Becoming Your Own Banker

by Todd McLay

May 7, 2020

Becoming Your Own Banker

Banking is the cornerstone of our financial system. All of our assets, liabilities and cash flows are connected to banks to some extent. With that in mind, we have worked to create an innovative concept that allows you to essentially become your own bank. “The Vault” is part of our Infinite Banking system that utilizes the unique tax properties of whole life insurance policies to reduce the cost of borrowing, increase the return on your investments and maximize your overall wealth.

How it works

Unlike regular term insurance policies, whole life plans include both a death benefa tax-sheltered investment component. Each policy is unique and the details will vary depending on age, death benefit, etc. but the important part is that there is a guaranteed, creditor-protected“cash surrender value”, or CSV. This investment asset provides tax-free growth through guaranteed dividends that are not correlated to the stock market. This means greater tax-efficiency and faster growth in a safe investment that is not subject to the whims of volatile international markets.

These policies are available with minimal underwriting when used for financial purposes and if left in place indefinitely both the CSV and death benefit are paid out to your heirs tax-free on death. However, as we’ll explain shortly, there is an even more effective way to use this asset to increase the long-term value of your portfolio.

Asset Accumulation

The average investor puts some money away but spends the bulk of their cash flow on consumer items that lose value over time. Wealthy investors, on the other hand, focus on assets that will earn them income and continue to grow, creating an endless cycle of wealth. Real estate is one of the best examples of this. Wealthy people purchase property, allow the growth to create equity, then unlock that equity to invest in additional growth assets. This is often referred to as the “Velocity of Money”, letting your money work you to create more assets. This is the foundation of our Infinite Banking strategy.

The Vault

In traditional banking, we deposit our cash at minimal interest rates, then borrow it back at considerably higher rates to pay for things such as homes, vehicles and vacations. We have no control and generate no profit. When we want to purchase an asset we either make a series of deposits over time and eventually save enough to pay for it, or we borrow a lump-sum, then make a lengthy series of repayments that include interest charges.

Our Infinite Banking method, however, uses the CSV within our whole life insurance policy as a separate asset class that can provide financing instead of the bank, allowing the interest to benefit us rather than penalize us.

Financing Strategies

We can borrow against the value of the CSV to purchase any of the usual things (house, car, education, vacation) while the existing investments continue to grow inside the policy. An even more effective use of the Vault, however, is to super-charge our retirement savings.

A typical retirement savings plan involves making RRSP deposits, investing them for the future and then either reinvesting the tax refund or using it to purchase consumer goods. With our Infinite Banking strategy, though, we deposit our cash into our whole life policy first. This goes into the tax-sheltered CSV. We are then able to borrow up to 90% of the CSV, and we useamount to make the RRSP deposit. Meanwhile, the CSV investments continue to grow through guaranteed dividends, as usual. The tax savings are then re-invested into the Vault, replenishing the CSV, further increasing the amount available to borrow and significantly leveraging our investment growth.


As we mentioned earlier, the exact details of each policy will differ by situation but an average example would be a joint-last-to-die whole life policy for a couple aged 35 and 32 where we deposit $6,000 per year. The available CSV in year one is $4,800 and we can borrow up to 90% of that amount, which will be used to make an RRSP contribution. The resulting tax savings are re-invested into the policy, increasing the CSV and the available loan amount the following year. Assuming a 6% rate of return and taking into account the nominal 4.5% interest rate on the loan, if we were to do this for 20 years the balance of our RRSP would be $74,000 greater than if we were to simply deposit $6,000 per year. On top of that, the CSV would still be $22,000 greater than the outstanding loan balance, for a total of $96,000, representing a increase in overall wealth!

Of course, the Vault is not limited to retirement saving, it can also be used to design specific strategies for funding a college education, purchasing vehicles, creating emergency savings accounts and even making business loans.

By recycling assets through the Vault we can greatly increase our annual growth, tax efficiency and total portfolio values, all while avoiding the high fees and costly interest charges of traditional banks.


Disclaimer & Legal

Any views or opinions expressed on this website are solely those of the representative, and do not necessarily represent those of Harbourfront Wealth Management Inc. The information contained herein was obtained from sources believed to be reliable, however, the accuracy is not guaranteed.

Click here to read more about Harbourfront Wealth Management's legal privacy policy.

Harbourfront Wealth Management advisors are currently licensed to sell equity securities, bonds, mutual funds, GICs and other securities that are subject to available regulatory exemptions. Your advisor may also offer insurance-related products and/or financial planning services. These services are not offered through Harbourfront Wealth Management Inc. However, your advisor is duly registered to provide these services under applicable insurance legislation and the dealer approves such activity to be conducted outside of the dealer.

IIROC Advisor Report