Protect Yourself from Bad Financial Advice

As of June 2021, it was refreshing to see that action was being taken against an agent/financial planner who claimed to be helping clients practice the Infinite Banking Concept (IBC) by accruing retirement savings in variable annuities and variable life insurance policies.  Among many other things, this agent/planner was selling insurance products by recommending clients to borrow against one whole life insurance policy to finance the premiums for another life insurance policy.

Many of this agent/planner’s clients had been advised to liquidate their IRAs and 401(k)s, as well as other savings vehicles, to purchase variable annuities, thus exposing themselves to the market risks normally borne in full by the insurance companies who willingly assume such risks when fixed guaranteed annuities are purchased.

In addition to the issues previously mentioned, blank forms were utilized by the agent or financial planner to collect client signatures authorizing variable annuity purchases. This practice violated the client’s right to full disclosure, as it failed to inform them about the associated risks, costs, and fees tied to these complex and often volatile financial products. By not providing an understanding of what the client was agreeing to, the planner took advantage of the lack of knowledge and trust given to financial professionals.

Variable annuities are complicated, with fluctuating returns that depend on the performance of underlying investments, and they carry costs, like high administrative fees, mortality charges, and surrender charges. In the case at hand, these details were kept from the clients, and they were pushed into purchasing these products without understanding the financial burden they would face.

All-in-all, it’s somewhat satisfying to see that, “another one bites the dust,” referring to the individual who was hiding behind the IBC (Infinite Banking Concept) mantel, fraudulently taking advantage of others. However, this case highlights a number of flashing amber lights that should have been warning signs for anyone checking out this agent or planner before getting involved.

First, the use of blank forms is always a red flag. Whether it’s for a simple life insurance policy or complex financial products like variable annuities, signing blank forms opens the door to manipulation. Full transparency and understanding are key when it comes to signing any legal or financial document. A legitimate planner would never request a client’s signature without thoroughly discussing the details and seeing that the client fully understood what they were committing to.

The failure to clearly explain the risks and costs associated with variable annuities should have raised immediate concerns. Financial professionals are legally and ethically obligated to make sure their clients are well-informed, especially when recommending products with such intricate and opaque fee structures. Without an understanding of what they are signing up for, clients are left exposed to the potential for major financial setbacks.

The fraudulent use of the IBC concept to push these products demonstrates a blatant disregard for the core principles of honest, ethical financial planning. IBC is meant to empower individuals to create their own financial independence through life insurance, not to serve as a disguise for predatory practices. It’s important to always scrutinize the qualifications and integrity of any planner who claims to be using IBC, as well as the specific strategies they propose.

Cases like this are a reminder that there is always a need for vigilance when navigating financial products and services. Clients must ensure that they are working with professionals who prioritize their well-being and make it a point to educate them on all aspects of their financial decisions. If something doesn’t feel right or seems too complicated to understand, it’s always wise to take a step back and reassess the situation.

1. The cost of life insurance should always be based on your current income and net worth. You should never have to borrow money from a third party, against another policy, or sell your assets to purchase life insurance. That said, selling certain assets and liquidating certain savings accounts can be a solid financial plan to move funds from non-guaranteed taxable accounts to guaranteed non-taxable contracts like whole life insurance or annuities.
2. Variable annuities are contracts which place the risk of future growth on the client instead of this risk being carried by the insurance company. This makes variable annuities an uncertain way to plan for retirement income.  Insurance should be reserved to help you avoid risk not assume risk.
3. IBC is about using cash value life insurance to reduce or recover the cost of interest in your life. Leveraging cash values in life insurance to purchase other policies, to fund investments or variable annuities carries an unknown risk which a good IBC agent should be quick to point out in advance.  Assuming risk is a financial planning or investment technique, not an IBC strategy.
4. Anyone who signs a blank form is not using common sense. IBC is based on common sense and common sense tells you to read and understand documents before signing them.
5. Leverage is a good thing as long as you control it. If it controls you, then you will lose interest and possibly even your principal. This is why using leverage to purchase anything, including life insurance and annuities, must be controlled by logic. Yet too frequently, greed tempts people to entertain ideas and actions where angels would fear to tread.  Taking time to understand the logic behind using other people’s money to build wealth while keeping your own money secure and growing in a guaranteed contract like whole life insurance is important.  Education of this sort can keep you from becoming the victim of schemers.

This case is one of many fraudulent cases where the name “IBC” was used as a cover to take advantage of uninformed or greedy people. Fortunately, this schemer was caught and held accountable.  But there is no rule, law or government official who can protect you against all the schemers, frauds and imposters out there.  You must become educated.

At McFie Insurance, we have practiced the concept of IBC for over 14 years.  We also understand the limitations of IBC and furthermore, realize that many advisors and agents proclaiming to teach and use IBC are not really doing anything other than attempting to sell more to earn more.

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Participating whole life insurance contracts as R. Nelson Nash, the founder of IBC, stated, are contracts that are guaranteed to perform better every year, no matter what.  Yet, knowing how schemers, frauds and imposters have highjacked IBC we trademarked our own brand the Life Benefits Formula to keep others from high jacking, perverting and scamming others.

In addition to our trademarked brand, we also encourage education by publishing webinars, weekly podcasts, weekly blogs, YouTube videos as well as live workshops which logically build upon your knowledge of finances, including IBC, so you don’t become the next victim of financial fraud or misrepresentation.  Our next live workshop will be September 17-18, 2021, right here is Las Vegas, Nevada.  Call our office to reserve your place because space is limited. 702-660-7000

Tomas P. McFie DC PhD

Tom McFie is the founder of McFie Insurance and co-host of the WealthTalks podcast which helps people keep more of the money they make, so they can have financial peace of mind. He has reviewed 1000s of whole life insurance policies and has practiced the Infinite Banking Concept for nearly 20 years, making him one of the foremost experts on achieving financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.