Episode 4 of The Infinite Banking Concept Series – Infinite Banking is a Scam
In today's blog, we'll go over the main reasons given for why the Infinite Banking Concept is a scam.
We'll be going over why people call it a scam and some legitimate views that people have towards the Infinite Banking Concept.
1. You can make more money doing something else
They usually compare it to an equity portfolio or an S&P 500 Index ETF that has an average return over time of 9%.
Yes, of course you can make a greater annual average return investing in an equity ETF than you can if you put it inside a conservative insurance policy.
It's not really a fair apples-to-apples comparison to compare an equity ETF to the cash value growth inside a life insurance policy.
And people who are setting up an IBC policy for themselves are not just doing it to get the highest average annual return on their money. There are other considerations and values that client want like:
- You need and want the life insurance
- You appreciate the privacy of having your money inside a life insurance policy vs banks or investments
- You appreciate the easy leveragability of the life insurance cash values - either through policy loans from the insurance company or collateral loans from a bank
- You appreciate the immediate vesting of any cash values and dividends, meaning your cash values can never go down, guaranteed - unlike the stock market which fluctuates wildly
- You appreciate the tax advantaged cash value growth inside the policy and the tax free death benefit payout
- Business owners appreciate the CDA Capital Dividend Account credit when the death benefit is paid out
2. It Costs Too Much – you can buy term insurance cheaper
One of the main criticisms of the Infinite Banking Concept is the high costs associated with permanent, whole-life insurance policies.
And if you haven’t watched the previous episodes in this series, then you don’t know that the Infinite Banking Concept is using an overfunded participating whole life insurance policy and taking a loan against the cash value of the policy to use for investments.
It’s true that permanent life insurance costs more than term insurance. To properly set up the Infinite Banking Concept for an adult in Canada, we use a baseline of - you should be able to save $1,000 a month for ten years without having to worry about needing it.
We have clients who invest $100,000 or $200,000 even $500,000 a year, so yes it does have a “high” cost, but it’s built for people wanting to safely continue to grow their existing wealth and be able to easily pass it on to future generations.
The concept is not for everyone, and if it’s not for you right now, that doesn’t mean it won’t ever be for you.
3. The Complexity
I’ve read articles online and heard people say that they find it too complex, here’s a direct quote from an article:
“Infinite banking can be a complex financial strategy that requires careful planning and understanding of the policy terms. It may not be suitable for individuals who prefer a more straightforward approach to managing their finances.”
Now this is sort of – it is a little bit complex, but it’s really quite simple
It even gives you an answer here, that if you don’t quite understand it then it might not be for you, but that’s why we make these videos.
These videos are here to be your library of Infinite Banking knowledge; we have many videos about the benefits of Infinite Banking and the most frequently asked questions, which you can see on our Blog linked here.
4. Pushy Salespeople
An extremely common reason that people view Infinite Banking as a scam is that a lot of people selling it, especially in the U.S., are quite pushy and try to sell you, your mother, and everyone you know. I agree that there are pushy salespeople in this industry, especially in the US, but that doesn't mean the concept is bad. It means you should find someone who is not a pushy salesperson to work with.
As we mentioned earlier, the Infinite Banking Concept is not for everyone.
We are not here to sell everyone the Infinite Banking Concept, this concept can be “expensive”, there is some level of opportunity cost while you wait to take your first loans, it is more complex than say saving in your TFSA, which if you are doing this strategy, you probably already have a strong TFSA and a strong RRSP.
The Infinite Banking Concept should not be your first investment, it’s something that anyone can do but not everyone should.
5. Conclusion
These are the 4 main reasons we see online of why people call the Infinite Banking Concept a scam. There are millions of Canadians and Americans who have this financial strategy set up for themselves and are living happy lives everyday. Judge for yourself whether this is a strategy that fits your values, your goals and your lifestyle.
Contact & More Info
If this is something you want to set up for yourself, your family or your business, set up a discovery call with one of our advisors.. We’ve been doing this all day every day for 14 years and have 100s of clients all across Canada. We are happy to chat and see if we can be a good fit to work with you.
Click this button below to schedule an initial consultation and see if the Infinite Banking Concept can be right for you and your family.
See all Episodes of the Infinite Banking Series
- Episode 1 of the Infinite Banking Concept Series – What is it? Who is it for?
- Episode 2 of the Infinite Banking Concept Series – The Mechanics and Benefits of IBC
- Episode 3 of the Infinite Banking Concept Series - How Policy Loans work and what is the Adjusted Cost Basis?
- Episode 4 of The Infinite Banking Concept Series – Infinite Banking is a Scam
- Episode 5 of the Infinite Banking Concept Series - Leaving a Legacy
Schedule an Infinite Banking Call
We've helped 100s of Canadian families and business owners set up the Infinite Banking Concept for more than a decade. We are official Authorized IBC Practitioners with the Nelson Nash Institute click to verify here.
To discuss if this financial concept can be right for you, schedule a no pressure Discovery call with our advisors. We will let you know if this concept is a good idea for you or not. We have no pushy salespeople on our staff.
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