“Many banks have more invested in life insurance policies than they do in bank premises, fixed assets and all other real estate assets combined.”
-Denver Nowicz, Equity4Profit
Have you ever wondered: Do banks invest in life insurance? Moreover, how do successful banks build wealth and monopolize power?
Surprisingly, their tried-and-true approach is very different from what they advise their clients. The big banks and the 1% have made trillions based on timeless financial principles that extend beyond holding investment accounts and certificates of deposit (CDs).
To learn why banks invest in life insurance policies more than any other investment option, read more. And if you’re interested in taking a deep dive that explores the financial secrets of the 1%, enroll in our free webinar “Surprising Secrets From the 1% Rulebook”.
Financial Institutions Don’t Follow the Advice They Give You
Denver Nowicz was profoundly affected by watching how his family fared from following traditional financial planning advice. In spite of working their entire lives to protect themselves financially through savings, investments and pensions, Denver’s parents and grandmother had to rely on him for financial support. Eventually, they even had to move in with him when their efforts at financial independence failed.
Nowicz’s father owned a business, but he could never quite keep up with taxes and inflation. When his health took a turn for the worst, his savings didn’t last long. Nowicz’s mother watched her inheritance from her father disappear in the stock market. After her husband’s passing, she moved in with her own mother, who had outlived her own small savings and pension, to pool resources. However, the demands of a home and their own medical care proved too much, and they came to live with Denver until their passing.
The experience spurred Nowicz to examine conventional wisdom. What he discovered is that banks and other financial institutions don’t follow the advice they offer to most Americans:
Banks, when it comes to investing their own money—don’t follow conventional wisdom and put their cash into mutual funds, stocks, hedge funds, term life insurance or risky real estate deals. Instead, they place a large portion of their vital reserves, known as Tier One Capital, into high cash value life insurance or permanent insurance … Banks invest billions into high cash value life insurance. Surprisingly, for many banks, life insurance is their largest asset class.
The amounts that banks invest in life insurance are large and quickly growing. As of Sept. 30, 2020, bank-owned-life insurance assets reached a record high of $182.2 billion — a 3.3% increase from 2019 — according to the NFP-Michael White Bank-Owned Life Insurance (BOLI) Holdings Report.
Why Do Banks Invest in Life Insurance? (What Your Banker Won’t Tell You)
Why are banks increasingly investing in life insurance — namely, cash value life insurance? After all, aren’t the financial institutions doing exactly what Suze Orman and Dave Ramsey warn consumers NOT to do?
As Barry James Dyke explains in an article, “The Case for Investing in Life Insurance,”
“Why do banks look to insurance companies for sound investment? Unlike banks, life insurance companies do not use excessive leverage. If a bank has $1 million on deposit, it can lend out up to $10 million to the public. This leverage is called “fractional reserve lending,” and it can lead to instability. Indeed, excessive leverage is a major reason why banks are failing today and have throughout history.
“However, if a life insurance company has $1 million on deposit, that company may loan no more than $920,000, and usually only a fraction of that. As such, life insurers are 100 percent reserve-based lenders, which makes them stable institutions in down economies.”
The Real Scandal Behind Corporate-Owned Life Insurance
Corporate-owned life insurance has been practiced for over a century, and not without controversy. In “Capitalism: A Love Story” Michael Moore describes “dead peasant policies”, or the practice of major corporations and banks of purchasing life insurance policies on their employees. By some estimates, Fortune 500 companies and large banks have policies covering approximately five million employees.
The topic is covered in expose fashion: How dare those banks make a profit on a loved one’s death — especially if the family didn’t even have life insurance. But perhaps Moore misses the real point of the policies. Rather than being exploitive, the cash value insurance policies are used to fund long-term benefits for employees, and even pensions. If Enron had been purchasing whole life policies instead of looking for fast money and cooking the books, history would look very different for Enron’s employees.
New rules and laws make corporate-owned policies illegal in some states, and notice must be provided (or permission obtained) in most other states. However, most employees are not offended that their companies invest in life insurance and agree to the policies.
The real lesson buried in the segment of “Capitalism: A Love Story” is a powerful invitation for action — not of protest, but of participation. If the families would have insured their loved ones, they could have prepared for the loss of income from an untimely death, while saving money that could have been used or borrowed against in the meantime. The real shame exposed by the film is that the families hadn’t taken this opportunity.
Model-Proven Methods for Success
The trick to building wealth is to do what the financial institutions and their executives do, not what they tell their customers to do. (Please note that we’re speaking historically here — prior to 21st-century credit default swap meltdowns. Those are strategies nobody should follow.)
Banks tell us to put money in certificates of deposit (CDs) at incredibly low rates for “safety”, but are they themselves investing in CDs? They advise that we invest in mutual funds, but do you think financial institutions put their assets into mutual funds and cross their fingers?
Of course not. Banks and other financial institutions are investing in “real” assets, such as life insurance and, of course, real estate. (Consider how many buildings are named after banks, brokerages, and insurance companies.)
How Can You Follow the Example of Banks and Profitable Institutions?
Learning how to make investments that truly work involves altering your way of thinking about money and investments. It can be a difficult process, but your financial peace of mind is well worth the energy. To begin:
- Unplug from how we’ve been programmed to act and invest
- Re-examine your assumptions about money
- Find out how wealth is really built and sustained
- Divest yourself of recommendations from an industry that benefits when we do what they say, not what they do
Another great first step is to read the Magna Carta of the Prosperity Economics Movement: “Busting the Financial Planning Lies: Learn to use Prosperity Economics to Build Sustainable Wealth”. It’s available now on Amazon in both paperback and Kindle eBook versions.
Start Building Wealth Today
Setting yourself up to build wealth for the long term requires a holistic approach that the majority of middle-class Americans aren’t unaware of. That’s why the top 1% now hold more wealth than the entire middle class in the United States.
For generations, the 1% have passed down financial secrets that have helped build their families’ billion-dollar empires, while the vast majority of Americans live paycheck to paycheck.
Learn the financial secrets of the 1% by watching our free webinar “Surprising Secrets From the 1% Rulebook”. Otherwise, if you have any questions about building wealth by investing in life insurance, contact Prosperity Thinkers today.
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