Cashflow Banking or Cash Flow Banking is a strategy used to describe a way to capture the opportunity cost on your cash flow as it moves through your life. The banking aspect refers to the way you can transactionally access this stored cash flow from the cash values of a life insurance contract where it has been accumulated as a reservoir of capital. By stockpiling cash flow into a flexible cash value life insurance contract you create liquidity. When accessed strategically in combination with good habits this can be a revolutionary system for Canadians.
Keep in mind, this type of program only works effectively as long as the policy owner has good habits and a high level of discipline. That is, they can return the capital they have used back to the policy. If this is done effectively the overall values of the cash asset and the estate value can be increased when following some core principles and working with a good coach to assist them.
Does Cash Flow Banking work?
At its core, the Cash flow banking Method is simply put, a popular marketing term used to rebrand or relabel The Infinite Banking Concept created by R. Nelson Nash. Fundamentally the two things are the same. Caution is recommended however, as The Nelson Nash Institute advocates that only Participating Dividend Whole Life is to be used in structuring a life policy to be used for the purpose of IBC. As cash flow banking is a marketing description there does not appear to be any restrictions on what an advisor may actually recommend to a prospective client for implementing this method. Therefore anyone considering this strategy should research and clearly understand that any life product should be a match for the strategy and confirm that Par Whole life ideally with a Mutual Insurance company is the vehicle they are going to be using to implement the concept.
In 2016 a book was released by bestselling author Garret Gunderson titled, What Would the Rockefellers Do?: How the Wealthy Get and Stay That Way … and How You Can Too
This popular book has helped many Canadians learn about the cash flow banking method and how to think in terms of keeping money in the family as a system like the Rockefellers family is considered famous for. Since releasing this book Garret Gunderson has continued to educate the public on these principles and helped many discover how the cash flow banking strategy can help them when they overcome certain physiological human factors that require discipline. In this way Garret has helped many discover in a roundabout way the teaching of R. Nelson Nash who pioneered The Infinite Banking Concept many would isolate as the root of cash flow banking.
Although there is no specific calculator that shows how cash flow banking can work for a specific person there are many tools that can be used by an advisor to show the power of such a strategy. An advisor familiar with this concept would be able to show a client how they can flow cash through a combination of premium deposits and policy loan repayments to create efficiency and optimization and capture some of the lost opportunity cost on their money. As every person and business has a wide variety of expenses and outflows of capital the key is getting clear how to control those outgoing dollars. By finding ways to multitask your money through a flexible cash value policy to intercept these cash flows before they exit a person's financial life forever.
Is there really anything called Cash flow Life Insurance? The answer is no. No life company sells a product that identifies with this. However, there is very high quality and efficient Par Whole Life insurance. When used as a savings vehicle, capital can be easily harnessed for this strategy. It is really important to distinguish the difference between a strategy and the product that may be used to help in the implementation. Par whole life insurance designed with flexibility and cash accumulation in the early years of the contract is, generally speaking, the life insurance mechanism that someone looking to start cash flow banking would use.
Unlike Cash flow banking, the Infinite Banking Concept has an official educational organization that provides fundamental economic training and authorization of financial advisors. The Nelson Nash Institute is not a financial organization or licenced in the financial industry. Rather they are an educational institution dedicated to supporting the ideas and vision of the late R. Nelson Nash. It is important if you are looking at the Cashflow banking strategy you clearly understand how it works and to work with an advisor who is thoroughly familiar with it. Consider booking at time to meet with an Authorized Practitioner from The Nelson Nash Institute.
The process of borrowing money from life insurance is extremely simple. Most companies have a very simple policy loan form that is typically one or two pages long. It requires some key information such as, the policy number, how much you want to borrow, the current policy loan interest rate of the life company, the owner's signature and date as well as the owner's social insurance number or the corporate business number. Once these forms are completed and sent to either the advisors office or to the life company, funds can be directly deposited or a cheque sent in the mail. It is even possible for a policy owner with some companies to call in directly and request up to $25,000 of a policy loan over the telephone once they have correctly verified their identity.
Alternatively, a person can pledge their cash value as collateral to a 3rd party banking institution and get a collateral assignment. They are socially assigning the cash values as collateral for a bank loan or operating line of credit. The policy owner will still need to qualify for this loan with a third party lender including credit checks and debt servicing calculations. These rules can adjust from time to time as lending criteria changes. Whereas, accessing capital from the life company directly is referred to as an unstructured loan where the policy owner has total control over the repayments terms of any policy loan.
We have expert financial advisors and coaches that can help you with cash flow banking strategies in your life. Register for the online training and learn how to implement cash flow banking so that you can book a time with your own advisor.