"Missed Fortune 101"

[nedbenz]

I've seen it used by LEAP guys to justify their Whole Life recommendations, inappropriately IMO. It might be helpfull to research the archives regarding the board's discussion of LEAP and LOC, no need to rehash again.

[CourtoftheTable]

I am going to the seminar Mr Andrew holds in Utah this month I would be glad to report to you all

[j105]

Why did you think that I didn't read the book?

His main point is to "invest" in life ins.. The interest he uses in the book are way too high compared to current UL interest rates.

I believe any who uses a UL for an investment is a fool.

At the seminar, tell Mr. Andrews that you don't have to take distributions at age 59.5. In fact, the owner never has to take distributions from a Roth IRA.

[CourtoftheTable]

I will ask him Buzz and I agree I am not an UL advocate I prefer WL in most cases except at older ages

[j105]

Why in the world do you prefer whole life? For what purpose?

[cgfoster34]

Not saying i'm a whole life fan, but i would guess the guarantees would be a good feature when you are using a concept like the missed fortunes concept.

I know there has been a lot of discussions about whether this concept works or not, just a few too through out there.

What do you see as the biggest downside to someone refinancing and taking their equity (a dead asset) and investing it in something that will earn a rate or return?

[j105]

The point is where to invest equity money.

You talk about the guarantees of whole life, compare the prem. paid to the "guaranteed cash value", without dividends, and tell me what you think. Dividends are not guaranteed.

[Lucullus]

Not all whole life contracts are participating. Of course, the current interest rate in nonpar contracts is not guaranteed either.

But if CASH VALUE is an important consideration, then I believe it's fair to consider that just about any cash accumulation instrument involves non-guaranteed rates. If lack of guarantees is a defect of dividends or current interest in a WL policy, it's a defect in CDs (which do not guarantee a rate beyond the duration of the certificate), bonds (because, while the coupon rate is guaranteed, the TOTAL RETURN cannot be), etc., etc.

If DEATH BENEFIT is the ONLY consideration, a nonvariable UL with strong secondary guarantees is probably a better choice than WL, but not every client considers cash value to be unimportant.

John Olsen

[cgfoster34]

And i think that is the point with this concept, building cash values.

By no means am i championing whole life, but, like many investments i think it has a place.

I guess when you are talking about the MF's concept, it seems to make some sense because you don't have the same type of concerns (lapsing the policy, underperformance, changing caps, coi changing) that you have with EIUL or VUL.

Now, will you be able to illustrate the same type of cash accumulation as those products, absolutely not. But illustrations have been deceiving in the past when it comes to life insurance.

I guess i look at the MF concept this way, you are creating interest rate arbitrage basically. Banks have made a killing by borrowing money (CD's)at a certain rate and then putting that money to work for them (loans) at a higher rate.

People have acquired great wealth throughout our country's history by leveraging non working assets to acquire working assets.

To me that is the basis for the concept. Any thoughts?

[j105]

To me that is like buying a fire insurance policy from you wife who is going to pay the claim out of YOUR joint savings account.

Another thing, they say you need to wait 7 years in order to build up enough cash values.

Are you saying you are making money by borrowing from yourself?

[j105]

Non-par whole life's cash values are GUARANTEED!

[cgfoster34]

I guess i'm saying you are making more money by using an asset that is not earning anything and turning it into an interest earning asset

[j105]

Be specific, would you be investing in a level face amount whole life?

Take a whole life policy, show the prem. paid for 20 years and the total cash values in 20 years. Then we can see what you are actually earning.

[Lucullus]

Buzz,

You've made it very clear that you have no use for WL. Questions like "Are you saying you are making money by borrowing from yourself?" make that pretty clear.

I am far from a "WL advocate". But I understand how it works and when it works, and I simply do not agree with your conceptualization of either.

John

[j105]

That is OK, John. You never agree on anything.

Would you care to explain your post that whole life ins. doesn't have guaranteed cash values?

I understand, and I have the book, how you pay high prem. then borrow your own money and become your own banker. Only a fool would advocate such a scheme. What the whole life guys will go through in order to justify selling whole life. Nash also said that a whole life policy is a 20% investment.

[Lucullus]

Buzz:

Do a Google search on "excess interest whole life" or "interest sensitive whole Life".

[Lucullus]

Buzz writes "Non-par whole life's cash values are GUARANTEED!"

That is an inaccurate statement. While ALL whole life policies contain guaranteed cash values, many WL policies provide for "excess interest". A few decades ago, Jackson National sold TONS of these "interest sensitive" contracts. So did many other carriers.

These days, the nomenclature is a bit more confusing. "Current assumption" WL is really a HYBRID of WL and UL. "Excess interest" WL may not provide for fixed premiums, but resembles a traditional WL more closely than it does a traditional UL.

It is NOT accurate, however, to state that ALL the cash value to be earned in a nonparticipating WL policy is guaranteed.

- John Olsen

[j105]

Pay attention,

I said WHOLE LIFE!

[j105]

You keep getting confused, Professor.

Whole life is whole life, interest sensitive
whole life is called interest sensitive whole life, not whole life. Have you ever sold this stuff?

[j105]

A little tid-bid I picked up on the net:

"Whole life offers both a death benefit and cash value, but is much more expensive. Half of all cash value policies are surrendered within the first seven years, making the coverage very expensive because huge commissions (thousands of dollars the first year) and fees limit the cash value in the early years. Since these fees are built into the complex investment formulas, most people don't realize just how much of their money is going into their insurance agent's pockets."

[Lucullus]

"Whole life is whole life, interest sensitive
whole life is called interest sensitive whole life, not whole life. Have you ever sold this stuff?"

By that "logic", participating whole life is not "whole life" either, because it's called "participating whole life".

You make an inaccurate statement, and when the inaccuracy is noted, you defend it by redefining the terminology to accomodate your error.

Have a nice day, Buzz. I'm through wasting time on this.

[j105]

Your try and correct everyone and when you mess up, you try and dance your way out of it.

Non-par whole life has guaranteed cash value.

Par-whole life has guaranteed cash values.

I specified non-par whole life trying to keep you from getting confused because of the dividends. You still got confused.

There is a difference between whole life, par and non-par, and interest sensitive whole life. That is a different class of whole life.

You need to double check your information before correcting someone.

[CourtoftheTable]

Not guaranteed are dividends but if they have been paid for over a hundred years its a better bet then hoping the market cooperates

[CourtoftheTable]

and John its not "your money" that you borrow its OPM

[CourtoftheTable]

But once the dividend is earned it is guaranteedJohn L. Olsen, CLU, ChFC, AEP wrote:

> Buzz writes "Non-par whole life's cash values are GUARANTEED!"
>
> That is an inaccurate statement. While ALL whole life policies
> contain guaranteed cash values, many WL policies provide for
> "excess interest". A few decades ago, Jackson National sold
> TONS of these "interest sensitive" contracts. So did many
> other carriers.
>
> These days, the nomenclature is a bit more confusing. "Current
> assumption" WL is really a HYBRID of WL and UL. "Excess
> interest" WL may not provide for fixed premiums, but resembles
> a traditional WL more closely than it does a traditional UL.
>
> It is NOT accurate, however, to state that ALL the cash value
> to be earned in a nonparticipating WL policy is guaranteed.
>
> - John Olsen
>
>
>
>

[CourtoftheTable]

Exactly Buzz

[CourtoftheTable]

So what is the return on an asset if you never use it????

[CourtoftheTable]

To justify our whole life commissions by us LEAP guys???? LEAP is not just WL it is about coordination integration and acceleration. All with money the client didnt know he had. Get licensed go to a seminar ask Castiglione a question in front of 400 other professionals and see yourself get "slammed"

[CourtoftheTable]

Its not your money.....Dont you get that its a pool of other peoples money thats why in certains cases you can deduct the interest to offset gains. And a low cost or no cost loan is not a bad deal

[CourtoftheTable]

Gooooo BUZZZZZZZZ

[j105]

Let those "un-professionals" talk with the real professionals and see who gets slammed.
The have made Primerica a fortune. Look at the money that AL Williams was able to make because of the LEAP guys.

Name one financial publication not written by the insurance industry that advocates WL and LEAP.

LEAP is a cult for whole life peddlers.

Invest in life insurance, what a joke!

[j105]

Sure it is if you know the difference between types of whole life which apparently you don't.

Whole life is one type.

Interest sensitive whole life is ANOTHER type.

All whole life, par and non-par, have GUARANTEED CASH VALUES.

Did I say interest sensitive whole life? No! So why are you saying I said something that I didn't?

[j105]

You obviously don't know where dividends come from.

The whole reason that they are not taxed is because they did not come from earnings.
They came because of an over-charge in premium. Anyone can pay a dividend if they over-charge the policyholder to begin with then give some of the money back. WOW, what a deal!

[nedbenz]

Using the illustration of borrowing the equity in one's home, the cost is the after tax interest cost. Obviousley if one can borrow at an after tax cost of 3.5% and invest at a higher after tax rate , one is ahead of the game. I personally wouldn't do this, and wouldn't advise a client to, but technically it is possible, risky, but possible. IMO, caveat

[nedbenz]

Been to many meetings, tried to get my arms around the concept, Castiglone? won't answer the questions Belk asks. I took 5 HNW clients to a "major" LEAP producer to work jointly, numbers didn't add up, illustrations weren't correct, and couldn't get answers to quetions that I asked. If it works for you, that is your business and I hope you remain successfull.The meetings I went to are so cultish it was scary, I was waiting for the kool aide. Why did NYL pull out? Why don't other companies endorse the process?I/m not picking an argument, but reread the past threads and you will see how others feel, some favorable some not.

[j105]

Blue, I am with you 100%!!!!!

[Lucullus]

LEAP has always seemed to me to be Blue Smoke and Mirrors. You never get to see where the numbers come from. And as for being "slammed" by Castiglione, that guy would "slam" Mother Theresa for not bowing to him.

If the idea makes sense, you don't have to deride those who doubt and ask for proof. You respect their prudence and you give them the proof.

Unless, of course, you can't provide it.

- John Olsen

[ajc1588]

The key there is you said that you "glanced through the book". Read the whole thing partner. You don't know what you don't know!

Have a good day:)

[j105]

I did read the whole book after taking a first glance.

Page 4 contains a gross error.

I have gone on record saying the main point of the book was using insurance as an investment vehicle.

What part of my post do you think indicate that I haven't read the book?

[j105]

How about you, AC?
I just received the book, "Missed Fortune 101". I have glanced through it and I think it is going to be a joke.

On page 4, the author, Douglas R. Andrew talks about a Roth IRA. He states that, with the Roth," distributions cannot be made until 5 years after the first contribution is made. In addition, distributions MUST be made when or after the owner reaches age 59.5, except in the event of the owners death or disability, or for "qualified first time homebuyers expenses."

Anyone see anything wrong?

[j105]

After re-reading my post, I am still right, John, and you are still wrong.

Non=par whole life's cash values ARE GUARANTEED.

BTW: Non-par whole life is the same product as par whole life. One simply pays dividents and the other does not.

[j105]

It surprises me how many of your BD control your fixed business.

[ajc1588]

The only reason I made the comment about you not reading the whole book is because you said you "glanced" at it.

I am glad to hear that you have read the whole thing. I saw another post "Missed Fortune II" that I think you created as well. Good discussion there.

There is nothing wrong with questioning these strategies. They are very contrarian in nature and they are not for everyone.

I know Doug personally. In fact he has done seminars for us in the past. We use his strategies with clients quite often. But, they are not for "financial jellyfish". It's just another way of looking at things.

The one thing I would caution advisors on is the structuring of the insurance contract. It is very important to build the contract properly so that you have the mimimum death benefit required within TEFRA/DEFRA/TAMRA guidlines. If you build the contract the right way, it can perform well.

Plus as someone indicated in a previous post, Indy/AmerUs has a neat feature in their loans that actually results in a positive arbitrage. Meaning that they credit you back 2% on loans. We do use F&G as well, and even some companies with fixed UL's for older people (PAC Life/JP/etc.)

We have been using Doug's strategies for about 4 years. It's a huge learning curve (just like everything else). We have invested in the education of going out to SLC and becoming TEAM members.

I appreciate your post. It's good to read about what people are learning about these concepts and hearing feedback. I wasn't trying to start a fire. I just don't like when people try and thrash these strategies without reading the book. Your email sounded like you hadn't read the book yet. That's why I said what I said. If someone will read the book from cover to cover, I have no problem with them asking questions, agreeing with it or even thrashing it.

Have a great day! I look forward to seeing more posts about this topic.

[ajc1588]

Oh I forgot to mention... I have read both of his books... the original "war and peace" version. The 500+ page jobber as well as Missed Fortune 101.

[j105]

I did say that I had glanced over the book and that I found a glaring error on pager 4, having to take distribution at 59.5, Totally wrong. Later, I posted that I had read the whole book. I have sold some over funded VUL's. I would never sell over-funded UL's. I would not ever suggest to a client to borrow their equity and invest it in anything. Just My opinion.

[ajc1588]

Ok then... thanks for the clarification.

[FPAdvice]

Page 4 did contain that statement, like a lot of other statements I think the author should have been a lot better about what was said vs. what he meant. I think we all know he meant accessing basis plus growth after 59 1/2. He also says something about you have to live in your house for the last 2 years to avoid capital gain which is obviously not exactly a complete explaination.

[j105]

I guess no one proof read the transcript before printing. To me it is a bad sign.

Yes, you can make money with his concept, which is not new, but I think you are working in a risky enviorment. IE, borrowing equity to buy life insurance.

If it works for you and you are comfortable with it, use it.

[cgfoster34]

Just a clarification on not taking equity out of a home to invest, are you saying there is no risk with equity?

What is a home depreciates, that will directly reduce the equity. Wouldn't your clients be in a better position if you had diversified some of their equity into a safe investment?

[j105]

I am saying that there is little risk in home equity. Let's say the value of your home declines, so what?

Are you advocating using home equity to buy life insurance?