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Today’s episode features a dynamic conversation with Chris Naugle,
an entrepreneur whose journey has taken him from professional snowboarding to building successful businesses and ultimately redefining his approach to wealth. Chris is a former Wall Street financial advisor who walked away from the traditional system after discovering that the way he was trained to build wealth wasn’t how the ultra-wealthy actually do it.
In this engaging discussion, Chris shares candid stories from his upbringing in a modest family, his entrepreneurial start with a basement-born clothing business, and the lessons he learned while grinding through Wall Street’s ranks. What sets Chris apart is his willingness to challenge financial norms and bring transparency to systems that often leave everyday investors in the dark.
Host Dave Wolcott dives deep with Chris into the realities of mainstream financial advice, exposing how conformity to traditional investment vehicles like 401(k)s can limit financial growth and true wealth-building potential. Chris explains why he believes that reclaiming control of your capital—through strategies such as the Infinite Banking Concept—is crucial for accelerating your personal wealth trajectory.
Listeners will walk away with actionable insights and a new perspective on approaching their finances with curiosity and courage. Chris’s message is clear: question what you think you know, seek new knowledge, and don’t let outdated systems hold you back.
In This Episode
- Chris’s journey from entrepreneur to Wall Street advisor and beyond
- What’s broken in the traditional 401(k) and financial advisory model
- How the wealthy think differently about cash flow, debt, and opportunity cost
- The Infinite Banking Concept—what it is and how it works
Will Rogers said the biggest problem isn’t what people don’t know. He said the biggest problem is what people think they know that just ain’t so. That right there unlocks the biggest secret. It’s not what you don’t know, it’s what you think you know that gets you in trouble. So go out there and seek the information.
Hey everyone, welcome back to Wealth Strategy Secrets of the Ultra Wealthy. Today’s episode is about breaking free from financial conformity. My guest, Chris Naugle, went from pro snowboarder and entrepreneur to Wall Street financial advisor to ultimately walking away from the traditional system after realizing that what he was taught to sell wasn’t how the truly wealthy build wealth. In this conversation, we unpack what’s fundamentally broken in the mainstream 401(k) and advisory model, why most people unknowingly give up control of their money, and how the affluent think differently about cash flow, debt, and opportunity cost. We also dive deeper into the infinite banking concept, what it is, how it works, and why Chris believes reclaiming control of your capital is the fastest way to accelerate your wealth trajectory. If you’ve ever questioned the traditional retirement paradigm or wondered how to think differently about money, this one will challenge your assumptions.
Welcome to the Wealth Strategy Secrets of the Ultra Wealthy Podcast, where we help entrepreneurs like you exponentially build wealth through passive income to live a life of freedom and prosperity. Are you tired of paying too much in taxes, gambling your future on the stock market, and want to learn about hidden strategies for making your money work for you? And now your host, Dave Wolcott, serial entrepreneur and author of the best-selling book The Holistic Wealth Strategy.
Chris, welcome to the show.
Hey, thanks for having me on.
Yeah, awesome to have you on, and really look forward to jumping into some of your origin story. And I know you had some similar revelations as I did in terms of, you know, traditional finance, wealth building, what was really commonplace in terms of Wall Street and really traditional financial advising. And just really curious to see, you know, how you came to that revelation, in terms of understanding, like, how wealth can be built in a different way. Because it’s so fascinating, right? We learn things from our peers, from work, right? From all these different places. And so many of us, right, regardless of our upbringing, you know, we’re just exposed to these different things. The first job we get, here’s a 401(k), right? Here’s how you do it. Here’s how you invest, right? You’ve got, you know, you’ve got parents and siblings and even my kids, kids, right, their, you know, their boyfriends and girlfriends, their parents are talking about, well, that’s how we invest. We invest through the 401(k).
So, frankly, it takes a lot of courage to really break the norm and break mainstream. And, you know, really appreciate you coming in today, Chris, because I want to kind of talk through your journey, you know, how you were able to discover that, and really kind of what’s broken with the traditional system. And then, you know, what type of approach are you using to really build wealth today. So, yeah, with that being said, let’s kick off a bit with your origin story.
Yeah, I’m going to try to kind of keep it abbreviated, but I’ll go take right from where you were with the things we learned from our peers or our family. My grandma, I was really close with my grandma. I grew up in a lower-income family. Grandma and Grandpa lived in a mobile home, and I’ll never forget, I was probably 16, and I was at Grandma’s, and Grandma was giving me financial advice because she knew I was out looking for a job. And she said, when you get out there looking for a job, I want you to remember to ask them if they have a 401(k). So I’m like, okay, Grandma, 401(k), I’ll ask. You know, I’m just like, I just need a job. And she’s like getting into the weeds.
All right, 401(k). And then she’s like, okay, and if they do have a 401(k), ask them this. This is really important. Ask them if they match. I had no idea what that meant, but I asked Grandma, and she said, well, they give you free money just for contributing to your retirement. I’m like, really? They give you free money? So I went off on my little journey, and I did ask all the questions that Grandma did. But the point I’m trying to make is with this grandma story, that’s what most people are taught, the traditional things that we have been taught throughout the different timeframes that we’re alive. And much of it comes from conformity.
So, get back to the origin story. As a young kid, I didn’t plan to go to the workforce. Matter of fact, I was very entrepreneurial. I started my first company at 16 years old, and I only started the company, it wasn’t because I had these dreams of becoming an entrepreneur and making all this money. My goal was simple. I wanted to be a pro snowboarder. To be a pro snowboarder, I needed money because Mom and Dad didn’t have any money to send me to the resorts and pay for all the season passes and stuff.
So my path to becoming a pro snowboarder was I had to find a way to make money. Well, I was working traditional jobs, 14 at the farm, and then at 16, I got normal jobs at restaurants. But I found that working these normal jobs, it took my weekends away, and they always wanted restaurants always wanted me to work Friday, Saturdays, and sometimes Sunday mornings. And obviously, when do I want to compete and snowboard? Friday, Saturday, Sundays. That was the competition days. So clearly, clearly, I had to figure out how to make money without giving up my time. And, you know, it’s an interesting thing. In a lot of your podcasts that I’ve listened to, you talk about this.
When we define wealth, you know, we talk about what is wealth. Wealth is nothing more than the freedom of time. That, that to me is the ultimate definition of what wealth is. It’s when you are in control of the most valuable resource we all have, and that is time. So back then, I needed to control time. So I got this idea after I quit a job at a restaurant that they treated me terribly. I came home to Mom, and I’d thought about this for months, and I’d consulted with my art teacher, Mr. Mahalsky.
I was going to start a clothing line, a skateboard, snowboard-inspired clothing line. It was going to be called PHAT Clothing Company, P-H-A-T. So when I quit, I rushed home, told Mom this whole vision of this clothing line. I’m gonna make shirts with Mr. Mahalsky after— I’m going to sell them out of my backpack, and this is how I’m going to fund my snowboarding. And my mom was just like, sounds great. So I did that. And Phat Clothing was born in 1992 out of Mom’s basement.
And I did exactly what I just said. And that grew. By the time I was 16 turning 17, I had three seamstresses working for me, local gals that just sewed all the patterns that I would buy at Joann Fabrics. And I had this little business going, and it was funding my snowboarding, but not just funding it, it was totally aligned with it. Aligned that one day I was traveling to a snowboard contest, and I had learned that a way to sell my clothes outside of my backpack at school, because that’s a very small group of people you can sell hats and t-shirts to, is I would stop at all the skateboard, snowboard shops on the way to whatever snowboard contest I was going to, which, you know, I’m from Western New York, was usually New Hampshire, Maine, or Vermont. I stopped at this one shop. The guy, Tim, who owned it, bought some of my clothing, which I was really excited. But then he says to me, and this is at about 11 in the morning.
I want to preface that because I was trying to get down to Vermont, to Stratton, actually. And he says to me, he says, do you want to go snowboarding? And I kind of was stunned. I’m like, I got a little time. Like, let’s go snowboarding. Because it was right by Rochester. It was in Canadagua, so close to the resort. And I looked around. He was the only one in the shop.
And I’m like, looking around. And I’m like, okay. When did you want to go snowboarding, Tim? He’s like, let’s go right now. And I’m like, is someone coming in to work the shop? He’s like, no, just close the doors. I own the shop. My mind exploded. I had an epiphany that I’d never had, and that was this guy who owns this shop has the complete and utter control of his time. So much so he can shut the doors and go riding.
I need a shop. So, that began the pursuit of working with my teachers. Now, as you know, a lot of us are very influenced at an early young age by our teachers. And I had some key teachers at my high school that were very influential in helping me with business. And I remember I got with one of them, Mr. Nemi, and he helped me create my business plan. It still blows my mind. This is like, I’m 48 now, how long ago that was.
And I still remember these teachers by their names. He helped me write a business plan for this shop called Phat Man Board Shops. Now, remember, I had Phat Clothing Company, and now I was going to open Phat Man, P-H-A-T, Shops, and it was going to open in the Lockport Mall, tiny little mall that no longer exists. I got turned down by everybody, you know, and this is one of the first lessons of my life of, you know, conformity, if you will. I went around to all my family members and I just told them about my idea. I had so much excitement, so much joy. I spent 6 months writing this business plan, and every one of them in their own way shut me down.
My father shut me down and said, son, you got to really grow up a little bit. You know, let me get you an interview at the factory. He worked for Delphi back then. It was Harrison Radiator. Let me get you an interview. You can work here. They got a 401(k). There’s that word, a pension, which clearly the pension is no more.
And all these things. And how I took that is I said to myself right there, my father doesn’t believe in his own son. My father doesn’t believe in my dream. My father wants me to conform to his failed reality, his failed financial plan. I wasn’t being rude about this, but this is the reality of it. We do in life often conform to someone’s failed reality, somebody’s failed plan. And this, in this case, was my dad’s.
So I didn’t talk to my dad for 2 years, not just because of that, but other reasons. But I ended up getting an opportunity with a bank to get an SBA-backed loan. But that loan was contingent upon something I didn’t understand called collateral. And they explained it to me, and I’m like, oh, I got a 1986 Buick Skyhawk. Awesome. I got a 125 KX 125 dirt bike and a wicked baseball card collection. Clearly, they weren’t buying that. So I thought the dream was over.
Fat Man was never going to happen. But when I came home and told my mom, my unconditional one, which is my mom, about this, she said, well, Chris, we—not I—she said, we have this, which is the house she got in the divorce, a 700-square-foot, 2-bedroom, 1-bath house. And she said this house has roughly about $70,000 in equity. Ask the banker if this would be sufficient for collateral, to which it was. Now, I’m going to go faster with this story, but that was where—that’s where the rubber met the road. The clothing line, great. I mean, you just kind of nickel and dimed it and had fun with it.
The shop, now I had a loan that I had to make big payments on, at least big back to me then. And if I didn’t make these payments over these 5 years, I lost mom’s house. That’s not optional. You can’t fail. So that was where it all began and where I really concreted me being a real entrepreneur. Let me fast forward a little bit. Everything was going so good. I became a pro snowboarder.
I had my skateboard, snowboard shops. All my buddies worked for me and ran the shop while I was out traveling in the winter. And it was so good that we opened 2 other locations. I was literally like, you know, in my early 20s, I was crushing it, not financially, but from a dream standpoint. I was living the quintessential dream: pro snowboarder, running skateboard, snowboard shops. This thing happened, which I’d never heard of, called a recession. It was the dot-com recession. And we talked about this, but some of the audience, believe it or not, don’t even know what that is.
And never felt the impact like we did, but I felt the impact to the tune of about a 30% drop in my sales. So much so that I had to close one of my locations. I couldn’t take a paycheck. I almost lost the pickup truck that I was leasing for $198 a month, and I needed a job. At this time, I was 22 years old, give or take a year or two, and I needed to go back to the workforce and find a job. Unfortunately, or fortunately, during a recession, they’re not hiring. So when I put my resume out—and I’m going to stop right after this—the only place that responded to my resume was Wall Street.
I got 2 inquiries from Wall Street firms, advisory firms, and they wanted me to interview. Now, first off, remember, I’m a pro snowboarder. I’ve never put a suit on in my life. That same grandma with the 401(k) had to take me to this little suit shop and get me a suit and a zip-up tie because I didn’t know how to tie a tie. So I went to this interview nervous as hell, and I ended up getting the job, to which then I became a financial advisor and spent the next 16 years of my life. But that is where everything kind of pivoted for me. I got a little uncomfortable because I went from the thing I loved to now a thing I didn’t love that I had to do because of necessity that I ended up loving, if that makes sense.
Yeah. So many great points in there to unpack, but I want to continue the journey here before we kind of go back on anything and really want to hone in specifically on what you learned about the industry, about being a financial advisor, and when you really made that shift.
Well, let me just—I’d be remiss not to hit this point. One of the most valuable things I learned when I entered Wall Street and started wearing suits every day is my shops didn’t run themselves. I still had my skateboard shops, okay? And I had to promote people to run the stores, and I had to that now I wasn’t working in the stores, I was working on the business. And that was a parallel, just a paramount thing for me, because up to that point, I’d always worked in the business. I was the best skateboard grip taper. I was the best person for selling everything, like, because it was my baby, that was my business. But now all of a sudden, I’m sitting in an office, I’m out seeing clients every single day. I’m not working in the shop.
And guess what happened? My business took off. The retail stores, when I wasn’t there, did better than when I was there. And it made me realize that there was something to this working on the business, not working in it. But let me get into the industry. So at first, like many, you know, you get your basic licenses, 663. Then after that, I got my Series 7, and that was a huge push by the firm. And, you know, listen, I was a student. I excelled and I learned some things.
When I first got in, I was a new agent, okay? Which means I was part of a group of all new reps. You’ve seen the movies. They call us pond scum, and rightfully so. We were, we basically were slaves to the other advisors at the corner offices that made all the money. We did all the work and they made all the money. But this is how I learned. And in learning, it was pounding the phones every single day, doing these meetings, these training meetings with the development and training managers. And I watched this room of about 23 new orgs dwindle.
After 1 year, 23 was down to about 10. And then by the 3rd year, it was me and 1 other guy, Vinay. And shortly after that 3rd year, it was just me. So the first thing I learned is that this is a hard, stinking business. The only reason I made it was out of sheer need. I was desperate. I couldn’t even afford lunch. You know, when I first started there, I couldn’t go to lunch with all the guys because I couldn’t afford to go to lunch.
Had to pack my lunch. And as I kind of expanded my knowledge base, I learned how the industry—and I don’t want to downplay the industry too bad because I could do a really good job of doing that and telling you everything with the financial industry is pretty much broken. And I think it’s gotten worse. But we’ll be nice. The things that I learned is that the industry tells the advisors what to sell, when to sell it. And they always ran these offers or these promotions, I guess you would call them, of here’s what we’re going to sell, like the flavor of the week, you know, and they would bring in the consultants and rally us up all about this new mutual fund that was coming out, this new annuity they wanted us to sell, this new wrap account they wanted us to sell. Things are different today, but not much. And I would go out and I would peddle what they sold, and they’d get these bonuses and these trips and everything else.
But here’s what’s wrong with the industry. They say that advisors are there to only do what’s in the best interest of the client. And I know, like, you know, as a Series 7 advisor, Series 7 and some of the other licenses, you are considered a fiduciary, but we were a hybrid shop, an RIA, registered investment advisor with a broker-dealer. I will tell you that even though we called ourselves fiduciaries, we sold what the firm wanted us to sell. And I, looking back—I’m no longer an advisor. I want to be very clear about that. I sold my practice. I gave my licenses up in 2018, which I’ll cover that in the story.
But I will tell you that looking back, there were a lot of times—and shameful but learning lesson—that I definitely didn’t do what was in the best interest of the client. But I was so brainwashed, and I don’t know what else to call it, brainwashed, that this is what I was supposed to do. This was my job. This is how I maximized my compensation. Then I did it. And, you know, I’ve learned a lot, and that’s what’s made me successful today in what I do, is I understood the mistakes I made back then. Now let me go further into it. There’s a lot that happened in there.
I got into real estate, a lot of other things. I sold my retail shops after the Great Recession of 2008, did what Warren Buffett said, bought low in real estate and did that. But at the end of my career, I was a high-level advisor. I was number—I was either number 2 or number 3 behind my business partner, who was always number 1. So I made a lot of money as an advisor. But the things that happened is as I got further into it, I started working with hedge funds, fund managers, different SMA managers, and I got into the deep, dark secrets of the advisory world. And I learned some things, and some things that I don’t repeat because I just don’t want the consequences, but things that I can’t unsee.
Let me just put it that way. And I see these things now today, just like you, when you look at the markets and you look at them from a macro or a micro view. It is severely broken. I mean, come on, how can 7 stocks prop up the entire S&P 500? You don’t think that’s problematic? Look back to 1929, and you’ll see how problematic that was back then because the same thing happened. And it is literally just greed. That’s all it is. It is greed. It is manipulation to its finest hour and speculation. And that is really what I see with the advisory world.
So much so that when I left, I vowed to change the advisory world in the future. And I’m not going to say I’m going to be able to fully do that, but I think I’m doing my best. And I would have never left the advisory world. I really wouldn’t have. And, you know, depending on how you believe things, I’m very faithful, you know, believe in God. And I think God shows us the way. We just have to follow the signs. And some of the things that happened is me and my wife were flipping a lot of houses, and we got really involved in that.
Now I got this dream to get a TV show. And we got it because we went to a seminar where there was Tark and Christina on stage. And I said, I want that. So we started filming, and lo and behold, we got an opportunity with a producer. The producer took us to HGTV, several different shops. HGTV was the one we landed at, and we ended up getting a TV show called Risky Builders. You guys can all look it up. It was aired in 2018, and it was a ton of fun, but as an advisor, you’re very compliant.
And I had to go to my compliance officer, and I had to always get what’s called outside business activity approvals. And I had lots of them for all my different real estate entities. So when I brought the compliance officer, who I had told about the TV show, when I brought her the news, which I was thrilled about—you know, we got the show, blah, blah, blah—I needed to get the OBA. She kind of sat me down and she said, listen, I’m really excited for you, but I have some bad news. I cannot approve your OBA. We can’t have a financial advisor who has a national television show. The two just don’t work. So, Chris, you have to make a decision.
Are you going to be an advisor, or are you going to go off and chase this dream of being on TV? Easy decision for me. I was going to chase my dream because that’s what I’ve always done. So I had to very quickly unwind this 16-year journey, which I was one foot out the door already. Sold my practice to another guy in the firm, probably took way too little now that I know what the multiples are on AUM, but nonetheless, I just wanted out.
And when I broke free, there was a 2-year period where my Series 7 was still mine. I just had to hang it somewhere. But I remember 2 years after that date, when I left that industry and my license expired, I had just this overwhelming sense of excitement because that time, that door of that period of time in my life closed, and I would never open it again. So that is where I went.
So in this real estate journey, I learned a lot. I was around some really wealthy people, and I know you deal with these people all the time, but the wealthy compared to, you know, the people I was serving as an advisor, which I had wealthy clients but not uber wealthy, you know, the people that I was working with in real estate who were very wealthy, hundreds of millions in some cases, just what they did with money was completely different than everything I did as a financial advisor, as an advisor. 401(k)s. Oh, yeah, we’ll sell you the 401(k), the SEP, the Roth, the 529 plans. God forbid I sold a single one of those. But nonetheless, when I got out and I started getting around these wealthy people and I realized what they did with their money, how they invested their money, how they viewed money was a complete disconnect from everything I had learned over these 16 years as a financial advisor. And I am not candycoating that, exaggerating on this.
You know this, but your audience may not. It was so blatantly obvious what they were doing was different than what I had been taught to do. And that’s where that divide really took place because I’m like, why doesn’t everybody know this? Why doesn’t everybody know what these people are doing with money? Because this is how you build wealth. What I was doing is just maybe you can get rich doing that. Maybe you can retire doing that modestly, but you’re never going to get wealthy if you follow traditional advisory or traditional wealth methodology because you are never in control of your money. And I learned what I do today from a gentleman who was very wealthy, who I sat down to ask to borrow money for a real estate deal. And I just asked him, I just said, so how do you do this? How do you lend money like this? And he started unpacking the entire thing of privatized banking. And the way he did it was remarkable.
The way he explained it, because as an advisor sitting here talking with this guy, Mike was his name, he’s a very wealthy Utah developer and real estate investor, and he’s explaining this whole thing and he’s talking about things like he changed where his money went. He got a guaranteed interest rate plus dividends in a tax-free account protected from judgments and liens, and it protected his family. And he called it his own private banking system. And I’m like, you have a bank? That’s what I thought. And as an advisor, I don’t know what this is. I’m just like, you own a bank? But he unpacked it all and told me what it was. And I’m just like, no, uh-uh, there’s no way that exists.
I spent 16 years and I never heard a single thing about what you just explained. But see, I’m going to pause. This is what I mean. Like, this thing that Mike was doing, this privatized banking that he was doing, I had known about it the entire time I was an advisor, but I’d never known about it. And that’s not going to make sense to most of you, but what he explained, I knew the fundamentals of what it was, but I had no idea how it was applied. And as an advisor, I remember I got so mad when I learned about this. I went back to my old managing partner at the firm because I was friends with him, and I said, why did you not teach us this? If you had taught us this, we could have done so much better for our clients. We could have made our clients so much more money and made more money.
You’re never going to get wealthy following traditional financial advice if you’re not in control of your money.
But you never taught it. And he explained why. He said, you know, you remember your new org, 20-10-1? He said, if I had to tell all of you to go out and do what you teach, privatized banking, known as the Infinite Banking Concept by R. Nelson Nash, if I had taught you guys this, you guys would have had to take a reduction in your commissions by 60% to 90%. How many reps do you think I’d have in this office if everybody made 60% to 90% less? And it was a valid point. I’m like, well, none. And he’s right. It’s a difficult industry.
To make it in. So, of course, the wealthy know things. Of course, the wealthy do things different. They work with family offices that are truly aligned with that family’s goals and needs. And they find the unique things, the micro things that only a couple of people know about to help their clients. These are not things that, in the past, as far as I’m concerned, were available to the general public. So, the general public’s always left out in the dark to only do what they’re told to do, to give up control of their money. And because of that, they have such a hard time breaking through to the levels of success or time freedom.
I didn’t mean—I said way too much there. I’m so sorry. I went long, but there’s a big problem.
It’s great, Chris, because I think, you know, it’s these personal stories that really underpin what is truly wrong with the system, right? And it’s not till, unfortunately, a lot of us have to go through these experiences before we can come to this conclusion that, like, wow, we’ve had the rug pulled out from underneath, and it took this big experience to go through that. And that’s what gives me so much passion to try to help people think for themselves and really understand the system that they’re operating in. And this conformity to what’s going on that’s being plugged out there is not necessarily in your best interest. I will say, however, that it does suit many people. You know, it’s not that everyone should be, you know, investing in private assets and doing infinite banking. They might not be as sophisticated to be able to do that, right? And working through the traditional system might be right for them. But it’s our job to be able to expose and help educate people on whether other options are really available and then make their own decision. So, that being said, let’s succinctly summarize, you know, the top 4 or 5 things you think is wrong with the traditional framework, right, the traditional form of advising Wall Street, that approach.
And then let’s put a lid on that, and then now let’s kind of, then we can transition into IBC and some other strategies.
So, I’ll start with kind of something I already said. It’s an industry that is so difficult to succeed at because of the way it’s structured, like only the strongest survive. So, to survive, especially today, and I don’t want to go too deep down this because I’ll upset a lot of people, but more so today, the way that these firms are recruiting new reps, new agents, whatever you want to call it, new advisors, they’re luring them into typically a hybrid model with a broker-dealer where they can sell a commissioned product because it’s very difficult. And I just want to preface this. If you were me or you went into the financial industry and you said, I’m just going to be a financial advisor, I’m going to go out and I’m going to get clients that are going to give me their assets to manage, and I’m going to charge a fee on the AUM, which is assets under management, that model, I really don’t know anybody that would succeed if that’s what they tried doing, unless they came from an ultra-wealthy family and they could manage their family’s wealth, to which their family probably wouldn’t let them, green, you know, manage their assets. So, that’s a failed model.
So, what they do is they have these hybrid models where you come in, and this is how I did it. You come in and you sell products, commissionable products, and namely, I’ll just pick on today’s world. They’re selling indexed universal life products, which, in my opinion, is an incredibly toxic, dangerous product for a non-licensed or even a licensed rep to be selling because they just don’t know what the problems are. They don’t know what the underlying elements are. They’re just, like I was, told and taught to sell a product. So, the first problem is the model, the complete model for how you become a financial advisor. It’s flawed. It’s just completely flawed. And because of that, a lot of damage is done in those early years.
And the firms know this. Most of these agents or reps are not going to make it. They’re going to fizzle out in 3 years. That’s the LIMRA average, if you will, for the advisors. In 3 years, most of them are gone. So now all those assets or products that were sold are now being managed by someone at the upper line. So someone in the upper management or the—I don’t know. There’s a lot of IMOs. We’ll just call it a marketing strategy. That’s problem number 1.
Problem number 2. And this, I think, is one of the biggest problems with the industry. The industry is 100% designed to control other people’s money. It’s like banking. Wall Street and banking aren’t too far off. As an advisor, your job is to go out and help your clients solve their financial problems by either selling them a product or giving them advice, to which almost 100% of what I just said is designed to take money out of control of the client and put it in control of a firm, really a custodian, a firm, an advisor. And in doing that, the advisor makes money whether the client makes money or not.
So, to me, that doesn’t seem aligned when you talk fiduciary, right? It just seems odd to me that the advisor can keep making money whether the client makes money or not. And there’s no real reward. In most models, the advisor can’t be rewarded for making the client more. And I’m going a little too deep in this, but as the family office or when you get into the upper echelons, there are performance-based compensation models and retainer models, but that didn’t exist and still doesn’t today work in the wealth advisory model. And another thing is just generally that industry, they keep trying to make the industry simpler. Okay. And rightfully so, the average person doesn’t understand money at all. They don’t understand how money works. They don’t understand how the system works.
They just know someday I want to retire. Someday I want to have wealth. And then they hire an advisor to help them do that. There’s nothing wrong with that. But the problem is, there needs to be a level of education for the client, the general consumer, to understand what these things are so they can make better decisions instead of just relying on an advisor. Or, you know, somebody that they basically hire, a firm they hire to manage their assets because that firm takes their assets, invests those assets. And a lot of times it’s just a small grouping of stuff, but let’s namely talk about 401(k)s. 401(k)s nowadays are different than when I used to sell them.
We had a lot of options for the clients and the participants in 401(k)s. Today, if I look at the majority of the 401(k)s out there, there are only a couple offerings. Mostly, they’re these packaged funds, okay? Freedom Date or Retirement target-date funds. And it sounds great, right? You put your money in a target-date 2035 fund because you want to retire around 2035. And then over time, that fund reallocates and gets safer and safer or more conservative as you get closer to retirement to protect downside risk. That seems like a really good thing. But what people don’t do today, and what advisors I think do a poor job, is explaining what you give for that simplicity. And it’s simple, it’s fees.
Those funds have much higher fees than anything I ever saw when I was an advisor. And the average person doesn’t read the prospectus. The advisors aren’t doing a great job of positioning that, that expense ratio and what that means. And over time, how much that’s going to take from them. So much so that the SEC and FINRA, you can go on both their websites and it will show you how much those fees are actually costing you over a period of time. And it’s substantial. So I just think it’s kind of like they’re pulling the wool over the client’s eyes and promising them all these things and painting all these hopes to which, whether they know or don’t know, will never happen. They just won’t.
It won’t materialize the way that it’s being said it’s going to. And I think, and I could keep going, but those are just some key elements that I think are major problems within the industry. The real things that the people should be being shown their own. They’re not. They’re not.
Yeah, I couldn’t agree more, Chris, and I think the audience has heard it from my side as well. Um, the, the other thing I would just, you know, the last thing I would just add to this entire thing is just the entire construct, right, of the paradigm, which is so outdated, right? So it’s based upon, you know, being really in this society where we retire at 65, and so you’re saving up all precious life force energy until 65. You then have this nest egg and then start to draw on it and then hope you don’t outlive your money. It’s just completely fundamentally flawed. It fails at all levels. You’re going to be paying taxes on all of that later on, you know, versus an approach where you can have income today and live your best life today. Create time freedom, purpose freedom, relationship freedom, all of those things today.
And at 65, have more income than you’ve actually ever had in your life to be able to create, you know, true legacy wealth and things like that. So, so I think it’s a huge paradigm shift as well on how you actually live your life. And most of our audience really understands that and are leaning into that. So, so I appreciate all of those those examples you cited because it really helps make it real for people, you know, who are struggling to kind of figure it out.
The real question is whether the system you’re operating in is actually designed for your success.
So, with that said, let’s talk about one more thing. I know we’re going somewhere good, but you just said something I got to just bring out. Do you mind? Yeah. So, one of the things that really in today, you know, how I look at this that I can’t ever understand is you hire an advisor. The advisor is going to manage your assets, sell your product, put you in some type of an investment. But the advisor looks at your budget and looks at your your global picture, if you will, your income, your assets, and your liabilities. And they see that you’ve got a bunch of debt because the majority of people out there today have substantial debt because we live in a— we just live in a world where credit is how we live. We have car loans, we have credit cards, we have lines of credit, we have loans for just about everything.
Let me just paint this picture, like, because you’re in the industry. If you went to your clients and you said to your clients, hey, listen, I found this amazing place you can put your money where you’re going to get a 29% return guaranteed. What do you think your clients would say? Sounds too good to be true, right? So, and it would be, but it’s not. So let’s say I look at a client. This is how I’d look at a client today. Client’s got a bunch of credit card debt. Okay.
That credit card on average is paying, is charging them 29%. The client comes to me and says, hey, I want to invest money. I want to get into real estate. I want to, you know, do Bitcoin. I want to do all these things because I want to, I want to become wealthy. Healthy. How I would look at that is I would say, okay, the fastest way for you to build wealth is through your own debts and expenses. So, what I would do is I would set up a savings program if they don’t already have one or take their money that’s savings.
I’d reallocate that money over a systematic process, a process and a system to pay down or pay off their debts. But I wouldn’t stop with just paying that off because I know systematically and just human nature, they’re going to rack those debts back up. So what I’m going to do is I’m going to control the cash flow by creating the system where they pay the debt off, then they take the exact amount they were paying to that, that credit card, let’s call it Visa at 29%. Let’s say they’re given $100 a month to Visa every month, but now they don’t owe Visa money. I would have them set up that $100 they used to give away, and we would redirect that money into a different account that they don’t have immediate access to because the checking account, even sometimes the savings account’s like a black whole. So, we reallocate that to, let’s call it, a segregated account where that money, they can see it, they’re in control of it, but it’s not just a debit card swipe away or a check away. Okay? It’s a little tucked away so that they can’t just get to it. That $100 that they put into this segregated account every month, it is no different than them making 29% because they’re recapturing 29% they used to give away and they would have never got it back.
So, when I say that, that’s what I meant. Can you make 29% guaranteed? Well, that depends on, do you have any debts that you’re paying 29% annualized. Well, if you weren’t paying that debt anymore and you made that same payment you made to the debt back to your account that you are in control of, that would be no different than the 29% you gave away. You’re now recapturing. So, you are indeed technically taking back 29% return. But this isn’t what’s taught by advisors. Like, they just, they don’t get paid for showing people how to get out of debt or how to, people get in a better position by just controlling their cash flow. They want to take their cash flow and move it into investments because that’s how they get paid.
So, I didn’t say that as a problem, but that is one of the fundamental issues I see that is so easy to understand, but yet, it’s not taught.
Yeah. Love that example, Chris. And I love, you know, really being resourceful and using financial engineering really to think through these things in a pragmatic way. And I’ll toss another one over to you too. I’d love to get your thoughts on this, right? Because, you know, there’s folks like, you know, Dave Ramsey and Suze Orman talking about, let’s say, paying off your house early, right? And do you know how much interest, you know, you’re paying over the lifetime of, say, a 30-year loan, right? But what if, for instance, we take instead of putting extra principal that we would pay towards our house, just like you talked about, about, put it in this side fund, which really goes into— let’s call it, put it into your IBC policy, right? And it starts compounding for you there versus actually paying off your house. How would you, how would you think about that strategy?
Oh, I would have to run the numbers, but I— we don’t— we’re not in the practice of telling people to pay off their house unless it’s the very last thing they have left and they have the disposable income. I think Dave Ramsey’s model is completely flawed. Because— but, but to Dave’s defense, I guess you would say Dave is the only person I’ve ever seen publicly who has a magic 12% mutual fund that he tells people to put their money into. You’ve heard him say that, right? His magic 12 mutual fund that his magic advisors have that makes 12%. He talks about this all the time. I don’t know how he gets away with it, but I think that that would be much smarter because when your, your house— okay, you can call it an asset, but for the most place, for most people, it’s going to be a liability.. But most people, what they should be doing is using the equity in their house by getting a home equity line of credit. So they have control of that equity.
And it’s not just lazy money sitting there, especially in a highly appreciated market like now. But I would most certainly tell people that we’d need to run the math. We’d need to run a scenario as to whether or not you should be paying your house off or should be doing something different with that money. I bet you 99.9% of the time they’re much better off doing something different, whether it’s an IBC policy and putting money there or something else. But paying a house off, typically that doesn’t build wealth for anybody. It locks your money away because that’s all it’s going to do. And Dave might say, oh, well, then Dave doesn’t like debt, so he’s just like, pay your house off. So basically what Dave teaches in a general sense is Dave teaches you how to always stay at zero.
And I always tell people this. I said, Dave is great for people that are broke, that are living paycheck to paycheck and need to get out of debt. Great. Okay? But Dave likes to take people like an injured bird. Bird flies into your window, breaks its wing. You bring it in the house, you put it in a cage, you feed it, you help it get better, you mend it, its wing gets better. The bird wants to be set free. The bird wants to go fly again because it has lived its life out in nature, out in the free land, and now he’s stuck in a cage.
Dave doesn’t want to let you out of the cage once he’s got you in there. That’s the problem with Dave Ramsey, you know. So I think in, in its fundamental fact, he, he does a good job, but he doesn’t let the bird fly free after. And, uh, that’s kind of right what you were saying, where he tries to keep people trapped. He thinks he’s setting them free, but he’s not. Yeah.
So let’s talk about IBC, um, and let’s talk specifically about, you know, some of the things that I think a lot of people struggle with. So one would be, you know, hey, the rate of return is not that great, right? Maybe I can put it in a money market. It’s pretty close. I can also borrow against my money market. So, I can use that as collateral, right? That might be one. Second, let’s talk about opportunity cost, right? I’ve got this employment cost that I have to deal with versus if I just have it in cash, right? What is the difference there? So, why don’t we start with those too.
Yeah, I love it. You working in a family office capacity fully understand all this. So, I don’t need to tell you about IBC, but your audience. So, the infinite banking concepts, okay, it’s been around for hundreds of years. It wasn’t called infinite banking, but R. Nelson Nash in the late ’90s, early 2000s coined this process, this concept, the infinite banking concept. So, if you go back to the Rockefellers, the Rothschilds, it would have been privatized banking commonly known. And in the upper echelons, everybody knows what privatized banking is, but you would think most of you, you know, or most of the people that you hear privatized banking, you think that that’s a division at your bank that is for the private wealthy clients.
And they’ve done a good job of pointing that out. But privatized banking is not. Privatized banking means your banking, your money is private. And there’s no bank account that is private. But what it is, is you’re not using banks, you’re using giant mutually owned life insurance companies. And the reason for it is they’re the most solid financial companies that have ever existed, always have been, and still are to today. Okay. They’re larger than banks in most cases.
They actually have money, their own money, their own surplus. Banks, they have your money. Okay. They have the Fed’s money. Like they have very little of their own money. Just, just look it up. But insurance companies do. So what they did, and I’m just going to go back to these families, we’ll pick on the Rockefellers because they’re probably the most commonly known that use this.
They looked at their wealth and they said, you know what, our wealth isn’t all safe at the bank. So where can we park our money. And they found insurance companies. Mutually owned insurance companies is the place. But mutually owned insurance companies are not depository institutions. They’re life insurance companies. Okay? So, they had to find a way to get their money into the general accounts of these insurance companies, to which they found the way through a product that you all know and most people hate called whole life insurance. But back then, that was the only life insurance, whole life.
Today, you got all sorts of different things. But whole life is still the only, and I want to preface this, the only life insurance vehicle that works for the infinite banking concepts. And it’s not a normal whole life. I want to preface this. The Infinite Banking Concepts, again, is a process. It’s not a product, but I’m talking about a product now, so I want to differentiate the two. So, the product, the whole life policy, is not the whole life that you would buy from an advisor like I used to be. I would have never ever known how to give you or design you a whole life structure from a contractual level the way that I do today.
So, most advisors, if they hear IBC, they just think, “Oh, this is a good opportunity to sell a whole life policy. Or worst case, some of them say, oh, you should just do an IUL— higher commission. The whole life policy does a couple things, and you had mentioned money markets, to which we’ll also throw in high-yield savings. If we’re going to compare all the places you can put your safe, guaranteed money— we’re talking about bank accounts, high-yield savings, money markets, maybe T-bills or Treasury bonds, we could throw them in there because they’re guaranteed by the full faith and credit— and then whole life. So if I just said, which one do you want, you’re not going to pick whole life. But now let’s unpack it and not call it whole life. Call it, we’re gonna set a privatized banking system up for you, and we’re gonna use a vehicle that provides you a guaranteed interest rate. Today, all the companies we use are— the average would be about 3% guaranteed contractually.
Now let’s compare that just across the board. Do Treasuries pay more than 3%? Yes, right now they do. Do high-yield savings pay more than 3%? Probably right now. And money markets, probably you can get more than 3%. But the whole life contract, the privatized banking, pays 3% guaranteed for the rest of your life. It never changes. You see, if Jerome Powell or whoever’s, you know, sitting in that seat in the future decides to lower interest rates, well, guess what? Your high-yield savings, your money market, and more than likely your Treasuries are all going to drop. The interest you’re getting is going to go lower.
The yield you’re getting is going to go lower. The whole life does not. But the whole life is a mutually owned company, so it pays a dividend. And by today’s standards, the 5 companies we use pay between 5.9% and 6.6% dividend crediting rate, which means the dividend plus the guaranteed rate is a simple way to understand that. Now, you’re not going to get that with those other sources. So, right off the bat, we’re higher from a return standpoint or perceived return standpoint with the whole life than we are with the other vehicles. But now, that whole life, because of our beautiful IRS code and how it favors life insurance, is tax-free. So, now, to get the same return you can get in the whole life, you’d have to get even more in those other vehicles because it’d have to be after-tax returns.
So, that’s another thing. Protected against judgments. It’s whole life. It’s life insurance. So, it’s protected. It’s got a lot of protections in most states. Bank accounts, money markets, maybe even treasuries are low-hanging fruit if you ever get sued. And then, I have a 5-year-old daughter.
I know you have children. I love my family. And if I leave tomorrow, if I die tomorrow, I want to leave them in a better place. And the death benefit certainly does that. So, when we just say what vehicle should we use for the infinite banking concept, this process, it’s hard to argue that the whole life makes a really strong stance that that is the best vehicle. But here’s where it gets even better. Now, let’s put this into application. The infinite banking concept— I’m just going to pick on cars because everybody listening to this has a car, and they either finance the car, pay cash for the car, or lease it, or maybe they steal their cars.
I don’t know, but we’ll leave that last one out. If you finance a car, You buy a car. That’s great. You get a car, but you make a monthly payment of principal and interest to a traditional bank. That interest never comes back to you. And I would argue that the principal probably doesn’t either because you bought a depreciating vehicle or depreciating asset. So, that’s the way most people do it. Some lease and some pay cash.
And the ones that pay cash think that they’re winning the game, the Dave Ramsey types. You’re losing if you’re paying cash for cars. You’re probably losing more than any of the others. And here’s why. When you save up money to have the ability to pay for a car, let’s call it a $50,000 car, you take that money out of that high-yield savings, that bank account, that money market, and you buy the car, you just lost opportunity cost, which you said. So, what was the opportunity cost? It could be huge because that money is no longer liquid and can no longer be used by you for anything other than this vehicle, which is depreciating faster than just about anything else you’re going to buy. So, buying cars for cash is probably, in my opinion, I don’t mean to be rude, but very stupid when you run the mathematics. How we would do it using the Infinite Banking Concept is we would capitalize the policy or the banking system, which means save enough to be able to buy a car.
Okay, call it $50,000 in cash value. I would then take a loan from the policy or a loan from the insurance company, to which the insurance company sends the money within 36 hours to whatever account I wanted in. So now, $50,000 went from the policy to the bank account. Now, this is really important, and this is what that Mike guy told me that I couldn’t wrap my head around. If I started with $50,000 in the policy and I took $50,000 out of the policy to buy this vehicle, how much is left in my policy earning that dividend crediting rate? Most people would say nothing because they’re used to bank accounts. But if you understand what happened is you still have $50,000 in your cash value earning interest and dividends in, in a tax-free account. The $50,000 that you used, that you took out, was the insurance company company allowing you to use money from their general account anytime you want. They collateralize that with your $50,000 cash value.
So it is a collateralized loan, if you will, but it’s a loan that never needs to be paid back. And I want to preface that— you’re always going to pay it back, but it doesn’t— they’ll never ask you for the money back because what they’re literally doing is they’re giving you part of your death benefit while you’re living. The $50,000 they loaned you was literally $50,000 of the death benefit they have to pay when you die, because they have that money. See, insurance companies are different than banks. They have to have the assets to cover the liabilities. Unlike a bank, they have to have 10%, maybe a little more in reserves to cover your full account, and then they lean on the FDIC. But insurance companies have to have all of the money that they pledge. So, you’re using your death benefit.
So, now what you’ve done is you’ve found a way to earn uninterrupted compounding interest on every dollar of your money. You lost no opportunity cost in this transaction, except we’ve got to factor in that the insurance company does not give you this loan for free. They charge you interest. So, let’s go back to banking. And then I’m going to get into the infinite banking concept and really drive it home because the rest is simple. In a bank, you make a deposit into a bank, let’s say they pay you 3%. Okay, you’re happy that you’re getting 3% for your deposit, the bank immediately turns that money that you just gave them in a deposit, turns it around in the form of a loan, and they lend that money out. Let’s just pretend they lend it back to you for a car.
Do they or do they not charge you more in interest than what they pay you in interest? So in other words, they’re paying you 3. Can you get a loan from any bank for less than what they’re paying you in interest on, on your deposits? I would say no way. So they’re gonna charge you probably 6. That’s about the going rate. So if they’re paying you 3, they’re charging you 6, they’re making a spread. That’s all I need you to understand there. That’s how banks make money. Come over here, your private banking system.
Let’s just assume that the insurance policy is paying you, let’s round up to 6%. Okay, because remember, I said 5.9 to 6.6 is the gross dividend crediting rate. But so let’s just for an example, call it 6% that you’re making on the money. But let’s say you could borrow from the insurance company at a rate of 5%. Aren’t you indeed making a spread like a bank? You are. You’re earning 6%, you’re giving up 5% to the insurance company. But you see, that’s not even right. But I just want you to understand, you’re making the spread, not the insurance company.
So you take the $50,000, you buy the car for cash. But at the dealership, you sat down with them and you said, how much would a 60-month loan be if I wanted to finance this car? And let’s just say they tell you it’d be $800 a month. Okay, that’s the monthly payment for a 60-month long loan. So now you know that the dealership or the best bank the dealership could come up with would cost you $800 $800 a month. And you would have gladly done that in the past. But see, now you’ve made one change. You want to be your own bank, you want to use the infinite banking concept. So if you were willing to pay them 6%, let’s just say, okay, or whatever the rate is, they’ll call it 6%, $800 a month, you were willing to give the Bank of America that amount.
Now you just took a loan from your policy at 5%, and you bought the car. How I do it, and I do this a lot, I collect Porsches and this is how I buy them all. I would then take that $800 a month and I would pay that back to my policy every month. Same dollars I would have paid for the car anyway, but I pay it back to myself. $800 now comes back into my policy. Two things happened, actually three. Number one, I made a spread on my money and I lost no opportunity cost. Number two, I got an asset, a truck which is going to depreciate, or a car that’s going to depreciate, but I make payments of $800 a $800 a month back to my policy.
And that $800 a month represents 6%. So, I’m making that 6% plus the spread. But now what I’m also doing is every dollar of that $800 a month is in my control and fully liquid the next day when the check clears. So, every car payment I make back to my private banking system, the policy, I have that money in my account, penny for penny, $800. Because the insurance company doesn’t charge you interest every month. They charge you interest one time per year. Every one of the insurance companies, one time per year. So I got 12 months before I got to pay the insurance company anything.
They’re, they’re charging me simple interest. Remember, 5% is the hypothetical rate I’m using. But every month, $800 is going back into the policy as a loan repayment, which is paying down that loan I took from the policy. So at the end of 12 months, I have bought down the APR. Okay, so now I didn’t really give the insurance company 5%. I gave them probably somewhere in the 4% range in the first year, but I lost no liquidity of my money. And I just keep doing this every single month, every single year. The truck gets paid back, but I now was able to learn how to get all the money back for every vehicle I buy, drive, and own.
And you did, and you actually made money on the cars. So I went the long way around that because I wanted to unpack it. Everything I just explained is a system, a process called the Infinite Banking Concept, but it doesn’t involve a product. But the whole life policy policy makes it better because you don’t lose the opportunity cost. Could you do that from a money market? Could you do that from a stock account? Yes, but there’s underlying things that you can’t control, like your money market. If you had a money market account and you got a margin or a loan, okay, the bank gave you a loan against your money market. Number one, the money market isn’t paying you a lot in interest, but number two, if the Fed drops rates, your money market loses value. So, that is a risk you have because you could very quickly find that your money market’s paying you less than 1% like it used to, okay? Or a stock account, the underlying assets in a stock account or a brokerage account that has margin, you could lose value there.
The whole life, you can’t lose value. It’s guaranteed to have more money next year than it does this year. So, that’s why it is the reigning champ as vehicles to use with the infinite banking concept.
Yeah. Awesome, Chris. Really appreciate the very specific example, and I think it’s such a fuzzy concept for many to really kind of get their heads around. So providing really concrete example of how to utilize that and the benefits of it, I think, is super helpful. Yeah, unfortunately, the time just completely flew by. It always does. I know. I’d love to keep going, and I know we could.
But I guess in closing, just, you know, one, one final question for you. If you could give the audience just one piece of advice about how they could accelerate their own wealth trajectory, what would it be?
Yeah, I mean, the simple answer would be to take control of your money. But let me give you a Will Rogers quote that I love. Will Rogers said, the biggest problem isn’t what people don’t know. He said, the biggest problem is what people think they know that just ain’t so. That right there unlocks the biggest secret. It’s not what you don’t know, it’s what you think you know that gets you in trouble. So go out there and seek the information. Find the people that know how to do the things you want to do or that you’re seeking, and then go after them.
And don’t let other people tell you your dream is not your dream.
Love it, Chris. Really appreciate your time and insights today. If people want to connect with you and learn more, what is the best avenue?
Yeah, just my, my YouTube or any social media channel @TheChrisNaugle, and it’s N-A-U-G-L-E. Or they could go to BeYourOwnBanker.com, and they got a lot of resources there.
Awesome. We’ll make sure to put that in the show notes. Thanks again for coming in today.
Appreciate it. Thanks for having me on.
You bet. Thanks for listening to this episode of Wealth Strategy Secrets. If you’d like to get a free copy of the book, go to holisticwealthstrategy.com. That’s holisticwealthstrategy.com. If you’d like to learn more about upcoming opportunities at Pantheon, please visit pantheoninvest.com. That’s pantheoninvest.com.