Say your advisor recommends an investment strategy you have never heard of before: using an annuity and its income stream to fund a life insurance policy. Despite your skepticism, your advisor is adamant that the strategy will be beneficial to you, resulting in reduced taxes and the benefit of lowering financial risk. You trust your advisor and take a “LEAP of faith,” only to find yourself hopelessly stuck in a terrible investment strategy.
LEAP, short for Lifetime Economic Acceleration Process, has been around since the 1980’s. Yet recently, it seems to be gaining some traction in the financial community. It is obvious why – it results in a huge payday for financial advisors at the investor’s expense.
Our firm recently represented investors who lost money as a result of their financial advisor using LEAP concepts, i.e., placing the investor into an annuity to fund the purchase of a large life insurance policy. The financial advisor scored himself a huge payday, and the investor was stuck in the illiquid products with no way out. LEAP concepts can be very difficult to understand for even the most seasoned financial professionals, let alone the common individual seeking retirement advice. It is critical that investors be wary anytime their broker or advisor recommends LEAP concept strategies.
LEAP is described as a “preeminent financial analysis tool in the industry,” that considers multiple factors such as taxes, fees, interest rates, and protections from uncertainty. What LEAP essentially boils down to is method of selling more whole life insurance. The primary purpose of the insurance policy is not the death benefit, but rather as a savings tool that investors can dip into whenever needed.
There are many dangers associated with trapping yourself in a whole life policy. The ordinary investor usually does not need life insurance, and can instead buy inexpensive term coverage. Further, whole life insurance should never be used as a savings tool, as it is in LEAP. 99% of the time, LEAP concepts are grossly unsuitable for the ordinary investor.
Let’s look at some of the key objectives of LEAP:
Essentially, what LEAP wants you to do is ignore tax-deferred retirement savings vehicles (IRAs, 401ks) because you will be paying taxes down the road. But this is exactly what investors want – compound growth! Further, your money may not be taxed, but it is also stuck in illiquid products and cannot be taken out when its needed.
With no stock market risk comes no stock market gains! The simple fact is that the average American has not saved enough for retirement. Putting your money in a whole life policy will not help the situation, only make it worse.
Wrong again! Money in the annuity and life insurance policy will be tied up indefinitely. Sometimes, the investor may surrender the policies for a huge loss and oftentimes, they are unable to surrender the policies at all. In short, the money is tied up in illiquid insurance products and cannot be taken out absent a massive surrender charge.
One of our clients was placed into some horrendously unsuitable insurance products at the hands of LEAP thinking. She trusted her advisor, who gave her the whole pitch: LEAP concept of using a SPIA (annuity) to fund a whole life policy will reduce tax exposure, will work as “forced savings,” and will remove all market risk from her portfolio. She took the “LEAP of faith” under the assumption that her advisor had her best interest in mind, only to discover that she had been burned and her advisor profited handsomely.
If you suspect you have been burned by an advisor recommending similar investment strategies or LEAP concepts, we would like to hear from you. Contact our attorneys today.
Talk to an Experienced Attorney Today
Call and speak to one of our attorneys* for a no-cost consultation to discuss your situation, answer your questions, and help you determine the next steps. This call usually takes about 15 minutes, but we are happy to talk to you as long as you would like!
Quick Review of Your Paperwork
If we think you might have a case, we will need to review a few basic documents. If we determine you have a case, then you will have the option to hire us as your attorneys to pursue it.
Signed Attorney/Client Agreement
If you decide to hire us to pursue your case, we will have you sign an attorney-client agreement so we can begin the process of trying to recover your losses.*
*In the vast majority of cases, our agreement is contingent – meaning you won’t owe us any money unless we recover money for you.