Effective Marketing Techniques?

[James]

I do agree with you James. The theory behind Missed Fortune is sound, it is the practicality of it that is lacking.

Last night in a near drunken state, I actually caught Suze Orman espousing how bad Interest Only Loans are. Yet when she was doing her "Can I afford this" segment, someone called in and mention they had a IO only loan on a house valued at $350 grand (Suze nodded in disaproval), she was asking if she could afford a $3,500 watch. She had a savings account of $275 grand and a Retirement fund worth around $150 grand and she and her husband were in their 30's. Needless too say Suze had to suck it up and stated she could afford the watch and complimented her on the savings. Yet, last thing she wanted to do was go into how the IO aided in the savings amount! What a weenie she is!

 

[Guest]

I do agree with you James. The theory behind Missed Fortune is sound, it is the practicality of it that is lacking.

Could you explain that?

Not debating, just learning.

Al
(Who until a few weeks ago thought Missed Fortune was a TV game show!)

 

[Agent Jeff]

Could you explain that?

Not debating, just learning.

Al
(Who until a few weeks ago thought Missed Fortune was a TV game show!)

I could try to answer that:

The sound part is that if you can borrow money for an after-tax interest and lending expense cost that is less than the after-tax risk-free interest gain you can make with the money, then you are making money.

One of the impractical parts of it is that there aren't any cash-value life insurance policies that promise you enough guaranteed return to make it work after all fees and expenses are counted.

 

[J.R.]

Could you explain that?

Not debating, just learning.

Al
(Who until a few weeks ago thought Missed Fortune was a TV game show!)

Andrew purports that people should take out equity that is not currently earning interest and invest it in something (life insurance) that can build up enough cash value to pay off the mortgage later on in life. If I recall correctly he used policies that were earning 17% annually when he did his calculations. The theory is sound because anytime you borrow at a lower interest rate and can invest at a slightly higher interest rate you will make money. One just has to make sure they understand every facet of the transaction.

1) If somebody is currently paying off their mortgage the rate of return on their money is their interest loan.

2) Using ARM's and IO loans are very dangerous UNLESS the individual understands the risk and rewards. An agent who exposes Andrew's techniques better understand some simple real estate calculations, as well as the tax codes on deductions, 1034 exchanges, etc. etc.

3) Charging ludicrous amounts of money to become a member of the TEAM. The same knowledge would cost you under $500 with a few books by reputable real estate investors, insurance agents, etc.

I commend him for thinking outside the box, but do not have much patience for people who do not have the professionalism to write about subjects in details and negate basic accounting principles to sell books.

 

[James]

Let us not get bog down with Missed Fortune and Andrew, I suggested the strategy of "Equity Harvesting".

For Equity Harvesting to work, you have to have responsible people without a doubt. First off, they don't over purchase when they buy a home and they don't pay too much or they get a good deal on their home. Now if they are really smart they understand that paying the home off or even trying is a fool's game unless they have emotional ties, such as a historical family homesite. Yet if like most, they purchase a home and likely will move every 5-10 years, why even worry about paying the home off or down? Just doesn't make sense. Plus as demostrated before in these forums, one can make up to two percent less in interest compared to the interest to cover the home to make this work, one is compounding the other is not.

The Interest Only or and the ARM is great, esp. if one only pays the minimum of 1-2% and every 4 years recycle the loans. I do suggest if possible too roll up unpaid interest to the new loan if it can be reasonably expected that once the home is sold the price can cover the unpaid interest.

Take a 40 year mortgage, first five years IO only, pay minimum of 1.25 for the first 4 years and then refinance in that year or the 5th year. Your payments will be around $104.40 on 100 grand, of course the second five years will be slightly higher with unpaid interest being rolled over to the new loan. Now the cost on the so called traditional 30 year mortgage at 6.5% is $632.07. The difference is $528, now lets see what that $528 dollars does in ten years earning 6.5%, $88,916.87. Now of course depending upon what saving vehicle one uses will influence the final numbers, the 6.5% numbers are base on a tax free saving vehicle.

While this isn't the entire solution, it is a important start of wise use of the largest investment most people will have. I also think it is very important not to depend upon tax savings as MF does. In fact, more then likely with todays new laws a person will recieve no tax favored treatment on a home mortgage if one uses Equity Harvesting or MF if you look at Title 26, Section 264(a)3 that specifically says no to the mortgage deduction if you are simply repostioning the money and not spending it? Once again the IRS (the US Government) punishes savings, yet on the other hand they wonder why people are not saving more? I suppose that is why we make fun of the intelligence of the average Bureaucrats and those we elect!

 

[somarco]

"I can't afford it" line quite a bit. I've also heard "I ain't gonna die no time soon" , and "Well, I'll just pray that I don't get sick"

You seriously need to upgrade your market.

I can't give you any pointers on cold calling life insurance because I don't work that market. Tried it in the past and quickly found out it was not for me.

For me at least, health insurance is an easier sale and a more approachable topic. Depending on where you are, about 80% of the people you meet will have health insurance . . . and they are usually paying a significant portion of the premium.

Compare that to maybe 20 - 25% who own life insurance other than what their job provides. Most of them will take what the boss gives them and never opt for additional coverage even at $4 per month.

There is a tremendous market for health insurance, especially if you know how to put plans together that free up cash flow without affecting coverage they really need. The recognized need for health insurance is much greater than it is for life insurance.

Life insurance is a sale where you create the need. Health insurance is already established in their mind.

The only challenge to health insurance is finding the funds.

If they already have health insurance they are paying for, all you have to do is show them ways to save money.

With life, you have to create the need and find the funds. "Find the need, find the money" was a phrase that I was taught early on in my career.

The folks who are blowing you off now are never going to be prospects. What they are really saying is, they don't see why they need your product. Unless you can hit them between the eyes with a need, they will never roll over.

If you are calling on business owners, ask them this. If you were to die today who would buy your business? How much would they be willing to pay for it? Would your family be able to settle all debts and still have money to survive?

An often overlooked approach is the beneficiary. Rather than trying to convince Jughead that he needs to buy insurance, ask the wife & mother. Friends who work the PRD market tell me there are two things women buy. STD and life insurance on their spouse.

You will never find a widow who thinks her husband had too much life insurance.

 

[Mr. Bill]

The Missed Fortune/Equity Harvesting strategy works great in theory, but the implementation is where things go awry. One situation I know if is that a FP (who uses LifePro, which Doug Andrew has a financial interest in, but won't admit it), recommends using Andrew/LifePro instruments, which just happen to be whatever products will pay them a huge override as well as a huge commission to the agent - last week he was practically crying in the parking lot because so many people were frightened - they're seeing the value of their homes go way down, and all of a sudden they realized how little they had left in their policies because of the high commission structure of the policies.

Another agent I recently met was bragging, and I mean BRAGGING about how he was doing the "missed fortune concept" long before Doug Andrew wrote his book. Brag brag brag. Then said he just does a HELOC for funding. Went on and on. Then said now he's combining it with a money merge accout (The New Latest Greatest Thing Since Sliced Bread and if you beleive that I will be willing to sell you any piece of any bridge you would like to buy!) and how he has two homes and uses the MMA on one of his homes.

In other words - there are a lot of CLOWNS who pass themselves off as knowledgeable and who really know nothing at all. You would not beleive how Clown #2 was mouthing off at the meeting that I met him, and how many agents asked him for his card. In fact, towards the end he had a "groupie" who started asking him about would he do cases in his area with him.

Sometimes I really hate Clowns. Especially when they really don't know what they're doing, and guess what? They still have a license to sell. As much as I appreciate the saying caveat emptor, unfortunately, as well all know, much of the general public really doesn't have a clue and are susceptible to Clowns in our business.

 

[TotalCoverage]

PM me with your mailing address and I'll have the girls snailmail one out to you.

I like your resume-mail approach. Would you be able to email something on this matter or you would rather mail it. Email is [email protected]

Thank you,

Nev

 

[rjalf]

salpro22,

how did they resume pan out?

txs.

 

[stuy119]

I do agree with you James. The theory behind Missed Fortune is sound, it is the practicality of it that is lacking.

Interesting this came back up.

I'm pretty sure the downside to this approach is home values dropping like stones in a pond. My guess is that most of the people who were using the "Missed Fortune" technique are now without homes.