Darren Mitchell’s Be the Bank chronicles the author’s efforts to find a way for the average Jane or Joe to “control and compound” their wealth, in the way that banks and wealthy Canadians do.

The book’s story starts back in 2008, when Mitchell was a financial advisor. When the markets crashed, he was on an Alaskan fishing trip, trying to keep track of the carnage via cell phone. “It was sickening,” he writes. “There was nothing I could do… that’s when I realized that everything I knew about money was wrong.”

He wanted to find out why financial institutions and the wealthy got through market downturns fine, while those of us in the middle class coped with losses. He found that “the actions the wealthy took with their assets were the exact opposite of what the middle class did.”

Conventional investing in such things as registered retirement savings plans, registered education savings plans and tax free savings account are, the author suggests, very limited, with little control for the investor.

“Banks and Wall Street are in control. You roll the dice. You hope it all works out when you reach the top.” But, he writes, you need to face “retirement risks” such as taxes, inflation, “the possibility of long-term care,” volatile markets and fluctuating interest rates. “And,” he writes, there is also “the most significant risk of all: longevity.”

He looks at the conventional wisdom of withdrawal rates from investments that are based on 50 per cent stocks and 50 per cent bonds. He calls decumulation rates “the Monte Carlo process,” since you are taking money out of a fund without being able to predict how the fund will perform in the future. It’s a guess.

If you withdraw four per cent per year, Mitchell writes, you have a 57 per cent chance of outliving your money. If you withdraw three per cent, you still have a 24 per cent chance, he explains. “Is that how you want to live the rest of your life – in fear that you’ll run out of money, and with the real possibility that it’s exactly what will happen,” he asks.

After a look at the pros and cons of conventional investing, we come to the meat of the book. In Chapter 7, Mitchell says there is a solution that has been out there “for over one hundred years” that allows you to overcome most investment and decumulation risks – “a specially designed, dividend-paying, high-cash-value life insurance contract with a mutual company or participating whole life fund.”

Such products do come with “some death benefit” but “our focus is the cash value,” he explains. “Fewer than one per cent of life insurance policies sold in Canada are designed this way,” he adds.

Such products pay out steady dividends, he writes, with charts backing him up. Thanks to government regulations, such products charge very low management fees, usually lower than 0.18 per cent.

The longer you live, the more you get out of the product, so there is actually a longevity gain, Mitchell writes. Your growth, which after a few years “should be between 3.5 per cent and 5.5 per cent per month,” is tax -free and exempt from most conventional barriers to wealth accumulation, Mitchell explains. You can also borrow against your holdings to make a purchase, and since you are effectively the bank, you can decide when or if to pay the money back.

Mitchell’s book takes a look at annuities as a way to avoid market volatility.

“Think of an annuity like a government worker’s pension plan. They have a lifetime pension coming in every month until the day they die – guaranteed,” he says. And as well, he notes, an annuity addresses “the biggest retirement risk we will ever face… longevity. No matter how long you live, you will get paid,” he explains.

This book covers a lot of ground and it is hard to do justice to it in a short book review. But if you are looking for information on a different way to grow your personal wealth, via an insurance industry product, it’s worth having a look.

Annuities are becoming a better buy these days, since higher interest rates actually work in your favour, and give you more annuity income for the same purchasing dollar. Did you know that the Saskatchewan Pension Plan offers a variety of different annuity options for its retiring members? Check out SPP today for more details.

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