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"

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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.

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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 **