Thursday, February 14, 2008

Can we really retire comfortably? (2)

The 2nd posting on this topic is with regards to policies that typical Singaporeans have.

I normally do 4 basic financial planning groundwork for a prospect
1) Policies Consolidation (Compile all their existing policies into a specially designed portfolio)
2) Risk Management Planning (Insurance Needs after a fact finding)
3) Retirement Planning (Will also get to know how they save regularly and how they invest their existing assets)
4) Education Planning (for those with kids)

It is not a comprehensive Financial Plan but it can take me up to 5 hours to complete an analysis and followed by a recommendation which nothing is on product.

From my experience, I observed that
a) Singaporeans are buying too many Life Insurances and Endowment Policies
* Life Insurances gives an approximate returns of 2.5% to 3% p.a and Endowment gives an approximate returns of 3.7% to 4.3%.
* Comparing to projected inflation of 2.5%, a life insurance plan barely beats inflation. It should not be viewed as a saving plan.
* I'll only recommend Life Insurance with Critical Illnesses cover up to a small amount of around $50k to $100k. It is to take care of their CI cover into their senior years.
b) They are not investing sufficiently on regular basis
* A properly constructed investment portfolio potentially gives 6% to 8% p.a returns. The only thing different from the traditional plan is the removal of the "Guaranteed" portion.
* Singaporeans are not calculative enough to see the difference between a 2% returns and a 6% returns over a period of say 20 years.
* $5,000/yr x 20 yrs * 2%p.a = $123,916
* $5,000/yr x 20 yrs * 6%p.a = $194,963
* $70,000 / 20 yrs = $3,500/yr

c) There are no proper investment blueprint when it comes to investing their assets
* They buy from everywhere. ILP from an Insurance Company, Unit Trust from Banks and Shares which they don't understand, etc.
* There are no Investment Horizon, Target Returns, Risk control measures, etc

d) Few have term insurances and even fewer make use of Group Term insurances to beef up their cover.
* For this, I'll talk about it in future postings about Insurance advisers.


Anonymous said...

I read that you are have nothing to do with NTUC, right? But why are you defending ntuc on many occasions?
If you are objective and unbiased you should point out the wrongs of ntuc agents, the lack of conscience for the clients. Look at the way they sell revosave and vivolife and growth.Is it not unethical to sell revosave to a 60 year old man or woman? Is it not unethical to tell the clients to invest their special account in growth plan? These are some examples. There are many more.

Khiat Han Hwee Adrian said...

First, I did not see anyone scolding agents from other insurance companies such as GE or AIA in my blog or Tan Kin Lian's blog. When will I have the chance to defend them? I'm trying to be objective in all my comments.

As I mentioned, there are black sheep in all companies. Instead of talking about Revosave, do you know about the other similar plans in the market?
1) Prucash from Prudential
2) SmartSaver from ManuLife
3) MoneyBack from Aviva
4) Cash Rewards from AIA
5) Biennial Choice from TM AsiaLife
6) Annual Cashback End from GE

Especially for Prudential with their Prucash. Their premium received for prucash exceeded all insurance companies combined for such plans.

I am not saying all agents are good, but its an unfair comment to say that all agents are liars, cheats, unethical, etc

Many are hiding under the identity of anonymous to scold NTUC agents. I had rejected many such comments because they are not posting objective views. I have reasons to suspect that they are an agent from a competitor of NTUC Income trying to post defamatory remarks on the company.

You can challenge my comment but I will not post it if you write malicious remarks about any specific insurance company or person.

Thanks for your comments anyway.

Anonymous said...

How can you say the comments are malicious? is it because that NTUC agents are being bashed? Anything negative about ntuc agents is malicious? The truth is ntuc agents deserve what is coming at them. Whatever written about them is the truth. You should defend instead of avioiding the real issiue..
Why ntuc agents? becuase thaey talk big and talk the loudest. look at their advertisements , they scream and baost the loudest. Look at revosave and vivolife , the ads talk rubbish. Naturally tyhe target in yout blog is ntuc . And you are ntuc, you should be the best person to defend and rebut if you think what written is all lies and untruth. TYhe other companies' cashback products are worse but they keep low profile. so nobody's eyesight got sore or their ears got jarred. Unlike others ntuc is bulling with meaningless words about thier products. One word to describe ntuc's ad is it is trying to CONFUSE.
Ntuc's revosave is the better of the worse.Does this make you a little happier?But it still belongs to the garbage.

Khiat Han Hwee Adrian said...

Thanks for your comments and I respect your views.

3 things I like to repeat.
1) All insurance companies have their black sheeps.
2) By targeting agents from any one insurance company alone is not fair. You should target all agents as a whole if you like to comment.
3) My blog has nothing to do with NTUC Income. I'm protecting it because I felt unjust.

jx said...

personally, i don't think a 50K to 100K cover on life insurance is sufficient.

Khiat Han Hwee Adrian said...

Hi Jx,

If a proper retirement savings is enforced, you should have the required amount to self-insured yourself. If you try to save via a life insurance, you may not be able to reach such retirement savings.

Returns of a Life Insurance may probably be just 2.5% p.a. A proper investment portfolio can easily gives you 6% p.a.

I'll recommend you to get a term insurance for the coverage so that you have more money to invest your money.

Lastly, it is usually not necessary for someone to have so much of life insurance at old age unless he wants to leave behind a large inheritance to his family. Just keep a Medical insurance will do.

Hope you have a better idea.

AMG said...

Mr Adrian, that anonymous commentor is clearly an unsatiefied customer or a competitor of any of those insurance companies, or simply lack of love and attention from anyone he/she is expecting. Even at Tan Kin Lian's blog also not spared with all the attacks. People like this should be banished to another island; disappear from the face of the Earth. To me, I think insurance is a wonderful product that each of us need. Of course, the type of needs should comply with the type of coverage therefore agents need to review these plans at least annually for the customer. Customer will buy when they are willing and one cannot say the agent is conning the persons money. An agent will receive any kind of money that comes, if not why become an agent? And it is a fact that despite all the so-called scams and bogus about such products, there are still people who believe and subscribe to it.