Wednesday, August 20, 2008

Misunderstandings or Misled???

I encountered a cases of an agent and a case of a bank Relationship Managers who had planned for 2 old folks this week. I really don't know if they are cases of misunderstandings or being misled.

1st Case - 5% guaranteed Returns???
One of my client called me last Friday and asked if I am able to offer a plan that gives over 5% guaranteed returns. I told her that only her CPF minimum sum is able to give such guaranteed returns. She insisted that her sister had purchased a plan that gives 5% guaranteed returns and claims that her sister is very investment savvy and won't be wrong about it.

I told her to call back and asked her sister on the inital outlay and the returns shown in the benefit illustration. She called back and told me $50,000 and around $75,300 after 10 years. Her sister still insisted that this returns is guaranteed. My client told me that if I don't offer it, she will buy from that agent. I didn't argue much and I used a very soft and firm voice to answer her, " Madam XXX, Trust me, check it out first. Give me a chance to go through that plan with you if you really want to get it from that agent"

+++++++++++++

So whats wrong with this figure?
* The agent had used simple interest to calculate this yield. 5% surely sounds more attractive.
* Secondly she did not highlight to the old lady about the non-guaranteed portion of the plan. The actual returns is 4.18%.
* There is actually nothing wrong with this plan but I really have no idea how the old lady can get misled. Does the problem lies with the lady or the agent? Your guess...


2nd Case - Deposit money become buying an Endowment Plan
* I visited my client today for a financial review for her son. During the review, I get to know that my client who is a housewife had purchased a 10 years endowment plan of $10,000 a year when she went to the bank to deposit some money.
* My client insisted that the RM told her it is a 5 years limited premium term plan which proves to be untrue after going through the BI and Policy schedule.
* From my understanding about my client's profile, she is not working but has a lumpsum of money and don't wish to take much risk.
* End of 10 years, the non guaranteed returns is $113k. A potential returns of $13k. A non guaranteed yield of 2.2% basis 5.25% investment returns of the insurance company.

+++++++++++++

So whats wrong with this plan?
* I don't know why my client insisted that its a 5 years plan. I don't know what the RM told her.
* The endowment yield is only 2.2% after 10 years. It cannot beat the current inflation of 4% at all.
* My client is not working, what if she cannot fork out the money in any year or need to withdraw the cash? Surrender penalty is tremendous for such plan.
* The RM told her to put in as yearly premium. She will lose everything if she terminate it now.

** I am angry because my client will be stuck to this plan for the next 10 years. I also get to know how some RMs earn so much money now. A 10 years, $10/yr endowment plan is able to give better commission compared to a 10 yrs $100k lumpsum investments **

12 comments:

Anonymous said...

I suspect the 5% p.a. guaranteed return is Manulife's variable annunity- Secured Retirement Plus. If it's so, bad news. Please tell the poor lady that it's a long term commitment with projected yield of less than 2% p.a. She won't be able to cash out after 10 years. Oopss.. Kenal conned again.

Really, we don't need those suckers in the industry. Shame on them.

Adrian, hope you walk the talk. Please don't touch that regular ILP. People know what you are doing..

Khiat Han Hwee Adrian said...

Moderated Comments:

You see, insurance agents will not spare the old folks. They are the easiest to bluff and cheat. I have known agents fleecing old folks at roadshows on revosave. The old folks must be protected.

Khiat Han Hwee Adrian said...

Moderated Comment:

You tink IFA don't mislead people? IFAs and agents are sama sama. You can enjoy eat your grass and tell people to BTITR now. When the time comes to sweep agents, you will also kena. You are not independent unless you charge fee like provident or ipac.

I want to see for how long you can eat grass and tell people to BTITR. Next time people buy etf and buy term from TKL, you also die like other agents. You go tink carefully.

Khiat Han Hwee Adrian said...

Moderated Comment:

Adrain,the financial industry is full of unethical and no conscience consultants.It is also full ignorant customers.
The industry is booming because we have 2 matching groups.
Let me tell you about a top agent from one company as told to me by a friend.
It was some years ago a can do client had a lumpsum of $100K. Instead of investing the lumpsum in Single premium endowment the customer was advised by the agent to split into 5 yearly amount by investing $20K in a regular endowment for 5 years.

Adrain, if you were the agent which is correct plan you would advise if the cleint wanted to grow his money and was a risk averse person.
Tell us honestly. Which is the right plan which gives more to the cleint?
Was the agent ethical and honest?
I heard the commission was 1% for that Single premium plan and 15% for that regular premium. Am I right?

Anonymous said...

Adrian,

I have some kind advice for you. All these comments you allowed to post will demoralise you. I suggest that you focus on your work and not too much time in this blog.

If you want to continue with this blog, then write things that people can learn. I noticed that you are complaining quite a lot lately and not sharing much of your knowledge.

I believe you are a good man and you are sincere in helping others. I'm impressed with your professionalism and I hope to see your success. Direct your energy towards more positive things. Don't get distracted by negative people and their remarks.

Wish you well. Good luck.

Anonymous said...

Adrian, this is Joel. I agree with what anonymous 4:44pm said. Direct your time and energy in a more value added way. Perhaps it’s time to ban all non-constructive comments. The way I see it going, you may get burnt out if you continue to allow these negative replies. I think it’s affecting you.

Anonymous said...

9.17pm, ADRAIN isn't negative. He was raising real life issues about the industry where consumers are constantly been abused by insurance agents and consultants. He is creating awareness. He is helping us to open our eyes to see our way around when approached by insurance agents or at the bank by RMs. This is education.. We are grateful that he has brought his expereience to his blog. Are you an agent from ntuc? If you are , it is quite obvious that you don't' like ADRAIN TO EXPOSE your trade dirts and malpractices. He is not wasting his time. Unlike other blogs of his ex-colleagues' his is educational. The others are advertisements and some stupid biased untrue things they write. They are self centred, whereas Adrain's is balanced and that is the spirit of an objective financial planner. His ex-colleagues' are salesmen and unethical ones too.

Anonymous said...

as usual, no one dares to write a complaint letter to MAS and sign off with his/her name. It's no wonder MAS isn't doing anything

Khiat Han Hwee Adrian said...

Thanks everyone, especially Joel and Anonymous 9:17 for the comments and concern for me. I'm perfectly okay, don't worry about me.

I wrote this posting because I was disappointed with what I saw. It was no wonder reputations of advisers are so bad and get scolded by everyone.

In my opinion, Financial Planners is a very noble profession and deserves more respect. They rightfully serve an important role in the society and it saddens me whenever I see an adviser selling all sort of funny plans especially to "old folks". Best of all "Sell without identifying needs"!!! I'm not demoralised or whatever. I'm disappointed.

* Anyway, I'll be reducing my postings due to heavy work commitments and I'll be more stringent in allowing comments to go through. Thanks for your feedbacks.

Anonymous said...

Adrian,

Forget about all these negative comments.Don't even need to moderate.Remember:

"It ain't what a man don't know as makes him a fool,but what he does know as ain't so."

Khiat Han Hwee Adrian said...

Moderated Comment:

hi adrian, there is a chinese saying, when you point one finger at others, there are 3 fingers pointing back at you. before you criticise others, ps look inward. in case you are not aware, your team has been the no 1 or 2 in selling zurich's vista. dun be one of them. people are watching. mas too..

Anonymous said...

looks like you will be heading back to where you came from...you are defensive..anything truth mentioned about ntuc you black out.Why? speak up and expose them. They are the biggest threat to consumers...