March 1, 2024 • 35 mins
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EPISODE DESCRIPTION
In this episode, Tom & Brandon are joined by Darren Mitchell. Darren is the Founder and CEO of Control and Compound Financial from Nova Scotia, who specializes in the Infinite Banking Concept, a unique approach to financial planning which utilizes High-Cash Value Insurance. Darren is also a best selling author and successful real estate investor, who's a sought-after expert and trusted advisor within the real estate investment community.
Darren is here to discuss: → The concept of Infinite Banking - what it is, who it's for, and why it's a benefit to business owners. → How this can help you avoid the multiple levels of taxation so you can keep more of your money. → And why having control of your money, not it locked in a bank, is the real path to financial independence.
For a complimentary meeting with Darren's team, visit:
https://controlandcompound.com/tie
Control and Compound Website: www.controlandcompound.com
Control and Compound Instagram: @controlandcompound
Control and Compound YouTube: @controlandcompound
Control and Compound Podcast: @controlandcompound
Control and Compound Linktree: @controlandcompound
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
you ever had a moment in your lifewhere you thought to yourself in
that moment, whatever I'm hearingright now is too damn good to be
true?Well, I had this moment after
speaking to my guest today, ashe's someone that I've been
wanting to have on the show forquite some time now, and man, was
I glad we made this happen.
The infinite banking concept was
something I did a deep dive onabout a year ago, and I always had
(00:21):
the intention to get started onit.
my However, business and life justsimply the intention to get
started on it.
my However, business and life just
simply got in the way of followingthrough.
But after my conversation withDarren, I now have more clarity on
how the infinite banking conceptcan supercharge my growth and
shortcut my journey to FI.
So if you're sitting there
thinking, I have no idea what theinfinite banking concept is here,
Tom, well, no worries, my friend.
You will after this episode, and
(00:43):
you won't look at investing ormoney the same way.
If you are someone who understandsthe power of infinite banking and
have either started implementingit or have the intention to, be
sure to stick around as we divedeep on a few tactics that I
haven't heard elsewhere myself.
If you're new to the show, my name
is Tom Moffitt, and I'm joined bymy good buddy and co-host Brandon
Love.
Our show is geared towards helping
(01:04):
Canadians achieve financialindependence through real estate,
investing and entrepreneurship.
So if that sounds like you, be
sure to follow along and let'sdive right into the episode.
everyone.
Welcome to this week's episode of
The Invested Entrepreneur.
It is Brandon Love here with my
good buddy, Tom Moffitt, andspecial guest, Darren Mitchell
from Control & Compound.
(01:24):
Darren, we're going to get right
into it today, and we're going tobe talking about a lot of this
stuff here.
So can you just talk to me about
infinite banking?What is it?
How does it work?Give me the nuts and bolts of
things.
so there's a lot to unravel, but
I'll give you the sort ofshortened version.
Basically, you have to save yourmoney somewhere.
Your money has to residesomewhere.
So we think that place should be arock solid, bulletproof place
(01:45):
that's not subject to marketcorrections or fluctuations in the
stock market.
We can talk why cash value life
insurance is the best place forthat.
So we grow that money inside acash value life insurance policy
for the rest of our life tax-free.
Never pay a nickel on that,
corporate or personal dollars.
We grow that money tax-free.
We're going to have a tax-freeretirement, but we're going to
multiply those dollars and alsoprovide a death benefit for our
(02:06):
family if something happens to usor to keep that business or
apartments in the family when youdie.
And then the third thing we'regoing to do, we're going to
multiply money again, and we'regoing to literally keep the money
in the policy so it's compoundingtax-free for a tax-free retirement
and we're going to leverage thatmoney 90 of it to put back into
the business or back into realestate or back into some other
opportunity that we can grow ourmoney so we're talking about and
(02:27):
assets every other asset you haveis an or asset do i put money in
real estate or my business or myrsp this is an and asset i'm I put
money in real estate or mybusiness or my RRSP?
This is an and asset.
I'm going to put my money in the
cash value life insurance, grow ittax-free for a tax-free
retirement, multiply it for adeath benefit, but also be able to
use that money short-term to growmy business and keep my business
afloat.
Okay.
Okay.
The main reason why I did a huge
(02:48):
deep dive on this about a year agowas because of the fact that you
can borrow from your policies,which I thought was super cool.
And it still grows while you'reborrowing it.
And obviously, we'll go throughthe details of like how that works
and how you do have to technicallyrepay that and set up a payment
structure.
But before we go there, in your
mind, after dealing with probablyhundreds of clients, like who is
this right for?Sure.
So we only deal withentrepreneurs, business owners,
(03:10):
real estate investors, people thathave a healthy income, you know,
family income, a hundred K and aplus.
I don't think this is foreveryone.
And that's where I kind of varyfrom some of the people in this
industry that if you can fog amirror, great, you're a perfect
person.
Let's go.
You know, I think if you're notable to save five or $10,000 a
year, then you're probably notready for this strategy.
(03:32):
You should focus on managing yourbudget or investing in yourself to
improve your income so you do havethat amount of money.
$100 a month into something likethis, you're not going to get to a
point where you can really get thebenefits of this.
But if you're a real estateinvestor or a business owner, no
brainer.
Like business owner, the corporate
money, it's a slam dunk becausethere's so many additional levels
of taxation we face as businessowners and this can defer or
eliminate a lot of Okay.
(03:53):
That's cool.
I like that.
So is there like a sweet spot in
terms of money you would want tohave in a policy where it starts
to make sense or is it one ofthose things you build towards?
How does that approach work forsomeone who doesn't have this in
place at all?Yeah.
So typically, again, think of itas a savings vehicle.
And if you think of it from asavings vehicle, it's like people
say, well, how much do I have toput into this?
(04:14):
And I'm like, well, nothing.
But think of it as your
opportunity fund.
How big of an opportunity do you
want to take advantage of, right?So I put in multiple six figures a
year because I think this is anamazing place to grow my money for
a tax-free retirement and use itin the short term.
But you're typically not going tosee anything under $500 to $1,000
a month, all the way up to $25,000a year or something like that.
A lot of people, when they learnabout RRSPs versus this, are
(04:36):
sometimes taking that $25,000 or$30,000 into RRSPs and putting it
in here, just saving it at adifferent spot.
We get a lot of business ownerssitting on cash that will throw
significantly more than that in,like multiple six figures in a
year.
Because as opposed to saving for
like an RRSP where you put yourmoney in, it's in prison for the
rest of your life.
Here, you put your money in, and
if I can't make payroll thissummer, I know I can access that
(04:58):
money in my cash value lifeinsurance policy.
So there's no fear of putting thismoney in there knowing I have
access insurance So there's nofear of putting this policy.
money in there knowing I haveaccess to it.
And that's really the key forbusiness owners, because business
owners tend to be sitting on somuch cash because they're scared
to invest, because what's going tohappen next quarter, next year, I
need access to that money.
Cool.
Yeah, I find we do that in ourindustry specifically because it's
(05:19):
feast or famine, seasonalslowdowns, you spring you make
your nut know, for the yearmarket, and then January might be
a bit quieter.
So you're sometimes sitting on
that whole chunk of money, which,you know, it's not doing anything
for you at that point.
It's just sitting there, not
collecting any interest oranything.
Right.
So I think every business is in
our business, it's the fall inJanuary when people get excited in
spring to get it done beforesummer.
of people beating our in the ofJuly.
As opposed to your business,summer is busy.
(05:40):
We have a couple of cattlefarmers.
I love these people.
They use this infinite banking
policy.
They sell their herd off to market
in the fall, and then they fundtheir policies and all this stuff.
Then they start accessing loans tobuy the little cows in the spring,
feed, grow, cost, borrow againstit, and then sell.
So really, when they say it'scalled infinite banking concept,
the possibilities are infinite.
So across the business.
(06:01):
That's really cool.
That's a cool example because it's
like basically saying any businesscan get into this as long as it
makes sense from a cashflowperspective.
And from my mindset, the way Isimplified in my mind, and please
correct me if I'm wrong, becauseI'm new to this, but let's say you
have 50K every year that you know,you're going to be having like a
cash surplus in your business.
And instead of having that sit in
(06:23):
either your personal bank accountor corporation, or even investing
it into like high risk stocks,you're saying maybe not all of it,
but put it into a policy for thisexample.
And that's going to grow thepolicy.
You're going to have the compoundinterest in it.
And then at any point, if youwanted to pull that money, you can
do so and invest that in whateverelse you want to do.
(06:44):
And that policy is still growingin the background as long as you
repay the money you're taking out.
Am I correct in saying that?
absolutely.
So just a couple clarification.
I wouldn't say you're borrowingfrom the policy.
You're borrowing against thepolicy is technically right.
If I've got a hundred grand inthere and I'm borrowing 90 grand
to take advantage of anopportunity, I still have the full
hundred grand in there, like yousaid.
So we like the term borrowingagainst it, but yeah, that's
(07:06):
exactly it.
And, you know, you got business
owners sitting on retainedearnings.
That's really tax efficient money,right?
Like an Ontario, like 12, 12.2%tax on that first 500,000.
So you get these tax efficientdollars and you talked about
investing and we can get into thethree or four levels of taxation
when you start investing inside abusiness, we can address all four
of them.
side of business, we can address
all four of them.
Yeah.
And that's exactly why I wanted tohave you on the show is for that
(07:30):
specific topic, because Brandonand I are always toying with like
what to do with the money that wehold in our corporations.
And I like the idea that you caninvest that in there without
incurring, I believe it's 35% forcapital gains in your corporation,
correct?For any gains, right?
Yeah.
So a of things.
Yeah.
You can place dividends, capital
gains, capital gains be a littleless than that.
It'd be roughly half the top taxbracket of 53, but where most
(07:53):
business owners are looking at,let's picture a pie, you get a
million dollar portfolio.
Well, the low hanging fruit, in
other words, the money, I thinkthat would make sense in here is
more of the fixed income.
So if we go back to the business
owner sitting on a hundred, 200,300, 400 grand of cash because
they don't know what's going tohappen, right?
That money, that cash, that's thefirst place we go.
Because when you start puttingmoney in a high risk investment,
it's really not accessible to thebusiness.
(08:15):
If the stock market drops 40% andthen all of a sudden an
opportunity comes along, are yougoing to cash out when you're down
40%?So we think for a portion of your
money, it's got to be rock solidand bulletproof.
So if you invest, say, in a bond,a GIC, somewhere high interest
savings account, you're going topay upwards of 50% tax on the
growth.
And then you're going to pay tax
(08:35):
when you go to get that money out.
And then you're going to pay tax
when you die.
And then if you have too much
money in there, now apparently ifyou have more than $50,000 of
passive income, that is too muchfor a business owner, and they're
going to tax you 70, 80, 90% onthat money.
So politicians can have $150,000pension, that's okay.
But we can only have, as businessowners, $50,000 of passive income.
So that's four levels of taxation,taxation on the growth, taxation
(08:57):
when you go to spend it, taxationwhen you die, then that passive
income one.
Well, if we take those $0.88, pay
our 12% tax, we can put that moneyin a policy, the growth is
tax-free, the loans are tax-free,the death benefit, depending when
you die, but usually most or allof it can flow out tax-free, not
just the cash value, but the deathbenefit as well, tax-free to your
beneficiaries, let's say it's yourfamily.
And then the passive income rules,we've eliminated that because
(09:17):
there's no tax on the growth onthis.
There's no tax slip, so you'renever going to run into that
passive income.
So we've got a lot of clients that
just come in and say, I haven'tbeen investing inside my corp
because I'm running up againstthat $50,000 passive income, or
I'm scared to.
And like, oh, this is perfect.
And when you borrow against apolicy, who sets that rate?
(09:37):
Is it set by you?Is it set by the company?
Like, how does that work?Yeah, it depends how much we like
what we charge.
No. So each insurance company has
their own rate.
So we have really seen an uptick
on those rates as interest rateshave increased.
So, you know, we go back a yearand a half, two years ago, almost
all the rates were 4.45 to 4.7. Ahigh was 6.2.
(09:58):
Today, you're talking anywhere thefour companies we deal with
between 6.5 and 9, 9.2, somewherein those.
So some of those are completelyvariable that up and down with the
interest rate.
So we'll expect in the next couple
of years, you guys tell me exactlywhen, but in the next couple of
years, when rates come down, thoserates will drop.
But again, mostly it's short-termmoney.
And then if it's longer-termmoney, like in retirement, because
(10:18):
we keep talking about repayingthose loans, but we'll get into it
in a minute, you don't necessarilyhave to repay them in the later
years.
Then we're going to shop that.
And there's some banks set upspecifically to loan on these.
And there's a few American firmsnow, I think, trying to come to
Canada even to do more loans onthose.
Those ones we can usually get alittle bit better interest rates.
But in the short term, we don'treally care whether it's 6%, 7%,
(10:42):
or 8%.
If you need 50 grand to take
advantage of an amazingopportunity that's going to make
you 30% or 40% and you're going toborrow money for a year yeah who
gives a shit if it's six or eightyeah yeah and i think people get
hung up on the rate and when youstart getting to the higher rates
(11:02):
of course like you want the ratelower but when you actually
compare it against the investmentsyou're making from pulling that
money out hopefully you're doingsome sound investments and you're
making money on that you comparethat to the interest you're paying
on that.
And also, your policy is still
growing while you're borrowingfrom it too.
So I'll you a quick story.
I years ago, I'm down in Florida.
I was at this conference, and itwas this accountant talking about
(11:22):
2008.
And he goes, all my clients are
business owners.
And he goes, in 2008, when
everything crashed, nobody couldaccess money.
Everybody's money was in the stockmarket or real estate.
Everything had plummeted.
Banks weren't giving loans.
And he had this client, he said, Iforget what business, he had a
franchise.
He goes, he had a $2 million cash
value in his policy and heborrowed a million in change from
that.
And he bought 13 additional
(11:42):
franchises at 30 cents on thedollar.
It was like a fire sale, right?And smart ass insurance guy puts
his hand up and goes, was the loanrate on that 5% or 7%?
And the accountant's like, whogives a crap?
He made millions of dollars.
He's 10x richer four years later
by doing this.
The point was he had access to
money.
And for me, like, you know, he's
called control and compound.
I used to think compound was be
all to end all.
Still fantastic, right?
(12:03):
Tax-free, uninterruptedcompounding.
But to me, that control is evenmore important now.
When I studied the wealthy, and Ispent a lot of time and money
studying the wealthy, they don'toperate like you and me.
They don't give up control oftheir money.
And that's what I really try to donow is keep control of my money
because they don't lose when themarkets go down.
They're in control.
They take advantage of
opportunities.
Yeah, I love that.
(12:23):
So when you're borrowing againstthat policy, is it, I've got
$100,000 put in, I can borrow upto $100,000 against it?
Or is there like a loan to valueratio?
Is there a leverage opportunitythere?
Like, how does that piece ofthings work?
so the simple plain Jane versionis 90% of your cash value.
So if you get 100 grand, $90,000.
Now, when you go to get this loan,
they're going to ask you twoquestions.
(12:44):
So you're going to be prepared forthis.
They're going to ask you, justlike you guys, you know, dealing
with mortgages, the questions.
When you go to get a loan in an
insurance company, we're going toask you, do you want a check or do
you want to deposit it in yourbank account?
So you're going to have to answerthat question.
And that's the only question wewill ask.
(13:05):
That's the extent of it.
There's no financials.
There's no reporting to a creditagency.
Doesn't show up on your creditreport.
So I love to use this as downpayments on mortgages.
So picture this.
In my operating company, I make
money.
I pay 12% tax.
I have $0.88.
Or I could have had $0.50 if I
took that dollar and paid it outto myself.
So now I'm 76% ahead, $0.88.
Roll that into my whole go.
Now my whole go, I put that moneyinto a cash value life insurance
(13:29):
policy.
I bought a fourplex a couple of
years ago in Cornwall.
Had to come up with 80 grand for a
down payment.
Fourplex was $3.75.
So now me, I try to go to my kidsand brainwash them since they were
little.
And I go, all right, kids, great
opportunity, good cashflow,actually cashflow, right?
Place I bought in poor credit, thecondo was twice as much as my
fourplex in Cornwall, but that wasa cashflow deal.
So I said, can I access money fora down payment for my RSPs?
(13:51):
No, that money's in jail.
All right, the kid's been
listening.
What about your education fund?
that No, money's in jail.
What the kid's been listening all
right what about your educationfund no that money's in jail what
about this beautiful cash valuelife insurance policy and they're
like yeah and i said well whydon't i leave that let the cash
value grow tax-free for the restof my life so i have a tax-free
retirement and i just called theinsurance company up and said hey
(14:15):
can i have 80 grand a year moneyand they said sure they didn't ask
me what it was for when i waspaying it back no questions they
said sure then i went to the bank,said, hey, I need a mortgage.
And the bank goes, where'd you getyour down payment from?
And I said, I borrowed against mycash value.
What do you think of that?And he's like, stop being an
(14:37):
idiot, Darren.
I know you do this all the time.
Yes, it doesn't affect yourborrowing capacity.
That's fine.
So now we did that.
We're going to do a refinance thisyear.
We actually did some renovationson this place.
Now the valuation's around 640.
We'll refinance that.
I'll pay off my policy loan.
I didn't make any payments on the
policy loan other than the cashflow I was putting towards it.
I never used a nickel on my ownmoney.
(14:57):
Cash flow positive opportunity.
And that didn't affect my policy
one cent.
If I took a loan or didn't take
that loan, my policy would havegrown the exact same.
So to me, I call those andopportunities, right?
And I do private lending the sameway.
I borrowed 100 grand at 5%, loanedit out at 15.
I just pocketed the 10 granddifference and opportunity.
Didn't affect my policy growth thewhen you're going to do that,
you're setting your own terms.
So you can pay back the loan at
any point?Is that how it works?
guy who works with his dad, whowas a former commercial banker at
(15:18):
one of the big banks, when hefirst learns about these loans,
he's like, these are like the holygrail of loans.
Like, what do you mean?So the loan is tax deductible.
So assuming you use it forbusiness or investment
opportunities, it's taxdeductible.
It's uncallable.
So valuations change, business
goes south, COVID version 17.0comes back, whatever happens,
there's nothing they can do tocall that loan.
And then the third one we kind ofreferenced, it's unstructured.
And an unstructured loan isphenomenal for business owners and
real estate investors.
You pay that loan back when you
want, how you want, and if youwant.
(15:39):
When you want, how you want, ifyou want.
That's huge.
Now, we do want you repaying the
loan in the younger years.
At your guys' ages, we want you
paying back that loan because ifyou borrow that money and never
pay it back, well, you're going tohave interest accumulate and then
you're not going to have access toa lot of money.
So in the early years, you know,the first 20, 30 years, depending
(16:00):
upon your age, pay back thoseloans.
But once you reach retirement, nowwe can actually borrow that money
and say, you know what, we'renever going to pay back this loan.
We're going to let it accumulateand it'll be paid off by the death
benefit.
But by that point, now our cash
value and death benefit has grownso high because we've had this
uninterrupted compounding.
We have a massive cash value,
massive death benefit.
(16:21):
And the cool part in retirement,
most people save a million dollarsor whatever your number is, and
then start spending it, you know,950, 900, 850 when they're
spending it in retirement.
You could retire here with a
million dollars cash value andhave two or three million dollars
of cash value by the time you die,because we're continually
compounding it, even inretirement.
And we're just taking tax freeloans against that death benefit.
(16:41):
So that 100 grand or 50 grand orwhatever you're taking, those
loans in retirement, those aretax-free money that you're not
paying back till you die.
900, That sounds amazing.
So I've got one question that justcomes to mind because sometimes
it's like, holy grail.
It sounds too good to be true.
What is the downside?What is the risk?
Why isn't everyone doing this?And why don't you take us there?
(17:02):
my second book, that was the lastchapter of my thing.
I was like, the questions we getthe most, why isn't everybody
doing this?Why haven't I heard about this
before?What are the downsides?
So great question.
So there's over a billion dollars
a year goes into this in Canada.
So this is way bigger than people
think.
Okay.
But the banks can't sell it.
Banks can't sell this type of
product.
The banks don't want you to be in
control of your money.
You think of a 22-year-old
(17:23):
starting an RRSP in their firstjob.
They put their money in the RRSP.
The bank has control of that
money.
They hang on to control for the
next 50 years, and then they dripit back to you 30 years in
retirement.
That's 80 years of them
controlling your money.
Here, you're controlling your
money.
So the banks can't sell it's the
big one.
The downsides, really, there's two
big downsides.
(17:44):
This is not designed to be a
one-year, put money in, and thenstop this.
This has to be funded over aperiod of time.
So the only really downsides, ifyou put money in this year and you
cancel it within a year, you'reprobably going to lose anywhere
from 10% to 30% of your money.
So if you put in $20,000, you're
going to get back 70% to 90% ofthat, depending upon the
(18:05):
structure.
Once you get through the second
year, then there's usually enoughmoney you can pause for a year or
two and then go back.
So it's got to be funded.
The bigger down risk is this isbecoming increasingly popular
across North America, exponentialgrowth curve.
A lot of firms like mine that aredoing national business, we
operate in every province andevery territory.
And then you get every Tom, Dick,and Harry say, hey, I can do
(18:26):
infinite banking too.
Yeah, sure.
I get an insurance license.
And they set up the wrong policy
with the wrong company structuredfor comp of the advisor as opposed
to maximizing the cash value.
And those policies are crap.
I mean, I'm sure in your business,there's the odd person that went
and got their real estate licensebecause real estate sales were
easy and the odd person got themortgage broker license, but
(18:47):
they're not experts at it, right?So this is all we do.
We deal with business owners, realestate investors, high net worth
individuals to implement theinfinite banking concept into
their system.
We're not going to sell you a
mutual fund or an RRSP.
This is what we do, and we're at
it, right?So this is all at it.
Yeah.
So when you open up a policy, and
let's say you're paying into thepolicy for a total of 20K a year,
if you wanted to stop, you wouldbasically cancel the policy.
(19:10):
And at that point, whatever thecash value is of that is what
you're getting back, and you couldbe out of pocket.
Is that what you're saying?I'm saying in the early couple of
years.
So basically when you start a
policy, I equate it to doing arenovation on a property, right?
First couple of years, you'reunderwater.
So if you put 20 grand in, youmight have 16, 17, $18,000 cash
value year So year two, prettyclose.
(19:31):
By year two and three, if you putin 20, you're growing by 20, and
then you're rocking and rollingafter that point.
So if you put money in for five orsix years and decide, screw this,
I'm done, I'm canceling it, you'llget all your money back
effectively, right?Right.
Even in year three or four, you'regetting 90, 95% of your money
back, right?Plus you had the insurance debt
(19:52):
benefit for that period of time.
What I was saying is once you get
to the year two, you could be at apoint, say you have 35 grand of
cash value and you're going tocome up with a 20 grand premium in
year three, you don't have anymoney.
Well, you could actually borrow 20grand from your own policy to make
the premium payment.
Now, again, not a great long-term
strategy, but you're at a pointnow where you've got a safety net
(20:14):
built in that, yeah, I should fundthis for the next seven or 10
years or 20 years, whatever, atleast six or seven, ideally.
But once you get through the firstcouple of years, if you go
sideways a year or two, there'sall kinds of flexibility built in
that we can do that if it's set upcorrectly, right?
So this would be like, when I sayif set up correctly, like less
than one 10th of 1% of the policysold in Canada would be set up
like this, right?I mean, not just because advisors
(20:36):
don't know how, because a lot ofinsurance is just purely for death
benefit right like yeah exactlypurely for cash value the death
benefit comes along for the ridein a lot of cases so if you're
opening up a policy and you'resomeone that you're in year three
or whatever year it is and youwant to start drawing from, is
there ever a situation where yourdeath benefit wouldn't cover the
cash value if you were to passaway and you've just been
(20:56):
borrowing from this thing and yourinterest that you haven't been
paying back on the loan itself?Is there ever a situation where
that death benefit never is ableto be sufficient to pay back?
the way it's always going to be isthe death benefit is going to be
the highest number followed by thecash value followed by the loan.
Because the loan is only 90% ofthe cash value, so the loan has to
be smaller.
Now, the cool part is, well, up
(21:18):
till we had this sort of spike ininterest rates, and we'll get back
to where we've been the last 150years, we're at a point where if
you got 100 grand of cash valueand you've got a $50,000 well,
sure, maybe your loan grows bythree grand if you don't pay it
off, but your hundred grand ofcash value is going to grow by
five or 6,000.
So typically that's why the 90%,
right?It's meant never to catch the cash
value.
Now, if you borrowed 90.0% day one
(21:39):
and something happened and you hadto pay, you know, 500 bucks of
interest to get you to that 90%.
I'm sure that can happen, but we
don't see it Okay.
That's interesting.
So just going back to when you saylike year two or three, people
stop funding their policy.
Are you setting up, let's say I
want my policy to be a milliondollars.
I'm contributing a hundredthousand a year for the next 10
years.
And that's my my commitment or is
it like my target goal is amillion dollars and i can
(22:02):
contribute when i have surpluslike how does that piece work yeah
we will always build in the amountof flexibility that we possibly
can okay and the way we do that isto maximize the cash it's like
life if you have a bag of cash yougot options and a cash value life
insurance if you maximize thatcash by year two or three, you can
say, you know what, I'm going totake four or five years off of
(22:24):
paying this because I'm focused onthis part of the business now, and
then I'll resume it.
So you build all kinds of options
in there, but you still can cancelit, right?
Like we don't get cancellations,but you know, if in year five or
six or three, you want to cancelit, well, year six or seven,
you're probably getting more thanyou put in.
Year three, You're probablygetting close to what you put in.
Maybe by year four or five, you'regetting all of what you put in.
(22:47):
I mean, it's a rounding error,right?
If you put in 40 grand and you getback 37 grand, you had the
insurance for two years and it'scorporate money.
Yeah.
You know, so we don't get
cancellations, but I love talkingabout cancellations because it's
the break glass and in case ofemergency, right?
Yeah.
You know, I can talk to a business
owner who made a million dollars ayear for the last 20 years, and
(23:11):
he's worried about if he's goingto make any money this Yeah.
So wants to know, if everythinghits the fan, can I get out of
this thing?What if I got to go to Belize?
If I hear that question one moretime, right?
What if I decide to move?Well, great.
Cash it all in.
Of all the things it's going to
cost you to cash in and move toBelize, a couple thousand dollar
loss on an insurance policy isn'tthe big thing.
And that's only in the earlyyears.
In the later years, you're goingto sell it for a Yeah.
(23:34):
And before you even go that route,you would be looking at like,
okay, can we draw from this andtake a loan out to act as a buffer
until you get to a situation whereyou have money coming in?
Like that would be the first thingyou look at before actually
canceling the policy.
single time someone says we need
to cancel, we're like, well, whydon't you just borrow money
tax-free for the policy?time someone says Oh, we need to
(23:57):
we're cancel, why don't like, youwell, just borrow money tax-free
for the policy?Oh, okay.
Yeah.
And to your point, so a typical
plan might be, say, for a40-year-old, we're going to plan
to pay this for the next 20 orhave the option to pay this for
the next 20 or 30 years, right?You might only end up contributing
seven of those 30 years.
That's fine.
But we want to build in themaximum amount of room when we go
through underwriting because theinsurance company is going to look
(24:17):
and say, okay, if they made everypayment, how much death benefit
would they have?We need to make sure they're
insurable for that today.
And that just gives you the
flexibility.
Like we've got a ton of people
that say, I'm only going to payfor 10 years and then I'm done,
right?25 grand a year for 10 years, I'm
done.
And we're like, all right, why
don't we just run it for 20 or 30just to have that flexibility?
And then year 11 comes and it'slike, okay, you still have to put
(24:39):
your money somewhere.
This is probably by far your best
place to save money.
You've seen how it works for 10
years.
That 25 grand deposit is going to
increase your cash value 37,000 orwhatever the number is.
Why would you not put money inhere and put it in a bank account?
And they're like, all right, I'llcontinue to fund it.
So we get people retired stillfunding these policies because
your money needs to residesomewhere.
And if you change your mind inthree months, great, you can
access tax-free loans access themoney.
Okay.
(24:59):
So let's say the target goal is to
have half a million in there.
Can you front load it?
So I would say, hey, Darren, can Iput in 100,000 this year one, and
then I'm going to contribute kindof from there over that next 20
year horizon.
Like, is that an option?
So not an front load.
We can't put a million bucks in
this year and then 500 bucks ayear for the next five years.
But yeah, there are ways we can,you know, maybe get two years of
premium, the equivalent in yearone or a little more, and then
(25:19):
resume at a lower Cause premium.
we get a lot of that yeah, with
the equivalent in year one or alittle and then resume more, at a
lower premium.
Because, yeah, we get a lot of
that with business owners that aresitting on cash and they're like,
all right, let's do a 50 grandpolicy.
But it's like, hey, can I throw100 grand in year one to sort of
jumpstart this?And the answer is yes.
We're just going to make sure westructure it And Or you just open
a second policy, right?Like you can start small and say
someone wants to start with 20K ayear.
(25:39):
You start with that policy.
And then if you wanted to increase
it, you could put more towardsthat policy but you have that
threshold but you can also open upa new policy and keep growing from
there and have multiple policieswithin the same umbrella so like
year all of a sudden you're likeall right darren this actually is
doing exactly what you said it wasgoing to do like we love our
annual reviews like okayeverything just worked out like it
has for the last 150 years boringbut effective but you know it's
(26:00):
it's like, okay.
So then people want to do more.
And we're like, well, listen, wecan't fit more than 20 grand, say,
in that policy.
So yes, we'll start a second,
third, or fourth policy.
I've got nine of these now.
First policy was, ah, that's allI'm ever going to need.
And then it was like, oh, well,then I'll do corporate ones.
And then I'm like, oh, I'll do acorporate one on my spouse.
And then I'll do policies on mychildren.
(26:21):
And like, there's all kinds ofstuff you can do with this.
But if you are the business owneror someone sitting on a bunch of
cash, there is a way that we caneffectively, you know, double up
that year one and get you a littlejumpstart.
Because, you know, you start alittle underwater for that first
couple of years where we can kindof almost eliminate that by two
years premium roughly up Okay,sweet.
I like this because it jumps rightinto the premise of our show,
(26:44):
which is financial independencefor Canadians.
And I like the fact that, like, ifyou have a successful business,
and you're like, you know what,I'm having fun doing this, but I
don't see myself doing this in 10or 15 years time from now, I have
all this money coming in, I needto put it somewhere.
And I want to set up thesepolicies.
So I know in 10 years from now, Ihave the option to retire and draw
(27:04):
from these policies, that FImoment in my life.
Can you sit down with that personand set up a plan and say, hey, in
10 years time from now, I want tohave X amount of cash value in my
policy.
And then I'm able to withdraw from
that and never pay a dime for therest of my life.
Can you do that?100%.
Every single day, what we do.
Okay.
That's what we do.
Now, I will caution you as
business owners, they usuallydon't retire when they say they're
going to.
Life's pretty good.
I've gone on seven trips this yearand I've conferences and I've done
this and that and I golf 30 roundsa year a year and only going in
four days a week, three days aweek.
(27:26):
Yeah, maybe I'll continue on.
But yeah, absolutely.
That's what we do day in, day out.
People come and say, okay, where's
the most effective place to savemoney?
We'll show you why we think thisis.
And then how does this help ourretirement?
Well, based upon this number, youcan take this amount of money
tax-free in retirement.
Oh, I was hoping to do more.
Great.
We'll do more.
or let's start here.
And then if you like it in two
years, we'll do a second policyand we can build in some
(27:47):
guarantees that you don't gothrough medical again, the second
time there's all kinds of detailedplans, but yeah, exactly what you
explained is how we set up.
And up.
And it's funny because like, thatis the premise of our show.
We don't talk about the firemovement.
We erase the RE from it, retireearly, because we find that
business owners that arepassionate and are doing well,
they just want to keep working anddoing their thing.
So it's funny you say that.
So I have a little of life
insurance in place.
(28:07):
And I did find like the initial
wave, you got to go through allthe physicals, all that stuff.
Is that the same for thesepolicies as well, that you have to
do that out the gates?And is there an advantage to doing
it early?Like I remember when I put mine in
place, it was right around, I waslike 31 years old and they're
like, get it done now because it'sgonna affect your premiums.
Is that the same for this?Yeah, great question.
So a of things changed really.
(28:29):
COVID, you'd like this as an
entrepreneur story.
So my business is going really
well and then COVID hit.
And at the time, almost all of our
cases were nurse had to come toyour house and do blood work and
And stuff.
then during almost COVID, all of
our cases were nurse had to cometo your house and do blood work
and stuff.
And then during COVID, they just
announced, OK, nurses can nolonger come to your house.
(28:50):
And we're sitting around theoffice going, huh, that's kind of
95% of our business.
That's going to be a challenge.
And then fortunately, theinsurance companies got together
and said, well, this isn't goingto work.
So they actually massivelyincreased the amount of death
benefit they'd give withoutfluids.
So now typically it's just a phoneconversation.
Because if you think of it, theinsurance company is looking at
the death benefit.
And our goal is to drive the death
benefit down as small as possibleso we can have the highest cash
(29:13):
value.
So we don't have significantly big
death benefits.
To your point, 100%, buy when
you're young for death benefit.
If you're just buying term
insurance, because then it's puredeath benefit.
But this shocks people.
People think, oh, I'm 50.
I should have done this when I was30.
If I built a policy today for youfor a 30-year-old and a
50-year-old, the cash value at theend of, say, year 10 would be very
similar.
The 50-year-old might even win.
(29:33):
It's that close.
Because all that would happen, the
30-year-old putting in, say,$20,000 a year, and he's going to
have a death benefit of $800,000.
Well, the 50-year-old is putting
in $20,000 a year, and they'regoing to have a death benefit of
$275,000.
So the dollars going towards the
insurance is the same.
The dollars going towards the cash
value is the same.
It's just the 30-year-old unit
cost is lower, so they can buymore death benefit, but it's not
going to get the more cash So thebeauty of this.
(29:56):
You can be 50 or 55 or whatever,60, and still, this totally makes
sense if you can fund it for thatsix, seven years.
Okay, interesting.
And if I have an existing death
benefit policy in place, that'spretty good that way.
I don't want to cancel my existinginsurance.
Can I add this policy here andmore heavily weight it to the cash
value and have a smaller deathbenefit?
So the first thing we do is lookat your current policies and say,
okay, what do you have?Can we use one of those?
(30:17):
And then oftentimes, like whathappened with me, term insurance
is great, right?If you need to replace your
income, cover mortgages, coverlike crap on term insurance, I'd
love term insurance, but it's metpurely as a death benefit.
So typically when people startthis, their death benefit isn't
that high that they're going toget rid of their term insurance.
But term insurance, that littlesneaky renewal that bumps up every
10 or 20 years and you have thesemassive rate increases.
Well, I got to a point over timewith my nine policies, my death
(30:39):
benefit got to a point, not rightaway, but after a while, I was
like, you know what?I've got millions of dollars of
death benefit here.
I don't need to renew that term or
maybe I can cancel that term.
So I was able to free up $2,500 a
year of cost I was spending onterm because the dollar I was
putting in my cash value was doingmore than one job.
It was growing my cash value foropportunities in retirement
tax-free, but it was alsoproviding a death benefit.
And eventually it got to a point,but I would rarely, rarely say,
(31:00):
especially someone your age thatwould buy a new policy and would
want to cancel their terminsurance because most people we
talk to just don't have enoughinsurance anyway.
Really, what's a million dollarsgoing to do for a family with a
couple of little kids?$50,000, $60,000 a year of income,
40?Is going to be enough?
Yeah, it's no, a good point.
And I think that perspective is
(31:21):
really great.
And I don't know about you, Tom,
but my wheels are spinning ondifferent strategies for how this
can be used and implemented in myown business and life in general.
So I know I'll be booking a call,Darren, but for our listeners who
wheels are likely spinning aswell, what's the best way to reach
you?can check us out on all our
socials at Control & Compound.
We got a big Instagram following,
YouTube following.
(31:41):
Our podcast is Control & Compound.
We've got over 100 episodes onthat.
And that's really geared to thebusiness owner, real estate
investor, and just people thatlike to talk about money and
stuff.
But actually, just for your
listeners, we created a speciallanding page.
So when people try to meet withus, there's a process to go
through and some qualify and somedon't.
But just for your listeners, wehave a dedicated landing page,
(32:03):
controlandcompound.com forwardslash T-I-E.
And if you go there, you get frontof the line treatment.
We're going to provide a couple offree webinars you can watch.
And then when you apply to workwith us, because you're a listener
of the Inspired Entrepreneur, youjump right to the front of the
line.
We'll put that in the show notes.
Awesome.
I appreciate this, Darren.
And we'll have that landing pagein our show notes.
And I'm pumped.
(32:23):
Thank you for doing that for our
listeners as well.
you so much, Darren.
Great to have you It's been agreat chat.
Look forward to seeing you guys inperson.
you ever had a moment in your lifewhere you thought to yourself in
that moment, whatever I'm hearingright now is too damn good to be
true?Well, I had this moment after
speaking to my guest today, ashe's someone that I've been
wanting to have on the show forquite some time now, and man, was
I glad we made this happen.
The infinite banking concept was
something I did a deep dive onabout a year ago, and I always had
(00:21):
the intention to get started onit.
my However, business and life justsimply the intention to get
started on it.
my However, business and life just
simply got in the way of followingthrough.
But after my conversation withDarren, I now have more clarity on
how the infinite banking conceptcan supercharge my growth and
shortcut my journey to FI.
So if you're sitting there
thinking, I have no idea what theinfinite banking concept is here,
Tom, well, no worries, my friend.
You will after this episode, and
(00:43):
you won't look at investing ormoney the same way.
If you are someone who understandsthe power of infinite banking and
have either started implementingit or have the intention to, be
sure to stick around as we divedeep on a few tactics that I
haven't heard elsewhere myself.
If you're new to the show, my name
is Tom Moffitt, and I'm joined bymy good buddy and co-host Brandon
Love.
Our show is geared towards helping
(01:04):
Canadians achieve financialindependence through real estate,
investing and entrepreneurship.
So if that sounds like you, be
sure to follow along and let'sdive right into the episode.
everyone.
Welcome to this week's episode of
The Invested Entrepreneur.
It is Brandon Love here with my
good buddy, Tom Moffitt, andspecial guest, Darren Mitchell
from Control & Compound.
(01:24):
Darren, we're going to get right
into it today, and we're going tobe talking about a lot of this
stuff here.
So can you just talk to me about
infinite banking?What is it?
How does it work?Give me the nuts and bolts of
things.
so there's a lot to unravel, but
I'll give you the sort ofshortened version.
Basically, you have to save yourmoney somewhere.
Your money has to residesomewhere.
So we think that place should be arock solid, bulletproof place
(01:45):
that's not subject to marketcorrections or fluctuations in the
stock market.
We can talk why cash value life
insurance is the best place forthat.
So we grow that money inside acash value life insurance policy
for the rest of our life tax-free.
Never pay a nickel on that,
corporate or personal dollars.
We grow that money tax-free.
We're going to have a tax-freeretirement, but we're going to
multiply those dollars and alsoprovide a death benefit for our
(02:06):
family if something happens to usor to keep that business or
apartments in the family when youdie.
And then the third thing we'regoing to do, we're going to
multiply money again, and we'regoing to literally keep the money
in the policy so it's compoundingtax-free for a tax-free retirement
and we're going to leverage thatmoney 90 of it to put back into
the business or back into realestate or back into some other
opportunity that we can grow ourmoney so we're talking about and
(02:27):
assets every other asset you haveis an or asset do i put money in
real estate or my business or myrsp this is an and asset i'm I put
money in real estate or mybusiness or my RRSP?
This is an and asset.
I'm going to put my money in the
cash value life insurance, grow ittax-free for a tax-free
retirement, multiply it for adeath benefit, but also be able to
use that money short-term to growmy business and keep my business
afloat.
Okay.
Okay.
The main reason why I did a huge
(02:48):
deep dive on this about a year agowas because of the fact that you
can borrow from your policies,which I thought was super cool.
And it still grows while you'reborrowing it.
And obviously, we'll go throughthe details of like how that works
and how you do have to technicallyrepay that and set up a payment
structure.
But before we go there, in your
mind, after dealing with probablyhundreds of clients, like who is
this right for?Sure.
So we only deal withentrepreneurs, business owners,
(03:10):
real estate investors, people thathave a healthy income, you know,
family income, a hundred K and aplus.
I don't think this is foreveryone.
And that's where I kind of varyfrom some of the people in this
industry that if you can fog amirror, great, you're a perfect
person.
Let's go.
You know, I think if you're notable to save five or $10,000 a
year, then you're probably notready for this strategy.
(03:32):
You should focus on managing yourbudget or investing in yourself to
improve your income so you do havethat amount of money.
$100 a month into something likethis, you're not going to get to a
point where you can really get thebenefits of this.
But if you're a real estateinvestor or a business owner, no
brainer.
Like business owner, the corporate
money, it's a slam dunk becausethere's so many additional levels
of taxation we face as businessowners and this can defer or
eliminate a lot of Okay.
(03:53):
That's cool.
I like that.
So is there like a sweet spot in
terms of money you would want tohave in a policy where it starts
to make sense or is it one ofthose things you build towards?
How does that approach work forsomeone who doesn't have this in
place at all?Yeah.
So typically, again, think of itas a savings vehicle.
And if you think of it from asavings vehicle, it's like people
say, well, how much do I have toput into this?
(04:14):
And I'm like, well, nothing.
But think of it as your
opportunity fund.
How big of an opportunity do you
want to take advantage of, right?So I put in multiple six figures a
year because I think this is anamazing place to grow my money for
a tax-free retirement and use itin the short term.
But you're typically not going tosee anything under $500 to $1,000
a month, all the way up to $25,000a year or something like that.
A lot of people, when they learnabout RRSPs versus this, are
(04:36):
sometimes taking that $25,000 or$30,000 into RRSPs and putting it
in here, just saving it at adifferent spot.
We get a lot of business ownerssitting on cash that will throw
significantly more than that in,like multiple six figures in a
year.
Because as opposed to saving for
like an RRSP where you put yourmoney in, it's in prison for the
rest of your life.
Here, you put your money in, and
if I can't make payroll thissummer, I know I can access that
(04:58):
money in my cash value lifeinsurance policy.
So there's no fear of putting thismoney in there knowing I have
access insurance So there's nofear of putting this policy.
money in there knowing I haveaccess to it.
And that's really the key forbusiness owners, because business
owners tend to be sitting on somuch cash because they're scared
to invest, because what's going tohappen next quarter, next year, I
need access to that money.
Cool.
Yeah, I find we do that in ourindustry specifically because it's
(05:19):
feast or famine, seasonalslowdowns, you spring you make
your nut know, for the yearmarket, and then January might be
a bit quieter.
So you're sometimes sitting on
that whole chunk of money, which,you know, it's not doing anything
for you at that point.
It's just sitting there, not
collecting any interest oranything.
Right.
So I think every business is in
our business, it's the fall inJanuary when people get excited in
spring to get it done beforesummer.
of people beating our in the ofJuly.
As opposed to your business,summer is busy.
(05:40):
We have a couple of cattlefarmers.
I love these people.
They use this infinite banking
policy.
They sell their herd off to market
in the fall, and then they fundtheir policies and all this stuff.
Then they start accessing loans tobuy the little cows in the spring,
feed, grow, cost, borrow againstit, and then sell.
So really, when they say it'scalled infinite banking concept,
the possibilities are infinite.
So across the business.
(06:01):
That's really cool.
That's a cool example because it's
like basically saying any businesscan get into this as long as it
makes sense from a cashflowperspective.
And from my mindset, the way Isimplified in my mind, and please
correct me if I'm wrong, becauseI'm new to this, but let's say you
have 50K every year that you know,you're going to be having like a
cash surplus in your business.
And instead of having that sit in
(06:23):
either your personal bank accountor corporation, or even investing
it into like high risk stocks,you're saying maybe not all of it,
but put it into a policy for thisexample.
And that's going to grow thepolicy.
You're going to have the compoundinterest in it.
And then at any point, if youwanted to pull that money, you can
do so and invest that in whateverelse you want to do.
(06:44):
And that policy is still growingin the background as long as you
repay the money you're taking out.
Am I correct in saying that?
absolutely.
So just a couple clarification.
I wouldn't say you're borrowingfrom the policy.
You're borrowing against thepolicy is technically right.
If I've got a hundred grand inthere and I'm borrowing 90 grand
to take advantage of anopportunity, I still have the full
hundred grand in there, like yousaid.
So we like the term borrowingagainst it, but yeah, that's
(07:06):
exactly it.
And, you know, you got business
owners sitting on retainedearnings.
That's really tax efficient money,right?
Like an Ontario, like 12, 12.2%tax on that first 500,000.
So you get these tax efficientdollars and you talked about
investing and we can get into thethree or four levels of taxation
when you start investing inside abusiness, we can address all four
of them.
side of business, we can address
all four of them.
Yeah.
And that's exactly why I wanted tohave you on the show is for that
(07:30):
specific topic, because Brandonand I are always toying with like
what to do with the money that wehold in our corporations.
And I like the idea that you caninvest that in there without
incurring, I believe it's 35% forcapital gains in your corporation,
correct?For any gains, right?
Yeah.
So a of things.
Yeah.
You can place dividends, capital
gains, capital gains be a littleless than that.
It'd be roughly half the top taxbracket of 53, but where most
(07:53):
business owners are looking at,let's picture a pie, you get a
million dollar portfolio.
Well, the low hanging fruit, in
other words, the money, I thinkthat would make sense in here is
more of the fixed income.
So if we go back to the business
owner sitting on a hundred, 200,300, 400 grand of cash because
they don't know what's going tohappen, right?
That money, that cash, that's thefirst place we go.
Because when you start puttingmoney in a high risk investment,
it's really not accessible to thebusiness.
(08:15):
If the stock market drops 40% andthen all of a sudden an
opportunity comes along, are yougoing to cash out when you're down
40%?So we think for a portion of your
money, it's got to be rock solidand bulletproof.
So if you invest, say, in a bond,a GIC, somewhere high interest
savings account, you're going topay upwards of 50% tax on the
growth.
And then you're going to pay tax
(08:35):
when you go to get that money out.
And then you're going to pay tax
when you die.
And then if you have too much
money in there, now apparently ifyou have more than $50,000 of
passive income, that is too muchfor a business owner, and they're
going to tax you 70, 80, 90% onthat money.
So politicians can have $150,000pension, that's okay.
But we can only have, as businessowners, $50,000 of passive income.
So that's four levels of taxation,taxation on the growth, taxation
(08:57):
when you go to spend it, taxationwhen you die, then that passive
income one.
Well, if we take those $0.88, pay
our 12% tax, we can put that moneyin a policy, the growth is
tax-free, the loans are tax-free,the death benefit, depending when
you die, but usually most or allof it can flow out tax-free, not
just the cash value, but the deathbenefit as well, tax-free to your
beneficiaries, let's say it's yourfamily.
And then the passive income rules,we've eliminated that because
(09:17):
there's no tax on the growth onthis.
There's no tax slip, so you'renever going to run into that
passive income.
So we've got a lot of clients that
just come in and say, I haven'tbeen investing inside my corp
because I'm running up againstthat $50,000 passive income, or
I'm scared to.
And like, oh, this is perfect.
And when you borrow against apolicy, who sets that rate?
(09:37):
Is it set by you?Is it set by the company?
Like, how does that work?Yeah, it depends how much we like
what we charge.
No. So each insurance company has
their own rate.
So we have really seen an uptick
on those rates as interest rateshave increased.
So, you know, we go back a yearand a half, two years ago, almost
all the rates were 4.45 to 4.7. Ahigh was 6.2.
(09:58):
Today, you're talking anywhere thefour companies we deal with
between 6.5 and 9, 9.2, somewherein those.
So some of those are completelyvariable that up and down with the
interest rate.
So we'll expect in the next couple
of years, you guys tell me exactlywhen, but in the next couple of
years, when rates come down, thoserates will drop.
But again, mostly it's short-termmoney.
And then if it's longer-termmoney, like in retirement, because
(10:18):
we keep talking about repayingthose loans, but we'll get into it
in a minute, you don't necessarilyhave to repay them in the later
years.
Then we're going to shop that.
And there's some banks set upspecifically to loan on these.
And there's a few American firmsnow, I think, trying to come to
Canada even to do more loans onthose.
Those ones we can usually get alittle bit better interest rates.
But in the short term, we don'treally care whether it's 6%, 7%,
(10:42):
or 8%.
If you need 50 grand to take
advantage of an amazingopportunity that's going to make
you 30% or 40% and you're going toborrow money for a year yeah who
gives a shit if it's six or eightyeah yeah and i think people get
hung up on the rate and when youstart getting to the higher rates
(11:02):
of course like you want the ratelower but when you actually
compare it against the investmentsyou're making from pulling that
money out hopefully you're doingsome sound investments and you're
making money on that you comparethat to the interest you're paying
on that.
And also, your policy is still
growing while you're borrowingfrom it too.
So I'll you a quick story.
I years ago, I'm down in Florida.
I was at this conference, and itwas this accountant talking about
(11:22):
2008.
And he goes, all my clients are
business owners.
And he goes, in 2008, when
everything crashed, nobody couldaccess money.
Everybody's money was in the stockmarket or real estate.
Everything had plummeted.
Banks weren't giving loans.
And he had this client, he said, Iforget what business, he had a
franchise.
He goes, he had a $2 million cash
value in his policy and heborrowed a million in change from
that.
And he bought 13 additional
(11:42):
franchises at 30 cents on thedollar.
It was like a fire sale, right?And smart ass insurance guy puts
his hand up and goes, was the loanrate on that 5% or 7%?
And the accountant's like, whogives a crap?
He made millions of dollars.
He's 10x richer four years later
by doing this.
The point was he had access to
money.
And for me, like, you know, he's
called control and compound.
I used to think compound was be
all to end all.
Still fantastic, right?
(12:03):
Tax-free, uninterruptedcompounding.
But to me, that control is evenmore important now.
When I studied the wealthy, and Ispent a lot of time and money
studying the wealthy, they don'toperate like you and me.
They don't give up control oftheir money.
And that's what I really try to donow is keep control of my money
because they don't lose when themarkets go down.
They're in control.
They take advantage of
opportunities.
Yeah, I love that.
(12:23):
So when you're borrowing againstthat policy, is it, I've got
$100,000 put in, I can borrow upto $100,000 against it?
Or is there like a loan to valueratio?
Is there a leverage opportunitythere?
Like, how does that piece ofthings work?
so the simple plain Jane versionis 90% of your cash value.
So if you get 100 grand, $90,000.
Now, when you go to get this loan,
they're going to ask you twoquestions.
(12:44):
So you're going to be prepared forthis.
They're going to ask you, justlike you guys, you know, dealing
with mortgages, the questions.
When you go to get a loan in an
insurance company, we're going toask you, do you want a check or do
you want to deposit it in yourbank account?
So you're going to have to answerthat question.
And that's the only question wewill ask.
(13:05):
That's the extent of it.
There's no financials.
There's no reporting to a creditagency.
Doesn't show up on your creditreport.
So I love to use this as downpayments on mortgages.
So picture this.
In my operating company, I make
money.
I pay 12% tax.
I have $0.88.
Or I could have had $0.50 if I
took that dollar and paid it outto myself.
So now I'm 76% ahead, $0.88.
Roll that into my whole go.
Now my whole go, I put that moneyinto a cash value life insurance
(13:29):
policy.
I bought a fourplex a couple of
years ago in Cornwall.
Had to come up with 80 grand for a
down payment.
Fourplex was $3.75.
So now me, I try to go to my kidsand brainwash them since they were
little.
And I go, all right, kids, great
opportunity, good cashflow,actually cashflow, right?
Place I bought in poor credit, thecondo was twice as much as my
fourplex in Cornwall, but that wasa cashflow deal.
So I said, can I access money fora down payment for my RSPs?
(13:51):
No, that money's in jail.
All right, the kid's been
listening.
What about your education fund?
that No, money's in jail.
What the kid's been listening all
right what about your educationfund no that money's in jail what
about this beautiful cash valuelife insurance policy and they're
like yeah and i said well whydon't i leave that let the cash
value grow tax-free for the restof my life so i have a tax-free
retirement and i just called theinsurance company up and said hey
(14:15):
can i have 80 grand a year moneyand they said sure they didn't ask
me what it was for when i waspaying it back no questions they
said sure then i went to the bank,said, hey, I need a mortgage.
And the bank goes, where'd you getyour down payment from?
And I said, I borrowed against mycash value.
What do you think of that?And he's like, stop being an
(14:37):
idiot, Darren.
I know you do this all the time.
Yes, it doesn't affect yourborrowing capacity.
That's fine.
So now we did that.
We're going to do a refinance thisyear.
We actually did some renovationson this place.
Now the valuation's around 640.
We'll refinance that.
I'll pay off my policy loan.
I didn't make any payments on the
policy loan other than the cashflow I was putting towards it.
I never used a nickel on my ownmoney.
(14:57):
Cash flow positive opportunity.
And that didn't affect my policy
one cent.
If I took a loan or didn't take
that loan, my policy would havegrown the exact same.
So to me, I call those andopportunities, right?
And I do private lending the sameway.
I borrowed 100 grand at 5%, loanedit out at 15.
I just pocketed the 10 granddifference and opportunity.
Didn't affect my policy growth thewhen you're going to do that,
you're setting your own terms.
So you can pay back the loan at
any point?Is that how it works?
guy who works with his dad, whowas a former commercial banker at
(15:18):
one of the big banks, when hefirst learns about these loans,
he's like, these are like the holygrail of loans.
Like, what do you mean?So the loan is tax deductible.
So assuming you use it forbusiness or investment
opportunities, it's taxdeductible.
It's uncallable.
So valuations change, business
goes south, COVID version 17.0comes back, whatever happens,
there's nothing they can do tocall that loan.
And then the third one we kind ofreferenced, it's unstructured.
And an unstructured loan isphenomenal for business owners and
real estate investors.
You pay that loan back when you
want, how you want, and if youwant.
(15:39):
When you want, how you want, ifyou want.
That's huge.
Now, we do want you repaying the
loan in the younger years.
At your guys' ages, we want you
paying back that loan because ifyou borrow that money and never
pay it back, well, you're going tohave interest accumulate and then
you're not going to have access toa lot of money.
So in the early years, you know,the first 20, 30 years, depending
(16:00):
upon your age, pay back thoseloans.
But once you reach retirement, nowwe can actually borrow that money
and say, you know what, we'renever going to pay back this loan.
We're going to let it accumulateand it'll be paid off by the death
benefit.
But by that point, now our cash
value and death benefit has grownso high because we've had this
uninterrupted compounding.
We have a massive cash value,
massive death benefit.
(16:21):
And the cool part in retirement,
most people save a million dollarsor whatever your number is, and
then start spending it, you know,950, 900, 850 when they're
spending it in retirement.
You could retire here with a
million dollars cash value andhave two or three million dollars
of cash value by the time you die,because we're continually
compounding it, even inretirement.
And we're just taking tax freeloans against that death benefit.
(16:41):
So that 100 grand or 50 grand orwhatever you're taking, those
loans in retirement, those aretax-free money that you're not
paying back till you die.
900, That sounds amazing.
So I've got one question that justcomes to mind because sometimes
it's like, holy grail.
It sounds too good to be true.
What is the downside?What is the risk?
Why isn't everyone doing this?And why don't you take us there?
(17:02):
my second book, that was the lastchapter of my thing.
I was like, the questions we getthe most, why isn't everybody
doing this?Why haven't I heard about this
before?What are the downsides?
So great question.
So there's over a billion dollars
a year goes into this in Canada.
So this is way bigger than people
think.
Okay.
But the banks can't sell it.
Banks can't sell this type of
product.
The banks don't want you to be in
control of your money.
You think of a 22-year-old
(17:23):
starting an RRSP in their firstjob.
They put their money in the RRSP.
The bank has control of that
money.
They hang on to control for the
next 50 years, and then they dripit back to you 30 years in
retirement.
That's 80 years of them
controlling your money.
Here, you're controlling your
money.
So the banks can't sell it's the
big one.
The downsides, really, there's two
big downsides.
(17:44):
This is not designed to be a
one-year, put money in, and thenstop this.
This has to be funded over aperiod of time.
So the only really downsides, ifyou put money in this year and you
cancel it within a year, you'reprobably going to lose anywhere
from 10% to 30% of your money.
So if you put in $20,000, you're
going to get back 70% to 90% ofthat, depending upon the
(18:05):
structure.
Once you get through the second
year, then there's usually enoughmoney you can pause for a year or
two and then go back.
So it's got to be funded.
The bigger down risk is this isbecoming increasingly popular
across North America, exponentialgrowth curve.
A lot of firms like mine that aredoing national business, we
operate in every province andevery territory.
And then you get every Tom, Dick,and Harry say, hey, I can do
(18:26):
infinite banking too.
Yeah, sure.
I get an insurance license.
And they set up the wrong policy
with the wrong company structuredfor comp of the advisor as opposed
to maximizing the cash value.
And those policies are crap.
I mean, I'm sure in your business,there's the odd person that went
and got their real estate licensebecause real estate sales were
easy and the odd person got themortgage broker license, but
(18:47):
they're not experts at it, right?So this is all we do.
We deal with business owners, realestate investors, high net worth
individuals to implement theinfinite banking concept into
their system.
We're not going to sell you a
mutual fund or an RRSP.
This is what we do, and we're at
it, right?So this is all at it.
Yeah.
So when you open up a policy, and
let's say you're paying into thepolicy for a total of 20K a year,
if you wanted to stop, you wouldbasically cancel the policy.
(19:10):
And at that point, whatever thecash value is of that is what
you're getting back, and you couldbe out of pocket.
Is that what you're saying?I'm saying in the early couple of
years.
So basically when you start a
policy, I equate it to doing arenovation on a property, right?
First couple of years, you'reunderwater.
So if you put 20 grand in, youmight have 16, 17, $18,000 cash
value year So year two, prettyclose.
(19:31):
By year two and three, if you putin 20, you're growing by 20, and
then you're rocking and rollingafter that point.
So if you put money in for five orsix years and decide, screw this,
I'm done, I'm canceling it, you'llget all your money back
effectively, right?Right.
Even in year three or four, you'regetting 90, 95% of your money
back, right?Plus you had the insurance debt
(19:52):
benefit for that period of time.
What I was saying is once you get
to the year two, you could be at apoint, say you have 35 grand of
cash value and you're going tocome up with a 20 grand premium in
year three, you don't have anymoney.
Well, you could actually borrow 20grand from your own policy to make
the premium payment.
Now, again, not a great long-term
strategy, but you're at a pointnow where you've got a safety net
(20:14):
built in that, yeah, I should fundthis for the next seven or 10
years or 20 years, whatever, atleast six or seven, ideally.
But once you get through the firstcouple of years, if you go
sideways a year or two, there'sall kinds of flexibility built in
that we can do that if it's set upcorrectly, right?
So this would be like, when I sayif set up correctly, like less
than one 10th of 1% of the policysold in Canada would be set up
like this, right?I mean, not just because advisors
(20:36):
don't know how, because a lot ofinsurance is just purely for death
benefit right like yeah exactlypurely for cash value the death
benefit comes along for the ridein a lot of cases so if you're
opening up a policy and you'resomeone that you're in year three
or whatever year it is and youwant to start drawing from, is
there ever a situation where yourdeath benefit wouldn't cover the
cash value if you were to passaway and you've just been
(20:56):
borrowing from this thing and yourinterest that you haven't been
paying back on the loan itself?Is there ever a situation where
that death benefit never is ableto be sufficient to pay back?
the way it's always going to be isthe death benefit is going to be
the highest number followed by thecash value followed by the loan.
Because the loan is only 90% ofthe cash value, so the loan has to
be smaller.
Now, the cool part is, well, up
(21:18):
till we had this sort of spike ininterest rates, and we'll get back
to where we've been the last 150years, we're at a point where if
you got 100 grand of cash valueand you've got a $50,000 well,
sure, maybe your loan grows bythree grand if you don't pay it
off, but your hundred grand ofcash value is going to grow by
five or 6,000.
So typically that's why the 90%,
right?It's meant never to catch the cash
value.
Now, if you borrowed 90.0% day one
(21:39):
and something happened and you hadto pay, you know, 500 bucks of
interest to get you to that 90%.
I'm sure that can happen, but we
don't see it Okay.
That's interesting.
So just going back to when you saylike year two or three, people
stop funding their policy.
Are you setting up, let's say I
want my policy to be a milliondollars.
I'm contributing a hundredthousand a year for the next 10
years.
And that's my my commitment or is
it like my target goal is amillion dollars and i can
(22:02):
contribute when i have surpluslike how does that piece work yeah
we will always build in the amountof flexibility that we possibly
can okay and the way we do that isto maximize the cash it's like
life if you have a bag of cash yougot options and a cash value life
insurance if you maximize thatcash by year two or three, you can
say, you know what, I'm going totake four or five years off of
(22:24):
paying this because I'm focused onthis part of the business now, and
then I'll resume it.
So you build all kinds of options
in there, but you still can cancelit, right?
Like we don't get cancellations,but you know, if in year five or
six or three, you want to cancelit, well, year six or seven,
you're probably getting more thanyou put in.
Year three, You're probablygetting close to what you put in.
Maybe by year four or five, you'regetting all of what you put in.
(22:47):
I mean, it's a rounding error,right?
If you put in 40 grand and you getback 37 grand, you had the
insurance for two years and it'scorporate money.
Yeah.
You know, so we don't get
cancellations, but I love talkingabout cancellations because it's
the break glass and in case ofemergency, right?
Yeah.
You know, I can talk to a business
owner who made a million dollars ayear for the last 20 years, and
(23:11):
he's worried about if he's goingto make any money this Yeah.
So wants to know, if everythinghits the fan, can I get out of
this thing?What if I got to go to Belize?
If I hear that question one moretime, right?
What if I decide to move?Well, great.
Cash it all in.
Of all the things it's going to
cost you to cash in and move toBelize, a couple thousand dollar
loss on an insurance policy isn'tthe big thing.
And that's only in the earlyyears.
In the later years, you're goingto sell it for a Yeah.
(23:34):
And before you even go that route,you would be looking at like,
okay, can we draw from this andtake a loan out to act as a buffer
until you get to a situation whereyou have money coming in?
Like that would be the first thingyou look at before actually
canceling the policy.
single time someone says we need
to cancel, we're like, well, whydon't you just borrow money
tax-free for the policy?time someone says Oh, we need to
(23:57):
we're cancel, why don't like, youwell, just borrow money tax-free
for the policy?Oh, okay.
Yeah.
And to your point, so a typical
plan might be, say, for a40-year-old, we're going to plan
to pay this for the next 20 orhave the option to pay this for
the next 20 or 30 years, right?You might only end up contributing
seven of those 30 years.
That's fine.
But we want to build in themaximum amount of room when we go
through underwriting because theinsurance company is going to look
(24:17):
and say, okay, if they made everypayment, how much death benefit
would they have?We need to make sure they're
insurable for that today.
And that just gives you the
flexibility.
Like we've got a ton of people
that say, I'm only going to payfor 10 years and then I'm done,
right?25 grand a year for 10 years, I'm
done.
And we're like, all right, why
don't we just run it for 20 or 30just to have that flexibility?
And then year 11 comes and it'slike, okay, you still have to put
(24:39):
your money somewhere.
This is probably by far your best
place to save money.
You've seen how it works for 10
years.
That 25 grand deposit is going to
increase your cash value 37,000 orwhatever the number is.
Why would you not put money inhere and put it in a bank account?
And they're like, all right, I'llcontinue to fund it.
So we get people retired stillfunding these policies because
your money needs to residesomewhere.
And if you change your mind inthree months, great, you can
access tax-free loans access themoney.
Okay.
(24:59):
So let's say the target goal is to
have half a million in there.
Can you front load it?
So I would say, hey, Darren, can Iput in 100,000 this year one, and
then I'm going to contribute kindof from there over that next 20
year horizon.
Like, is that an option?
So not an front load.
We can't put a million bucks in
this year and then 500 bucks ayear for the next five years.
But yeah, there are ways we can,you know, maybe get two years of
premium, the equivalent in yearone or a little more, and then
(25:19):
resume at a lower Cause premium.
we get a lot of that yeah, with
the equivalent in year one or alittle and then resume more, at a
lower premium.
Because, yeah, we get a lot of
that with business owners that aresitting on cash and they're like,
all right, let's do a 50 grandpolicy.
But it's like, hey, can I throw100 grand in year one to sort of
jumpstart this?And the answer is yes.
We're just going to make sure westructure it And Or you just open
a second policy, right?Like you can start small and say
someone wants to start with 20K ayear.
(25:39):
You start with that policy.
And then if you wanted to increase
it, you could put more towardsthat policy but you have that
threshold but you can also open upa new policy and keep growing from
there and have multiple policieswithin the same umbrella so like
year all of a sudden you're likeall right darren this actually is
doing exactly what you said it wasgoing to do like we love our
annual reviews like okayeverything just worked out like it
has for the last 150 years boringbut effective but you know it's
(26:00):
it's like, okay.
So then people want to do more.
And we're like, well, listen, wecan't fit more than 20 grand, say,
in that policy.
So yes, we'll start a second,
third, or fourth policy.
I've got nine of these now.
First policy was, ah, that's allI'm ever going to need.
And then it was like, oh, well,then I'll do corporate ones.
And then I'm like, oh, I'll do acorporate one on my spouse.
And then I'll do policies on mychildren.
(26:21):
And like, there's all kinds ofstuff you can do with this.
But if you are the business owneror someone sitting on a bunch of
cash, there is a way that we caneffectively, you know, double up
that year one and get you a littlejumpstart.
Because, you know, you start alittle underwater for that first
couple of years where we can kindof almost eliminate that by two
years premium roughly up Okay,sweet.
I like this because it jumps rightinto the premise of our show,
(26:44):
which is financial independencefor Canadians.
And I like the fact that, like, ifyou have a successful business,
and you're like, you know what,I'm having fun doing this, but I
don't see myself doing this in 10or 15 years time from now, I have
all this money coming in, I needto put it somewhere.
And I want to set up thesepolicies.
So I know in 10 years from now, Ihave the option to retire and draw
(27:04):
from these policies, that FImoment in my life.
Can you sit down with that personand set up a plan and say, hey, in
10 years time from now, I want tohave X amount of cash value in my
policy.
And then I'm able to withdraw from
that and never pay a dime for therest of my life.
Can you do that?100%.
Every single day, what we do.
Okay.
That's what we do.
Now, I will caution you as
business owners, they usuallydon't retire when they say they're
going to.
Life's pretty good.
I've gone on seven trips this yearand I've conferences and I've done
this and that and I golf 30 roundsa year a year and only going in
four days a week, three days aweek.
(27:26):
Yeah, maybe I'll continue on.
But yeah, absolutely.
That's what we do day in, day out.
People come and say, okay, where's
the most effective place to savemoney?
We'll show you why we think thisis.
And then how does this help ourretirement?
Well, based upon this number, youcan take this amount of money
tax-free in retirement.
Oh, I was hoping to do more.
Great.
We'll do more.
or let's start here.
And then if you like it in two
years, we'll do a second policyand we can build in some
(27:47):
guarantees that you don't gothrough medical again, the second
time there's all kinds of detailedplans, but yeah, exactly what you
explained is how we set up.
And up.
And it's funny because like, thatis the premise of our show.
We don't talk about the firemovement.
We erase the RE from it, retireearly, because we find that
business owners that arepassionate and are doing well,
they just want to keep working anddoing their thing.
So it's funny you say that.
So I have a little of life
insurance in place.
(28:07):
And I did find like the initial
wave, you got to go through allthe physicals, all that stuff.
Is that the same for thesepolicies as well, that you have to
do that out the gates?And is there an advantage to doing
it early?Like I remember when I put mine in
place, it was right around, I waslike 31 years old and they're
like, get it done now because it'sgonna affect your premiums.
Is that the same for this?Yeah, great question.
So a of things changed really.
(28:29):
COVID, you'd like this as an
entrepreneur story.
So my business is going really
well and then COVID hit.
And at the time, almost all of our
cases were nurse had to come toyour house and do blood work and
And stuff.
then during almost COVID, all of
our cases were nurse had to cometo your house and do blood work
and stuff.
And then during COVID, they just
announced, OK, nurses can nolonger come to your house.
(28:50):
And we're sitting around theoffice going, huh, that's kind of
95% of our business.
That's going to be a challenge.
And then fortunately, theinsurance companies got together
and said, well, this isn't goingto work.
So they actually massivelyincreased the amount of death
benefit they'd give withoutfluids.
So now typically it's just a phoneconversation.
Because if you think of it, theinsurance company is looking at
the death benefit.
And our goal is to drive the death
benefit down as small as possibleso we can have the highest cash
(29:13):
value.
So we don't have significantly big
death benefits.
To your point, 100%, buy when
you're young for death benefit.
If you're just buying term
insurance, because then it's puredeath benefit.
But this shocks people.
People think, oh, I'm 50.
I should have done this when I was30.
If I built a policy today for youfor a 30-year-old and a
50-year-old, the cash value at theend of, say, year 10 would be very
similar.
The 50-year-old might even win.
(29:33):
It's that close.
Because all that would happen, the
30-year-old putting in, say,$20,000 a year, and he's going to
have a death benefit of $800,000.
Well, the 50-year-old is putting
in $20,000 a year, and they'regoing to have a death benefit of
$275,000.
So the dollars going towards the
insurance is the same.
The dollars going towards the cash
value is the same.
It's just the 30-year-old unit
cost is lower, so they can buymore death benefit, but it's not
going to get the more cash So thebeauty of this.
(29:56):
You can be 50 or 55 or whatever,60, and still, this totally makes
sense if you can fund it for thatsix, seven years.
Okay, interesting.
And if I have an existing death
benefit policy in place, that'spretty good that way.
I don't want to cancel my existinginsurance.
Can I add this policy here andmore heavily weight it to the cash
value and have a smaller deathbenefit?
So the first thing we do is lookat your current policies and say,
okay, what do you have?Can we use one of those?
(30:17):
And then oftentimes, like whathappened with me, term insurance
is great, right?If you need to replace your
income, cover mortgages, coverlike crap on term insurance, I'd
love term insurance, but it's metpurely as a death benefit.
So typically when people startthis, their death benefit isn't
that high that they're going toget rid of their term insurance.
But term insurance, that littlesneaky renewal that bumps up every
10 or 20 years and you have thesemassive rate increases.
Well, I got to a point over timewith my nine policies, my death
(30:39):
benefit got to a point, not rightaway, but after a while, I was
like, you know what?I've got millions of dollars of
death benefit here.
I don't need to renew that term or
maybe I can cancel that term.
So I was able to free up $2,500 a
year of cost I was spending onterm because the dollar I was
putting in my cash value was doingmore than one job.
It was growing my cash value foropportunities in retirement
tax-free, but it was alsoproviding a death benefit.
And eventually it got to a point,but I would rarely, rarely say,
(31:00):
especially someone your age thatwould buy a new policy and would
want to cancel their terminsurance because most people we
talk to just don't have enoughinsurance anyway.
Really, what's a million dollarsgoing to do for a family with a
couple of little kids?$50,000, $60,000 a year of income,
40?Is going to be enough?
Yeah, it's no, a good point.
And I think that perspective is
(31:21):
really great.
And I don't know about you, Tom,
but my wheels are spinning ondifferent strategies for how this
can be used and implemented in myown business and life in general.
So I know I'll be booking a call,Darren, but for our listeners who
wheels are likely spinning aswell, what's the best way to reach
you?can check us out on all our
socials at Control & Compound.
We got a big Instagram following,
YouTube following.
(31:41):
Our podcast is Control & Compound.
We've got over 100 episodes onthat.
And that's really geared to thebusiness owner, real estate
investor, and just people thatlike to talk about money and
stuff.
But actually, just for your
listeners, we created a speciallanding page.
So when people try to meet withus, there's a process to go
through and some qualify and somedon't.
But just for your listeners, wehave a dedicated landing page,
(32:03):
controlandcompound.com forwardslash T-I-E.
And if you go there, you get frontof the line treatment.
We're going to provide a couple offree webinars you can watch.
And then when you apply to workwith us, because you're a listener
of the Inspired Entrepreneur, youjump right to the front of the
line.
We'll put that in the show notes.
Awesome.
I appreciate this, Darren.
And we'll have that landing pagein our show notes.
And I'm pumped.
(32:23):
Thank you for doing that for our
listeners as well.
you so much, Darren.
Great to have you It's been agreat chat.
Look forward to seeing you guys inperson.
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