Why Rich People Don't Trust Banks (And Where Their Money Really Goes)

Added: 2026-05-19

[00:00:00]why the wealthy don't park cash in banks. In this episode, I'm going to reveal the secret behind how money really works. I'm going to issue a warning in this episode. The principles I'm going to reveal often fly in the face of conventional wisdom. So, be prepared. I'd recommend that for the next few minutes that you, number one, be open-minded to new ideas that may even sound or seem a little counterintuitive. Number two, that you suspend your disbelief [music] until I prove my case. And then, you do the math yourself. Don't sit there and justify, "Well, I've always thought this." or whatever because you've got to be open-minded and then do the math. The math doesn't lie. And then, number three, withhold justifying why you think you can or cannot do any of the things I'm going to talk about or explain because you can do this. Uh yeah, anybody can if they're disciplined. And then, just remember, today is the first day of the rest of your life.

[00:01:05]>> [music] >> So, I'm Doug Andrew. I've been a financial strategist and retirement planning specialist now for north of five decades helping thousands of Americans optimize assets, minimize taxes, and actually create uh wealth.

[00:01:28]Let's go out uh in the the world and look at how banks make money, okay?

[00:01:34]>> [music] >> Now, a bank is very willing to pay you uh interest. Why?

[00:01:42]Because they will turn around and make more than they're paying you.

[00:01:47]So, a bank might uh credit you 4 and 1/2% on a on a savings deposit, okay?

[00:01:53]And then, they take that money, and if you went in to borrow uh from the bank an equity line of credit, they're going to charge you maybe 7 and 1/2 or 8%, okay? So, that difference or that spread in this case, uh that's only 3%. And there's people who don't understand how money works. They go, "You'll do all that for 3%?" Yeah, banks do, and they make [music] billions and trillions of dollars. So, what do they know? What do they understand that most Americans don't understand? Okay? [music] It It means that they are willing to pay interest in order to make more interest.

[00:02:29]So, let me restate it another way. A bank or credit union's greatest assets are their liabilities.

[00:02:37]Did you hear that? Okay? If they stopped paying this interest, they would wither up and die. See, most people view paying interest as a foe. Let's hurry and get rid of this debt paying interest. If banks got rid of all the uh interest they were paying on OPM, what's OPM? Other people's money, they'd wither up and die. They'd stop making money. So, this is called arbitrage.

[00:03:03]Now, truth be known, if a bank pays 4 and 1/2% interest uh to borrow OPM, other people's money, and they loan it back out at 7 and 1/2, they have overhead costs, uh their brick and mortar structures and their overhead, their employees and everything, they might only make a net of 1%.

[00:03:23]So, people who sometimes look at this, they go, "Wait a minute. If If you uh borrowed at 4 and 1/2 and you only made a net of 5 and 1/2, uh 1%, uh you'll do all that for 1%?" Yes, because banks are earning an infinite rate of return. And you're going, "Doug, what are you talking about infinite?"

[00:03:43]If If you're earning a rate of return and it's it's 1%, uh people that don't understand this, they go, "Well, that's only 1% return." Let's say on a million dollars, okay? Let's say collectively we loan a bank cuz whenever you have money in a bank or credit union, it's in a lent position. You got it? And if they are paying us 4 and 1/2% so on 100,000, that's 4,500 a year. On a a million dollars in the bank, they're paying 45,000 out in interest. Now, why are they willing to do that? Cuz they're going to make 75,000 by loaning it out. But if they make 75,000, that's only a $30,000 profit, but they have overhead, they have costs, and so they're not really netting 3% or or that maybe they're only netting 10 grand. But at the end of the day, if they're only making 10% or that 1% net arbitrage, then they're making 10 grand, but [music] you say, "What's the rate of return?" It's not 1%, okay?

[00:04:50]>> [music] >> It's infinite cuz you can't calculate it cuz they're making $10,000 net profit on money that's not even their money. When interest rates are high for borrowing, they're they're they're high for earning. When interest rates are low for borrowing, they're low for earning.

[00:05:05]Interest rates are interest rates, regardless of whether you're on the paying end or the receiving end. Do you understand that? Okay.

[00:05:12]So, what I do with my real estate is I if I borrow at 6% interest, I make sure I can tax deduct that. Now, this is where some people stop watching the video cuz they go, "Oh, well, I I don't itemize deductions. I take the standard deduction, so this is not applicable."

[00:05:29]Don't make that mistake, okay? [music] This works even if you can't tax deduct the interest, but hello, I have always made sure I can tax deduct the interest. In a nutshell, how?

[00:05:43]First of all, if I borrow or refinance on non-owner occupied rental properties, I could deduct the interest off of the schedule E on my tax return or the LLC return or the corporate return, however I own that rental property. Now, if it's a personal residence, okay, you can you can deduct the interest as long as you comply under Section 163 of the Internal Revenue Code where you establish acquisition indebtedness when you acquire the property and you don't kill your tax deductibility by paying it off the wrong way.

[00:06:19]But that's if you just say, "Well, I want to deduct the interest off of my tax return under Schedule A." And you go, "Well, that that's not enough.

[00:06:29]I should just take the standard deduction, so this isn't benefiting me."

[00:06:35]Most of my clients, they're wealthy people and they they contribute 10, 20% of their income to charity, their church, they pay tithing to their church, okay? And if you itemize deductions and you contribute 10% in charitable contributions, you'd be really dumb not to itemize deductions because charitable contributions, if you give back to charity at least 10% of your income, which most wealthy people do, that's one of the secrets of creating wealth if you have never heard of this concept.

[00:07:08]>> [clears throat] >> They itemize deductions.

[00:07:11]But here is what a lot of people don't understand.

[00:07:14]The Internal Revenue Service could care less if you borrow a mortgage on your personal residence and use that equity line of credit or that that money, those loan proceeds, for business purposes, which makes it tax-deductible off of your business tax return or your corporate tax return.

[00:07:34]Now, you may sitting there [clears throat] going, "Well, I don't have a business."

[00:07:38]>> [music] >> Well, then instead of ignoring this, why don't you start a business?

[00:07:44]I [clears throat] think every American should have a business.

[00:07:48]And there's ways that you can actually have a business even at home and you can tax deduct the interest if you borrow and you use the money for business purposes, you can tax deduct the interest off of your business tax returns, corporate returns, or whatever.

[00:08:06]Having said that, that's what I've done for years.

[00:08:08]One way or another, I tax deduct the interest on any mortgages that I have.

[00:08:16]On my house, on secondary properties, on any rental properties, anything, okay?

[00:08:24]So, I'm in a [clears throat] combined federal and state 33% tax bracket or higher. Many people in California are.

[00:08:31]And so, if we're talking about tax deductible interest in a 33% bracket, >> [music] >> which many wealthy people are in, now, let's come full circle. Where do I put my money? In a properly structured max funded IUL laser fund. Because I'm able to by diversifying and rebalancing, by managing that, I've been able to earn returns not just of 6, 7, 8%, I've been able to push those to 10% net net internal rate of return after all costs.

[00:09:01]>> [music] >> And so, let's use that as an example.

[00:09:04]I've actually, you know, averaged 10.07.

[00:09:07]>> [music] >> Every million dollars that I have parked over in an IUL laser fund, I become my own banker, okay? [music] And I use it as a working capital account. If I need a million out of there, I can I can withdraw it, but now it's no longer in there earning interest, so that's dumb.

[00:09:26]You actually use this concept to become your own banker.

[00:09:29]>> [music] >> I leave the million in there and I borrow from the insurance company. Why would I do that?

[00:09:36]Because of what I'm teaching you.

[00:09:38]The insurance company I I don't have to qualify for a loan. I have >> [music] >> I they have a million of my money sitting there as collateral. So, they will loan me a million uh and they'll loan it to me at 2% and then they'll credit me 2% on that million that's sitting there as collateral.

[00:09:53]That's called a zero wash loan. It doesn't cost anything. But, why do I do that? Because now the million is tax-free. It's a tax-free proceed.

[00:10:01]But, that's not what I do. That's not what most of my savvy clients do. They they go for what is called an index loan or a spread loan because of how money works.

[00:10:11]They charge me 5% 50,000. I don't have to write out a check for that.

[00:10:15]But, that allows me to continue to earn 10% on that million.

[00:10:20]Why would Why would I do that? Well, why would I Why would I I just withdraw that money and fire an employee if that employee is going to make me 100% more than they cost me? If I borrow from the insurance company using my million as collateral, I make it 100% more than they're charging me.

[00:10:39]Hello. I I'm still making a net profit of 50,000 bucks >> [music] >> or 5% net tax-free on my million even if I access a million out of my laser fund.

[00:10:52]Are you getting it? Okay, folks.

[00:10:55]>> [music] >> Uh let me give you an actual true story example. In 2017, I have a very savvy business owner that uh uses an IUL fund as his working capital account. Uh he makes tons of money buying uh you know, apartment complexes or a a strip mall uh commercial strip mall. He buys them that are distressed. People want out. Uh he gets a good deal and then he fixes them up and then he flips them. He doesn't like to stay the owner or the landlord like I don't. He he flips them and he has a pool of clients who love how he finds finds great deals, fixes them up, and they get a great deal, but it's all fixed up, okay? And so, he found a $17 million strip mall that he needed a million dollars to in earnest money to tie up the property. To show that he was serious. And he called me and he said, "Doug, I I need I need a million dollars to tie up this $17 million strip mall that I'm going to fix up and flip this year." This was 2017.

[00:11:57]Now, he could have withdrawn a million out of his IUL policy cuz he keeps that money on hand as a liquid safe working capital account, just like I do.

[00:12:06]Uh instead, he borrowed. Did he borrow at the 2% and while they quoted him to the zero was No, no. He knows how money works. He's savvy. He's wealthy. He gets it.

[00:12:17]So, he borrowed it at 5% like I do.

[00:12:20]That's 50,000. He doesn't have to write out a check for 50,000. So, he borrows from the insurance company. He's not borrowing his own money. He's borrowing from the insurance company using his money as collateral. That's a difference.

[00:12:34]They charging 50,000. He doesn't have to write out a check. That just That automatically comes out of what he is earning or out of any balance in the policy. That year, on the million that he left in there as collateral, he got credited 25%. He capped out. He hit the cap. He made 250,000.

[00:12:55]Let's do the math. He made 250 minus the 50,000, he netted 20% on his million or 200,000 tax-free on his million while he was technically using that million to buy a $17 million property, fix it up, and flip it to make two or three million.

[00:13:18]This is what wealthy people do.

[00:13:21]They do what banks, credit unions, insurance companies do.

[00:13:26]They learn when it's wise to pay interest to make more interest.

[00:13:31]Now, if this has resonated with you and you want to see actual examples, I would recommend you study my most recent best-selling book, The Laser Fund, cuz you're probably going, "Well, what is this IUL Laser Fund?" This book will teach you. It's 300 pages jam-packed with information. It retails on Amazon for anywhere from 20 bucks up to 60 bucks, but I'm not trying to convince you to buy my book. I'll gift you a copy free, okay?

[00:13:55]Uh now, it's actually two books in one.

[00:13:57]This white-covered side is about 200 pages, 14 chapters with all the charts and graphs and explanations, if you're a left-brain learner, okay? If you're more of a right-brain learner, you learn more by stories, uh you can just flip it over to the orange book. This is about 100 pages, uh 12 chapters with 62 actual client stories, and one whole chapter is on this very concept, okay? If you want to use uh your right brain and your left brain, in other words, your whole brain, I would recommend you read both books.

[00:14:26]But, you simply go to laserfund.com or clicking on the link below, and I require a little skin in the game, okay?

[00:14:33]Uh you contribute a nominal amount towards the shipping and handling, and I will cover the rest of that cost, cuz it costs more than than what I ask you to contribute. And then, I'll pay for the book. I'll fire out a hard copy to you via priority mail.

[00:14:49]And uh when you're in there claiming your free copy, if you like to listen and learn or watch and learn, there's those formats available for a nominal investment, okay? Uh there ain't no such thing as free lunch. I require a little bit of skin in the game. But, folks, I would recommend that you schedule an appointment. While you're in there, you can schedule an appointment to talk to an IUL professional that I've trained and I oversee, and they can actually show you how a properly structured max-funded IUL works in your particular set of circumstances, because that's a key. It's imperative that it's set up right so that it does everything I've been talking about in this episode. So, hopefully now you understand why the wealthy don't park cash in banks. They become their own banker.

[00:15:37]And they pay interest. Because if they stop paying interest, they would not become mega wealthy.

[00:15:44]And if you don't get that now, I feel sorry for you. I don't know if you'll ever get it, but don't miss out.

[00:15:52]Watch this again and again, and you do the math.