite banking concept. His legacy will be marked by real world solutions overcoming financial challenges.
• 49:50
  Speaker C: But that's all I'm going to say about that.
• 49:54
  Speaker A: Well, I'm glad you kept it pg for all our listeners, Jay, in your statements, and hopefully everyone listening in or watching can really get clear and take away the importance of what you just stated in your own words. Of course, especially for those watching the video, I think they'll really connect with the clarity of intention by which you stated all of that.
• 50:24
  Speaker C: That was good. Thank you for asking that question as well. And to all of our viewers, you see the next video that's shown up. That means that we're encouraging you to continue your journey of learning, and we would also encourage you to head on over to Nelson Nash's institute's YouTube channel. So, the Nelson Nash Institute YouTube channel. And when you get there, hit the subscribe. There's a lot of great content we have resurrected a lot of great content that we're helping the institute curate for the channel and so that you can get an even deeper glimpse into the process from the gentleman who pioneered it and developed it directly, the late R. Nelson Nash, who we were blessed beyond measure to be mentored by for so many years and so make the rest of your week outstanding. Don't forget, if you haven't already, get your hands on the copy of the book titled Cash follows the leader. We'll have a link to that. We'll even send a copy, complimentary copy, to Dave Ramsey at his headquarters, understand.
• 51:26
  Speaker A: How whole life insurance works after, hopefully.
• 51:28
  Speaker C: He learns something from it. But I would like to say just in closing that know, just understanding what Dave's style is and the fact that he loves to incite such emotionally charged responses from people, I really do believe that he knows what the truth is, and I also believe that he's really well paid to sort of give the impression that he doesn't really understand what this is. And I believe that he knows full well what it is. And it's a real shame someone who has such reach is sharing information that is just simply just not true. It's just wrong. And it's really unfortunate that while he knows better, that he conducts himself that way, but he earns a very good living. He has a great business. We certainly wish him continued success. And he does some good things. Got to give him credit. He does have some good programs, and he really cares about people being.
• 52:37
  Speaker A: A lot of people manage their debt effectively, get clear on their spending and their behavior, spending around their day to day budget, for sure. Those are things that we would agree with Dave on as far as the way of going to them. We have several people who are former clients and graduates of the financial peace university and people who even used to teach that. And later in life, they've come to understand what the process of becoming your own banker is all about. And they can take the good habits that they learned through Dave's education and teaching, and then they can implement that now effectively in combination with what Nelson is teaching and really be able to put amplification almost to a degree on their ability to be successful in the becoming your own banker. So.
• 53:21
  Speaker C: Totally.
• 53:21
  Speaker A: That's fantastic.
• 53:22
  Speaker C: Absolutely.
• 53:23
  Speaker B: Yeah.
• 53:24
  Speaker A: This was a lot of fun. Jay, I think people should comment maybe on this video if they want to see us do some more things like this. It'd be nice to know. And there's a brand new video popping up right there. Go ahead, check that out. That's curated right for you. You want to click on that video and start watching the next one. A lot of good content there. And again, man, appreciate you, and thanks for sharing what you really felt about Mr. Ramsey today with everyone.
• 53:43
  Speaker C: Well, and I'll share one more thing to Dave, if anyone, whether it's him or someone on his team, I think it's really important to know productive conversations. And while everyone's entitled to their own opinions and their approaches, I think you and I share the same belief, rich, that it's important to approach a conversation, especially one where there's disagreement, to do it with respect. And if you have a differing viewpoint, it's always best. And we had this discussion earlier on a prior episode today that it's best to focus on the facts and I understand. I think that Dave's got to have a different outlook on things. It's different strokes for different folks and I think that Dave just needs to hear that message and to maybe understand that he doesn't have to be so condescending, rude and disrespectful that he can have, I believe, even more reach if he had really productive conversations. And so Dave, that advice is on the house, no charge. Thanks Rich. This was fun.
• 55:06
  Speaker A: Thanks for listening to the wealth without Base 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.
• 55:20
  Speaker C: With someone you care about.
• 55:21
  Speaker A: Join us on the next episode where we continue to uncover the financial tools, strategies and the mindset that maximize your wealth.