041- Do What Banks Do w- J Hutchinson

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In this episode, we interview John 'Hutch' Hutchinson about how banks invest their liquid reserves so businesses can learn and adopt the same strategies for their own cash profits.

:00      Opening Remarks:
Steve: I met Hutch in PV
Or Will: We’ve worked together on mutual clients
Hutch is licensed as a financial planner and insurance agent, but he specialized in the unique challenges that business owners face. Business owners have special sections in the tax code, they have a greater need for asset protection, they have additional estate planning considerations, but most importantly liquidity is often the life’s blood of their business.
 
:45      Introduce episode: 
And that’s mainly what Hutch is going to talk about today, how business owners can transform their liquidity, their cash reserves, from the likes of a lazy employee to a star performer who’s wears multiple hats for the business. 
 
1:15   How does the listener benefit? 
     Ever wonder what to do with your emergency fund or your savings in between buying equipment, inventory, or property? There’s a huge vacuum in the financial planning industry for what to do with money reserved for these purposes. Here’s your 3 choices according to most financial planners:

1. Put them in “safe stocks or mutual funds with really conservative blue chip companies?” Not with this money. Remember, we saw even the Dow 30, arguable the most stable stocks, lose half its value on two different occasions between 2000 and 2010?
2. Put them in treasuries, munis, or investment grade bonds? No thanks, not when they’re yielding a paltry 3% or 4% and they can easily lose 10%-20% of their value as interest rates rise?
3. Keep it safely in banks and be happy with a rate of return that starts with a dot. Most business owners I know wisely choose option 3 because like Mark Twain they’re more concerned about the return of their principal than the return on their principal.

Here’s 3 benefits their missing, that ironically the banks pick up by accepting their deposits and routing it into investment-grade life insurance.
 
2:00   Discussion points:    

1.      Missing out on compounding with paltry growth
2.      Too add insult to injury pay taxes on your growth
3.      Most term insurance expires worthless

Business owners usually own some insurance anyway, but by funneling their cash flow through policies engineered primarily for liquidity and cash value growth they can get $1 wearing multiple hats for them.
 
10:00 Tips for improving or overcoming the above challenges:

1.      Keep your safe and liquid assets constantly compounding and build 2 assets at once.
2.      Enjoy complete immunity from taxes for these dollars
3.      Protect against death and serious illness or injury (bolster your buy-sell agreements and key man protection)
4.      Hedge against future interest rates by locking in a lifetime line of credit at 5%-6% with an opportunity at safely earning positive arbitrage on these funds.

 
17:00 Final Take-aways: (2:00 mins) Recap benefits for listeners
The proof is in the pudding that fact that Bank of America and Wells Fargo invest over $20 Billion in these types of products for their cash reserves, more than double that each own in real estate. They’d even do more if they had more key employees to insure. In fact if you type in “Walmart Life Insurance Lawsuit” you see that Walmart liked this idea so much they took out policies on low level employees like cashiers and janitors. You don’t have to do anything illegal. You can be like Walt Disney and insure yourself, or you can legally own policies on your business partners or certain key employees. 

 
20:00 Show ends 
 
Guest Resource Information:
Be Your Own Bank in 5 Simple Steps:
https://bankingtruths.com/awr-5-steps-to-build-your-own-bank-with-whole-life-insurance/
 
The Top 4 Myths Behind Becoming Your Own Banker:
https://bankingtruths.com/awr-top-4-myths-behind-being-your-own-banker/
 
Indexed Universal Life's (IUL) Pros and Cons Thoroughly Explored:
https://bankingtruths.com/indexed-universal-life-insurance-pros-cons/