I have purchased a whole life policy from a company that uses the LEAP
system to market whole life insurance.

What is the LEAP system, and why is it controversial? I see that
Joseph Belth has written some skeptical articles in the Insurance
Forum on it, but I don't subscribe to his publication.

I've had several LEAPers explain the system to me, and I have to admit
that much of it didn't take. The terminology is a little fuzzy; they
use words like 'turbocharged money' and stuff like that.

I know that this system helps persuade people to purchase vast sums of
whole life insurance.

One of the highlights is that you can borrow your own money, then
deduct interest payments, as long as the money borrowed was for
investment purposes. I'm not sure how they deal with wash loans, since
that's available on darn near every permanent product now. Perhaps
they are deducting interest payments made back into the contract, even
though they are 100% credited back to the policy? I just really don't
know. Perhaps Ed can jump in and explain how most personal interest
payments are not deductible, and where there may be an exception.

The real problem I see is that, as far as I know, it has never been
approved by the NASD or a broker/dealer for sales purposes. Even if
you only use it for whole life, color me crazy, the regulators would
find a way to nail a registered rep in one way or another. I'm not
interested in getting in trouble, so I've avoided paying the $3,000
toll for the seminar on the system.

I was told by someone at NYLIC that they were trying to get it past
their internal compliance department, earlier this year. I have no
idea if they ever did. Guardian agents are known to use the system,
probably more than any other company. I have no idea if they have it
'officially approved' or not. The people who use is swear by it. In
some cases, they totally change how they do business. I've never met
anyone who attended the seminar who came back saying it was bogus --
they all thought it was the real deal.

Perhaps why I'm not convinced is this: If it was all it cracked up to
be, insurance companies would be all over it like flies on honey. This
casual unwritten endorsement stuff isn't good enough for me. When I
see Guardian, Mass Mutual, Northwestern Mutual and NYLIC company
produced literature with LEAP on it, I'll change my mind. Until then,
I'm a doubting Thomas.  =)

beliav...@aol.com, you asked:

<< <i>I have purchased a whole life policy from a company that uses the LEAP
system to market whole life insurance.

What is the LEAP system, and why is it controversial? I see that Joseph Belth
has written some skeptical articles in the Insurance Forum on it, but I don't
subscribe to his publication.</i> >>

The LEAP (Lifetime Economic Acceleration Process - as you may already know what
the acronym stands for) is actually a SYSTEM to help life insurance
agents/brokers sell more life insurance, in particular . . . Whole Life
insurance.  It's designed to help the agent sell higher amounts of whole life
insurance using a particular "philosophical" point of view.  This philosophical
point of view mainly has to do with concept of "velocity of money" and tries to
incorporate other financial concepts like "time value of money" into that
philosophy.  And so, the bottom line turns out to be . . . buy as much Whole
Life insurance as you can afford and don't use any other system of determining
one's life insurance needs/wants.

It tends to be very controversial because those who've actually bought the
system will not or can not discuss the details of the system to outside
sources.  So, in effect, unless you're a member of the cult like group, you not
authorized to know how it works and why.

If you go to their web site, about all you can find out is there (
http://www.leapsystems.com/ ), though it really doesn't answer your or anyone
else's question(s).  The best place to get such question answered is to pay the
exorbitant fee to attend one of their seminars where they SELL the system to
life insurance producers.

 > If you go to their web site, about all you can find out is there (
http://www.leapsystems.com/
 >  ), though it really doesn't answer your or anyone else's
 > question(s).  The best place to get such question answered is to
 > pay the exorbitant fee to attend one of their seminars where they
 > SELL the system to life insurance producers.

I remember looking that site over a couple years ago...I'd hardly give
it a glowing endorsement (from the investor's perspective) based on what
they put up on the "consumer" side of the site. I'm all for things that
help people to save/invest, and to understand the process. But it's full
of trite statements, nonsensical language, and just plain bad writing.

The pages on things like compound interest, IRAs, and dividend
reinvestment look specifically tailored to confuse uninformed investors.
They're repeatedly making the point "tax deferral is good" but clouding
the issue in the process. You don't need to talk someone out of an IRA
contribution to sell them whole life insurance, and I think it's a bit
irresponsible to do so. If an agent using LEAP or SPIN or AIDA or
whatever convinces someone with no savings to sign up for whole life,
great. If they stop contributing to their 401k and IRA to do so, or sign
on for more premium than they can afford, not so great (I recall that
exact scenario in an article on one of the more aggressive LEAP
practitioners).

-Tad

Interestingly enough, I received this in my email today:

http://pmiinc.com/ownbankclients.html

I suspect, based on the concept of "being your own bank" and the
testimonials on this page, that LEAP and Pam's new seminar have
something in common. This isn't an endorsement of Pam Yellen, but her
10 hour seminar is a heck of a lot cheaper than LEAP, and she has some
kind of money back guarantee.

The following post was cross-posted, which is contrary to our
moderated group's charter.  Since the topic is appropriate here, the
poster new to the group and I had a few minutes <grin>, the post is
shown below in its entirety.  I have corrected the headers.  -HWW

To: misc-invest-financial-p...@moderators.isc.org
From: Ram Samudrala <r...@sp1.compbio.washington.edu>
Newsgroups: misc.invest.financial-plan
Subject: Value in paying off mortgage principal with unsecured low APR
loans?
Organization: Computational Genomics Group
Message-ID: <aofq7i$8f4$1@nntp6.u.washington.edu>

I get two kinds of unsecured loan offers these days: ones that let me
borrow money for 0% APR for about a year or 18 months, and ones that
have a low fixed APR (3.9%) until the loan is paid off.

Now I also have a mortgage at a rate of 6.125%. Is it worth paying off
the principal using these unsecured loans since it'll save me a great
deal in interest?

The issues that make me hesitant are carrying around large unsecured
loans, and also the tax benefits of having the mortgage loans.

--Ram

End post.

-HW "Skip" Weldon
 Columbia, SC

http://www.nytimes.com/2002/10/13/business/yourmoney/13CALP.html

There is an article in today's (Oct 13 2002) New York Times about how the
California Public Employees' Retirement System (Calpers) may be investing its
funds to achieve left-wing political objectives rather than maximize
risk-adjusted returns, which is its fiduciary responsibility. If the fund
underperforms, California taxpayers will be on the hook.

There is less talk about investing Social Security funds in the stock market
than there was two years ago, for obvious reasons. I think the article
highlights the advantage of individual accounts in which people can choose a
stock or bond mutual fund, rather than a government-run stock fund that some
have suggested as an alternative. Proponents of Social Security directly
investing in the stock market claim that it can be insulated from poltical
pressure, but that is unlikely in the long run.

It does raise some interesting questions - some that also come up with
individual investors who want to invest through socially-responsible
mutual funds. I have clients in Calpers and they seem generally happy
with their investment management; I haven't discussed these specific
topics with them though.

My first thought is, somebody needs to be out there fighting against
what I guess you would label right-wing political objectives that
ultimately affect beneficiaries. Eg: allowing an free-market system of
corporate governance where Bernie Ebbers, CEO of WorldCom, can borrow
$700 million from WorldCom's bond underwriter, Citigroup, which then
leads a huge series of debt issues, and provides glowing ratings on the
stock. And if not someone like Calpers - who's going to do it? Fidelity?
Indexers like Vanguard or Barclay's?

The fact is, unless you've got enough proxy votes, you can't achieve
much - it's a fairly closed system. And without some reforms, in the end
investment returns are hurt. This is very specific to Calpers,
WorldCom's bankruptcy cost beneficiaries several billion dollars; ditto
Enron. So it's perfectly OK for them to be riding the boards of
companies even if their objectives might be labeled "left wing" (IMO
when the term "left wing" is thrown around, invariably it's about things
that are really pretty moderate...as an example from the piece,
abolishing private property rights is safely labeled a left-wing
approach to urban sprawl, but most "New Urbanists" talk more about
having nice sidewalks & hiding garages).

Also it's not surprising that labor has a big representation on the
board, just as it's not surprising that labor has a small representation
on corporate boards. Calpers serves a pool of employees, after all -
it's essentially an employee collective. So they'll have high labor
representation on the board, and in their representative capacity, will
probably skew towards the labor perspective (mirroring the views of
their constituents).

In the middle you have decisions like that of investing in "emerging"
areas of our state. There are social policy agendas underlying the
decisions, and if that's the sole motivation then it's a breach of duty.
Arguably there are some valid reasons for it, though. The 1.5 million
pension beneficiaries live all over the state, and improving the state
improves their living conditions. Also, expected returns may be
satisfactory, or even above-average, on these investments. Anyone who
bought real estate in the early 1990s in, say, the SOMA District of San
Francisco knows that buying real estate in "abandoned urban areas" can
yield incredible investment returns - social-policy considerations
aside. That decision may in fact be more defensible than buying any IPO,
or any large-cap growth fund, as a long-term investment.

Also defensible - though they involve social-policy questions - are
policies to stick with democratic countries (they have more secure
markets, less volatility) and avoiding investments in companies that use
child labor to lower costs. Maybe I've spent too much time in the land
of fruits and nuts, but I find it hard to believe that avoiding child
labor (with the expense of potentially lower investment returns) is a
"left-wing political agenda." What about, say, slave labor? That really
lowers costs and improves returns. When studying board duties in law
school, we spent time on these topics - the law of fiduciaries does
leave room for something other than profit maximization!

But then you get to things that look more like good old-fashioned pork;
these don't involve left- or right-wing political agendas, they're just
a breach of duty, plain & simple. Campaign contributions in exchange for
investment advisory engagements, or gifts made to trustees, as examples.
And of course, that stuff is completely inappropriate, if it's
happening. There are no doubt strict rules against this sort of thing,
it's a matter of finding out about them & going against the individuals
doing it.

Agreed...the latter items mentioned in that NY Times article happen to
benefit Democrats, because they're in office now, but it's a bipartisan
problem. I have absolutely no faith in the SSA to invest Social Security
dollars wisely, and believe it needs to be the most stable, predictable
part of a retirement plan. Buy your stocks elsewhere, and pick them
yourself, uninfluenced by some dopey campaign contribution!

-Tad

There is an article in the Oct 28, 2002 issue of Forbes by Carrie Coolidge on
multibenefit life insurance, which combines with life insurance with disability
and/or long term care insurance. Reading the article, it seems to me that
buying the policies separately may be cheaper and offer may flexibility. Is
this generally true?

The article is at http://www.forbes.com/forbes/2002/1028/336_2.html . You need
to register with Forbes.com, but it is free. Here is an excerpt from the
article

"Here's how it works: Upon the policyholder's disability or diagnosis of
specific critical illnesses (heart attack, cancer, stroke, paralysis, etc.),
the death benefit will be accelerated in the form of cash payments. Benefits
are based on the type and severity of the illness or disability, up to limits
ranging from 10% to 50% of the death benefit. You don't have to be terminally
ill to receive benefits, and the cash can be used for any purpose. In other
words, you do not have to become hospitalized or confined to a nursing home.
When an accelerated benefit is paid, the policy's death benefit and cash value
are reduced by a corresponding amount."

Are there reasonable ways to accrue frequent flyer
miles by investing?  I normally hate gimmicks and
am guided by "no free lunch" principles, but I know
by first and second hand experiences that you sometimes
can accrue tens of thousands of frequent flyer miles
by shrewdly shopping around for things you need anyway.

On a modest scale, I think there are brokerages
that give at least signup awards and perhaps used to
give awards for transactions - anything notable now?

On a bigger scale, I see claims by folks of getting
enormous awards by credit card purchases of tbonds:
http://www.publicdebt.treas.gov/ols/olshome.htm
If using credit card giving 1, 2, or 3 ff miles/$
folks claim to make all the free flying they can
possibly use, especially when selling the tbonds
to buy more.  Site also takes Discover cards, which
gives cash kickback without annual fees.

Doesn't the .gov charge you a commission or something
to make up the charges that credit companies levy to
them to finance this bonanza?  I see no mention of it
on their clunky web site.  Of course the high reward
credit cards have an annual fee, but even that with
a very modest commission might make it advantageous.