Immediate Financing Arrangement (IFA) with Whole Life Insurance Canada - YouTube

everybody it's chris with life180 and i am here  with galen nuttall from canadian whiteboard  

finance and uh back to our weekly videos um back  this is my first video after being in costa rica  

for a couple weeks and uh so dalen thanks for  being here man yeah i know thank you for uh  

choosing me as the first one back to  reality after uh the amazing costa rica trip  

yeah man it was it was a lot of fun so so so today  what you we were we were just talking and um you  

were talking about um some ifa stuff is that what  it's called yeah up here at least it's called the  

it's immediate financing arrangement or the ifa  okay uh for when people are looking at taking on  

a whole life policy perfect that's awesome so so  in the united states it doesn't really work this  

way so this video is going to be really geared  towards canadians which is awesome um and and  

i think from what i've heard about this and i've  talked to you and a couple other people about it  

um i don't know all there is to know about it  or you know whatever but it seems like a really  

uh intriguing opportunity and i honestly from  what i've heard i wish we had it in the united  

states like honestly like every time i i talk to  a whole life person in canada like a whole life  

sales person i just think like you guys got it  so much better up there like it's so much easier  

to sell whole life insurance in canada because  it's so much more like valuable and it's amazing  

in the united states and it's just like when you  look at the tax laws when you look at the way  

you know the economic system works  when you look at all the different  

little nuances like the ifa we're going to talk  about all these little things that you can do  

it's like how did canada like somehow beat united  states at this something like i don't know like  

it just seems like it's so much better in canada  so like that like i said as good as it is in the  

united states and i talk about it and i love it  um you know for entrepreneurs and real estate  

investors and and all these different types of  people in the united states and i think it's like  

absolutely a core foundational asset that  everybody should have you take that and five exit  

for canada and that's how much more important  it is you know to have this as a foundational  

asset in your life as a as a business owner as  an entrepreneur as a real estate investor as like  

honestly anybody in canada it reaches everybody  and so um i'm super excited to uh to kind of talk  

to you about this and learn a little bit more so  can you i guess just to start can you kind of like  

do the the 101 overview of what an ifa is sure  yeah and i mean you're talking about canada versus  

the states i mean maybe it's just like you know  maple syrup curling and hockey like maybe it's  

whoa whoa whoa whoa whoa whoa first of all first  of all that's fighting words i'm from vermont  

okay okay okay all right canada has better maple  syrup than we got the maple syrup there in vermont  

you got the maple syrup yeah yeah i will guard  that with my life the hill i'm willing to die on  

did you hear about did you hear about like the  there was like like hundreds of thousands of  

gallons of maple syrup that were stolen  up here last year it was like this big  

story in quebec that's like breaking news it's  stolen billions of dollars in maple syrup that  

stuff is expensive man oh totally it's like um  but yeah i didn't know until a couple weeks ago  

that like like the non-maple syrup up here they  just call it sugar syrup like kind of the stuff  

i grew up on like everyone saw we'd splurge  on some like log cabin stuff or whatever but  

like most of the stuff we had what happened was  all fake it was it log cabin or maybe i'm not  

misremembering like this is butterworth on jamaica  they just call it sugar syrup up here oh really  

okay because they're like sugar syrup i just heard  that the other day because i was camping with some  

friends and they're like yeah sugar syrup i was  like that's really smart like maple versus sugar  

anyways um so yes what i'll say is i mean one  of the i mean one of the big things that makes  

whole life more applicable at least from our  conversations in canada just because our taxes  

are more extreme our estate taxes are more  extreme it seems to me so that's one of the  

reasons why i think a lot of people you know like  as i've mentioned like there's a there's a um  

a doctor finance guy in the states who's really  anti-whole life and when i look at the comments he  

makes about it not being a great idea is partially  from the estate planning perspective and now i  

don't know exactly how it works down there but i  wrote him and i told him like up here in canada  

like you get to that 50 to estate tax very fast in  canada um it's very easy to get there which seems  

to me a little bit different than the states  and then we've also talked in the past about  

capital gains being um you know  capital gains up here is instantly 50  

there's no graduated level it's like instantly  50 is capital gains so that's another thing and  

the rumor is every year the rumor is that they're  gonna take it up uh they haven't done it yet but  

every year the rumors they're gonna take it up  to like 75 or something um so so yeah so it is  

whole life is i mean there's obviously some very  specific good reasons for using it up here a big  

part being around tax planning um now the 101 on  the ifa saw immediate financing arrangement ifa  

a bit of an advanced concept so i'm going to stay  to like the high level today i'm going to talk  

about like who among whom is this really popular  um and i'll just kind of talk about like you know  

who who looks at doing these um again like it when  i do these i have to like send these illustrations  

around to different like people to make sure that  they work so it's a pretty specific thing but  

it's based like it's really popular  among so i mean the concept around it is  

someone says hey i want to take on a whole life  participating insurance policy um is there a  

way that i could do this and not have to come up  with the whole premium right off the bat and the  

way that the immediate financing arrangement  is is you look at what's the total premium  

what's the cash value you're gonna get as  soon as you start putting money into it  

and looking at can you use that immediate  that cash value to immediately borrow against  

to keep the policy going rather than having  to come up with the whole premium yourself  

so really what it is is like young professionals  who are not necessarily interested in borrowing  

against their policies quickly or like or using  it for more of a long-term retirement strategy  

where they say look uh like so doctors i'll give  the doctor example so a doctor who's starting out  

a lot of times they jump from residency to  practice they start making a lot more money  

but maybe they've still got a lot of overhead  maybe they're still building their practice  

maybe they're still figuring out some like the  nuances of running the business of a practice  

and or they've still got a lot of debt that  they're paying off or like their lifestyle is  

just starting to ramp up so they're like  you know what i don't have a ton of cash  

now but i know like 10 15 years from now i'm gonna  have way more like my kids are gonna be grown up  

my house is gonna be paid off you know my  my my practice is gonna be chugging along  

so they look at the long term need and they  say you know i really should take on a policy  

like you know of this much per year but i  can't afford it right now what can i do and  

so basically what you do is you borrow to pay the  difference between the cash value and the premium  

so a lot of people what they can look at is taking  on a larger premium earlier on because they don't  

have to come up with the whole premium right away  so i wonder is that like premium finance in the  

united states it sounds very similar i think  that might be it i remember someone telling me  

like kind of mentioning what in the states  is similar and it sounds like it might be  

does it work like you're you're i mean how does  it work in the states yeah i mean it's it's very  

similar to what you say and there's honestly it's  there's no simple way to explain premium financing  

it's it's there's different ways you can leverage  it based on the different type of product  

a lot of people are actually using iul  right now which i think is a super dangerous  

thing to do for premium finance um it it's been  done with whole life for a long time but like  

it's it's it's all about leverage right it's  about using money to buy whole to buy insurance  

and build cash value and creating arbitrage  essentially in between um the loan rates and  

the return yeah i mean interesting that they're  doing it i mean the company that i was literally  

on a webinar today with a company that was kind of  going through some of the finer points of this and  

i don't think they'll even do it for uh ul like  the one that was talking today maybe there are  

that's not that maybe there are some that would  um but some banks up here don't even touch  

universal life for loans they just do they just  do participating that's pretty common i mean down  

here we have the cash value line of credit um yeah  banks will do for whole life but they won't do for  

iul and that that speaks a lot you know to what i  always tell people like iul's are not all they're  

cracked up to be and if the growth in iul's  was so um you know predictable and and good  

and consistent and uh you know dependable first  of all insurance companies would be using the  

strategy that they use for iul's with their whole  general fund to be able to get better returns in  

a really stagnant market you know and these banks  would lend and leverage them and let you leverage  

them better and they don't and and listen if  you think you know more than a bank knows well  

i got another thing for you so oh yeah i mean  certainly some of the people that have reached  

out to me from the videos have said to me  oh yeah i've already got a ul policy or  

you know should i take on a ul policy for this  and you know i talk about how i mean one of the  

things is simply the philosophy i have is i don't  mind people investing and i see this as a part of  

what other things people may have going  on like real estate or a business or  

you know whatever um really whole life  place participating whole life plays a very  

specific role in that and from what i've  seen universal life does not replace that  

at all because and i mean just like talking about  the borrowing standpoint the companies that do  

uh offer financing for ul i'm pretty sure they  only give up the 50 percent usually whereas with  

up here with participating whole life they loan up  to 90 percent yeah they don't that they don't do  

they do 50 with ul because they know it's the  guarantees just aren't the same like they're  

not willing to take they're not willing to um put  themselves on the line for something that doesn't  

have the same level of guarantees around it yeah  i love it up down here they'll do um they'll do 95  

of the cash value and a whole life policy that  they'll lend you for cash value line of credit  

which is pretty for any friend like for 95 for our  whole life and what about for ul nothing they want  

i'll eat it yeah yeah so that's one of the big  things i've talked about some of the people that  

reached out to me from the videos um so yeah so  this one like i said like i'm still i am still  

looking at ways to to whiteboard the ifa to make  it simple for people really when i run the cool  

thing about when i run the illustrations  is it basically shows the net benefit  

down the line of having done this and it's  pretty cool like it just shows like how  

you know the cash flow isn't as high  out of pocket because you're paying for  

a portion of the premium plus interest on  the loan that you're using to finance it  

and you can technically just leave that loan  forever and let the death benefit take care of it  

like 40 years from now which a lot of people  do they just leave that once that loan hits  

the top they just leave it they pay off the simple  interest and they let the cash value and the death  

benefit just keep growing and that they're like  you know down the line it'll take care of that  

like like more than enough to take care of it  or they can pay it off like it's very flexible  

you can either pay it off or you can just  leave it until the end of the day and i'm sure  

like a lot of people just like the idea of  leaving it because they'd rather just have the  

cash freedom that's awesome so talk to me who is  this good for who is it like who do you who is the  

ideal person who you think this is like a good  fit for yeah so what i'd say is it's like it's a  

good fit for someone who's looking at doing 50 000  or more in premium a year because that's usually  

the minimum threshold to get qualified for this  the lenders who are lending financing to people  

are looking at 50 000 a year for 10 years so it's  not it's good for someone who like i said like a  

lot of the professionals i know that know that  this is a good strategy are very interested in  

putting money in for years and years and  then using it to supplement retirement  

as a borrowing strategy different than the people  who come to me and they say galen i want to put  

premiums in for like you know 10 years or less you  know and i mean they could still do it technically  

but the premium would have to go way up because  they're usually they're looking at a total of  

500 000 of them so it's really good for for  someone who's in it for the long haul um  

you know 10 plus years um like i said someone who  usually it's a good fit for professionals who have  

maybe lower income now than they're going  to have in the future but they still have  

a need for retirement planning for insurance  coverage for tax efficient growth like they're  

looking for all those things and they just say  you know what i can't necessarily come up with all  

the money out of pocket today for all this or i  don't want to tie up all my money you know like my  

this all the money and the premium then they only  have to tie up a fraction of it and still still be  

able to take on the same policy just that it has  like an inherent loan from day one that's awesome  

that's cool so so it's are there any  any drawbacks to it that you would  

i mean aside from the fact that you need 50k  a year you know so you're really talking about  

you know a certain demographic of people but yeah  for sure like it's definitely you know like i said  

like a lot of the people i see doing premiums in  that neighborhood are higher doctors professionals  

you know if you have a corporation obviously it's  an even better deal um yeah so i'd say that the  

drawbacks would be that people who are doing  this are not looking at doing a really quick  

quick deposits like that's not the demographic  or someone's looking to borrow quickly against  

their policy because i do meet people who say hey  i'm going to put this money in how quickly can i  

turn around and borrow it that's not going to work  because that cash value is technically still part  

of the loan in the early years so you can't borrow  you can't take it and use it in two places at  

once like you can't borrow against it to use it to  keep the policy and borrow against it to go put it  

somewhere else so it is for more of the long-term  folks which is a lot of the people i started out  

with years ago when i started as an advisor were  people who were committing to at least 10 years  

if not 20 plus like if i've got a doctor who's  in their 30s they're looking at easily in the  

neighborhood of 25 30 years of premiums such that  by the time they go to retire they can just borrow  

a ton of money out of their out of their um out  of their yes yeah yeah yeah got it that's awesome  

so what else what else would we need to know i  mean it seems super straightforward and it seems  

like if you are if you are uh a doctor if you're  a business owner entrepreneur um and you need to  

kind of come up with your own retirement strategy  uh like you know this is this is a a play that  

would definitely make a lot of sense because it  it's getting one dollar to do multiple things for  

you which is fantastic um for your personal life  for your retirement for your business for your  

legacy for your you know estate and tax planning  all that stuff right so um it seems like uh  

that that it's just a no-brainer for people um so  what i guess what would you what would you say um  

is the next thing for people to do like  er like you know for for people who are  

interested in it who want to learn more are there  resources you know could they call you and have  

a conversation with you about it like what what  would you suggest to people yeah for sure i mean  

the biggest thing yeah i mean you definitely  want to be talking to someone who knows how to  

look at all the different options because this is  just one of them like really i don't bring this  

option to the table until i've got a really good  feel for what someone's up to around this so um  

you know i had a business owner out in bc reach  out to me and he was like yeah galen i want to  

build the cash value really quickly i want to  borrow against it you know quickly and so i'm  

like all right doesn't sound like this is going  to work for you then more recently i had a doctor  

reach out to me in ontario who said you know all  my colleagues are doing whole life inside of their  

corporations i would i'm really interested in this  much of a premium is there any and for a long time  

she's like i don't want to access this in the  short time i definitely want it just to keep  

staying like she's like not planning on it she  could like technically like in in general with  

whole life she's not planning on it so she's like  gayle and this is a long-term retirement strategy  

is there something you could do to make it look  even more attractive and so that's when i start  

running the the immediate finance arrangement  options because before that people might get  

excited about it like oh yeah like i mean because  it can mistakenly sound like they're getting like  

free life insurance or like really cheap life  insurance well that would be that would not be  

accurate because it does something has to has  to has to shift in this case it's it's your  

access to the cash value in the early years is  limited um so yeah so i mean really definitely  

people you can reach out to me as always you put  you've got the link there in the in the comment  

or in the description um really starting with the  general idea of when people come to me it's like  

you know they usually come to me with an idea  of how much money they've got how long they're  

going to put it in for and the final purpose  of it all and then i can take the time to say  

okay either you fall into this category where an  ifa could make sense or you fall into the category  

where i can tell right off the bat it doesn't make  sense and then when if it does make sense i simply  

just show the um the you know i've got crafts and  charts and stuff that just show the difference  

between not doing it and doing it and what the net  benefit will be at the at the end of the day cool  

and at the end of the day it doesn't doesn't hurt  to uh take a look and see what it would look like  

for you right no harm to foul in checking it out  it's i'm a big believer with this stuff to leave  

no stone unturned right you like it's a big part  of the education process you know and personal  

finance is like really taking a look at some of  these alternative strategies and methodologies  

and and seeing what they would look like you  know and and that's i think one of the things  

i like about it is you could kind of get a get  some clarity about what it would be like for you  

on a guaranteed basis with no commitment no  nothing just to kind of see and then if it makes  

sense you can move the ball forward and you know  talk about potentially implementing it or whatever  

at that point in time so that's awesome man is  there anything else no that's it i mean i really  

like what you said leaving no stone unturned i  mean i think that definitely in the early days  

when all i had was like the easy sort of training  around how these things worked it was definitely  

like it's very easy to fall into a prescriptive  method of everyone has to do this the exact  

same way when in fact there's like our the last  video we did was about all about how flexible  

um whole life can be i'd say that most people when  they come to the table they don't understand how  

flexible it can be around and we talked about how  even me just flipping the switch on my software  

makes it more flexible and then i can even send it  up to have like a review from the uh actuaries to  

make it even more flexible like it takes it takes  extra work on my part but i want to make sure that  

at the end of the day my clients have got the best  option possible so i'm willing to go through a few  

levels of analysis to be like all right i've run  all the analysis i'm confident that this is like  

your best option for what you want to accomplish  so yeah so yeah i know that's that's it like just  

knowing that there's that option out there could  make sense it's always good to check it out to  

see if it makes sense rock n roll all right guys  well if i hope you found value in this if you did  

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we launch a new video galen and i try to do at  least one video like this every single week so  

if you are in canada and you're seeing this we're  doing all sorts of great content and we have done  

all sorts of great content on um topics of this  nature um you know for personal finance in canada  

that i think are really beneficial for people  um and aside from that obviously if you have any  

questions i try to engage and i hope galen engages  with the comments in these videos as well i try to  

engage with every single one so leave a comment  make a comment if you have any questions about  

anything ask it in the comment section we will  respond to every single one so that's it for now  

until next video have a blessed inspirational  day and we'll talk to you soon take care