Why create my own bank?

One of the questions that I get when looking at the banking concept for whole life insurance is "what is the catch?"  People are concerned that if the plan is so good, there has to be a catch. 

I think there are two catches. 

First, you have to be disciplined.  This is both a catch and a benefit though.  Many people do not handle their cash in a disciplined manner.  That's why they often find themselves deep in debt.  They do not begin their financial life managing their money.  They let their money manage them.  Banking forces people to both discipline themselves to fund their policy each month or year and it forces them to use that money wisely.  So, this "catch" also provides focus, so that the policy owner manages his or her own money and does not let life manage his or her money.

The second catch is that it takes time for the bank to capitalize.  That means the initial expenses will take away from the cash value paid into the policy at first.  We can structure the policy to reduce expenses.  That way capitalization can happen as quickly as possible.  This does not need to be a standard whole life policy with fixed premiums.  This is not just another way for me to sell a whole life policy.  It is THE way that I recommend that people buy whole life policies.  It means less money for me, but more for the policy owner.  It means that more people will be interested and that more people can (and hopefully will) take control of their own cash.  By reducing the fees to the insurance company and the commission to the producer, the policy owner sees the cash value grow faster.  However, a policy owner still can use some of the cash for banking during the capitalization process.  It's not optimal, but it can be done.  The policy owner does not lose money. 

I said two, but there is a side of catch number two that people ask about.  It is often asked like this:  "What if I need that money while the policy is capitalizing?"  There isn't a perfect answer because if a person needs the entire amount added to the bank, then there will be a deficit.  This is, perhaps, the biggest catch.  There is no good answer.  This will depend on each person and the risk that something major might happen in which the policy owner would need all of that money.  Because of the way I counsel my clients, it would be a very extreme case in which someone would need all of that money.  In addition, because I structure the policy to minimize those fees and the capitalization period, the chances of losing any substantial amount of money is minimal.  This is the only real risk that I've been able to identify in the banking concept.