Cash value is not cash in the bank: understand access before you commit

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But then in 2022, my daughter was sick with cancer. It's a rare cancer at the base of her skull, basically laying on her brain stem. I mean, look my daughter in the eye, said, "Your best chance of survival is full resection. I think I can do it." Great. What do we do now? It was proof of insurance, which we didn't have. Or the initial quote paid in full. That [music] was $275,000 US. I immediately ordered $400,000 Canadian against the insurance policies. I had other options. Refinance my house, reinance my cottage, sell my [music] business. All those things would have taken time I didn't have. And how does it work? When you take out the loan, you don't apply for anything. You [music] order it. You call right now. 3 days later, I had uh 290 around $290,000 with my bank account in 3 days.

The sheer ability to do that. How do you measure that value? Me, I'll never be able to measure it because I I can measure it as it was it was save your daughter's life. Yeah, exactly. Save my daughter's life. [music] So, welcome to Beyond the Bottom Line. I'm your host, Joey Lon, and this show is about pulling back the curtain. How the ultra wealthy actually protect and grow their money without the gatekeeping or the complexity. And my guest today is Scott Ganon, president of Magnify Wealth. And Scott is what I called a reformed financial adviser because Scott spent over 20 years in the traditional world of mutual funds and and market-based investing before a series of market crashes force him to rethink everything. Over 31 years, he's built a practice dedicated to helping incorporate Canadian business owners turn trapped retained earnings into flexible, tax efficient capital while maximizing their estate in legacy planning.

Uh, so Scott, that's a great intro. Welcome to Beyond the Bottom Line. Thanks for having me, Joey. Looking forward to it. So, I'm very excited about this conversation. You have a lot of experience and I'm sure there's gonna be a lot to dive in. So, if you're a Canadian business owner watch uh watching this right now, you you're going to benefit from this. So, Scott, you've been in the financial services industry for 31 years now, right? You've said publicly that for the first 20 of those years, uh, you put your money and your client's money into mutual funds. And then you watched it lose about half its value twice. Right? When I entered this business in 1994, all I wanted to do was I call them asset gatherer now, but sell mutual funds. I I had studied it and that's all I wanted to do.

And I was offered with several companies, but I actually started at a life insurance company, Sunlife. And I chose them specifically because they had a mutual fund division at the time and and [clears throat] the goal was to just gather assets and and be a financial planner as I was taught. Now the first six years I look like a genius even though I really all I was doing was selling and and then uh placing that money uh double digit returns for for the through the rest of the 90s. So, it made made it look um look like it was pretty easy and made me look like a genius until I wasn't. And you know, when uh and and the and the real history behind this is central banks flooded money uh coming into the the turn of the century because of the Y2K problem.

And and so that le led to well, I mean, you people talk about airplanes flying into buildings. that was the catalyst that that that spilled over. But 2002 was really the the you know the recession and the dot bubble burst and all kinds of things went sideways. I definitely understood why and the the the the system itself, my trainers, the mutual fund dealers association, they don't want you turn churning money. They want stay buy and hold. That's that's the process, right? So that's fine. And so I was like, well, it felt money fell by 50%. And I I was like, well, now's the time, right? This happens once in a generation. So between from late into 2002 right through 2004, um, you know, was it was did a lot a lot of investing new money, investing new money, put plowing money into the market because it only happens once in a generation as I mentioned.

Well, generations are apparently are in dog ears now because it happened again in 2008 in the financial crisis and again subsequent recession and so on. So all of this really got me soulsearching as you already mentioned in my in my intro. And if you look at a chart of the S&P 500 from 98 through to 2011 and all you did was stay there, you would have gone nowhere for 13 years. And that was, you know, I mean, I I was already working on other things. I was looking at real estate after the after that, but I left the money. I was like, you know, it will recover. I know that. And it bounced back fairly quickly. The markets did, but then they got stagnant again. And then they took off again in 2012. By then though, I was already focused on investing in real estate myself.

Didn't hide anything from my clients, but I really wasn't gathering any more assets. And then a couple years later I uh well I guess three four years later I discovered infinite banking and how very specifically designed life insurance contracts can act as very solid warehouses for cash. Went right into it myself. Started started uh piling money in and started marketing. But it was nice to realize that I had something in my day job that married quite well to real estate for to real estate and real estate investors in general, but also for business owners that have, you know, anything in a corporation has its advantages as well. So, so that discovery and then of course and then I had my real kind of validation moment, if you will. Well, I mean, I I had done some investing, some private lending.

I've done some several different things in the real estate field on the side, but then in 2022, my daughter was sick with CA cancer. And after a couple of surgeries here in Halifax, where I'm at, we were told I I'll fast forward the story a little bit. Within 4 hours after I found out what she had, I found the top surgeon in the world who only does cord cordomomas, which what it was called. It was a it's a rare cancer at the base of her skull, basically laying on her brain stem. And we went to see a radiation specialist in the 1 of January 2023 and cancer still there, too close to her brain stem, can't radiate. She still had cancer. Well, what do we do? Uh, we recommend you find a surgeon willing to go back in.

That was the first bit of relief I had. I had already accumulated about over half a million in in life insurance cash value. And when we sent our records to Dr. Paul Gardner is his name. He he was in Pittsburgh at the time. Now he's now at in New York. And within a few days, we were on a Zoom call with him. He looked my daughter in the eye. He said, "Your best chance of survival is full resection. I think I can do it." Great. What do we do now? He said, "Call this number." their business office. So, it was proof of insurance, which we didn't have, or the initial quote paid in full to get a surgery date, and that was $275,000 US. I immediately ordered $400,000 Canadian out of against the insurance policies, converted to US.

Any long story short, within a month, she was in and out of surgery. Um, yeah, and and got it all. October 2023, some radiation. She finally finished treatment. Now we're almost three years from the actual it was almost three years from the actual date of her final surgery on uh for the cancer and she's thriving. So it was a real validation for me because you know one opportunities are one thing but access to cash when you when you really want it because the problem was is is a type of cancer that gets very aggressive when you touch it. She had already had a a biopsy and two surgeries. She was failing in front of us and I had to move quickly and yeah, I was able to do it because I had that ready access to capital and frankly that just well it cinched it for me, right?

I uh you know I already knew mathematically it worked. Then I really realized that you know opportunity opportunities are are come come in different different looks and when it can be a lifeline. I had other opt I had other options. Refinance my house, re finance my cottage, sell my business. All those things would have taken time that I didn't have. Wow. That's the That's a powerful story. That's the That's the long version. So, you became you became your own case study basically of like liquidity, right? Yes, I did. That's amazing. Well, congratulations on on all that and God bless that everything is uh is good right now. Um that's definitely not a a happy story and that anybody wants needs to go through. Um and um happy ending. So so basically that life insurance policy, right?

Mhm. We're able to take a loan against it which was taxree. Exactly. Any other options would have been taxable, selling your business, refinancing everything, you would have paid what 30%, 40% whatever on it. Um, so now just because you had invested before and I policy through your business, if I didn't change the my thinking back uh what 15 years ago now or whatever it's been, yeah, my money would have been in the market inside those the corp and I really didn't like I yeah I mean they might have been able to margin or leverage some of it but generally I didn't even have time to even try to figure that out. I would have had to redeem it and then then I was then it was tax right. [snorts] How how is that structured? Because again like this is this is all things that happen when we the least expect it and one in three people will have cancer.

I got diagnosed myself in 2018. So I I'm I'm in the statistics. Um and anybody can go through it either yourself or someone in your family and if you're not ready to have those funds available. Um so it's it's how it's everything. It's how to prepare for it right how to prepare for it. So what was a structure like if you're a business owner and you want to prepare or set something up like that for yourself for your family if ever something would happen or when something would happen what are the specifics in terms of that properly structured insurance policy? Ultimately, it starts with liquidity and there are, you know, there's ways to structure insurance policies that maximize death benefit later on and that may be appropriate for people that have more money than more money than they'll ever need and and I've dealt with them there.

Um but I do focus mostly on those liquidity style policies which are designed to be is is you CRA has a a limit a cap on how much you can put into a a life insurance policy and remain tax exempt. That number we always max out right from the start. So and and so we push down the coverage as long as it's within the needs because the insurance is is important as well. But we also max out the amount of money that can go in. So in the design is that money that maximum is is based around the amount of coverage you have in place. So if that so it might be like like say $20,000 to buy a million dollar policy, but you can put up to say $100,000 in in a given year.

That might be a bit of a stretch. more like more like 75. Okay, 75 in that area. So that we go for the 75, but the the great thing about it is the flexibility. So yes, I maxed out my policies and yes, they were maxed out right up until until I dealt I dealt with what was going on with my daughter. The great thing about it though is the last thing on my mind was making making the next payment when I basically pretty much took two years off work. So I didn't max them out then because I have that flexibility. See because that 20 in that example that 20,000 that comes due each year the 75 that the difference between is flexible start stop any any portion of you can you can you can put that in but even more important is you throw in the 75 in the first year.

In effect, you're you're basically have enough in there for the first three, four, even possibly up to five years. If if push came to shove and you absolutely didn't have any money to put in, it could still stay in force because of the overfunding you started with. So, it's really all about safety, flexibility, and liquidity. And how does it work when you take out the loan? So, let's say you took out $400,000. What's the mechanics to repay that, the interest on that, and all that stuff? That was the awesome part. you you don't apply for anything, you order it. And for for the the 400,000 that I ordered was was across four different policies. Most of the money came in in the third day and the rest came in by day five of the third day.

Like you call right now three days later I had uh 29 around 290,000 of it. Damn. So, so the the the sheer ability to do that I don't know how do you measure that cost like or sorry that that value I should say how do you measure that value it's it's that value yeah me I'll never be able to measure it because I I can measure it as it was it was it saved your daughter's life saved my daughter's life exactly so uh you know that's I'll never be able to assign a value to it because it is infinite and how does it work to repay that loan. Well, that's there's flexibility. I mean, there's interest charged and you understand too, right? Like, so I had over like a little over 500,000 at the time, 523,000 at the time.

Okay, that 523 still grew at from 523 when I borrowed the four. And that's what people understand is, you know, one of the first questions I used to get asked and I didn't even know the answer to when I was first trained in life insurance back in the 90s is why do I pay interest to borrow my own money? I used to tell people it's not your money, but that's actually that's actually the right answer because it's not. It's the insurance company's money. Your money's still there growing and gaining interest. And that's a corporateowned life insurance policy that any business owner can uh set up for themselves, for the family, and that's just one benefit of it, right? Like if you need the liquidity for something that happens. Correct. Exactly. H how you said that you found uh the answer in the risk management side of your business not not the investment side.

So what did you find? What was why was it hiding in plain sight for you? So finding plain sight because it was always something that I was sheepish about and most people are about well what are you doing life insurance? Well, you know, it was it was it was this kind of and don't forget it don't forget the times too, right? Is we were going we were just closing in on the end when I first started in business. That was the end of the best 30 years in the stock market, continuous 30 years in the stock market in history that it was, you know, the S&P did about 13 and a quarter% annualized average from 1970 to 99. Crazy. Okay. So, back then, even then, it was just like, why would I do that? I can invest better.

Why would I do that? invest better. And I didn't know any better to argue with it mostly too because it's easy. Okay, I going to tell you why most people don't either don't see it or choose not to see it. Okay, so first off, money management is way easier. It pays you regardless if the money goes up or down in value. The results the results are relevant. It's it's it's a continuous basically an annuity to someone like myself. Money management is easier. When I say easier, I I like I don't mean it it it's it's like you put money and forget about it. They have work to do, but they don't have to worry about whether they're going to get paid at the end of the day because it's coming in regardless. It's hard. This is harder because it's the opposite of how we were taught.

So, it's kind of it's outside the box thinking what we do. So, you need to work or I do anyway. I first thing I do is work on on potential clients mindset. They need to shift their mindset from rate of return to clarity and certainty and protection of capital. It takes advanced study and knowledge and and it constantly needs upgrading because we're what we're focused on for rate of return. It's not about rate of return. It's about saving. It's about saving money from tax. It's about saving money from emergencies and it's about taking advantage of opportunities at the very right time. See what I do and I refer to this all the time I talk to my clients is I deal with the blind spots. I I always say money making money is easy. Keeping it is a whole other a whole other discussion alto together.

And that is where the blind spot that's where the blind spots live, right? The blind spots are how we're taxed. I just had a conversation literally before this meeting, like my meeting before this meeting or this recording. I'm with I'm sitting with clients and and they have two advisors, myself and like I do all their life insurance. They have an investment guy and I'm like I said something's bugging me and they were like what? I said I said how much money is in your holding company invested right now because their insurance is not I think it's under underutilized. And they're like um 2.5 million. So oh okay. I said I said and I mean these people have been clients of mine for 20 years and and I'm like okay so there's 2.5 million I said and and I said so you got and you have a business right they own a business they still own part of it they're they're retired now but they own a still they still own half the business and I said so your small business deduction I said did you I said did you take advantage of that like oh funny you ask about that we just had the conversation with Henry is the name of their accountant, right?

And and yeah, we we've lost that. I'm like, okay, I I bet you I can tell you why. So, so that all went into a whole separate conversation on passive income and how it's taxed and how this little known like I've literally had this conversation probably man the the the passive income cost so many times in the la in the last years now is so many people don't even realize that that 50 to 150 number in passive income is essentially taxed higher than what you earn. and and even though the first 50 is still punitive, it's 50 plus really except for Alberta. Um it's it it's it's it's beyond insanity. So I like to think of it as is, you know, I challenge um challenge them to think think outside the box and there's there's rate of return is not the end of it's not the end of the story.

That's crazy you say that because again a lot of the things that the recurring theme we hear all the time is is that most business owners again we don't know about that like we don't study that so we don't know about all those passive income rules and the tax rules so that's why we need to have people in our corners but then those people in our corner don't even talk to each other right you just said it right you've you've got those clients for 20 years and like how many time did you meet with that investment advisor or did they introduce you to talk about this strategic or this holistic plan and how much money would they have saved if you you have would have worked with Henry, right, the accountant and with the investment advisor and create a plan all the three together where you all work like within your specialty just like a surgeon and a general doctor and all that stuff would work but in finance I guess it's we don't work like that right so I I can safely say that's not on me like I've like I have actually worked with their accountant when I first set up their life insurance and I and and I have had asked the question several times I'm like this needs to be integrated.

We need to understand what each other's doing. And but they're very busy and you know they're busy make Yeah. Now that they're retired, they have a little more time. I'm like, "Okay, like we need to really address this, right?" And and they're busy paying taxes. Yeah. And Yeah. So, it's getting sizable. And I said I I I said I hate to say it, but there's probably a pretty big time bomb there. It's still deferred. They said, "But you know, at least now." I said, "Just send the email so that we can share information and give the permission." Why why don't most adviserss make this pivot like you made, right? Is it like a knowledge gap, a compensation gap or something else? Because it's hard. It's easy like this. I was just talking about it. It's easy to to manage money.

I mean, sorry. It's easy to bring it in. It's not managing like I I don't mean to criticize money managers like it's not easy. It's it's still it's still it's still valuable work to manage assets. Yeah. Yeah, but it's it it's not it's it's easy to get paid. And what's the benefit of going that extra mile like an adviser like you? Um why was it worth it before you do that? Make that like I said, I got frustrated. I got frustrated. I started looking around and I'm like, "Okay, you know, I want to deal with business owners. They're really good at what they do. Why am I trying to get them to extract money from their business to invest in in you know they whatever what whatever the return of equity 20% 30% whatever it is well let's take this out and diversify into something you know nothing about and have no control over like to me it doesn't make any sense expand your business if you didn't and if you're lacking capacity then store that money until the opportunity comes along I I just I couldn't sleep I like it it drove me crazy that there was there were really that you know that that I I talk about that 98 to 2011 all the time.

It's 13 years to go nowhere. That's that's that's uh that's that's a uh that's a gut-wrenching feeling sometimes. That's tough. You said you have a uh a particular process that you guys use uh personally at your firm. Um, so let's say for let's say I'm a business owner making let's say $3 million a year. Uh, $2 million retained earnings sitting in the old co. What does it mean to make every dollar work multiple times? Essentially any cash or money decisions there's there's a series of alternatives, right? That's if I do this, I do that. If I do this, I can do that. If I do this, I'm you know I you know, if I do this, I can't do that. Or if I do this, I can't do that. you know, so there there's opportunity cost in every decision you make because whatever you do now it's like you can't do that.

So, so it's it's one of those things that when you store your money correctly or I I say correctly, let let me rephrase that. Store the money store that money in the way I teach people then in a in a in a tax exempt environment. You protect yourselves. You you protect your cash from like four specific risks. Inflation, taxes, fees and risk. risk is volatility call it risk because I call it risk for a specific reason because a lot of a lot of business owners that are that are smart they don't really put that money at risk if if they want to be able to use it for other things because let's just like volatility is you know it's inevitable if if you're going to take risk with something you're committed to that because when that opportunity comes you know Murphy's law is going to be not the right time to take it out so so you end up passing on a decision let's just say you got 100 grand sitting in in in your whole co And so you decide to throw it in the GIC for a year, making 3%.

Okay, we'll just let's just call the tax 50% on that. So now you're at one and a half. Inflation's three. You've you've protected your money from going down in value, but it actually did because the spending power did. So you're now lower you've lowered that value and we haven't even addressed the other two risks which are fees and risk. Okay? Or sorry the other the other four factors. Fees let's just let's just forget about let's just say the bank doesn't even charge you a fee. You're still behind by the way. But what's the risk? You got money in GSSE. What's the risk aside from the inflation and taxes? If you got the money locked up, what if a life-changing opportunity happens in the middle of that? Mhm. You could probably sit there and browbeat your banker into letting you out of it, but now you've just had your money sitting there for six months doing nothing and and and disintegrating with inflation, but you won't get the interest.

Like you break a GIC, you're not getting it. And and and and of course there are there are altern so so there's all there's all these trade-offs, right? Banks are in it for them, not you. And yeah, and the other side of the coin, well yeah, you could invest it, but what if that opportunity of life-changing opportunity comes along and the markets are down? That's that's when those decisions become really really difficult. So to to say that a GIC or even holding cash is not not a risk, it is. It's a risk of spending power and it's a risk of missed opportunities. So, that's essentially how how it's if you store it in an area where it's going to stay tax exempt, generate a really respectable interest, basically bond-like returns, tax-free without a downside, and that's really key.

If you can get a bond-like return without risk, that that that's saying something. And not to mention the tax part of it is is is by far the hugest thing, right? So what's the alternative for a sevenf figureure business owner making a couple million dollars in profits retained earnings? Like what's the alternative that you suggest? At least we we have a very specific process we go through to not minimize let me say not like I be very clear here minimize the effect of your liquidity. Okay. So we we we use your free cash flow. We take a percentage of that. I won't get into the details of it, but but essentially we have a very specific process we go through and and like you know if your if your if your free cash flow is whatever say 20 grand a month or whatever that that's that's getting fed into that retained earnings or that whole car or whatever and you have you know whatever 100 200 a million dollars sitting there.

We base all of that around you not having your liquidity affected. Let's just face it, day one's your worst day and we don't want your liquidity affected by more than five, but likely three to four percent. And you said the whole like the whole point of all this and like your ideal clients are the ones that are coachable and open-minded and decisive and because if you're not because again people see insurance as that stigma of that that liability. So that's oftentimes the first step you got to do for those business or maybe once you tell your story it's not that hard to believe as well. Um, but so you do you actually turn away like clients that aren't ready to think differently? Course. Of course. I Yeah, I I I'll spend I I'll spend lots of time if they're with them if they're willing to take the time to learn and listen and and understand.

And when I say listen, I I don't like I I'm not going to preach. I'm going to teach. Okay? and and and what all all I ask is that they that clients or prospective clients understand that my goal is to have them immediately better off than they were the day before I came through the door. And that's if they can't be, then I don't I I just say no. I say if I if I can't help you get be better, your life be better the day after I'm there, then we don't do business. Is there an argument to think that it's not the best thing to do? You know, I I'm an open book, you know, and because I'm going to tell you like this isn't like this isn't all sunshine and rainbows like there there is a cost to doing this and that that's that that that reduction of liquidity up front, but there is and there is, you know, it it takes work like you got to get underwritten there's things to do, right?

But I think like the biggest reasons why not everybody do that is they don't have access to people like you. They don't h have access to professionals or they rely on CPAs or on other people that maybe don't have again the insurance license to even talk about it, right? We've talked about that a bit as well before which and they trust blindly their CPA or whoever they work they worked with for years and years or investment advisor and then once they come with that idea they shut it off immediately um when it could be the biggest thing for them. So, understand that if you're skeptical because h you know what the all I ever heard was, you know, you know, I had this insurance policy my my you know, my grandpa bought for me back in 1971 and and it was it was junk and I canceled it when I was 18 years old or whatever.

This world is different now than it was then. And and like I said, like actually those type policies still exist. is like I said right at the start said if all you want is a death benefit at the end then there are ways to do that when I say all you want if you know you've got the liquidity beyond having it immediately available in that in that vehicle we talk about that's that's a completely different conversation and that's fine like you can have that but understand that liquidity well I most people I talk to I I haven't really met anybody that I don't care how much money they have that they don't appreciate knowing that that their liquidity is going to be pretty much unchanged. And who who is that? Like which what's the profile the avatar of those business owners that this like makes the most sense for them?

Like once they hear it, it's like they cannot unsee it. Like if they're a business owner watching to kind of see if it's if it's for them or not. Like describe that that typical client because I guess you meet with a lot of those every day. So, so most of the people we deal with are probably north of 5 million in in worth. Uh, their business may not be worth that. It might be three three or four or two or whatever. Um, they're they're generally they're generally on their way to the eight figure uh worth. And I'm let me let me preface this with I'm not suggesting somebody that has 150 grand in in retained earnings is not ready. They are like this. This is we we have we we have brought this or the industry has brought this concept down to the masses.

So it's about acting you know you know if you're not already in the 1% act like it because you can get there too now but it's a different conversation. So when when I when I when I talk when I talk to people and I'm going to I'm going to cut this off at probably between like say seven and a half like if somebody's worth say seven plus million their problems are a little different than somebody that's worth one to one to seven. Okay. And when I say that meaning when I say their problems because their problems really aren't it's not it's not about um it's not about it's not so much about liquidity. It's more about like what's going to happen like cuz they they don't really even work for money because they know they'll never spend it all.

Their money will likely make more than what they what they'll what they earn by going to work. But they just love what they do and it just keeps building and building and building. And when I say seven plus really this is when you get to the eight figures everything changes. Okay? everything changes because you like, you know, unless you're, you know, have a mission to to spend all your money, they'll there's no way you'll spend it all. You know, obviously you can find a way, I guess, but most people don't. Once they build that, they're their concern is about losing it, not about making more. They're they're Yeah, it's it's really it's they get we're really focused on I don't want to, you know, I've gotten to 10 million or I've gotten to 12 or whatever.

I don't want to lose it. you know, I worked hard to get here. Those people think differently, okay? Because they want to protect. They want to, you know, and let's face it, like they obviously like to make more because that's what they do. But it's more important to know that they have that legacy in place. And so, how do how do we protect the legacy and make them almost legendary? And what I mean by that is think of, you know, try to put yourself, Joey, in this position. You're you're you're sitting across from me. You're you you've just crossed the $12 million uh net worth. Your business is pumping out a million dollars in profit a year. You've got, you know, you got several things on the go and you just know that um you'll never spend it all.

The business runs itself. You only need about a tenth of what it makes. It's just going to keep growing. And I look at you and I say, "What would you like to hear if you could hear because you won't be on this planet, you won't be on this side of the dirt when it said that your great great great grandchild, what would you what would it feel like to say, "Wow, I wish I would have met great great grandpa Joey." because that mean that that man knew what he was doing when he set up this call it a like you know I I I call it a family bank but it's kind of that Rockefeller style uh cascading is you know I really like it was genius what he did or who like three generations like who was my great great great grandpa I I don't know you know I had I I had a guy, he's worth real estate investor.

He was I think he's probably worth I guess worth more than $100 million. And he asked me an interesting question about Trump and this this is this this is this is completely talk about having a conversation there. Nothing. This is off script. That's for sure. So and he said he said would it he said if if I ask you would you be more would you feel more satisfied going from 0 to 10 million or from 10 million to 2 billion? Which is which is more impressive? I think the zero to 10. And that was my answer. He said, "Think about this for a sec. That is that you yourself made yes, but how responsible is it?" And again, I like it's about Trump and I know that that might be a little dicey to even have a conversation about right now, but but understand that that the fact that like because most people's criticism of Trump is his dad basically handed him $10 million to go work with or or thereabouts, right?

So it's not like he he could have sat on he could have sat on his ass and just stayed there and and lived a happy life but he didn't. Right. So is like you know what's more impressive? I it's for anybody to decide what's more impressive and and and and remove remove the name Trump and and you understand that there's so so understand that getting there is is is fine but like so you know I what I've done with my kids okay they they know that they they didn't pay for a thing well of course my daughter's not quite done yet because she missed full a full year of school but she'll be done this year that they don't pay for anything until they're done school and if They come to me with a business idea and conveniently as you know Joey my son has actually come into business with me.

So he went the easy road. He didn't start his own he came into the family business. Uh but my daughter I mean she's yeah she I like she I know she wants to set her own path and if she wants support financial support after after school she wants to start something she has to get yes she has to come he has she has to come to me with a proposal and this is how that Rockefeller meth method works and it become like you know so she has insurance that's part of it and she can borrow against it doesn't have to be from hers or mine or her mom's or whoever. It's it's a pool that that gets drawn on and if the if the if the if the concept is sound, we all agree that this is a good venture and the money might even be buying a business was to start one, doesn't matter.

We'll fund it. That's that's the concept. So, I'm not worth 10 million yet. I'm still doing that. And and I guess I guess that's not like you don't have to wait till you're worth $10 million to start thinking like that. like you said, if you want to get there, right, that's one of the ways to accelerate your wealth. It's interesting because, uh, we did an episode with Jeremy Kelly, uh, which is also in our in our network and he talked about his the same thing as what you said, but he calls it the cash waterfall and how him and his and his dad and his granddad, uh, put that in place so that life insurance just keep on stacking and sending it to the next generation and then they never lose their wealth. because one of the biggest tax bill you're going to pay especially as a business owner is that you're deaf, right?

So that's one other big big thing that that helps you there. It's that it it keeps the wealth in the family and you I think we're talking with another also guest in Canada. It's like it just it gives you option, right? Even if it doesn't save you all that money in taxes, what if you get to decide where that money goes instead of letting the government do it for you, right? So it's like it's that's that's I think just that to me is a is a good value, right? Depending not getting political here, right? But if all business owners they they trust their decision- making, they trust their themselves. And oftent times if I would if we ask 10 business owners, I would say nine of them would say they would probably make better decision at least for themselves with their tax dollars than the government would.

Right. You know, it's funny you brought up about uh I I've thought of because I just listened to one that just uh one of the podcasts that just dropped there, a part of it anyway. Um the names escaped me. The most recent one that just dropped and and the the part that he was he'd say he'd gladly pay more tax if if they were doing things that made sense to him, right? So, but they they just their values don't align with his. So, that's why he wants to avoid tax, right? And and in my mind, I've got there's there there's there's there's there's three areas, right? Anybody can make the choice, right? There's there's family, there's CRA, government, and there's charity. If you can pick two, which would you pick? Because you can. Yeah. And it doesn't affect your your estate either way.

You can you can kick out the charity, CRA gets it. You can kick out CRA and the charity gets it. As long as the planning is done properly, you can pick two and and and and being good like you know, it doesn't change your your your family's life at all. But that's a whole other conversation. I don't have time to explain. Yeah. Yeah. We don't I don't think there's time on this podcast to explain it. I I want to pivot to what we talked again as well before which is the the audit story because one that's one thing a lot of people might be scared to right uh but just this month a client had a large uh accounting firm audit your strategy and the feedback was yours uh um that one of only four out of the 96 uh was properly set up right walk me through that story from beginning yeah so just in the past year so this this this was amazing actually because I I worked with this guy.

Well, we we'll call him Sean. It's not his name, but and uh my brother's name, so I thought that was easy for me to come up with. Um so, I had worked with him for several months. He was actually initially um uh postponed for coverage and and so we went through all kinds of levels of back and forth, back and forth, so on. And when it when it because it would had been so long I think is why he did this. So he didn't actually send like it ended up getting audited my plan but he sent it to them only because he was wanted to make sure that the money that he had in his operating or it was funding his operating company like if his corporate structure was correct enough that he could put it up to his holding company where we had the ownership of the policy.

So he wanted them to look at the policy, look at the numbers. There's, you know, the safe income there. There there's some there's some things that they got to look at to make sure that that that is okay to do because he doesn't because he wasn't his structure isn't complete yet. But the policyy's ready to go. And of course, I was like, uh, you know what? You were just postponing. We got something in place. We we need to get this going. We can change we can change the ownership later if you need to. He said he said I he said I'm just going to sign it off to them and have a look at see see if we're okay or maybe we should just change the ownership of the operating company for now what happened and and I honestly think that this was this has to do with making sure because of the history he didn't ask for this audit but he got it and I think it was probably because they had seen so many incorrectly set up that they they doing a good thing for their clients right so they got it audited by a lawyer and accountant and so on that that knows their way around insurance policy.

So, I'm sitting there waiting and waiting. This is like back in December. And, uh, you know, eventually I just got the call. It was like, uh, yeah, we're good. Sign sent sign off the documents and we'll sign off. And I said, all right. I said, we'll meet, right? So, so we sat down and we we got back on screen like we are right now. And he goes, Scott, he goes, I got to tell you this. And so, he tells me the story. He he said they went in and analyzed our whole situation. They're, you know, they're a couple. They've got one one child and they're late 40s, mid late 40s and his wife and they, you know, they basically been had been doing things pretty conventional like they paid all the money out of their like they were they weren't really leaving anything in their holding company.

It's they had a little bit of property in there, but no no real cash. is paying it out, paying the dividend tax, putting money in RSTs, doing the conventional stuff. And and when I seen that, I was like, "Okay." So, I just ran numbers. I said, "Let's look at this." And and I got a few numbers here to share, and it may get a little fuzzy just because it's verbal versus visually. But, yeah. So, so I ran the the numbers at a at 150 grand a year for for 10 for Yeah. 10 of the next 20 years. And they it turns out we didn't do exactly that. We did about it turned out to be a little over 120. But uh here's where the numbers went. So you bas you know based on like I did like a 7% return minimal tax and very minimal uh fees attached to investing that money that at year 20 with 10 10 deposits like so it was 10 years and then let it grow um into their mid60s and they'd be at about $2.3 million and invest it.

putting it into the very well-designed life insurance. They actually had more money at the end of the It was actually which which surprised me, but because it you don't need it for for the rest of the story. That's for sure. It ended up being 2 point 2.874 million. So it was over half million dollars more based on my assumption. Of course, he could do better could do better with the money. So So that's that's not that's not necessarily the Toby fair. It was just a sample, right? But year one, he had a death benefit uh a death benefit of 2.789 million year 1 and a capital dividend account credit of 2.640 640 million the end of at the end of one year in addition to this money that he really didn't need doesn't need but he has access to year 20 that death benefit is at 5.351 million se capital dividend credit of 4.131 million.

So now if he passes away, he's put a million and a half dollars into this thing and a $5.5 million death benefit gets kicked at five. Just checking my numbers there. Five point Yeah. 5.35 uh with with over four million of that coming to his family taxfree. O for for a 1.5 for basically 1.5 in. Okay. Now the projected cash flow after year 20 22,000 a year for 20 years without having to pay anything back. So it's through that leverage. Okay. So, and I ran this inside the corp just to get past the whole kind of um you know if they take it out they got to you know personally then they you know they have maybe uh pay um um a lender fee or what you know a usage fee uh and andor if rules change you can't do that then so on.

So I just ran this as if it stayed inside because most importantly too is he has other assets. I wanted I I didn't want the c the capital dividend account access to to go to waste. So projected death benefit at year 40. So taking this cash out is it uh for for 20 years. So the the gross death benefit 9.88 million cash uh capital dividend account the same. It's it's it's 9.88 million. the net death benefit after taking all that money out without paying any any interest on it 2.69 million so an extra 2.69 million in cash coming out and the CDA credit 9.88 88 million. So if he has basically another seven odd million in assets that can come out of that company taxree all because he put a million and a half into this and took basically uh what is that uh two four over four million back out taxree or sorry as a dividend.

Now what did what would have happened with the other investment? while there's no death benefit, minimal CDA if there was some unre if there was some realized capital gains and projecting at the same like interest like which you probably won't get in retirement money runs out in year 14. It's like, yeah, there's there's there there's a good reason why when it got audited, it was like, yeah, this is set up right because it it really it's I when when I looked at it, like, you know, when I ran through that, I mean, I do this stuff all the time, so I I'm never really surprised by it. What I what uh what really hit home with me was the fact that when he said he to his accountant, I was more concerned about the accountant sending it to somebody else.

And he and but I had already cleared that up with him a few months later when he first wanted to show it to his account. He said, "Yeah, we got to get accountant to look at this." And that was before he got approved. I'm like I said, "Well, one of two things are going to happen." I told him, I said, "They're going to want to do it." I said, "They're going to tell you that they can help you with that or they're going to send it off to somebody else that they're that they he said, "They do that?" I said, "Yeah." I said I said, "That's my fear." He said, "Scott, I know you I've know you long enough now. You're not you're not losing this. If we do it, it's with you." Okay, good.

So I was happy to see them bought it. You know, it's it's good validation and he and he was good enough to provide testimony right on our website about it. So it's good. That's very interesting story that when what what does that tell you about the the state of the financial advice in Canada when 92 out of 96 strategies don't even pass a professional audit? When the subject comes up, everybody thinks it's easy and they can do it themselves. every, you know, every planner, if you will, is not Yeah. is is capable, has their insurance license to write. It doesn't mean they know know the best way to do it. The ones that aren't set up correctly lack liquidity, have unusual burdens on them, and frankly, a lot of them, too. They they use universal life, which is all you're doing.

Like to me, I mean, you already got your own money. You know, you know what you're doing business-wise. Why are you taking risk with a risk reduction product? Makes no sense. I I just don't get it. I really don't. And that's why. Yeah. And I guess that's it's maybe why it has such a negative stigma, right? Like we're talking about because like you said, the key word is a properly structured, right, corporate own life insurance for your business. Um and that might be why. Yeah. you know, so it was refreshing to know that that they passed their test, but at the same time, it was a little concerning that that many really weren't weren't like this is just in the past year, too. That's when they say external ones because they're they're an insurance. They're a an accounting firm that actually has an insurance division.

What's the biggest misconception that you hear the most often about corporate home life insurance? Putting your money into a black box that you'll never see again. It's most people because that historically that's what people did. They just park their money and forget about it. It's nice that it's quiet money doesn't mean it's not available to you. Yeah, that's the biggest misconception is is I well one Yeah. So that's one, but there there's a second one too and that's how can I afford to keep paying for this? And when you talk about those 92 that are set up incorrectly instead of like, you know, I said it was about 100 I think it's 120 around I'll just call it 120,000 that we're putting in to to uh Sean Sean Sean's plan. Like guys that don't know what they're doing would make uh just okay $120,000 of premium buys this much death benefit.

No no maximum no maximum exempt over funding. And unfortunately or unfortunately for the client and unfortunately for my industry is that that advisor have they put it if they put it in place are going to get paid probably three times what I would because of how the conversation works of the overfunding versus versus the cost of the insurance. That's very interesting. So there is there is that kind of a like you know what I say is uh yeah it's a it's that there that uh what what do you call it the you're treading the line is uh you know that ethical line you're trying to tread is like I'm oh you're tell you're doing a good thing because they got lots of death benefit if they ask for it great but if they but if they if they're if they're being introduced to this and you sort out what they want like I said it's okay to do it if you know, you're never going to need a nickel.

Scott, you said again 31 years uh started uh not the easy path, started wrong, pivoted, build a proprietary method like we just talked about, got a third party valu validation, right, which we just talked about as well. So, if a business watching this like making or or has built a million-dollar business, a million dollar net worth, $5 million, $10 million, but hasn't started planning or doesn't have the proper team like we're talking about, and they might kind of identify themselves to the different avatars we talked about today. What comes after? Like, what's the one conversation they need to have this week to at least get the ball rolling? Well, it's funny. I I give some thought to this. And the the the one thing they need to do is get find someone like myself to just look at everything.

I bring in my own accountants if they're not if they're not if they're not already. Um no, basically accountants are in different schools. Like let I'm going to digress a little bit. I'll get back to your question in a second. Okay. Is so most accountants are really about compliance. Okay. They're about annual filings and and they'll kind of, you know, they'll do a little review and and so on. How how's your business doing and and most business owners, what else can I do? Well, this is, you know, you're doing what you can. You know, you're paying the price of making money and so on. It's it's it's not very much. It's not a lot of thought put into it. So, I have I have relationship with relationships with four actually three mostly. I use of accountants that are what I what I would call advisory more so than compliance.

They're looking they're looking for those tax structure change. Maybe it's an estate freeze. Maybe it's a restructure of a of an existing shareholder agreement. Whatever. They're looking for those things that will pay right away. So yeah, it may cost you 10, 20, 30 grand to do a restructure. If it say if it saves you 50 grand in your first year, what do you care? Because anything accountants do like that generally perpetual. And same idea when I come in is is understand that we I focus on taxation over your lifetime. I'm not I'm not here to say, you know, you should do this because you'll you'll save 50 grand tax this year. That I'm not like that's business owners lean on their accountants for that kind of stuff. Myself, I'm I'm I'm I'm about uh tax reduction, mitigation, however you want to discuss it, optimization over your lifetime.

So that what they're going to take action. So getting back to your question is what can they take action on now is do some research like I if if what I'm saying resonates or at least gives you that ability or that want to say I need to I need to know a little bit more about what what what Scott's talking about is is yeah do a little bit of research because the insurance industry has benefits that other they call them investment options or allocation options I I I don't like to call it an investment but allocation options that are just far and away better than anything else they have they have benefits that nothing else can provide so educate yourself and the best way to do that well number one is I mean you call me [laughter] other than that u yeah just you know what I'm saying here is this is all real so it's not hard to find.

Educate yourself now and get on the phone. Understand that that this does not go away. Successful business owners, I got a whole presentation. It's it's problems for it's like the seven major problems for successful business owners and real estate investors. There's four there there there's there's four that are that there's se I'll just I'll just summarize this. There's seven problems that come up and every single business owner I I meet there's at least one or two that apply likely to and and obviously more and in fact the the longer they go the more successful they become th those other ones creep in as well. So those seven major problems I just I I just review that with them. I say this is this is what you're looking at. This is how I do it. This this is this is how I analyze.

And again, it's all about blind spots. You know, where are your blind spots? Actually, you want to know what something to do right now? Like you say this week, how about right now is do I is ask yourself a question. Do I have blind spots? And if you do, or if you think you might, that's when you might want to find out for sure if you do. That's really cool. Yeah. And I think that's that's the whole reason why we're doing these episodes and bringing people like you on the show. It's the first step is education. if you don't understand what you're doing, right? Or even like if they meet you and they don't understand the whole concept, they're not better off, right? Obviously, you're going to do a a good job. You're going to try to educate them, but try to do that research yourself.

And that's that would have saved me so many problems when I started as well. Uh and I think a lot of business owners are are facing it right now as they see that tax rates are not going down. Um and it's just how to play the rules of the game, how to play with the game, right? and instead of trying to fight it or just accept the rules as how they are like maybe there is different ways. So the first step is educating yourself and then I'll put your information below so they want to get in touch with you. uh they can check out the website as well to see resources and just just getting educated u or just subscribe to the channel like I said for uh the other guests are going to come on the show but uh Scott it was a pleasure to have you uh thank you for your vulnerability and being that open and sharing examples numbers um and a lot I know it's very hard these days to find that information for free so uh thank you for the value you brought I think it's going to be very much appreciated for business owners watching this for chatting with me Joey I I really enjoyed this and of Of course I doesn't show that I'm a little passionate about feel like I try to jump on the screen every time I like that's I have to restrain myself sometimes especially cuz you know that I mean that's that that's really what it really boils down to is is uh you know you got you find somebody who knows what they're what knows what they're doing and and you feel like you can trust them.

Right. Exactly. It's all about trust trust building. Um no that was great. Thank you so much Scott. If you're watching this the only thing we're asking we're not making any money from that. So, just subscribe to the channel and tell us what you like, what you didn't like. Um, and uh and yeah, we'll see you guys on the next one.