Episode 199: How Whole Life Policies Unlock Liquidity and Growth for Business Owners

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Are you letting too much of your business’s hard-earned cash sit idle when it could be working for you in multiple ways?

As a business owner, you know the importance of having liquidity—an emergency or opportunity fund you can access instantly. But parking that money in a savings account or GIC often feels wasteful, especially when inflation eats away at its value. The challenge is balancing peace of mind with real growth. That’s where the idea of a “wealth reservoir” comes in: a structured way to protect cash, keep it liquid, and still put it to work building long-term wealth.

In this episode, you’ll discover:

• How a whole life insurance policy can serve as a corporate wealth reservoir, giving you both liquidity and steady growth.
• Practical strategies for deciding how much to contribute and how to scale as your retained earnings grow.
• The emotional and financial considerations for starting small—and why most successful business owners eventually build multiple reservoirs.

Press play now to learn how to transform idle corporate cash into a powerful engine for security, opportunity, and long-term wealth.

Resources:

• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Discover which phase of wealth creation you are in. Take our quick assessment and you’ll receive a custom wealth-building pathway that matches your phase and learn our CRA compliant tax optimized strategies. Take that assessment here.
• Dig into our Ultimate Investment Book List
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX. 
  

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Building a strong Canadian wealth plan starts with a clear financial vision setting process and the right mix of financial buckets to support both corporate finance and personal finance goals. By using a wealth reservoir—a strategy that leverages insurance policies to keep retained earnings liquid while still growing—you can create an emergency fund and opportunity fund that optimize cash flow. For the Canadian entrepreneur finance journey, this ties directly into corporate wealth planning, corporation investment strategies, and personal vs corporate tax planning, ensuring tax-efficient investing and business owner tax savings. Layering in RRSP optimization, salary vs dividends Canada decisions, and capital gains strategy gives you flexible retirement planning tools, whether you aim for financial freedom Canada, an early retirement strategy, or simply a modest lifestyle wealth plan. With careful financial systems for entrepreneurs, including real estate investing Canada, real estate vs renting considerations, passive income planning, and estate planning Canada, you can achieve financial independence Canada while still focusing on legacy planning Canada, wealth building strategies Canada, and building long-term wealth Canada through smart investment strategies and financial diversification Canada.

Transcript:

Jon Orr: In this episode, we’re gonna talk about the wealth reservoir. And I think in particular, we’ll probably, you know, riff back and forth between the wealth reservoir on a personal side, but also the wealth reservoir mostly, I think, in our corporation side. And we’re gonna be selfish here. These are, you know, tools that we’re using and trying to optimize inside of our own businesses, our own real estate corporations.

our operating business, our holding company business, like we are optimizing the wealth reservoir tool. That tool you’ve heard us talk about here is the whole life insurance policy tool as a path through structure. And why we wanna talk about that tool here specifically today on the corporate side is when we meet with our business owners, our clients, some of the questions about establishing your reservoir, your emergency fund, know, this is the fund that you’re,

You have access to no questions, no back checks, none of this. It’s like you have this pot ready to go for investment opportunities, for again, like I said, emergencies. And sometimes when you go to set this up and why that tool we’ve talked about many times here is so important is because you get two uses to the same dollar. You don’t have idle cash sitting around doing nothing. If you got a bunch of cash in your corporate accounts,

for emergencies, we put our money into the wealth reservoir tool so that we have liquidity, but also the money’s growing. so, some of the questions that we get asked specifically is like, well, how much should I choose to be the top end of this kind of range for my contributions each year into the tool, which is your premiums for the insurance policy?

Sometimes we get hung up on that. It’s like, well, what happens if next year is a down year? What happens if it’s an up year? I don’t want to like have more cash sitting on the side when I could have put it the two uses to the same dollar now. And so it’s sometimes we get that question. It’s like, well, how much is the right amount? And there is a range. You can decide on the range, but I want to talk about that because I think…

We’ve got some solutions, we’ve got some strategies we’ve been putting together on our side because we also battle that and also when you have growing businesses year to year, you make more money. And now it’s like, well, what do I do with the extra cash knowing that I’ve maxed out my existing wealth reservoir pool? So let’s get into it, Kyle. What are you hearing from business owners?

Kyle Pearce: Right. Yeah, you know, and actually I hear a lot of the same things, whether it’s business owners or individuals who are investor minded, right? And looking to make investments and so forth. And really that challenge is trying to figure out what’s the right amount. And we’ll never get this right. There is no way to get it quote unquote perfect. But usually as a starting point, I like to get people to think about what is that amount of cash or that amount of capital that you aren’t

ready to deploy into investments immediately. So for most people, when they’re chatting about, let’s say, portfolio structures or whether they have risk on versus risk off or growth versus fixed income, you’ll hear us talking a lot about policies being a fixed income replacement. And why we do that is, first of all, it grows in a similar manner, right?

If you’ve watched a YouTube video out there and you hear someone saying 8 % cash value growth or 12 % cash value, that is not true. You’re not going to get it to grow that aggressively. What we can do, though, is we can get it to grow like fixed income products. I use here in Canada, like GIC-like growth is sort of what I look at. But when people are talking about their mix, they often

forget to include that safety bucket, that money that they weren’t planning to do anything with because they have it just in case. For some people, that’s cash sitting in a high yield savings account. For others, have like GICs that they ladder and it’s just sort of there just in case. For business owners, that’s usually a really high amount. Like there’s usually a large amount of cash and in their mind, they picture that cash is not part of their investment portfolio.

because they actually consider it part of the business operations. know, like they look at 50 % of their net operating income or 50 % of the capital inside of their corporate structure, they’re looking at that and keeping it as cash because they’re like, I need access to cash just in case. So when we’re looking at this, typically, especially with someone who’s new along this journey, we’re often thinking about starting small,

and actually putting yourself in a position where you kind of look back in a year or two and go, I wish I went bigger. Like that’s a much better place to start so that you can get the wheels turning on the process. You can start understanding how do policies work? How do the structures work? And to get comfortable with the idea of leverage because from a rational standpoint, especially for incorporated business owners, we can make the rational case.

that getting every available retained earnings dollar into a policy and then leveraging out to use for business operations, for putting it into the next investment property, for putting it anywhere you wanna go, we can make the case for why that makes sense. But you know what’s really hard to do is actually to help make the case to your emotions that that’s the right move, right? So I think starting small and really looking at and focusing in on

the money that is sitting there and that you’re not planning to put into long-term assets right away. Again, there are some people that are a little bit more aggressive on this strategy and they’re ready to go. They’ve done a lot of research and they know exactly what they’re signing up for and that might be different for them. But for a lot of people new to this journey, getting something small started is a great way to start slowly building that.

corporate wealth reservoir, or if it’s on the personal side, a personal wealth reservoir. And then over time, starting to scale that up as you get more and more confident in the strategy and feel like you have a trust in the actual numbers and that everything is making sense based on the plan.

Jon Orr: Yeah, like the way I look at it is, is if you were, if you were looking at it and going, look, I want to reserve 50 % of my retained earnings for emergencies and it’s cash is sitting there. It’s just idle. It’s just kind of like you’re, it’s, you’re managing in your bank account and then you’re deploying the rest. sometimes this is what we did early on is to say, you know what, like when we trickle that, you know, our, our, our, our retained earnings at say,

at the operating level up to the holding company level. It’s like, well, now let’s develop a plan for distributing that into different investment buckets. How much goes into that bucket? How much goes in that bucket? Well, how much do we keep just in case? It’s like that just in case, what we started to do was just say that just in case is now the emergency fund, but now that goes in our insurance policy bucket, but it’s earmarked. It’s earmarked to be the emergency fund. Also combined with our opportunity fund so that when we

that need an emergency or when we need the opportunity, we go to the policy holder or the policy, we’re the policy owners, but we go to the carrier and say, hey, we’re gonna take a policy loan on that because we need the money and they’re saying, where’s the bank account? You center there and then all of a sudden now we have our emergency money when needed, if an emergency arrives. So it’s like, it’s still liquid, but I’d rather see it sitting there earning, like you said, GIC level growth when it’s just,

normally just sitting there. And it’s usually that was the way the waterfall method was working. It was like the money was getting here. We replenish it here and then we move it here. But then there’s always this pot sitting there just in case. And it’s like, well, we put that pot to use. We just said, hey, it’s still ready to go. It’s just in use. And I remember on my personal side, when we restructured, it was like, I don’t know personally in terms of my budget, you know me with budgets. It was like, I know every dollar went. And it was like, well,

maybe I don’t have enough to start a policy in terms of to create my emergency bucket, my opportunity bucket, my wealth reservoir on my personal side. But when we looked at it, I was like, well, this is how much was going in savings. That’s the same thing my retained earnings were doing. It was like, here’s this bucket sitting there doing nothing. It’s like in my savings account, because I was like, every month we’re gonna put away some savings, make sure that’s my emergency fund. But then it’s like, also,

I’m putting away a little bit for my tax payment at the end of the year. And also I’m putting away my RSP money. You know, I’m dumping it into RSPs. Also I’m putting in the tax free savings account. Also I’m putting it over into an investment on registered accounts. It’s like when you add all that up, that’s a good chunk of your salary that you’re dedicating towards long-term investments, long-term growth, opportunity funds, and emergency funds. was like that right there forms the basis for my wealth reservoir.

and all of a sudden now I’m gonna take that lump sum, that’s my policy, I got my range to make sure it’s like hey, what’s my top end, what’s my bottom end, but if I make more, great. We’ve got that next choice, which we’re gonna talk about next, but it created this place that I could feel confident with to also know that I wasn’t just, that money wasn’t just sitting there doing nothing, but it was ready to go, ready to deploy, and making use of it while it was there. wasn’t, it was two uses to the same dollar that money went in there and

It was earning the GIC like, but then when I borrow it back and I put it in my tax free savings account for long term retirement, now I’m earning whatever the investment is over there on the arbitrage between the rate I was borrowing. these are the things that we think about and that’s why I want to share them. These are the moves, the secret sauce moves we’ve been making to make use of the wealth reservoir idea, which is kind of stage two of our healthy financial plan. Now, here’s the question I want to throw at you because

When we establish a plan like we have and our clients have and using it like a wealth reservoir and we realize that we get to that situation where it’s like, I now have more of my opportunity fund available. I’ve got more retained earnings in my corporation and I want to still have that same philosophy. I don’t want that to be sitting there doing nothing. And, but I’ve now maxed, like I paid my premium, my maximum premium this year.

I want my line of credit to keep going up, but I can’t do it yet. So it’s kind of like you’d like to go back and adjust that policy and say, can I make it bigger? Because I want to be able to put more money into the wealth reservoir tool to make use of it. But what we’re doing is we just opened another policy. And Kyle, talk to us about like downfalls, benefits, second policies on top of, or not on top of, but side by side with other policies.

Kyle Pearce: Yeah, like I think like when you’re starting the process and you’re like, OK, I know I want to get this going. You kind of fall into one of two camps. So what you’re referring to is the most common camp, which is this idea of like, I’m going to start the reservoir. I’m going to like for now use it as a fixed income like bucket that I’m going to use if and when I need it. But my plan isn’t to necessarily immediately leverage it as soon as it goes in force. So usually that bucket is.

a lot smaller than say the other end of the spectrum where somebody comes in, they’re like, actually, I’ve got a large sum of money, or I have a lot of retained earnings, let’s say in the corporation, I want to start getting this bucket going, I want to get as much of this retained earnings that I’ve built up over a number of years into a policy, I want to be able to sustain that policy. And I’m thinking I’m going to start leveraging this in the short to medium term, meaning I might maybe be buying a building in the next year, I might be

you know, investing into another business or private equity or something else like that. There’s kind of these two ends of the spectrum and the one end of the spectrum where you’re kind of using what we call like the leverage later strategy. It’s like I’m going to put money here. I don’t really see a need for this money in the next 90 days, even maybe year. It’s going to be more for fixed income. Like anyway, it was going to go and sit and earn interest or GIC interest or

Maybe it was just going to sit there and wait for an emergency if and when it happens. What ends up happening there is we actually encourage you to go pretty small on that bucket to start because we don’t want to tie up too much of the money that you’re planning to put into investments right away. So if we use the most basic scenario, someone who’s dollar cost averaging into ETFs.

If your plan isn’t to immediately leverage the policy and put it into the market, because maybe you’re not confident in using that leverage to go into the market or whatever the reason might be, we don’t want to put too much of those dollars into that bucket unless you are a more conservative investor, right? Maybe you’re more of a balanced investor and you want 60 % in growth than 40 % into fixed income. Well, guess what? 40 % of those dollars

a great spot for it to go is into that policy. And as you grow and as you grow, what you might find though is that you go, you know what, I actually want to start utilizing this opportunity bucket or this wealth reservoir in order to buy more growth assets. And that’s when you’ll start to go, shoot, I kind of wish I coulda woulda shoulda had a bigger policy. But let’s be honest, it’s,

emotional easier to small to start a small policy right without a huge amount of commitment from year to year. So now we’re going to start looking and saying okay maybe you’re at that stage where you want to open up the next bucket and maybe that bucket has a larger chunk of your available capital. If let’s say you’re an 80 20 investor so that could be 80 % into.

real estate, 80 % into the markets, 80 % into private equity, maybe it’s 80 % spread around all of those asset classes, you might now start to recognize that, you know what? I might still build up a bigger than 20 % of my available capital bucket here so that I can leverage a portion thereof into some of these growth assets. As income comes back,

I can refill that bucket and I can start looking at the next opportunity. So ultimately at the end of the day, when you’re getting started, those two camps are very different camps. It takes a lot more of emotional mental strength to start a big wealth reservoir or maybe a large amount of retained earnings that have been sitting, which is not uncommon for a lot of business owners, right? What started as a opportunity fund or an emergency fund in the building,

or in the business kept growing. And then you almost sort of start to go, I don’t know if I want to take and deploy all of it, half of it, some of it into a risky asset class, because you’re like, I put my sweat and tears into this. They want to try to get a nice large policy going. So there’s kind of two kind of camps here that you might fall into. And I’d argue that for most, starting with something small is likely if you’re

being successful with it and you’re successful in your planning, you’re gonna want to add on another policy in future years. And actually, I’ll be honest and say the most successful people end up having more than one because that’s just the way it sort of rolls. John, you and I are great examples of that. We started small and over the years, we started to recognize how valuable this tool was for us in our journey. And now we’re kind of on the other end of this.

the extreme ourselves where we try to get all of our retained earnings to touch a policy before those dollars go back into the business or other investments.

Jon Orr: Right? Multiple. Yeah. Would you like, is it, think about someone who, know, obviously let’s say I’m a business owner, I’ve got retained earnings. Is there a case where you’re like, this is not a good choice for you? Like the wealth reservoir tool, you know, a corporately owned, whole life policy structured specifically to act as a wealth reservoir. Is there a case or cases, like what, if I’m listening right now, how do I know that this is not the right move for me in my business?

Kyle Pearce: That’s a great question. I would say that, you know, if you don’t have retained earnings from year to year, you know, like, so if you’re, we often use the word successful business owners, because a successful business is going to have profit. And that profit after you’ve paid all those expenses and taxes, and you’re even your own salary, right, the salary you need to live on for your lifestyle personally, that’s going to leave retained earnings. So if you’re successful,

it’s gonna make sense. Now, where it’s not gonna make sense is if let’s say the business has some retained earnings, maybe it’s a small amount, I’ll use 100,000 as example. And you aren’t sure what next year is going to be like, or a couple years from now, or maybe you’re winding the business down completely. And you’re going, you know what, I have 100,000 in retained earnings right now, I’m going to do this for two more years, maybe I get it up to like 150,000 in retained earnings. Well,

I mean, you could probably use what we call the slow drain method to just kind of like slowly drain that out over a number of years. That means you’re gonna have to keep the corporation, you know, open longer and you’ll just slowly take little by little out and you’re gonna pay tax on that, right? That’s the trade-off, but you’re gonna pay a less amount of tax. But for most people that have retained earnings and for people that have, I’ll call it like a reasonable runway. Usually if you have like at least a

two to five year runway, or even if you have a short runway on your business, you don’t plan to keep doing this for much longer, but you have a large amount of retained earnings, quote unquote, trapped in there, right? On paper, it’s saying I got a million in retained earnings, or I’ve got, you know, whatever that number might be, it can definitely make a ton of sense for us to build a very, very well structured policy, try to get it funded as early as possible.

for the least amount of time so that now you have this tool that you can use for leveraging, for potentially for some good cash flow without triggering taxes and all kinds of other strategies that’ll help you to ensure that that tax on retained earnings is gonna be minimized over the long term.

Jon Orr: Right, so we encourage you, you when we think about our four stages, our four phases, our four structures of a healthy financial system for your corporation and also for your own person. Stage one we often talk about is our vision process, making sure that we know our numbers, making sure we know what we’re shooting for, what are our goals, what are our life goals, what is the target number.

for retirement or if we are planning a retirement, we have to describe that, we have to have a clear vision otherwise no roads lead everywhere and everywhere leads nowhere. And so that’s really important for stage one. Stage two is about establishing the reservoir. That’s what we’ve been talking about here today. The tool of choice that we use in our own businesses and we recommend for corporately owned business owners when they meet certain criteria like Kyle has just described is that whole life policy well structured, very carefully structured.

for that purpose. Stage three is about optimizing your existing structures and making use of that wealth reservoir to optimize and use the secret sauce moves to make sure that we’re setting ourselves up for the vision that we established in stage one, but also minimizing the taxes along the way. And then finally setting us up for stage four, which is making sure that we count for our legacy and also our estate and…

The tool there helps that as well. If you are looking to figure out where, know, what part of the journey, but also what stage you have strength in, you can head on over to CanadianWallSecrets.com for us as pathways. There is an assessment there to fill out and we will give you a report. It shows up in your mailbox that outlines, you know, this four stages and your strength on those four stages and gives you some next steps. can also book a meeting with us.

We can look at your situation, talk about your wealth reservoir strategies, and then help you establish one. Head on over to CanadianWealthSecrets.com for discovery and book that meeting today.

Kyle Pearce: All right, Canadian Wealth Secret Seekers, we will see you in the next episode. And just as a reminder, this is not investment advice. It’s for entertainment and educational purposes only. And you should not construe any such information or other material as legal tax accounting, investment, financial or other advice. And I, Kyle Pearce, am a life license and accident and sickness insurance agent and the president of Canadian Wealth Secrets, Incorporated.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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