As the old saying goes: it’s not what you know … it’s who you know.
And my old friend Lionel was proof of that fact.

Lionel was a researcher, writer and biographer who worked with a number of different ultra-wealthy clients to help document their lives and achievements.

Thanks in large part to his outstanding work, Lionel spent years of his life bouncing from one ultra-high net worth client to the next. Then one day, a light bulb went off in his head.

Because through years of hard work and diligent research, through dozens of different clients with unique success stories and experiences — Lionel realized there was a single unifying thread. One single asset, to which they’d all entrusted a substantial portion of their wealth.

“I didn’t notice it at first,” he told me, “because it was sort of hiding right there in plain sight.”

Lionel went on to explain that he’d expected his clients to be genius investors. He’d simply assumed like so many of us that the rich get rich by having a knack for spotting moneymaking opportunities.

“But then I started to realize, they weren’t rich because of the choices they made … but because of the choices they refused to make.”

Much like the inimitable Charlie Munger, Lionel’s clients had realized that “avoiding stupidity is easier than seeking brilliance.”

He ultimately boiled the ethos of all his ultra-wealthy clients down into a few key commandments they all seemed to live by.

First, you never spend your principal. Ever. When you commit to an investment, you commit forever. Money must be invested in order to make you more money. To quote Munger’s not-less-distinguished partner Warren Buffett, “our favorite holding period is forever.”

Second, instead of spending, you collateralize your wealth. Everything is an asset, everything can be leveraged, everything is flexible. Your favorite vacation home can become the security for your next great business venture. You can borrow against various assets without triggering taxable events. Wealth is all about flow, not stock. Having liquid access to your assets (without liquidating them) is key for multiplying wealth.

Third and finally, don’t trust anyone that isn’t family. “No exceptions … and I mean no exceptions,” as Lionel explained.

His ultra-wealthy clients didn’t trust most investments, they didn’t trust most banks — they didn’t even trust the government. “They always took their money as far off the grid as possible.”

This last part might sound a bit paranoid … until you realize that three of the four largest bank failures in American history all happened just a few years ago in 2023. America’s investment banks were nearly brought to extinction by the financial crisis back in 2008. And without major bailouts from the government, most of our “too big to fail” banking system would’ve been kaput.

If you’re opening a checking account or buying a CD, then your neighborhood bank might seem perfectly safe. But the more you start to zoom out, the more you start focusing on generational wealth, the more you realize that banks aren’t as safe as they want you to assume.

The same is true for popular investments like stocks as well. Since the turn of the century, we’ve seen the dotcom crash, the 2008 financial crisis, the 2020 Covid crash, and 2022’s (thankfully) short-lived bear market. These crises were thankfully short-lived, but they still involved months or sometimes years where accessing your wealth would’ve meant selling off investments at a loss.

Finally, there’s America’s tax policy, “which they trusted least of all,” Lional admitted.

For the moment, no one with a net worth under $13 million has to worry about estate taxes. But what if that changes? Right now, the top marginal tax rate in the country is just 37%. But what if that changes? What if top tax rates trend back up towards their Eisenhower-era highs of 90+%? IT’s unlikely, but what if?

“It’s not about money,” Lionel told me at last, “it’s about time.”

Because for his ultra-wealthy clients, money was no longer the rare asset. They had plenty of money to go around. What really mattered was keeping that money as safe as possible for as long as possible, so that generations of their heirs could live splendid lives thanks to the hard work of a lucky few.

So … where were they stashing their money instead?

What asset in the universe could possibly meet all three of those unique goals.

“Caleb, I want you to tell me about whole life insurance.”

Of course, this revelation came as no surprise to me. And I’ll take it point-by-point to explain why.

First, the principal investment in your life insurance will contractually remain untouched, growing tax-free for as long as you live. Main Street investors often view life insurance as a “just in case” investment for their family, while the ultra-wealthy see it as a contract for lifetime profits with some of the most stable companies in the financial industry.

Second, life insurance is one of the very best assets you can have for collateralization. Because you can take out a loan against the cash value of your policy without actually reducing that cash value or interfering with your compounding process. These loans can be used to save a few thousand dollars on car loans (thanks to lower rates), or even to take advantage of major investment opportunities. Terms are generally favorable, and you can pay the loan back at your own pace.

Third and finally, there’s far less trust involved in signing a life insurance policy than virtually any other type of investment…

Because every single detail — down to the exact amounts of your dividend payments and benefits — are outlined in the policy when you sign it. There’s still a counterparty risk, like with any contract, but in this case your counterparty is a life insurance company that’s likely been in business for more than a century.

Your life insurance dividends are also paid from the excess of that company’s profits, and thus they’re not dependent on an unpredictable stock market or any other external factors.

Add it all up, and it seems like a perfectly obvious formula for lasting wealth. Especially if you’re always thinking in terms of generations like Lionel’s wealthy clients. But you don’t have to be wealthy to cash in on that kind of long-term thinking by committing to a well-structured whole life insurance policy.

Key Takeaways

• Whole life insurance offers a stable, tax-advantaged asset where the principal grows untouched, providing long-term wealth continuity.
• The ultra-wealthy leverage life insurance as collateral to maintain liquidity and fund opportunities without triggering taxable events.
• Choosing investments that avoid unnecessary risks and preserve principal is key to sustaining and growing generational wealth over time.
• Trust is critical: ultra-wealthy clients prefer assets with transparent, contractual terms and rely on well-established insurance companies rather than volatile markets or banks.
• Life insurance policies insulate wealth from market crashes, banking failures, and potential future tax rate increases, safeguarding assets across generations.
• Intentional living and proactive financial planning, including the use of max-funded whole life insurance, empowers value creators to build resilient wealth aligned with their life goals.

Ready to see how this could apply to your wealth plan? Click the big yellow Clarity Call button and let’s map it out together.