The Offshore Banking Alternative – Episode 553

This transcript was auto-generated and may contain errors.

[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, we’re going to be talking about offshore banking alternatives. If you’ve been consuming any type of information online, you’re hearing about the threats of central bank digital currencies, about the changing of economies, marketplaces, the weakening of the dollar. There’s an alternative out there that you keep control. Kim, I’m excited to have this conversation today. Oh, me too. And, you know, I’m going to start with a fun story from Dan Sullivan’s strategic coach session that I attended on Monday, whereby a lot of people were talking about either Brazil or Mexico as medical alternatives and how unbelievably attractive our U.S. dollar is in these countries where people are going to deal with medical

[00:59] alternatives. So, for example, and this is public knowledge, Dan is going to Brazil for stem cell work for a knee injury of like 50 years ago, and it’s already making progress. And the Brazilians love the U.S. dollar. And then I heard other stories of similar examples where people are going to Mexico for very specific medical things that they are choosing to pay for themselves because these people sometimes have million dollar businesses. But ten dollar bodies. Oh, that’s so sad. It is. Isn’t isn’t that amazing? Yes, yes. You know, what you’re talking about of this geo arbitrage, we’ll call it. We have seen the medical tourism happen in your story with Dan. Now we’re seeing people do that with their bank accounts.

[02:03] Yes. And what’s strange is what we’re talking about right now was something that was called it magazine gossip 20 years ago, where it’s like, oh, you have you have to have a fancy yacht and you’ve got a Swiss bank account or you’ve got something in Panama or whatever that looks like. And now it’s a lot more simple. And same with the medical tourism. It’s a lot more simple. There’s people that do it. Well, what is so interesting is that the age old we’re talking centuries old methods of storing wealth are still working. And I think we get as human beings sometimes a little overly excited about the new thing, and it may not be new, but it might be new to you. So whatever it is, the medical ideas, the offshore banking account that you

[03:00] think is going to be the solution to your family’s capabilities. And yet, for a lot of people, that’s a scary step. I mean, it’s a big deal. And there’s a lot of paperwork and numerous aspects of risk that go with starting to add in the complexities of any kind of storage of wealth outside of the U S and that’s awesome. There are families, I would say probably $10 million worth is a good dividing line whereby if your family is over that, you absolutely should be pursuing that and the 30 grand a year minimum that it might cost for administration and trust support and that kind of thing is going to be a drop in the bucket of the opportunity that’s out there. But what about for the rest of us?

[03:59] You know, what about for those of us in the five to 10 million worth space or under 5 million worth space? Wouldn’t it be nice if there was a centuries old structure that we could count on? I think we’re going to have a good conversation about that. So shall we let’s do this. Let’s dangle that. Let’s hold that for a moment because I want to help our listeners see some of the stepping stones because you’re right. There’s this teeter totter that goes both sides, meaning the more wealth that you get, the more complexities you have. Now the complexities, they don’t necessarily have an X factor against them, meaning it’s not like it’s a hundred times more complex or difficult. It just has to have someone to help you navigate through it.

[04:54] And as you mentioned before, instead of chasing shiny things, you have to go back to the traditional things. So is that fairly accurate from what you’ve seen as well as you’ve helped people throughout the years? It is. And it’s so important when you’re doing your research on what opportunities are right for you and your family, that you look at the ongoing, I’m going to use the word administration of the platform, of the strategy, of the legal step that you take, of the accounting necessities that are around it. So I’m just going to put the word administration in that whole space. And again, I’ll give another quick personal story example where I didn’t do a good job of paying attention to step two.

[05:47] So step one was shiny. Step one sounded awesome. Step one was a specialized trust that I wanted to put some intellectual property into so that there would be the opportunity for that intellectual property to grow outside of our estate. And I was referred to an attorney by a very, very good friend. He actually even just got on the phone and helped me work through the legal aspects of it. That was all step one. We got, we actually ended up doing two trusts. So we got kind of a discount if you will, I guess, you know, volume discount is a thing that lawyers will do because the documents were not that different. That was all step one went beautiful. And then step two came around and it was 5,000 per year, per

[06:34] trust, administrative costs, which in light of the very beginning stages of this intellectual property is a lot of money. And so please, as you’re doing your research for what you’re going to do, pay attention to step two. And then step three, which is the next year, right. And step four, which is the next year, because a lot of strategies, platforms, whatever word products you want to use in this space require ongoing annual administration in the form of trustee fees, accounting fees, legal fees. I mean, it’s mind boggling. I did a really poor job of figuring that out ahead of time. And now I’m in, so we’ll deal with it and we’ll trust the intellectual property does what it’s supposed to do, which is the popcorn effect.

[07:35] Nevertheless, I really wish I had done better research. Yeah, absolutely. So, Kim, you’ve, you’ve gone through this. You’re not just stating something that you’ve read. You’ve applied these pieces here. We have, you know, looked at the variety, like the world is no longer just the state we live in or the city that we live in. There’s so many options and you’ve explored the trust. You’ve done these many pieces right here, but there’s one tool, one vehicle that you use that the offshore banks don’t have, meaning control. We can have offshore bank and us dollars and hail from Brazil. We can have it in pesos from Mexico or we can have it in euros, but there’s a one alternative that you talk about that we have control where we don’t

[08:31] have full control on the banks. So let’s talk about that. And that is the mutual life insurance company structure. So let’s have a conversation about a mutual life insurance company versus a stock life insurance company. And I think we’ve hit this before on some podcasts, yet it is something that is so unknown out in the marketplace. I am so surprised how many people that have wealth and work in a financial space where they should really have run across this before. And they flat out have not. And so the mutual life insurance company structure, think about companies like Guardian, Mass Mutual, New York Life, Northwestern Mutual, Penn Mutual, Lafayette, Mutual Trust, Security Mutual. Well, there’s a few others and it is a very short list.

[09:28] I think there’s around 20 at some point. I added them all up around 20 either mutual life insurance companies or mutual holding company life insurance companies that operate like a credit union. So when I say that they operate like a credit union, what does that mean to you, Spencer? I’m always curious is the, is the information I’m wanting to send with that analogy landing? Yeah. So for me, at least the way that I look at it, because I have a credit union as well, that it’s an organization that represents the values and I know what their values are, and I have to have those values to participate, they’re paying dividends. They tend to be more responsible and conservative and they’re member focused instead of put a big sign on the building focused.

[10:26] Really well said. And so working backwards, that member focus, the paying of dividends, the values of, I’m going to say typically long-term perspectives, not what’s happening this quarter and quarterly earnings and daily activity, but the longer term perspective is what a credit union brings to its members. Well, these mutual life insurance companies are the same way. In other words, they are only for their policyholders. So a policyholder is to a mutual life insurance company, like a member is to a credit union. And these mutual life insurance companies also have a history of dividend paying well over a hundred years, every single year dividend paid. And then they also have that kind of history whereby the company itself

[11:23] is 150 to 200 plus years old. And if you add in the ones in Europe, we can get into the five and 600 year old range. I don’t know any American bank. There might be some banks in Europe or Switzerland specifically that are over a hundred years old. I don’t, I don’t think any American institution is, and the American institutions are public. You can go and buy stock in a bank. Well, you cannot buy stock in these mutual life insurance companies. Yeah, quite, quite the difference. The other piece to this puzzle, which I’ve noticed is the, and I go back to the word control because that’s the one where, when I did research for this episode, when we’re looking at this offshore banking, I did the research of why are people doing that?

[12:23] And it could be because of fear of the central bank digital currency, or it could be because of the fear of the loss that maybe happened, the weakening of the dollar. And these mutual life insurance companies, they’re not operating that way. They’re not looking at what’s the next quantitative easing, or they’re not looking at like, what’s the next control mechanism we have in place. In fact, in order to join, you have to go through a medical exam. There’s work that has to be done. So talk about that, how it’s the filtered we’ll call it. Yeah, it’s a good word and must be applied for, and must be approved for. So the mutual life insurance companies in this regard are not any different from the stock life insurance companies.

[13:13] And so I’ll, I’ll speak about the approval process. And then I want to link back to get some clarity around what a stock life insurance company is for. So the mutual companies have an approval process to get a life insurance policy. The stock companies have a very similar approval process, and that is a paperwork that has to be signed a literal physical exam. Sometimes it’s something that’s done through the mail, like a cheek swab. Sometimes it’s a lot more involved, like a nurse coming to your home or your office, like a portable EKG being used, a blood sample, a urine sample, that kind of thing. Medical records are absolutely requested with your permission. Of course, sometimes accounting records are also requested.

[14:02] It’s interesting drivers license records, which are public are again, you know, if you have the right capability to get the information, a very important part of their decision, because clearly they don’t want to ensure from a life insurance perspective, somebody that’s speeding all the time. And there are a variety of other things that they are looking at before they approve you. But then the lines start to separate. So all during that, the mutual life insurance company and the stock life insurance company are doing the same thing. Just some examples real quick of a stock life insurance company, Prudential, Equitable, I think it’s called AXA Equitable now, Trans America, Pacific Life. And there are literally over a hundred stock life insurance companies.

[14:55] And once the policy is placed, there is a major separation between how a mutual company operates, which is for its policy holders only and how a stock company operates, which is for its policy holders and its stock holders and the public markets and the board of directors. It has all these interests that it is attempting to appease, and it makes the profits spread very thin because it has to be working in all those various arenas, whereas the mutual company has one job and it is by law. And that is to share its profits in the form of a dividend with its policy holders only, not with any stockholders. And so that’s a very, very important difference that people are just not well educated on in America.

[16:04] And it’s a sad thing because these companies are so old. They are higher rated than any bank that I have ever seen. And they also have a legal reserve requirement whereby the mutual life insurance companies are required to reserve their dollars, dollar for dollar, whereas we know banks reserve their dollars at seven to ten cents on the dollar. And so you and I could argue about whether the dollar itself has issues. And yet that argument, we have no control over. I mean, you can trade like if you want to trade bread for chicken or whatever in your little community, have at it. But if it’s not that you’re dealing in dollars right now. And so the question then becomes, where is the best, most efficient

[17:04] long term space to store and use your dollars? Yeah, that’s a really solid point. One thing I’m thinking about that would be helpful for our listeners, not only for a wrap up of the episode, but I think to give a highlight is this, because we let out with talking about the offshore banking, and then you explained putting the threshold and call it the 10 million dollar mark, meaning a 10 million. It’s fairly complex. You’re going to be able to pay the administrative fees for what’s happening below five million. Sure. You know, there’s some discovery and figuring out what really makes sense in that world for offshore banking, if you’re still at the level where you’re just starting the career, is that something you

[17:59] would give a thumbs up or you give a thumbs down and say, don’t even worry about the offshore banking. Don’t even worry about it. It is a interesting intellectual exercise and it should stop there. You’ll be so much better off doing your research about what you can use that you can control today. And then I realized you’ve got another question there, but I just want to point out that the administrative fees that we were talking about at the beginning were absolutely a deciding point for me. Once I realized the space that those can occupy and how large they can be, and I looked back at over 30 years of working with these mutual life insurance companies, where the administrative fees are there and yet they are netted out.

[18:53] So quick example, every investment savings account, what have you that is talked about, and I should be clear, whole life insurance is not an investment, but just anywhere in that financial space, when you’re talking about an interest rate by which the dollars are growing, the interest rate quoted as a gross interest rate. In other words, it’s typically before administrative fees in the life insurance world. It’s a net interest rate. In other words, after administrative fees and using the truth concepts calculators, we can black and white line item the administrative fees, and they are unbelievably minor. And that includes commissions as well, administrative fees and commissions for owning, using and working with a whole life insurance

[19:48] policy. And so it’s very, very important to realize that long term there is a space here in America where we can put dollars, have them available for our use, have them grow at a reasonable rate of return that’s liquid. So this is not an investment oriented growth. This is a savings account oriented growth that will beat inflation that is not taxable as it grows, as long as the policy stays in force and is when looked at net of administrative fees. And that is an amazing space. And that young person that’s just starting and can save a hundred bucks a month, that early career person that has the high income and can save a thousand to five thousand bucks a month, that wealthier family that can save a hundred grand a year to add to their

[20:43] liquidity, that whole life insurance space can do the job of storing their cash in an environment that they control is completely liquid. They can use for whatever they want. And it acts like equity because they can borrow against it. Absolutely. I love it. You know, what’s so what’s so helpful for me as a wrap up and as the interviewer in this situation is that we get to see a wealth meaning from above 10 million or just starting out. This is the vehicle that they can use. And yes, as the wealth grows, the complexity grows, but it’s not at a humongous factor. So for any of you that are looking at this and you’re maybe getting tantalized by offshore banking and thinking I’m going to set up this

[21:36] mechanism in this country here or that country, realize that there are things closer to home that are longer, that are more aged, that you keep the control over. And if you do have a lot of wealth, then there can be additional complexities and pieces you put in place as well. So send an email to hello at prosperity thinkers dot com for that. For me, it’s helpful just to see that listeners right now knowing what’s trending with the offshore banking instead of losing a lot of time, getting swindled, getting lost, going to something that works, figure that out. Worst case scenario, get your questions answered at prosperity thinkers dot com. Thank you for listening to the prosperity podcast to take control

[22:31] of your money and have it work for you. Visit prosperity thinkers dot com.