[00:00:00] Intro: Welcome to Private Banking Strategies Podcast with Vance Low and Seth Hicks, your secret weapon to protect your assets and never have to start over financially again. Vance and Seth help high net worth individuals, families, business owners, and investors, structure and asset protected tax-free fortress for their families.
[00:00:21] Intro: Learn how to keep what you earn and use the velocity of money. To create your own private banking system. Join us on this journey as we explore the secret strategies of the rich and political elite and help you take total control of your financial security. Now onto the show,
[00:00:47] Seth Hicks Esq.: well welcome to Private Banking Strategies Podcast with Vance Low and Seth Hicks Vance. How are you? I’m doing great. How are you? Doing well. Yeah. I’m excited about our topic today. We’re gonna [00:01:00] discuss business owned insurance policies on employees and some of the, the values that those bring to businesses and, and how to use those.
[00:01:09] Seth Hicks Esq.: So I’m super excited about that. A lot of our clients are entrepreneurs and business owners and like to structure this within their, their businesses.
[00:01:19] Vance Lowe: Yeah, I think that the business side of private banking strategies, there’s so much. A wider opportunity to use this strategy in and as business owners start learning the concept of money, how to control it and how to get it back, they can find all kinds of ways within their business to be able to use that strategy and be more profitable.
[00:01:47] Vance Lowe: And more beneficial to the, uh, employees, everybody involved. So,
[00:01:54] Seth Hicks Esq.: and we’ve also talked about business cash flow as a way to catapult [00:02:00] personal wealth within a business. And we’ve talked about that in relationship to Nelson Nash’s nephew who ran a forestry business. And we did a, a multi-part series called Paul Bunion and how to Use your business to effectively create wealth with.
[00:02:15] Seth Hicks Esq.: It’s just the cash flow that’s coming into the business. And so folks, get your, your pen and your pad and take some notes and, and jot that down the Paul Bunion series because that dovetails into this employer owned policies really well. When you want to structure a, a business that’s meant to, to last for legacy.
[00:02:34] Seth Hicks Esq.: So Vance, what are some of the fundamentals of the employer owned policies?
[00:02:40] Vance Lowe: Well, one of the facets of many is employee retention. You can kind of go in partnership with an employee and use what’s called golden handcuffs to incentivize the employee to stay with your firm. You’ve been there a long time.
[00:02:58] Vance Lowe: You’ve probably invested a [00:03:00] lot of time and, and actual money in helping the employee. To be more productive for the company. And the last thing, it seems like every time in business we train somebody and we get ’em to a really productive level. They get stolen away by someone.
[00:03:20] Seth Hicks Esq.: Right. It’s, there’s not a loyalty based culture like there used to be when, you know, our, our parents and our grandparents ran businesses or worked for people.
[00:03:29] Seth Hicks Esq.: There was a sense of loyalty. And so now you have to create constructs that incentivize people to, to stay. And these tools are used by some of the big boys in, uh, the industries like banking, Wells Fargo, bank of America. They have these employer owned policies on everyone down to the bank teller.
[00:03:50] Vance Lowe: Yes. You know, one of the incentives to keep Key Bank employees are totally involved [00:04:00] in this type of strategy, mainly for the branch presidents and vice presidents.
[00:04:05] Vance Lowe: When an employee gets to that point, they become very valuable to. The business, the banking world, and so they incentivize ’em to stay. I don’t know about all the listeners out there, but my banking experiences, I’ve always tried to establish, uh, a banking relationship with, uh, someone who’s over my accounts.
[00:04:28] Vance Lowe: And it seems like they changed two or three times a year. Right. And because they keep moving on and even the branch. President sometimes will move on. Seth, let’s kind of outline what that incentive is for us or for the bank to keep those big
[00:04:50] Seth Hicks Esq.: employees. The way that it typically works is the life insurance policies taken out by the the company on the life of an employee or [00:05:00] group of employees, and that.
[00:05:03] Seth Hicks Esq.: Policy accumulates cash value. Uh, the company pays the premiums and the company is the beneficiary. If the employee dies. Now, what benefit does the, the company give to the employee? Let’s say that it’s a bank teller. Let’s start at the bottom and, and work our way up, Vince. So if you’ve got a bank teller and you want to create, uh, a package for lower tiered employees, you could do that by providing a death benefit for no cost to them.
[00:05:32] Seth Hicks Esq.: They don’t pay the premiums, they don’t have any obligation, uh, uh, on the maintenance of that policy. But the company pays the premiums. And let’s say that that employee’s insured with a $250,000 death benefit, they can. Uh, provide a, a portion of that death benefit to the employee’s, uh, family. While they’re employed there.
[00:05:56] Seth Hicks Esq.: So Wells Fargo and Bank of America, for example, will provide a [00:06:00] $25,000 death benefit to their bank teller, uh, while they’re working there in the event that they happen to pass so that their family has funeral expenses and some other costs. Covered. That’s kind of the lower level aspect of it. And as you work your way up and, and higher management, mid-management CEOs, those incentives become much, much greater.
[00:06:22] Seth Hicks Esq.: So like for example, if you got a 10 year loyalty bonus, they could be paid a hundred thousand dollars out of their cash value that’s accumulated or even higher. So that’s kind of a 30,000 foot overview. What would you add to that?
[00:06:38] Vance Lowe: Well, yeah, let, let’s kind of talk about the top, uh, a little bit and then we can talk about the volume of money that banks actually put in this.
[00:06:46] Vance Lowe: Banks have never lost the strategy. They understand the strategy better than anyone out there. And they use it to their advantage. So with the higher Echelon people, [00:07:00] they pay a premium for each account of at least $25,000 in, in these banking contracts, again, they’re reverse engineered for a little bit lower death benefits, but if you take an employee from a till or all the way through their career at age 65, that’s an awful long time.
[00:07:22] Vance Lowe: And they give them the, the incentive for one, if you make it to retirement under our plan, we’re going to bonus you out. And the programs that I last heard was about $700,000. They would actually borrow the money from the policy and pay them the bonus of $700,000 they would get to deduct. That money from, you know, expenses because the client would receive that, or the employee retiring person would receive that as ordinary income.
[00:07:59] Vance Lowe: And [00:08:00] then they would have a hole in the policy of $700,000 that they could dump in, you know, additional cash. And that’s what they use it for, is they call it a, a level or a tier lending. This level of lending is not even audited. It’s, uh, so pure that they can use that money, borrow money from all of these contracts, and use them however they need to, which creates more holes which they can fill back up the end.
[00:08:31] Vance Lowe: Um, it’s almost like the banks are in the life insurance business because when a retiree takes the bonus. They do not give him the contract. He’s now out of that contract unless they’ve made arrangements to continue to pay a death benefit of X amount. That could, that could happen. But normally, even if that’s the case, when the individual dies, there is usually somewhere between one [00:09:00] and a half and $3 million death benefit because this build up so high and that belongs to the bank.
[00:09:08] Vance Lowe: You know, if the bank didn’t, you know, take any deductions for the premiums, which they don’t, then they receive that or a product of the bank. A trust of the bank is the beneficiary. It’s not the bank themselves. I think it’s more of a ancillary company receives the death benefit income tax free. So think of the possibilities if they’re putting in $25,000 for every one of these things.
[00:09:36] Vance Lowe: Seth, what do you think the premium for a bank is on those
[00:09:42] Seth Hicks Esq.: types of things? Well, I think the last time I checked the statistic, there was about 20 billion annually that Wells Fargo put into life insurance premiums on employees 20 billion.
[00:09:56] Vance Lowe: Yeah, that’s, that’s a huge number. So. You’re [00:10:00] also discovering that banks are probably one of the number one clients of the life insurance carriers.
[00:10:07] Vance Lowe: They absolutely pay a tremendous amount of premium, and so they kind of protect this. So again, we say, you know, this strategy and storing your money is probably the safest place on the planet. To be able to do those types of things, so we’re just barely, you know, we can explore quite a few other options.
[00:10:30] Seth Hicks Esq.: Yeah. Let’s talk about, for example, how can a business take a policy on an employee usually? You would, in a family context, you can take a policy out on the patriarch or or the matriarch or a breadwinner and to replace their income from a death benefit perspective. But how does a business take out a policy on an employer?
[00:10:52] Seth Hicks Esq.: Do they have a right to do that?
[00:10:55] Vance Lowe: And a lot of employers, that’s one of the main questions they have or one of the first questions [00:11:00] they have. You have a vested interest in that employee. You are paying for his education or her education in their expertise with your company, and should you lose that employee, you’re going to suffer.
[00:11:15] Vance Lowe: The business is gonna suffer a financial loss. Everybody knows when there is a financial loss that would fall under the term of Keyman, you know, employees and be a liability to the company if they don’t insure that. So they can either take that loss, retrain a new person, they’re gonna have to anyway, but are they gonna have to suffer the expense all over again if they purchase?
[00:11:48] Vance Lowe: Life insurance on that person. Then they’ve got the funds to train the new person without going in the hole all over again.
[00:11:57] Seth Hicks Esq.: Right? So they have what’s known [00:12:00] as an insurable interest on their employee that gives them the ability to create that life insurance contract and be made whole in the event of a loss.
[00:12:12] Vance Lowe: Yeah, it’s very rare if you approach an employee and offer to put life insurance on that person, offer a death benefit, and the employer pay all the expenses of that policy. It’s very rare for an employee to reject that. The only time we would have a problem if for some reason that employee was uninsurable.
[00:12:38] Vance Lowe: And that needs to be known because many, many employers don’t know the actual health of their employees, especially a lot of their key people. Now, when you get into big corporate, they a lot of times will send their key executives to get. Health exams and everything else, whatever you know they [00:13:00] need so that they can monitor the health of a key person, if that person’s very valuable, the younger other ones, you know, it, it’ll filter out, they’ll, they’ll come back with information or you can get information as to whether it’s a preferred rating or if it’s.
[00:13:20] Vance Lowe: Rated. Why is it rated? And that also helps the employer plan for the future.
[00:13:26] Seth Hicks Esq.: Yeah, I mean, there’s so much turnover in businesses and the retention is a valuable. Aspect of, of profitability for businesses. And so when you have these turnovers, you know, every couple years or three years, or even less like you described in your, some of these other banking relationships, you see people turning over all the time.
[00:13:48] Seth Hicks Esq.: It, it’s a great cost to the business. And I think with even smaller businesses and entrepreneurs that are closely held and have a smaller number of employees, the significance is even greater. [00:14:00] You’ve gotta take that into consideration so you don’t get. Uh, you know, have a flat tire and not able to move, move your business forward.
[00:14:07] Seth Hicks Esq.: Here’s another question that I wanted to ask you, van. We’ll go ahead and comment on that and then I’ll, I’ll hold my question for a second.
[00:14:13] Vance Lowe: Well, I just have a thought, a, a thought I’d throw it in before I forget it. We probably ought to throw in here the economics, you know, what is the cost to the employer to run one of these things?
[00:14:26] Vance Lowe: And what we try to do is we try to build very, very efficient contracts to get to a hundred percent efficiency as quick as possible. Now, it’s, it’s a startup. Every one of these contracts or a startup, and they need time to generate just like a new company does. You know, a new company can’t expect a profit, you know, for three to seven years.
[00:14:51] Vance Lowe: The average is five years. Well, in this case, we have access to funds immediately when [00:15:00] we pay the first annual premiums, and employers should think about everything’s normally done on a monthly basis, but this is something you want. To do annually. If we do it annually, they pay upfront all the earnings and the profits.
[00:15:16] Vance Lowe: It’s called Annualization. America used to be under before banks took control, but life insurance company has stayed that way. So when you make an annual payment, you get the guaranteed buildup. In cash value, you get access to that within the first week, two weeks. And you know that average is, you know, 50 to 60% of what the premium.
[00:15:39] Vance Lowe: The next year we pay that premium, it’s 75%, 85%, then 90%, and the fourth year somewhere around 90 to a hundred percent. And then things change and we can get over. A hundred percent for premium paid starting year five. We, [00:16:00] you know, the, the policies change up a little bit and we go through that. It’s kind of technical issues.
[00:16:06] Vance Lowe: We don’t need to go through that today. And we, we’ve done this in other podcasts, completely dissected these, how we set these contracts up. But the employer, the economics are, is there’s money available. To be used from these contracts owned by the employer. They own the rights to that cash value, and they can borrow that and put it back at will.
[00:16:27] Midroll: Did that story feel like it was about you? Do you feel like you are generating a lot of revenue but are not moving forward as fast as you would like? Do you feel you should be making more progress toward your financial goals? Do you feel stuck? Let us help you get unstuck. Are you ready to take action and get your own private bank?
[00:16:50] Midroll: Please visit us at www.privatebankingstrategies.com.
[00:16:58] Seth Hicks Esq.: Let’s give an example [00:17:00] based on the hypothetical, and I quoted a number 20 billion that I think Wells Fargo is paying in annual premiums on life insurance policies, and after these policies are in effect for. A number of years and starting in years five, six, and seven, you put in a dollar a premium and you actually get a dollar 10, a dollar 20, a dollar 30 in cash value available to use in the policy.
[00:17:28] Seth Hicks Esq.: Is that correct?
[00:17:29] Vance Lowe: Yeah, so a typical example, if you put $10,000 in premium in, in year five or, or later, you’re going to re see that the cash value growth is 12,000 or maybe even 13,000. You only put 10 in, but you know, to go back and be as a disclaimer or fair practice a lot, there’s a lot in play there to make that happen.
[00:17:57] Vance Lowe: But all we care about on the [00:18:00] economic side is if I’m paying a premium in, um, I’m making money, or is it costing me money in year five and at least, maybe even in year four, you are making money by paying the premium. This is money that can be used. It can be borrowed. It can be surrendered. Any number of issues you just want, uh, a little consultation will, uh, do it the, you know, the right way.
[00:18:26] Vance Lowe: And in the context
[00:18:27] Seth Hicks Esq.: that I described for like Wells Fargo, if they’re at a, an efficiency level with a seasoned policy on all 20 billion and they’re making a dollar 20 on that 20 billion, they just made $4 billion. Yeah, that’s 20, 20% on, on their 20 billion, $4 billion in available cash to utilize in their business.
[00:18:50] Seth Hicks Esq.: So it, it goes parabolic pretty fast as the efficiency increases year over year, and that’s why it’s so valuable. Now, I was gonna ask you a question. [00:19:00] What about closely held businesses where there’s like. You know, two or three key people in an LLC or a partnership. How did those work? Can you take, you know, reciprocal policies on each other?
[00:19:12] Seth Hicks Esq.: And then I’d also, as a follow up, you, you can describe a gentleman that you’d worked with previously that had, I think, over a hundred contracts from business relationships. None of them were family or him because he was maxed out on what his insurability was. And he created businesses to effectively do banking.
[00:19:32] Vance Lowe: Right. The business world is the opportunity to use money the way it’s intended and closely held companies like you mentioned earlier. You can take policies out on each other. So if you’ve got three, what is that? That’s a combination of six policies. ’cause all three of you’re are, are, are taking policies out on two of the other partners, and that’s a total of three and.[00:20:00]
[00:20:00] Vance Lowe: That’s where you store your money. If someone is really smart, they understand that if I put my premium in the policies, I’m going to get equal to or greater than market rate returns, taxed advantaged, and it’s yield. It’s not average rate of return, which is a fictitious number according to the actual product.
[00:20:23] Vance Lowe: You know, it’s just, it’s just a mathematical. Number where yield is money put in the account, that cannot be reversed. So putting your money there is your bank. It is a way for you to access the money, borrow it, pay yourself back with interest, grow it, and be totally tax advantaged and have those types of transactions.
[00:20:48] Vance Lowe: They’re private, they’re no not taxable events at all. Be it business or be it personal.
[00:20:55] Seth Hicks Esq.: So in, in that, the gentleman that I’d mentioned, it was always fascinating to me [00:21:00] to understand how he would create businesses and business partnerships just for the banking aspect. And then effectively the business wasn’t carried forth very far.
[00:21:10] Vance Lowe: You, you have to really understand, uh, life insurance contract law. And what has to be in effect at the time of issue, everything is termed around issue. When everything comes into play and is created, that’s when all legal ramifications of life insurance have to exist. If there’s any fraudulent or misrepresentation, then the insurance carrier has the opportunity to look.
[00:21:42] Vance Lowe: And make adjustments correct or even rescind a contract over the first two year period of time. If it’s outright fraud, then there is no time limit. So we don’t even go into that area. We don’t even get into any gray areas, but [00:22:00] it’s very, very much legal for two or three people. To form a liability company or an LLC and function as an LLC, set up a, uh, a checking account in that LLCs name and conduct a little business so that each other can purchase additional contracts of this nature.
[00:22:24] Vance Lowe: This is where we wanna put money, and this is where we can really grow a lot of money. We do everything we possibly can. And so this LLC buys Keyman insurance. So the guy we’re talking about was one of my early mentors, and he would form these three man LLCs and literally write six policies under that LLC.
[00:22:48] Vance Lowe: And once everything is issued. There’s no loss saying that that LLC has to stay functioning and in existence so that [00:23:00] slowly DeVol dissolves anytime after those contracts have been placed and everything’s fine. So actually when I lost count, Seth, he was at 153 policies, and this was almost 20 years ago.
[00:23:16] Vance Lowe: Wow. And he personally was uninsurable.
[00:23:20] Seth Hicks Esq.: There are clear ways to create your banking system without personal insurability,
[00:23:26] Vance Lowe: which is Yes, yes, yes, yes. So we just, we just need to talk and brainstorm on how we get insurability on someone. Every criteria has to be met in order to get a policy, but everything has to exist on the day of issue.
[00:23:46] Vance Lowe: After that, there’s, there’s no. Rule.
[00:23:50] Seth Hicks Esq.: Well, we’ve talked mostly and on. The benefits and values to the, the business owner, the employer. Let’s focus for a second on the [00:24:00] benefits to the employee, and this is something that bears flushing out so that our business owners out there and folks who have people that they can create a business insurable interest on.
[00:24:10] Seth Hicks Esq.: Understand. One is that for. Lower level employees, like we talked about, let’s call it a bank teller or the blue collar people in a roofing business, it’s an affordable way for them to access the basic life insurance coverage that they may not otherwise have or pay for. And they don’t pay for it. They don’t have to.
[00:24:31] Seth Hicks Esq.: They don’t have to come out of pocket a single dollar to have that protection for their family. That’s a great benefit for lower tiered employee employees. I think that creates security for their family members, their wives, their children, and they don’t have to work any harder, you know, for that. What else do you find as a benefit for the employees?
[00:24:51] Vance Lowe: Well, the employer can be very conscious of the employee’s needs. Sometimes, every once in a while a financial crunch happens [00:25:00] to the employee. Or he’s thinking about moving on or leaving a catch word that, you know, maybe he’s not as happy. And you had mentioned earlier that, uh, there are year marks where if an employee makes it to year.
[00:25:19] Vance Lowe: Five, for instance, he gets a bonus and that bonus can be predicated on a annual review and commitment that they’re gonna stay with the company. You know, it can be tied to that. The employer can create a contract where he can dump a bunch of money in there. He could provide a death benefit for, you know, the family that isn’t paid for by the employee.
[00:25:48] Vance Lowe: Now the employee feels a little more secure a lot of times that if something does happen to me, at least my, my family will be taken care of a little bit, and that can increase. Over [00:26:00] time, that death benefit, as well as little, um, bonus incentives and all the way to retirement. If you retirement, you stay here until retirement, we will bonus you x amount that ties that client or that, uh, employee to the business.
[00:26:20] Vance Lowe: An employee will change for a dollar an hour, maybe even less, maybe even a 50 cent per hour raise. Oh, you’re getting paid that. Well, we’ll offer this and they’re gone. That’s the loyalty out there. So employers, if they’re smart, will think up incentives to keep the employee at home working where he is at, and offer that employee away to to grow with the company.
[00:26:51] Vance Lowe: If a teller is a teller and they don’t ever see an opportunity. To not be a teller. They’re gone at the very next [00:27:00] offer because the next offer, that person probably said, oh, you’ve been a teller for a long time. We’ll come in, we’ll start you here, but we’re gonna move you to an executive position. You touched on one,
[00:27:10] Seth Hicks Esq.: uh, huge aspect, which is the ability for the employee to access loans without rigorous financial qualification.
[00:27:20] Seth Hicks Esq.: So if they’ve wanna finance aspects of their personal life or through their. Employer owned life insurance policy. The employers can create ways to do that and deduct it from paychecks and be able to have secured collateral on, on that loan and makes it very convenient for the employees and a benefit for working with the employer.
[00:27:45] Seth Hicks Esq.: That’s a great one.
[00:27:46] Vance Lowe: The old banking system needs to come back in. This makes us private. It makes us more independent. We create less taxable events, so [00:28:00] the employer world needs to catch hold that this is a way to grow our business, make our business. More productive. More profitable by keeping good employees longer, and you can’t treat a good employee badly or they’re gonna be gone.
[00:28:18] Vance Lowe: This is one way to do it, and the sky’s the limit on how you tailor it. We could talk, like I said to you, and I could probably do podcasts for hours just on the possibilities. Of what they can do here. So I think anybody has an interest here. You owe yourself and your own company and your future to look into it a little bit more and see if this is right for you.
[00:28:41] Seth Hicks Esq.: Absolutely. And so folks, if you wanna, uh, learn more about this, you can find all sorts of resources on our website. It’s, uh, private banking strategies.com. That’s private banking strategies.com. And if this is your first time to hear our podcast, you’ll have a, an offer for [00:29:00] a, a book that Vance and I.
[00:29:01] Seth Hicks Esq.: Authored called Secrets that Banks Don’t Want You to know that effectively keep you from being wealthy and financially free. And after that book offer is offered to you, you can listen to that in audio or PDF for just putting in your name and your email. And we also have, I think, closing in on a hundred podcasts now, where you can listen to all sorts of various topics and educate yourself on these issues.
[00:29:27] Seth Hicks Esq.: And if those. Things are resonating with you. Our book resonates with you. These topics resonate with you. Then schedule a, an exploratory call with Vance, which is in the email that we will send once you provide your email to us. So there’s an exploratory call link, Vance’s emails, where you can actually look into how these structures will apply to you personally, to your business, and an employer owned policy situation, and how you can make it work for you and your family.
[00:29:55] Seth Hicks Esq.: So we look forward to that. Folks, we’re glad you joined us and we look forward to having you [00:30:00] again on our podcast. Thanks, Vance.
[00:30:03] Outro: Thank you, Seth. Did that story feel like it was about you? Do you feel you should be making more progress toward your financial goals? Do you feel stuck? Let us help you get unstuck.
[00:30:16] Outro: Are you ready to take action and get your own private bank? Please visit us at www.privatebankingstrategies.com. Thank you for listening to the Private Banking Strategies Podcast. Click the subscribe button below to be notified when new episodes become available.
