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318: The Wealth Accelerator

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Buck: Welcome, everybody, to this special presentation and podcast of this presentation on the Wealth Accelerator program. This is a really fascinating product that I thought it was interesting enough so that rather than just have it sitting on wealthformulabanking.com as one of these products that you can explore, I wanted to talk through it, and I asked Rod Zabriske and Christian Allen, my colleagues in this space, to come and give us an idea of what this is all about. Now, what you’re going to find this is a really powerful program that if you can participate in, there are lots of potential benefits, no matter what your ultimate goals are, whether that’s cash flow, whether it’s estate planning or whatever. And I venture to say that in some ways, this new product design replaces the need for some of the things that we have done in the past, like premium financing or even Velocity Plus. In some cases, Velocity Plus may still be the preferred thing to do. But what you’ll find is that with banking and with all these different ways, this kind of combines are the best pieces of everything, and it really gives you lots of options. Again, it’s called the wealth accelerator. And with that, I’m going to turn this over initially to my colleague, Rod Zabrisky. Rod, why don’t you start talking a little bit about what the big deal is? Because I have to admit, when you guys explained it to me, I had to do a double take, and I was like, wait, what? Again, it was one of those moments where it just was like, well, this is incredible. And why are we not? Why did I just not know about this? And you told me, well, is because in your product decide, and that’s why. But anyway, why don’t you take it from here? 

Rod: Maybe the first thing is just point out here that the safest way to leverage your way to Wells. So Christian is going to hit on some of the key benefits and maybe some of the ways that it is different than premium finance and Velocity Plus, some of the things people are already familiar with, and we’ll break it down for you. 

Christian: Okay, so that’s perfect. Rod, today we’re going to talk like you both said, we’re going to be talking about a new and powerful premium finance design. And maybe just as a quick reminder, the basic concept behind premium finance is really simple. The idea is to get the bank to pay the life insurance premiums for us. Meanwhile, the goal for us is to earn a higher return in the policy than we’re paying in the bank loan. And when that happens, we create a spread that we call an arbitrage, and we’ll get a little bit more into that. But I just wanted to kind of create that context so everyone remembers the idea behind it is really simple. We’re building an asset. We’re letting the bank build it primarily for us. And the good news is history tells us there’s never been a 15 year time frame where we haven’t been able to create a 2% or better Delta between interest rate and interest paid. So we’re excited about that. We’re also excited to launch the wealth accelerator here with this group, because as Rod and I were talking, there’s kind of been four primary things that have kept people from moving over the years. And we have a lot of people who have moved forward and done traditional premium finance and Velocity Plus that are in really good places. But we’re excited here just because there’s a handful of things that have kept people from doing it, and we feel like we have a solution. I’m going to go through those really quick. So the four things that kind of kept people in our experience from moving forward. The first one was the lack of liquidity, just having to put money into the plan and then not being able to get anything back out of it for, say, 10, 15, 20 years. It was kind of in that way a lot like a retirement plan. The nice thing is we don’t have to worry about that issue anymore. There’s also historically with like velocity plus and premium finance been multiple years of funding that’s been required. We’ve had a reliance on exclusively index universal life. So for those of you that love whole life insurance, you like the guarantees and predictability associated with it. This new concept that we’re going to talk about allows us to utilize both index universal life and traditional whole life. And then maybe my favorite here is that there’s no longer in this concept any need for outside collateral. So in other words, it’s completely self contained. So we’re really excited about that because these kind of core issues have gotten in the way for people, and these are issues that kind of go away with this new concept. So let me jump in really quickly and I’m going to talk about kind of the key benefits. And then after I do that, Rod is going to do what Rod does, and he’ll kind of help us understand more of the ins and outs of the concept, and then we’ll go that way. So the key benefits to be thinking about first is a predictable double digit return. And we say that we realize that predictable and double digits don’t usually go together. We really believe in the concept and the math behind it. We’ll get into that. Like I said, we have history on our side telling us that we can create these predictable double digit returns over a long period of time. As Buck described, this may be something that replaces the other concepts that we use in the premium finance space, because our experience here is that it’s creating maximum tax free income. So the primary reason for that we’re going to get into is because we’re not going to stop funding it. After five years or ten years, we’re going to be able to pump that thing with cash utilizing the bank’s money, and that allows us to maximize the tax free income. We’re going to show an example of how we put inactive money to work. So if you’re someone who has money on the sideline, that ends up being a really good place for that. It’s important that there is checkbook access or liquidity. So one of the primary differences is that we can get to the money for necessary expenses, emergencies, situations like that. Now, to be clear, we’re not going to invest it the same way that we do. Like in Welk formula banking, but we do have access to it for needs that come up. It creates incredibly valuable liquidity for your state. And my favorite part is that there’s optimal leverage without any outside collateral. So those are kind of our key benefits to be thinking about. And with that said, Rod, why don’t you go ahead and jump into kind of the nuts and bolts of how this thing works. 

Rod: Yeah, absolutely. And so to do this, what I want to do is create a visual and try to do this audibly as well as anyone who is doing this in the webinar format. But what we have here is we have a gentleman in white coat, we call him Doctor Z. And in this case we’re going to say Doctor Z has a lump sum of cash that he otherwise it’s just leaving sitting in the bank or maybe money market account. This could represent his emergency fund, that could be his business reserves, just liquidity that he needs to keep on the sideline, but he wants to have access to. So in this case, what we’re going to do is take that lump sum of cash and put it into a life insurance policy. This life insurance policy is going to be the same design, the same concept is what we talk about in our other strategies. In other words, minimum costs, maximum growth of the cash value. And in this case, as Christian alluded to a minute ago, we are using indexed universal life, but we’re also using whole life. It’s a combination. And so to the extent somebody wants more predictability, more guarantees, they would lean heavier over towards the whole life side, to the extent they want more upside potential than we would lean towards the IUL side, but in combination, we can take advantage of the strength by using both. So doctors’funds go in fund the first year of this new life insurance policy we’ve created, then immediately we’re going to do is set up a line of credit with the bank. And what that does is it gives us checkbook access to the liquidity that exists now in the insurance policy. And for anyone who’s seen some of the other concept, we’re generally able to get about 75% to 80% of the initial lump sum that lands in the cash value. And so we’re creating that liquidity by doing that. Next, what we’re going to do when we get into year two and the second year funding is going to go into this policy, we’re actually going to use a loan from the bank or in other words, tap into that line of credit, increase the line of credit to fund year two through a loan from the bank and every year afterwards the same thing. So all of the funds that go in after that first initial lump sum from doctors, everything else going into this policy is happening through loans from the bank, leverage. So what this is going to allow us to do is build this asset primarily through leverage. And because the initial money that went in was all from doctors, we always have a higher cash value in the policy than what we’re carrying in the loan. So this gets back to what Christian mentioned a minute ago. We don’t have to come up with any sort of outside collateral. The insurance policy by itself is enough to cover the outstanding loan and then some creating that additional liquidity and checkbook access. But that’s a huge deal because it becomes just all a self contained strategy where we’re able to take advantage of that leverage, do it using the asset that we’re building with the leverage. And because we on average will be creating a higher growth rate inside of the policy than the interest that we’re accruing on the loan. Over time, we just end up with a much larger amount at our disposal. When it comes time to put together additional policies and or create future tax free income, we just create a lot more of it because the majority of the dollars going into the plan was not what I put in it’s what we got from loans from the bank. 

Buck: So one of the things I’ll just point out, this is one of the major differences right here. Just for simplicity’s sake, instead of multiple years with either wealth formula banking or Velocity Plus or anything like that, this is basically a one time pop of capital. And then that’s the beauty of it. Right. And then you’ve got the banking over from there, and then over time that gets paid off, and then Rod will kind of get into that a little bit more. But that’s one of the major things to think about, too, is now you do it or you don’t do it in a year. It’s not a commitment of several years. So that’s one major thing that I like about it. 

Rod: Yeah, exactly. Whatever the person decides is what they want to put in that first year. Then we’re going to set up so that all of the  future contributions coming in from the bank, we’re just matching that same number so that we’re getting as many dollars into the plan as possible. Again, now leveraging those. So we talk about the income that comes out. And again, I’ll emphasize this. You can start the income as soon as you want with some of these other premium finance plans. It was 15, sometimes 20 years later before we had access and could start turning that stream of income on. In this case, we can do it sooner, which maybe that was obvious to everybody because we have that liquidity. To the extent we have liquidity, we can create income. And so we’re not having to lock up these dollars for a long period of time. To the contrary, we have access to them, can use them on a short term basis. Like Christian said, if I wanted to access and use it in an emergency fund format, then relatively quickly getting to a place where I can turn that into a stream of income without any money back into it. Of course, the longer you wait, the more income you’re going to have. Is that fair? That is fair. One of the cool things that you’re going to see that is different here is that when we get to a point here where we’re going to show income coming out, you’ll see an increasing income coming out. So with Velocity Plus, especially we always were showing it as a level income for the rest of your life. In this case, it is an increasing income, mostly because, as Christian mentioned, because that money just keeps going, and not just for the ten years. We’re going to continue to funnel money into this through those loans. That makes it so that we can continually increase the income coming back. Outright inflation is a big buzzword these days, and rightfully so. That creates a scenario where we can have increasing income as we get older. And we’re going to emphasize several of these different ways to utilize it here in just a minute. We have, I think, five examples of ways to use the wealth accelerator. And so I think some of those things that we’re pointing out will become really clear as we go through those one last step here. And that is when doctors passes away, then there’s this tax free death benefit that pays out, creating an estate planning benefit that his kids can use, whether it be for liquidity or for estate taxes or whatever it might be, it passes on in a very efficient and direct way because that’s just the way life insurance works, right when that death benefit pays out. 

Christian: Perfect. Rod, let’s talk a little bit about the five case studies that we have put together. So our case studies consist of the following five. The first one is Lazy money turning into retirement income. Second one is Lazy money as an estate planning play. And we did this one specifically because Buck was excited about seeing the ability to put in a single lump sum and just let it do its thing. So we’ll get into that here in a minute. We have a traditional retirement alternative, an option where we’re showing College planning, and then finally a bonus. Rod is going to do a quick comparison between the wealth accelerator and just earning 7% in like a 401. That way you can just kind of get a feel for the difference between them. Okay, Rod, let’s just jump into them and we’ll take kind of every other one and knock these things out. 

Rod: So for this first one, again, we’re calling it lazy money in this case, for this example, we’re taking a 45 year old business owner who always just keeps $500,000 in their business reserves, just as a matter of being a wise operator of their business. And so in this case, we’re going to shift that what’s been sitting in the bank or in the money market account. We’re going to shift that into the wealth accelerator here in a minute. We’ll look at the numbers, but what you’ll see is that we’re creating a long term 14.4% IRR. And the way that that translates into benefit for this person is that it turns into a total of $25 million of tax free income through age 90. And then assuming that she passes away at 90, then there’s an additional twelve and a half million dollars how that cash value grows. And again, this is very similar. If you’ve looked at an illustration with us with wealth formula banking, then the cash value column is the same, whether we’re talking about wealth from the banking or with the wealth accelerator. In this case, the majority of the dollars are coming from the bank through those loans. And so let’s focus on this column here. This net equity. What this represents is the amount of moneof death benefit that will pay out at that point in time. Again, we’ll get into more details on what creates the engine that can do this. But really it’s leverage, right? It’s the same kind of thing that we talked about in all the previous premium finance conversations, the same thing you do when you’re investing with real estate and whatnot we’re taking the down payment, so to speak, in this case, the $500,000, putting it in as that first year and building from there with leverage.

Buck: To simplify this and to reiterate $500,000 in one year, resulting in $25 million tax free income through age 90 and $12.5 million death pen of it at the age of 90. Listen at it again, and that enough is just pretty darn telling. This is why I wanted to get this out there both in podcast and webinar format. 

Rod: What I want to do next is actually just kind of show the numbers. And for you on the podcast, I’m going to describe it as we go, but I think it’s important to see because that’s pretty exciting numbers to put out there. Right. Turning the 500,000 is 25 million income. How do we do that? And again, I can say leverage, but let’s look at how this works. So to begin with, let’s see here we have the $500,000 of cash going in. That’s the out of pocket contribution for Doctor Z. And next, let’s focus on building the cash value. So as I mentioned in other strategies that we use, we’re able to generate about 75% to 80% of that initial contribution, that land in the cash value, and that creates our liquidity in year one. Well, then in future years, as we continue to put $500,000 a year into the policy in the form of loans from the bank, then you can see here y we have in our cash value over and above what we’re carrying in that loan balance. So obviously, in year one, it’s the same, roughly $400,000. And then moving forward in those next few years, as we now start funding the policy through the loan, we see that net equity go down a little bit each year. But even in this example, it only goes as low as about 60% of the original amount that we put in. And then from that point forward, now it’s increasing as we go on. In other words, the growth that we’re creating in the policy is outpacing. Number one, any costs that are continuing the policy. And number two, the loan interest that is accruing in the plan to where we’re outpacing, we’re growing that. And then all of this toward what? Well, we are going to create income. And in this example, we show the income starting in year ten. We don’t have to take it that early. We almost are doing this just to really emphasize this idea that we can take it soon. We don’t have to wait a long period of time. So in this example, our 45 year old starts taking some income at age 55. It starts at 23,000 a year. And in that first year, 45,000, in the second year 65,000. So as I mentioned earlier, you can see that this income is getting bigger and bigger each year and continues to do that. So when I jump down to where she’s now 75, $700,000 of income coming out 750 the next year at age 80, close to a million at that point. And so because that continues to grow, an additional ten years worth of income on top of that. Now you can see how we get to that place where from age 55 to age 90, she will have taken out a total of $25 million worth of income.

Buck: Again. And I do encourage people to take a look at this webinar, if you’re listening to this at wealthformulabanking.com, but it’s pretty compelling when you look at the numbers. If you started this at 45, 20 years later, now you’re already at 300 grand a year tax free income. I mean, that’s just impressive. And again, just think about a one time investment like that to use in any which way you want. And it’s growing every year. And that’s also important because of inflation rate. But it’s growing way faster than inflation. Absolutely. The cool thing is that at 55, maybe you need a little extra money so you can slow down a little bit, and then the next you’re 60 and you want to slow a little bit more, and all of a sudden you got an extra $132,000 and you want to slow down even more by the time you’re 65 and you got $300,000. So it’s sort of like easing into retirement with one easy payment. 

Rod: Absolutely. Yeah. And I’ll reiterate this again because I think it’s just really critical that’s tax free income. So it’s growing and it’s not something you’re going to have to worry about paying taxes on as you get it. And so just to kind of circle back on our case study, here the 25 million of income and then an additional twelve and a half million dollars of death benefit. And let me just iterate that is twelve and a half million after that outstanding loan got paid off. So this twelve and a half is what actually went to the family in this example. 

Christian: So at the end of the day, we’re talking 37.5 million off of an initial contribution of $500,000. So that’s pretty incredible. Okay. The next one we’re going to jump into is the lazy money turning into an estate planning play. And like I said, Buck, this one’s for you, it’s a 45 year old business owner, same situation, $500,000 in reserves. We put that $500,000 reserve money into the wealth accelerator in this example. We’re not going to touch it. We’re just going to leave it. It’s really an estate planning long term play. So I’m Buck, I’m not necessarily worried right now about extra income, but I want to make sure that my family, my kids are taken care of and I’m leaving the legacy. If you just put that $500,000 in, that would turn into approximately $64.8 million of death benefit. If you live to age 90. If you lived longer, it would be a little bit higher. If you lived less, it would be a little bit less. But at the end of the day, that’s a ton of money to get from just a simple $500,000 contribution. 

Buck: And the reason I asked Christian and Rod to do this is that a number of you, including myself right now, we’re not necessarily worried about ourselves. I mean, we’ve done a pretty good job of investing. We think we’re doing. We’re going to continue to do so. But then if you actually think about legacy and you don’t have to worry so much about the investments that you make that are going to support you, you can look at them as a separate thing effectively. Like in this scenario, you’ve got a one time $500,000 payment. You die when you’re 95 now, which is very probably pretty realistic for where we’re headed. And we’ve got almost $65 million going to your errors with that in mind, you pretty much don’t really need to do anything else. It depends how much you want those kids and grandkids to like you and put photos up of you. But this is a substantial amount. And this is something that for me is very attractive, I have to tell you. 

Rod: And for anyone who goes in with that in mind, we can actually even put it into an irrevocable trust. So it lands outside of your estate. So again, just really cool things that can be done in an estate planning scenario for this.

Christian: This next example is really cool that Rod is going to get into. We’re going to talk a little bit about a retirement alternative where we start stacking policies, and I’ll just kind of turn that over and let you run through it. Rod. Yeah, that sounds good.

Rod: And this is what I had in mind, we’re going to use, for example, a 42 year old surgeon. And in my mind, I was thinking about someone who likes the idea of like a Roth IRA putting money aside that’s already been taxed. It grows, and ultimately all of it comes back out tax free, as many already may know. That basically describes the way that money goes in and comes back out of life insurance. So you put the money in it’s after tax, anything that comes back out, whether it’s in the form of loans for a short term need or income in retirement or even the death benefit, all of it comes back out tax free. The surgeon can’t participate in a Roth IRA, right? Even if they wanted to, they can’t because they make too much. Well, this is a scenario where this person starts setting aside $100,000 a year for this example, we’re going to assume they put $100,000 a year aside for the next ten years, and we are just going to build it into the wealth accelerator. So more specifically, what we’re going to do is in year one, he sets aside the first $100,000. Think about the earlier slide we showed where they put that lump sum in and then financed all future funding of the policy from year two onward. So that’s what we’re going to do. He puts 100,000 in all future $100,000 premiums get funded through loans from the bank. Then we get to year two, he’s going to put a new $100,000 in, where we’re going to create a second policy of $100,000 a year financing from year two onward. And we keep going like that. So we’re stacking these $100,000 policies one on top of the other until we get to year ten, where now there’s a million dollars a year going into this plan. But once he’s made that last $100,000 contribution in year ten, he’s done. So now a million dollars a year is going into the plan again, 100,000 year times ten. Right now we have ten policies stacked on top of each other, and it’s going to create a really powerful future income for this surgeon to the point where it’s a 14.8% long term IRR. So a similar IRR just with a lot more dollars attached to it. And so he ends up being able to generate $43.7 million of tax free income through age 90. And when he passes away, there’s an additional $31 million of death benefit that pays out. 

Buck: This one is particularly relevant to surgeons, and I’ll tell you why, because as an ex surgeon myself, not having finished training until I was about 32, 33 years old and not having any money, whereas like my colleagues who were doing various consulting or whatever, making six figures out of College, there is often an element with physicians of playing catch up. Some of it is also because a lot of surgeons were physicians in general are notoriously not great with investments. And all of a sudden you’re 42 years old, and you’re like, gosh, I don’t have that much time. And my investments aren’t doing great. Well, this basically requires a ten year commitment, really 100 grand a year. And this in many ways is what I kind of look at as a get out of jail free for the sins of the past. This is a really good way to look at it as well. 

Christian: And I would say to you, Buck, I remember we were talking about what you wanted to have as the name calling. It the wealth accelerator. And this really, I think, is what you were focused on of this kind of getting an opportunity to catch up, accelerating the dollars that they can put away now that they’re ready to do it, to create something really special, especially having waited so long to get started. 

Rod: It’s kind of like a defined benefit plan on steroids, right? So a lot of physicians, they get into the defined benefit plans where you can put higher contribution limits in. But we’re going to show kind of an example where it’s like a 401K alternative example, and it just produces so much more cash, so much more money that it’s kind of ridiculous. So we’ll get into that here in just a second. One more case study before we jump into how we’re actually making this happen, I want to really quickly talk a little bit about a College planning example. Rod and I, as we talk to people, we have a lot of people bring up this question, how do we best pay for it? And this ends up being a really cool hybrid strategy because we’re going to both pay for College for kids and produce significant retirement income for ourselves. So quick example, 38 year old parents, they’re putting in twenty K a year for five years towards College funding for their two kids. We’re expecting about a 14% long term IRR. And between years 17 and 22, they’re going to be able to take just over $60,000 a year out to pay for kids College. The nice thing here is that the policy still is going to continue to run and produce. So once they’ve paid for College, there’s still tons of money left over to create tax free income. So we have an additional 6.6 million in tax free income from 61 to 90. And finally, we still have a $4 million death benefit. So there’s a lot of money coming. And the nice benefit here is that you can really use it as a hybrid. You can pay for College and still use it as a way to create significant tax free income. 

Buck: A quick question for you on this one is can you assign that income effectively? You could be like, okay, kids, this money is for you. And once you finish College and then there’s some additional and you could do it for them. So there’s just a lot help kids is that he kind of progressed from College to graduate school. And if you got some kids who are going to end up in medical school and residency like I did, it’s just a great way to supplement during that period of time as well. So just trying to think of all the different possibilities here, which there are many, but it’s good to know that that’s an option. 

Rod: Yes. And the answer to the question is that you can assign that. You could just turn ownership over to the kids at that point whenever you’re ready. 

Christian: Now that we’ve been through these four examples, we’re going to do one more, but this one is going to be a little bit different. We’re going to compare it to a we’re going to jump into the nuts and bolts of kind of how we’re creating it. We talked a lot about building an engine, and that’s really what’s happening. We’re pumping money into this cash producing engine, and we’ll talk a little bit more about how that works. But Rod, why don’t you take us through the 7% comparison and then jump right into kind of how we’re making this thing run. 

Rod: What we’re doing is we’re just kind of piggybacking on the example you used earlier, that 45 year old business owner with the 500,000 in reserves, and we just want to compare it. So if we’re saying, hey, put the $500,000 into the well accelerator and produce these benefits that we highlighted a minute ago, comparing that to taking the same $500,000 and putting it somewhere type, think of it like a like that real simple. When we talk about, like after tax, what kind of return is realistic? Well, I don’t know the exact answer to that, but we use 7%. We feel like with what the markets done over a long period of time, last 40, 50 years. But that’s a reasonable expectation. Net of fees, net of taxes, all those things, 7% return. And so we just pitted them side by side. And as you already know, with the wealth accelerator, we ended up with $25 million of income from ages 55 to 90, and then an additional twelve and a half million of death benefit. We go in with that 7% return in a traditional investment. We turn that stream of income on at age 55 and mirrored the exact same income coming out that we showed in that chart a minute ago. And the problem is they ran out of money by age 65. So they did turn the 500,000 into 1.4 million, but then it was done. It ran out. There’s no death benefit in the end.

Christian: That’s not quite the same as 37 and a half million. So these numbers are just ridiculous. It’s just so incredible how big of a difference it makes. 

Buck: I just think that that is what makes it so compelling. This slide says it all. You’ve got the wealth accelerator for somebody who’s trying to save for retirement, same amount goes in and it’s $37.5 million versus 1.4 million. Come on, this isn’t even close. I just want to emphasize why we thought this was important enough to have on a podcast. 

Christian: I think it’s a good segue. So, Rod, why don’t we jump next into this concept of arbitrage? Because arbitrage, in conjunction with the engine that we’re producing, is really kind of the magic sauce that makes this thing go for arbitrage. We’re defining that as the process of growing an asset, using leverage, creating a differential between the average growth rate of the asset and the average interest rate accrued on the loan. And so for those of you listening to us on the podcast, I have two lines here. One represents the asset, and it’s growing on a compound curve, and its starting point is higher than the loan amount. But that difference between it and the line that represents our loan balance is just the Delta is getting bigger and bigger. We call that the spread. So the difference between what we’re earning in the policy versus what we’re accruing an interest on the loan is our spread. And here’s the thing is, it doesn’t take an enormous difference between the two to create everything you’ve seen. In other words, in our assumptions, we’re using about a 2% spread average difference between what we’re earning in the policy versus what we’re accruing on the loan. And historically speaking, as Christian mentioned earlier, there’s never been a 15 year time frame where we would have seen less than a 2% spread average across that. And so using that in our assumptions, we feel like it’s not only realistic, but very conservative. And so it creates this engine. In other words, we have this ongoing asset that’s just continuing to get bigger and bigger and bigger. And yes, we’re carrying this loan as well, but the difference is very different. I want to kind of highlight this here. Okay. So now, as we get in talking about the engine, this is especially for those of you who like to see the numbers. If not, then you can tune out for a minute. But anyway, the whole idea behind this is to say what’s the power behind making all of this happen? 

Buck: In other words, you’ve got the numbers in front. Some of you I know are going to want to drill down further. So whereas maybe they should have been at the front, but this is kind of going into the weeds and explaining how these numbers are possible. 

Rod: What I want to do is take a snapshot in time. Using that example we used earlier, the 45 year old put the 500,000 in. When we look at the total cash value of that in year 15, it was about $10 million. And the loan balance at that point in time was about 8.8 million. The difference between the two 1.2, we’re going to call that the net cash value. Think of it as like the net equity in the overall plan. Okay. So that next year the policies are going to grow, they’re going to earn some interest. And if we take even just a 7% growth rate inside of there, then that gets earned not off of the net equity of the one 2 million. It gets earned off of the 10 million, the total asset. So it earns $700,000 in interest in that year. But we also are going to accrue interest alone, which would be $440,000, assuming a 5% interest rate. And now when we take the difference between those two, we earned 700. We accrued $440,000 on the loan. That’s a net difference of $260,000. Well, if I take that 260 and say, okay, my net equity to begin with was 1.2, what kind of an interest rate would I have had to earn on the 1.2 in order to see a net gain of 2600? Well, the answer is 21.6%. And this was using, again, a 2% spread between the growth rate and the accrual on the loan. And so just using this brief snapshot in time, not saying we’re always going to earn 7%, that what we earn may vary from year to year, but the point is to say that even with that 2% spread in this snapshot, our net equity grew by more than 20%. 

Christian: The thing I like about this slide, Rod, is that it emphasizes the fact that we don’t have to go and earn a huge return each and every year. Right. That’s where it becomes really difficult to get consistent double digit returns when we have to generate 15 or 20%. In this example, we’re generating just a simple 7% growth rate. We could grow it at five and a half and pay three and a half or four, and we’d still be in a great position. The point here is really that it’s about the Delta between the two more so than it is about anything else in conjunction with just the pure pile of cash that we have from it. Okay, so let’s just kind of hit on our key takeaways and we’ll close up shop for today. So first off, it’s predictable double digit returns. We talked about maximum tax free income and various examples there. We talked about how it’s optimized with a single lump sum. So if you’re one of those people who really loved premium finance, but you didn’t want to have to make five contributions into Velocity. Plus this could be a really great alternative. In addition to being able to do it with a single lump sum, we can also stack multiple policies. So it looks a lot like a traditional retirement plan. So that’s the example that we talked about, like the defined benefit plan where he’s putting $100,000 in for ten years. It’s a great way to put inactive money to work. And there’s checkbook access, so that means we can get to it. Finally, probably my favorite piece here is that it’s completely self contained, it’s very safe, and that’s because of the optimal leverage, there is no need for outside collateral. Those are our key benefits. And takeaways and Buck, I think that closes up for what we’ve got. I’ll turn it back over to you. 

Buck: That’s great, guys. As I said before, I thought this was an impressive enough program that I wanted to present it also in a podcast format. However, I do encourage you to go back and look at these slides and look at the visuals as well. This is all going to be housed at wealthformulabanking.com, and that’s also where you’re going to go if you want to touch base with Christian and Rod about it. Now, guys, how does it work? Just as a reminder for people, if they get in touch, you do a one on one consultation with everybody going through their individual situations. Is that right? 

Rod: Once we engage with someone, we’ll set up an initial call and understand kind of what they’re looking for, how we can help them, what their situation is, answer any high level questions they might have, and then we’ll start putting together some more specific information to them, send that over, and then set up any additional calls that would be helpful for them to understand it and get to a place where they can decide whether it would work for them. 

Buck: Fantastic, guys.