Customer Reviews

Missed Fortune 101: A Starter Kit to Becoming a Millionaire

5 star:		(46)
4 star:		(11)
3 star:		(5)
2 star:		(8)
1 star:		(15)

 

 

Every flimflam man knows that the con must be carefully layered around a kernel of truth for credibility. Missed Fortune 101 by Doug Andrew succeeds in this by wrapping a number of preposterous ideas and prevarications around three basic and true axioms. They are: (1) income is taxed in what are essentially "chunks," (2) the only relevant tax rate for decision making is the marginal rate, and (3) tremendous wealth can be created by borrowing at one rate and investing at a higher rate. Everything else in this book is not only utter nonsense, but potentially lethal to one's financial health.

The author arrives at two basic conclusions. We should borrow out of our homes and invest the proceeds at a higher rate. Universal life insurance serves as Andrew's means to this end. We should also suffer the consequences of withdrawing from our IRAs and other retirement plans now rather than later, since the tax from such withdrawals will only get worse. Naturally, the leftover funds (heavily diluted by taxes) should be invested in the same insurance policies, which supposedly offer a higher--and safer--yield than whatever the retirement plans were invested in. By page 5, I realize I'm reading a book-length sales pitch and con that has the potential to wreak havoc in my clients' lives (disclosure: I've been an Enrolled Agent tax professional and Certified Financial Planner licensee for almost three decades).

Anything this full of nonsense is difficult to critique. Short of writing a book-length retort, I've settled on the idea of listing the multitude of problems by category and providing examples from each.

A far more comprehensive review is available at my personal sites; just Google my name to find me. This is an abstract from that review. Serious readers will want to check out my books to see what links may exist between financial abuse and the field of addiction. You may wish to start with Drunks, Drugs & Debits: How to Recognize Addicts and Avoid Financial Abuse or Alcoholism Myths and Realities: Removing the Stigma of Society's most Destructive Disease.

Highly misleading examples
(2) "A $6,000 interest expense deduction on an itemized tax return has the same impact as a $6,000 qualified plan contribution. They are simply reflected in different sections of the return." Aside from numerous other issues, the tax savings from the interest deduction may be zero if you don't already itemize deductions.

(3) He implies that ordinary investors can double their money for 20 periods by comparing one dollar pre-tax and one dollar taxed-as-earned, doubling each "period" for 20 such "periods." The number of humans who have done this or something equivalent numbers perhaps a few thousand, which wasn't accomplished by investing in insurance contracts.

Faulty and twisted logic
(4) "...Your home may likely sell much more quickly and for a higher price with a high mortgage balance rather than a low mortgage balance." What the heck does the balance on my mortgage have to do with what a buyer is willing to pay me for my house?

Broad, sweeping and misleading generalizations
(2) Andrew advises that we all sell our homes and repurchase with 100% financing with the goal of freeing up equity to invest in his recommended universal life policies. He ignores the higher interest and property mortgage insurance costs on such loans, overlooks possible increased property taxes and disregards fixed transaction and moving costs.

(4) "Unfortunately, non-spouse heirs far too often end up with only about 28 percent of the money that was left in their parents' IRAs and 401(k)s." This is exceedingly rare and, therefore, scare-mongering.

Questionable predictions and grand assumptions
(3) "Conservatively, [our cozy retirement] cabin will double in value every ten years..." and our $100,000 cabin will be worth "$800,000 in thirty years." Very few areas in the country even during the late real estate boom of the last three decades have done that well. What would qualify as "aggressively"?

Assertions and generalizations that may be lethal to your retirement
(1) "Home equity has no rate of return when it is trapped in the house..." This is outright nonsense. The return is what you save in interest or rents.

(5) He concludes that if not done before, "roll-outs" from IRAs commence at age 59 ½ over a five year period and that some younger people under age 50 should commence withdrawals despite the imposition of early withdrawal penalties. The value of tax-deferred growth is ignored, as is the fact that "repositioning" of funds shrink the amount available for investment by the tax paid, which greatly distorts his calculations.

Inane or incorrect assertions
(2) He states that the interest on an equity line used to purchase universal life insurance from which you contemplate borrowing is deductible. Under IRC section 264(a)3, it isn't.

Sloppy editing of facts
(2) "One requirement [for withdrawing tax-free income from a Roth IRA] is that a distribution may not be made until at least five years after the first contribution is made." This is incorrect. Principle contributions, which are withdrawn before earnings, can be taken at any time at no cost in tax or penalty.

Poor writing and berating of those who disagree with him
(2) "There are two ways to handle information: ignore it as false or increase your level of understanding to accommodate new ideas." Obviously, we are supposed to accommodate his ideas or we're complete idiots.

(3) There are probably hundreds of examples poor writing. "...Premium payments can be varied, fluctuated, and adjusted according to circumstances..." should be, simply, "Premiums can be adjusted."

Throughout, Andrew uses variations of the typical bunko-artist salesman ploy: scare you into agreeing to do whatever he says because life will be filled with disasters if you don't. On the contrary: your financial life will likely turn into a catastrophe if you do.

I've read the book. I'm a graduate of the author's seminars for agents (and mortgage brokers)and one who's sat through a friendly competitor's
version of same. I've also witnessed at least 6 public seminars on the subject matter and like to think I have a unique insight to the concepts
discussed in the book.
For one, the strategy is sound, both in theory and real life.
I have implemented the strategies myself and have no regrets.
The problem with the author's approach is that he beleives so strongly in his position, he trains his agents and mortgage brokers to aggressively push all prospective clients to place every last available cent they own in to an Equity Indexed Universal Life contract. Knowing the author's background and ethics, I can say without hesitation that he is a "True
Believer" and NOT a get-rich-quick Scam artist.
The "invest it all" tactic may be okay for some, but other agents/brokers simply educate the prospective client and try to get them to understand/acknowledge that home equity is NOT all it's cracked up to be. In fact it's often times a wasted, nearly useless asset.
But many agents have failed miserably using the author's "All-or-Nothing" investment philposophy. No surprise there.
Other savvy insurance brokers/agents simply ask, "Do you have any underperforming investments?"
Of course you do - who doesn't?
Then an investor can dip his toe in the water by investing a small amount of money in an EIUL policy. If the investment performs well after a year, he usually wants to consider placing more $$$ in the EIUL policy at the policy's anniversary date.
Bottom Line about the book and author: Good strategy. Bad sales technique.
If you want to try this concept, find an agent who knows EIUL's, has read the book, has gone through the training with either author Doug Andrew or 2 or 3 other gurus of Andrew's ilk AND, most importantly, is comfortable with your desire to start with smaller investment amounts.
If the agent/broker wants you to dump everything you own in to an EIUL, no matter how sincere his intent, he's NOT someone you want to deal with.
Find someone else.

When did Life Insurance become a good Investment?
Did they stop charging those 90% plus commissions on target premiums?
When did the Life Insurance Agent become a charitable organization?

Anyone who is believing this so called NEW way of thinking is either really bad with math or simply does NOT understand Life Insurance. There is a REASON you don't see REAL professionals using this concept they KNOW the TRUTH!!!

What is the ROI on my home Equity? MORE THAN ANY LIFE POLICY!!!!

After you learn how to subtract out all the commissions and fees, then the REAL cost of the death benefit, loan fees for your house loan fees for the life policy let's sit down and compare which approach works best. Having my house free and clear with NO COMMISSIONS to pay, no loans, and no INCREASING internal costs for the life insurance will BEAT any Life Policy I GUARANTEE IT!

Here is a shocker to reality. If you bought into this BS and mortgaged your house and placed the money into a life policy order a current statement for your policy showing the SURRENDER CASH VALUE in the first year, HOW MUCH did you LOSE? Then look at the 5th year how much have you LOST? Tenth year? Do the REAL MATH find out the REAL FACTS.

LIFE INSURANCE is one of the HIGHEST commissioned products in the financial industry if not the HIGHEST FACT! Where do you think that money comes from, YOUR POCKET. 90% first year target premium commission and then about 6% commission each year thereafter. Do the math if the insurance company is paying out 90% of the first year target premium in commissions and 6% each year how long does it take for YOU to make MONEY or even breakeven on your so called investment? It will take OVER 20 YEARS!

Here is a little KNOWN FACT there are currently MANY so called experts out there today TRAINING for a large fee many other life insurance agents and mortgage brokers how to SELL LARGE COMMISSIONED life insurance policies. They don't care if you need a policy or NOT they only care about SELLING a policy. Check the facts. Some are even paying for cruises for Seniors then encouraging them to apply for insurance. IT IS HIGHLY PROFITABLE to someone BUT NOT YOU the policyholder.

You will see many lawsuits in the coming years from these abuses when the you know what finally hits the fan.

By the way did you know that it was illegal for you stock broker to encourage you to take out a mortgage to buy an REAL INVESTMENT? It should also be illegal for Insurance Agents but it's not, well not YET, time will tell.

I wish more people would ask the harder questions before believing this new line of BS.

FACTS: Insurance agents make about a 30-50% commission on term life insurance and around 90-95% commission on whole life products. Keep in mind that this is the first year commission on the premium and subsequent year commissions are much lower with an average of 6% per year for whole life products and 4% per year on term life insurance products.

One of the great problems with whole life is only an expert can tell if a policy you own or are considering will ever become a decent investment. James Hunt, actuary for the Consumer Federation of America, who has analyzed thousands of policies, notes that whole life policies hardly ever yield a reasonable return unless held for 20 years or more.
So if you buy one be prepared to pay into it for the very long haul.
The key to a whole life policy is its internal rate of return -- the yield on the policy after all fees and charges are subtracted. A competent analysis can determine at a minimum whether the weight of the fees and charges built into one of these policies will ever allow a worthwhile return. Such an analysis will also pinpoint the minimum amount of cash value that you can derive from a policy at any given time interval.
Some financial planners, actuaries and accountants can perform internal rate of return analysis on your policy. The Consumer Federation has a service that will do this, calculating the real return year by year and comparing it with other investments.

I am astonished that so much negative is written about the ideas in this book. One person even admitted he had not read it, but critiqued it anyway. Many people misrepresented what he said. Must be some scary stuff in the book to get people so riled up. So here are my ideas about the book. Even the Dallas paper's columns were not very fair IMHO.

1. He says up front that for simplicity sake he will use 33% as the tax rate. But that is for both federal and state taxes. So if state taxes represent 5% that leaves a federal tax of 28%, a tax rate many of the middle class are in. But even using the 25% tax bracket the theories still hold true.

2. I have recently looked at the insurance products and there are some out there that have paid around 7%-8% over the last 15 years so the number he used (7.75%)is a legitimate number.

3. Suggesting that folks only have one tax deduction (their mortgage interest) is impossible. At the very least they have real estate taxes to deduct so the deduction gained over the standard deduction is not totally unrealistic.

4. Everything he says about dead equity in homes is true. It does have a 0% gain and lendors due foreclose on homes with high equity first.

5. If you take out the equity of your home and invest it you don't have to get a rate of return equal to the mortgage rate because of the interest deduction. Using a more conservative 25% tax rate if you have a mortgage of 6% then you only have to get a return of 4 1/2% to break even. I know of tax free muni funds that have returned better than than over the last 20 years.

6. Which brings me to a final point. The ideas he presents are solid, but if you don't like insurance companies then there are other alternatives for the investment side that makes sense mathmatically. And no lender will loan money to folks if they think that they can't repay the loan so it is unlikely that the larger mortgage would get folks in trouble. If you don't have the income for the larger mortgage you won't get it. If you hate paying commissions or fees for financial products then put your money under your bed or bury it and watch it slowly dissipate (time value of money).

Any investment idea is by definition not for everybody. If you don't like the idea of investing with life insurance and want to invest with banks (CD's, MM's), fine, this strategy might not be for you. If you feel the need to have a paid off house (although he talks about this in the book) then don't carry a mortgage. Just understand that their are ways of doing things that produce better results. This is one of many. Great book for many of us.

I always find reviews from people who don't read the book interesting.

So here are a couple of things that are being misunderstood and misrepresented. Mr. Andrew stresses that for a prudent investment to be valid, one has to follow, in order, these rules - Liquidity, Safety, Rate of Return and tax favorable position if possible. The investment itself - life insurance - is the only investment (besides a ROTH qualified plan) to provide tax free accumulation, tax free distribution, and tax free transfer. If you qualify for a tax free contribution using the deductibility of your home mortgage, fine, but the strategy still can work even if you don't.

The use of an Equity Indexed Life Insurance policy as the investment can be easily misunderstood. Often it is confused with it being an Equity Indexed Annuity, which it isn't. It does have a guaranteed minimum interest rate - which means your gains are not subject to loss if the index falls. It also has a "Cap" (the maximum percentage of the growth of the index that they will credit - if the index gains beyond the maximum percentage amount your account value is credited up to the Cap percentage).

Here though are three interesting things that should help clear up why this is the product of choice:

1. The minimum guarantee is covered by the reserves which are required of the insurance company - for every $100 they have to reserve $104 dollars (compared to a bank which only has to reserve $1.25 per $100). How many banks have failed vs life insurance companies in the past 125 years? Why do you think banks have to offer FDIC insurance?

2. The participation in the index is not DIRECT. The insurance company buys Options to cover the gains and protect against loss.

3. Each period (say, from one point this year to the same point a year later) any gain is applied to your entire account value and any loss still earns you the minimum guarantee. Then, regardless of what the index did, your starting point for the next measurement period begins there - either up or down from that new point. So your gains are LOCKED and your starting point is RESET. You only have interest risk, not principal risk.

A couple of side notes - had these investments been around for the past 30 years they would have averaged between 8 - 9.8% (depending on the product Cap) per year. So will the average remain the same over the next 30 years?

Additionally, on the downside, there are short term up front loads in the form of premium charges and cost of insurance (the latter because it takes about five years to fully fund your policy). Also, the company is free to change the Cap (which more than likely is to lower it) and to discontinue a specific product for new issue and homogenize new offerings to conform to industry standards.

How much insurance are you buying? Every dollar in the account value is yours and the amount of insurance you are "buying" is the difference between the account value and the death benefit. So if your death benefit is $700,000 and your Account Value is $540,000, you are paying for $160,000 of insurance. And... each year the amount of insurance will reduce as the account grows larger.

Most people buy "Death" insurance - As much insurance as they can for as little premium as possible - and term is great for this. But with "investment grade life insurance" you're buying the LEAST amount of insurance as possible (by putting in as much money as the contract will allow) and taking advantage of the tax free growth inside such a contract plus the ability to withdraw it in a tax free nature and pass it on to heirs tax free.

Wouldn't it be nice if you didn't have to buy insurance? But what other investment instrument provides tax free accumulation, distribution and transfer without much risk? (Leave a review if you know one.)

This is not a "get rich quick" investment scheme - it is a methodical conservative strategy that will increase your overall net worth by .... ??? who's to say - could be millions if you apply it over enough period of years. At least Doug walks the walk by applying the strategies to his own growth of net worth.

So who would this book appeal to? Well consider this...

If what you knew to be true was no longer true, when would want to know... most people want to know Right Now. So just because we were taught to use Qualified Money Accounts(IRAs/401(k) type accounts) to save for retirement, it really is better to pay tax up front than pay it later. Create your own ROTH like investment without the "strings" that the IRS attaches to a ROTH.

Also when you pay the principal on your house to the bank or mortgage company, what do they do with your equity? They invest it for themselves. Do they EVER send you an interest check for any of what they use of your money? Fat chance! So why not look into creating wealth using money you pay out to other people?

Why leave a portion of your wealth in a building that ties up your equity in an unsafe, illiquid asset that earns no rate of return? (Talk to my sister, mother and niece who lived in New Orleans. Their equity which was tied up in the house is totally unavailable to them - and if you think "That's what insurance is for" means anything - think again!!) Better to have access to it and not need it than need it and not be able to get to it!

So if you are interested in how your mortgage can create wealth for you, read this book. At the very end of the book you will find a telephone number where you can call Doug Andrew and he will get you in touch with a qualified individual who can help you understand how this can apply to your situation. It's worth the price of admission.

And yes, I am a "qualified individual."

After reading all the reviews, it appears that the major "hot button" issue in Andrew's strategy is recommending universal life insurance. We have all read and heard for years that such policies are scams to make insurance companies rich and us poor and we should all buy term insurance. However, that advice is correct for people who are interested in the death benefit of their insurance policy and not the estate planning aspects. For the person of average assets or no children or many years from worrying about how to leave their assets to their children, it makes sense that the knee jerk reaction of hating universal life dominates this discussion. For most, Roth IRAs and the new Roth 401(k) (if you can get it) seem to make more sense.

Just a personal note, our parents died 2 1/2 years ago and due to lawyers and probate, we have still not received the total proceeds of their estate. Both my husband and I have vowed not to do that to our children, and one way to avoid the time, taxes, lawyers and expense is to use life insurance in an estate plan. It's not the only way, but it is a strategy that should be considered.

One gentleman suggested buying non-dividend stocks instead of insurance. Just thought I'd mention that in 2011, the step-up basis for leaving assets to your heirs expires. But life insurance proceeds can be tax-free.

Several people complain, rightly, about the high fees for universal life. But there is a low load company out there--no commission, no surrender fees.

The advice in this book certainly isn't for everybody. One shortcoming I'm mulling over is the alternative minimum tax. With a large mortgage and high property taxes, this evil, despicable tax (but I'm being redundant) not indexed for inflation, might make using the mortgage strategy much less profitable for many people--and soon.

If you are a person of means, and are interested in estate planning, read this book. And read all the reviews. Some excellent advice can be found in them. Thanks to all who took the time to write.

You may be reading all these reviews and wonder whether these principles are real or not, but I will tell you an even bigger missed fourtune. I prepare peoples tax returns for a living. And I see Mr. and Mrs. Smith who have paid off their house with all their hard earned dollars and at age 65 turn around and get a reverse morgage and only get half of the equity out of their house. They take out a reverse morgage because social security is all they have. To combat inflation and to still stay in their house they have no other choice. So if you read this book like I have and follow the principles of seperating your equity from your house and letting it grow you will not be like the Smiths and get a reverse mortgage and only get half of it back.

Please don't waste your time, effort and money on this idea!!!! Been there done that, trust me you will be sorry. Check out the insurance policies on google first, these are not investments at all, just a way to give all your money to the insurance company. They say there liquid, safe, & guarantee your principle will be safe. Don't buy it, what they don't tell you is all the fees and commissions and taxes up front, kill any chance of you coming out ahead, even after years!!!!! & Years, you do the math, it doesn't add up, isn't true, and should be outlawed soon before someone gets really mad!!!!!!!!!! What ever you do don't take a second mortgage on your home and also put that in jeapardy. Basically you will be living in a nightmere state. That's where we're at now. Trying to get out of it!!!!!!!!!!!!! PS the Missed Fortune will be yours and the insurance company will then have it. Please don't waste your time!!! sincerely Teresa I had to give one star on the review because it won't accept none. Sorry! for that!!

this book will change my life. the only people that could say negative things about it are those who do not finish reading it or try to skim it as i did the first time. i got busy while i was in the middle and almost did not finish it but believe me after completing it , it was worth it.

as a real estate investor i had a complete opposite view of financing, equity, cost of money and basic compound interest. these are ideas are rock solid and proven over and over.

i took a rental that was paid off and employed the stategies suggested and i will create over $90,000.00 of found money over the next 20 years on a 116,000.00 rental property.

a must read if your involved in real estate and/or mortgages or simply want to build wealth with o.p.m., other peoples money!

Folks, this book will not apply to most readers.
I really wanted to understand and believe the method of this book because I certainly could benefit from it. The theme is to extract equity from your home(s) now before the bubble deflates. Then you invest it into insurance products for a guaranteed return. The whole book builds the reader up to find that magical solution, which climaxes at the end with a table of financial calculations.

Here is the problem with this method. His base figures are unrealistic to start with. Current rates for equity extraction (home loan/credit or refinance) are *higher* than what he uses in his tables. The returns from a fixed insurance contract are much *lower* than his tables. If you plug realistic figures into the calculations you will see this method barely makes sense.

There are many huge disadvantages to this method. First the upfront and yearly fees are so expensive it does not make sense to withdraw your money for at least 6 to 7 years should you need it. Second, you are paying a price for the guaranteed fixed return in the term of management fees which lower your return. If you invested in a regular taxed mutual fund, over a long period of time you will always do better than the insurance fixed return. Third, insurance contracts are not wise vehicles for passing on wealth to beneficiaries. Sure there is a payout, but should you live far past your average life expectancy, the majority your accumulated funds go into the insurance company's vault forever! Fourth, the method mentioned in the book is convoluted and is in part based on a series of tax loopholes. That means, as the author does acknowledged, the legality and advantages may change or vanish over time.

With all these drawbacks, why was the book written?
This book is essentially a sales pitch disguised as a presentation of logic and calculations. But as mentioned, the figures used for the foundation of the calculations are simply not realistic.

Financial planners make their biggest commissions on insurance products. The author is a financial planner.

Most financial gurus (Susy Orman, etc.) dislike insurance contracts and advise that individuals plan their own investments.

However, for those who would like a lower fixed return for a price and are less concerned about passing on their wealth to beneficiaries, this method could possibly apply.