Monday, November 17, 2008

A Grateful Email

I received an email with the heading "Very grateful to your advice" recently.
I'm glad that I managed to help a stranger away from such Regular Premium ILP.



I am a structural engineer, 27 yrs old, and earn a salary of S$4700 per month. Last week, I was determined to have an investment plan as I realize the importance of money management. so, I just went to a well-known bank, HSBC. A senior wealth manager persuaded me to join a ILP, life manager plus. I did not fully understand this plan as she did not tell me how to calculate the projected cash value, total deduction effect and distribution cost. When I asked, she said it's too technical and she did not know as well. and then, I just trusted the expertise of the professional and signed the proposal with a premium of S$2000/month.

After coming back, I read the proposal carefully, as a engineer, I have some mathematic knowledge, so I tried to figure out how to calculate the cash values by myself. Finally I made it and after doing some case studies, I realized how lousy this plan is! I will lose quite a lot investment if I follows this ILP with S$2000/month. The agent will get a very big fat from the low allocation rate of the first three(3) years.

Before I read your blog article 30 minutes ago, I still thought it was not a willful 'mistake' of the wealth manager. I dropped her an email this morning and told her my findings as attached. now, I know those agents know exactly what they are doing. My God! I am too naive and too easy to trust the reputation of the bank.

Now I understood why she emphasized the one-month waiver at the 1st year. It looks like the more premium I pay at the 1st year, the more promotion benefit I can get. Acutally, the big fat 87% of my premium goes to the agent. (allocation rate 1-3yrs: 13%,40%,45%,100%).

Thanks, Adrian, your invaluable advice saves me from a huge loss.


$2,000/mth is a lot of money. 202% of 1 years premium will not be invested and hence amount to $48,480. This is precisely what is happening on the ground and I feel that such allocation rate is simply unfair to the consumers and too good for the banker.


Anonymous said...

Great job...Adrain, your posting on the evil of regular ILPs has been spotted and helped someone. Continue to expose the evil of this product and other products like the wholelife and endowment and the most evil of the endowments is the anticipated endowment disguised as cashback, coupons and so on. MAy be you write something on these products giving the pros and cons and why insurance agents are selling and promoting them like crazy and what is it that the agents are crazy about.Thsi will create awareness so consumers are aware and suspect the agents.
Remember to do "what is right".
Promote the need based and campaign for product selling or pushing to be banned.
Explain the advantages of need based to consumers and how their needs can be met and how they can be protected from mis-selling and misrepresentation.Expose the evils of product pushing and selling.
Minibond fiasco is a good example of the evil of product pushing and insurance products are no difference and can be even worse. Continue to push hard until MAS relent to make need based compulsory.
All the best

a supporter

Anonymous said...

$2000 per month with salary 4700??? crazy or not!

anyway, comparing a WL and ILP, WL does seem to have more certainty compared to an ILP. Which may explain why some people enjoy slamming ILP over and over again like a broken tape. Why, coz WL is not transparent enough for such people to nitpick. Remember, certainty comes at a price too. When I see the same people slamming ILP over and over again, HA ANOTHER BTITR WANNABE.

Anonymous said...

insurance agents know that it is harder to sell WL because it has gained a very bad reputation and has so many disadvantages.
With ILPs the agents have more leeway to bullshit and con people.
My take is , both ILPs and WL are shit. Both are rip off. At least 2.5 years of your premium disappear without a splash.

Anonymous said...

btw, be mindful of the charges of Vista linked plan too. For the "standard" $675 plan, the fees are insane. Bad value. That $12 monthly fee alone is a staggering 1.77% "sales charge" and that's not taking into account the other fees, which're calculated in some unorthodox way.

I havent done the calculations for silver/gold plans yet.

Anonymous said...

adrian, from the league ladder i know you walk the talk and shall be admired & respected, unlike your fellow colleagues who sell dubious product (not 's' behind product means only ONE product :). wow, someone from there topped the chart this month. > $100k??? for the past 9 months only did $30k, october alone > $100k? you don't have to be a genius to tell that this practice is highly questionable. in my opinion, it's not healthy to associate with those people and be in that kind of environment. but from your production, i think you may be asked to leave for not producing. want to be a saint? you dun belong there. just an opinion, no hard feeling okie..

Anonymous said...

Hi Adrian,

Good job! However, I hope this person has approached you to do a proper financial planning otherwise he may have a gap in his protection planning.

Anonymous said...

stay focused and don't waver.

Anonymous said...

Don't let your former colleagues from NTUC dampen your spirit of fairenss and ethicalness.Don't let them tempt you. Their days of reckoning is soon. You shall see.