After the near collapse of the American economy during the 1970s, there were high hopes that the next decade would be a time for prosperity. Unfortunately, the 1980s marked a period of economic excesses and crises. R. Nelson Nash, a financial services pioneer struggling with high-interest loans from commercial banks at the time, sought a way to depart from traditional borrowing methods.
In his book Becoming Your Own Banker, Nash introduced the concepts of "be your own banker" (BYOB) and "infinite banking" (IBC). The philosophy behind these concepts involves reclaiming the interest usually paid to banks or other external entities to help people establish their own banking system. He proposed to "do what the wealthy do" and advocated to leverage the Participating Life Insurance (PAR) policy to make it happen.
According to Nash, the PAR policy allows individuals to build equity within their own "bank" through compounded dividends and borrowing against the growing policy value. With this, one can seemingly borrow from oneself. This notion has attracted attention due to its simple nature and enticing promises. However, unknown to many, these concepts can lead to grave consequences as they challenge the insurance industry's status quo, potentially impact life insurance's reputation negatively, and set unrealistic expectations for clients.
Adam Niman, with his extensive experience in the financial landscape spanning over a decade, recognizes the need for the insurance sector to reevaluate its approach and pivot toward a more pragmatic and sustainable financial strategy. From years of firsthand experience, Adam realized the importance of bridging the gap in the insurance policy sold, the expectations they set, and the reality of what they truly deliver. He underscores how some advisors overlook the long-term implications for the individuals they aim to assist in their eagerness to endorse PAR policies.
Following this, Adam authored Fortune or Fiction: Why the 'Be Your Own Banker' Concept is Flawed, an eBook that sheds light on the misconceptions and pitfalls of prevalent financial philosophies. Adam started his journey in the financial sphere as an advisor selling funeral plan life insurance. He ventured on his own after having a newfound purpose to provide genuine value and sound advice and established Niman Financial.
Adam's vision is rooted in the advisor business he purchased with policies on the books, dating back to 1968. Servicing these clients led him to the realization that there is a vast discrepancy between the way the policy is sold (the illustration) and the results. With this, he strengthened his resolve to advocate for a more transparent and reliable future in the industry. Adam emphasizes that "in an industry that's meant to protect you, your finances, and the people who rely on them, truth and transparency matter."
The expert sheds light on the issue of promised perpetual growth and leveraging of increased policy values; the first iteration revolved around a similar concept, vanishing premiums. This problem emerged when initial promises of paying premiums for a short period and enjoying sustained dividends failed due to undisclosed assumptions within policies.
Adam highlights how many insurance products are marketed to mask their true value, leading people to invest in plans that might not align with their needs. "I feel like products are marketed in a way that reinforces the interests of the industry and the advisors and not really the interests of the people that need their advice. There are many concepts out there that pull the wool over people's eyes to encourage them to buy things they otherwise wouldn't if they were getting the proper advice and given proper context in and around how these products work," he explained.
It is worth noting that Adam's advice is specific to Canadian products, and insurance policies like PAR can be advantageous when understood and utilized correctly. However, they should not be viewed as ways to "become your own banker" and obtain infinite wealth. Ultimately, Adam supports the insurance sector by promoting transparency and aligning client needs with the realities of insurance policies, ensuring that every dollar invested in insurance maximizes an individual's needs in potential catastrophic events.
