HSBC ILP

[lalaisgongon]

Hi!

i was recently offered this product from HSBC, normally i am quite skeptical about ILP due to the long break even time, high cost ( Bid -offer spread, sales charge, admin fee)

However, this product called the HSBC GrowthInvest Insurance Plan, seems to be slightly different,
it boast that

"Simple and transparent solution to increase your returns
• No more multiple charges like policy fees, supplementary charges, bid-offer spread or even cost of insurance.
• The product comes with only two charges:
- product administration fees of only 0.1% per month on your net asset value of the units in your policy account.
- fund management charges up to 1.55% p.a. depending on the fund you choose."

i have taken a look at the policy and it seems like the only catch is that you can only withdrawal the sum after 5 years, min 2.4k a year investing into it.

Furthermore, there is no exit charge after 5 years.

Thus, the only cost seems to be the annual 1.2% sales charge, which if you invest monthly of 200 dollars, its a 0.1 percent sales charge.

It also mentioned that 1 dollar premium goes straight to 1 dollar of the unit trust.

There is still an insurance coverage of "Guaranteed minimum 110% payout in the event of death or terminal illness "


So i am quite confused, what is exactly the catch of this product? Is this a RSP with some (maybe very lil ) insurance or and iLP with low cost?

The link is here "http://www.insurance.hsbc.com.sg/1/2/sghi/personal-insurance/investment/growth-invest"

 

[Perisher]

• The product comes with only two charges:
- product administration fees of only 0.1% per month on your net asset value of the units in your policy account.
- fund management charges up to 1.55% p.a. depending on the fund you choose."

i have taken a look at the policy and it seems like the only catch is that you can only withdrawal the sum after 5 years, min 2.4k a year investing into it.

Furthermore, there is no exit charge after 5 years.

According to what you said, it's gonna cost 1.2%+1.55%=2.75% a year?
And if your fund underperform?

Let's say your fund manage to earn 4.76% this year...
So your fund need to earn 2.01%(SGS SSB)+2.75%=4.76% a year to be on the same level as SGS SSB wor...
And how sure are you that it will perform in a 5 year cycle?

If the fund happens to outperform, say 8-10% for 5 consecutive year, then yeah...

 

[lalaisgongon]

According to what you said, it's gonna cost 1.2%+1.55%=2.75% a year?
And if your fund underperform?

Let's say your fund manage to earn 4.76% this year...
So your fund need to earn 2.01%(SGS SSB)+2.75%=4.76% a year to be on the same level as SGS SSB wor...
And how sure are you that it will perform in a 5 year cycle?

If the fund happens to outperform, say 8-10% for 5 consecutive year, then yeah...

Am i right to say that the 1.55 percent management fee is applicable to the fund manager and not the selling. This means, even if i was to buy the same fund directly, they would have this same mgmt fee?

Thus if funds returns a dividend of 4% annually nett of mgmt fee.

Then this means, 4-1.2% is 3.6% which is higher than SGS SSB alr.

This further excludes capital gains.

Furthermore, the 1.55 is up to, i have see in their fund selection ( a grand sad total of 6), they range from 1 to 1.55 percent.

However, my question is more of, is this an actually ILP? how does the insurance cover compare to normal ILPs?

 

[anfielder]

Am i right to say that the 1.55 percent management fee is applicable to the fund manager and not the selling. This means, even if i was to buy the same fund directly, they would have this same mgmt fee?

Thus if funds returns a dividend of 4% annually nett of mgmt fee.

Then this means, 4-1.2% is 3.6% which is higher than SGS SSB alr.

This further excludes capital gains.

Furthermore, the 1.55 is up to, i have see in their fund selection ( a grand sad total of 6), they range from 1 to 1.55 percent.

However, my question is more of, is this an actually ILP? how does the insurance cover compare to normal ILPs?

You do have to pay the annual management fee it whether you buy from HSBC or somewhere else. (But why not avoid it completely by not buying UTs in the first place?)

4% p.a. dividend net of management fee? That's a stretch. Something like 2-3% before factoring in fees is more reasonable, and most/all of it will be eaten up by the management and admin fees.

It seems the insurance cover is quite minimal (i.e 10% of what you have paid in premiums). I guess that's why they can hide the insurance charges in the admin fee.

 

[Shiny Things]

So i am quite confused, what is exactly the catch of this product? Is this a RSP with some (maybe very lil ) insurance or and iLP with low cost?

The catch is that it's a really expensive way to invest in the same stuff you can get elsewhere for a lot cheaper.

You're paying 1.2% per annum for the (minimal) insurance wrapper, which is like paying a 1.2% per annum platform fee at FundSuperMart, or a 1.2% per annum fee for the privilege of having an account with your broker. (A slick bloke from Morgan Stanley in a very nice suit tried to pitch me something like that once - "invest your money with us, we'll only charge you 1% per year to have your money managed by very smart people!". He gave up trying to sell to me when he looked at my Interactive Brokers statements and realised I was paying them less than zero.)

Then you're paying 1%-1.5% management fees on the funds, which is like paying 1.5% to invest in an ETF (hint: ETFs do not charge anywhere near that).

And it looks to me like the HSBC funds are just feeder funds for other funds (for example, the HSBC Singapore fund feeds straight through to the Schroders Singapore Trust), so I'm not sure that those underlying funds don't charge their own layers of fees, and I don't think there's any good way to prove it one way or another. Let's be generous and say they don't, so you're only paying 1.125% per year for the HSBC Singapore Fund.

Here's the thing, though. Let's say you invest in the HSBC Singapore Fund, which is actually the Schroders Singapore Trust plus a layer of fees. That Schroders fund is basically the same as the STI - its top four holdings are Singtel and the big three banks - so you could get pretty much the same exposure just by buying the STI ETF, but you'd only pay 0.3% per year in management fees instead of 2.325%.

That means you've got a more-than-2%-per-year head start over these fancy-ass fund managers. Unless they can beat the index by a solid 2% per year, every year, you'd make more money investing by yourself in the STI ETF. And I guarantee you they can't beat the index by that much - over the last 10 years, the Schroders fund beat its benchmark by a bit less than 1% annualised, so that's not nearly enough to cover the extra fees and charges that they make you pay.

This is why we bash on unit trusts, and why we bash on ILPs. You don't need to pay those fees. You can beat the fund managers at their own game - and it literally is as easy as opening a brokerage account at your local Stanchart branch.

 

[lalaisgongon]

The catch is that it's a really expensive way to invest in the same stuff you can get elsewhere for a lot cheaper.

You're paying 1.2% per annum for the (minimal) insurance wrapper, which is like paying a 1.2% per annum platform fee at FundSuperMart, or a 1.2% per annum fee for the privilege of having an account with your broker. (A slick bloke from Morgan Stanley in a very nice suit tried to pitch me something like that once - "invest your money with us, we'll only charge you 1% per year to have your money managed by very smart people!". He gave up trying to sell to me when he looked at my Interactive Brokers statements and realised I was paying them less than zero.)

Then you're paying 1%-1.5% management fees on the funds, which is like paying 1.5% to invest in an ETF (hint: ETFs do not charge anywhere near that).

And it looks to me like the HSBC funds are just feeder funds for other funds (for example, the HSBC Singapore fund feeds straight through to the Schroders Singapore Trust), so I'm not sure that those underlying funds don't charge their own layers of fees, and I don't think there's any good way to prove it one way or another. Let's be generous and say they don't, so you're only paying 1.125% per year for the HSBC Singapore Fund.

Here's the thing, though. Let's say you invest in the HSBC Singapore Fund, which is actually the Schroders Singapore Trust plus a layer of fees. That Schroders fund is basically the same as the STI - its top four holdings are Singtel and the big three banks - so you could get pretty much the same exposure just by buying the STI ETF, but you'd only pay 0.3% per year in management fees instead of 2.325%.

That means you've got a more-than-2%-per-year head start over these fancy-ass fund managers. Unless they can beat the index by a solid 2% per year, every year, you'd make more money investing by yourself in the STI ETF. And I guarantee you they can't beat the index by that much - over the last 10 years, the Schroders fund beat its benchmark by a bit less than 1% annualised, so that's not nearly enough to cover the extra fees and charges that they make you pay.

This is why we bash on unit trusts, and why we bash on ILPs. You don't need to pay those fees. You can beat the fund managers at their own game - and it literally is as easy as opening a brokerage account at your local Stanchart branch.

Ahhhhh i see what you saying, after you mentioned i realize most of the funds in thsi program are the index UT.

then can i ask, under what circumstances should one invest in a UT?

What about funds like schroders global dividend maximizer and the allianz income and growth?

 

[Perisher]

Ahhhhh i see what you saying, after you mentioned i realize most of the funds in thsi program are the index UT.

then can i ask, under what circumstances should one invest in a UT?

What about funds like schroders global dividend maximizer and the allianz income and growth?

The point is why bother?
Some products are out there to earn $$ from you instead of anything else.
Don't assume every product has a (good)purpose for the consumers to exist. ILP is a classic case.

If you are really that keen though, contact keverus?
He is a big supporter of short term investment in UT and he says he is keen to share...

 

[lalaisgongon]

The point is why bother?
Some products are out there to earn $$ from you instead of anything else.
Don't assume every product has a (good)purpose for the consumers to exist. ILP is a classic case.

If you are really that keen though, contact keverus?
He is a big supporter of short term investment in UT and he says he is keen to share...

Hmm i agree with then earning money from you part.

But i was also wonder the purpose of a UT, i understand if you want to go for the entire market , an ETF would be better?

am i right to say if you wish to go for a particular sector or industry thats risker, a UT would be better?

 

[wahkao3]

The point is why bother?
Some products are out there to earn $$ from you instead of anything else.
Don't assume every product has a (good)purpose for the consumers to exist. ILP is a classic case.

If you are really that keen though, contact keverus?
He is a big supporter of short term investment in UT and he says he is keen to share...

agreed
why bother

 

[wahkao3]

Hmm i agree with then earning money from you part.

But i was also wonder the purpose of a UT, i understand if you want to go for the entire market , an ETF would be better?

am i right to say if you wish to go for a particular sector or industry thats risker, a UT would be better?

go for UT if u have spare cash and like to make the fund managers huat big big

 

[Perisher]

Hmm i agree with then earning money from you part.

But i was also wonder the purpose of a UT, i understand if you want to go for the entire market , an ETF would be better?

am i right to say if you wish to go for a particular sector or industry thats risker, a UT would be better?

Isn't that what ETF is for? Unless you are going for some ulu stuff which only UT have.
Basically UT doesn't serve much purpose but for the niche market where ETF isn't there.

 

[Shiny Things]

Ahhhhh i see what you saying, after you mentioned i realize most of the funds in thsi program are the index UT.

then can i ask, under what circumstances should one invest in a UT?

Not quite. What I was getting at was that the funds in this program look a lot like index funds - they hold the same stocks as index funds, in about the same proportions. But the funds in the program charge a lot more.

Buying an index ETF would give you the same market exposure, but you'd pay a lot less in management fees.

What about funds like schroders global dividend maximizer and the allianz income and growth?

Nope, never. These things are basically marketing tricks, especially that Allianz Income and Growth fund - it uses a few tricks (most notably selling options) to produce a steady 8% dividend stream, but remember how Wahkao won't shut up about "don't be hard up over dividends"? The Allianz fund pays out basically all its capital gains (and then some) as dividends, to make you think you're making money - but what you make in dividends on that fund, you lose in capital gains. It's gone literally nowhere in the last five years while stocks have more than doubled.

The end result is that that Allianz fund does worse than a simple 70-30 stock-and-bond portfolio, and it charges 1.3% per annum for that crappy performance.

 

[lalaisgongon]

Not quite. What I was getting at was that the funds in this program look a lot like index funds - they hold the same stocks as index funds, in about the same proportions. But the funds in the program charge a lot more.

Buying an index ETF would give you the same market exposure, but you'd pay a lot less in management fees.



Nope, never. These things are basically marketing tricks, especially that Allianz Income and Growth fund - it uses a few tricks (most notably selling options) to produce a steady 8% dividend stream, but remember how Wahkao won't shut up about "don't be hard up over dividends"? The Allianz fund pays out basically all its capital gains (and then some) as dividends, to make you think you're making money - but what you make in dividends on that fund, you lose in capital gains. It's gone literally nowhere in the last five years while stocks have more than doubled.

The end result is that that Allianz fund does worse than a simple 70-30 stock-and-bond portfolio, and it charges 1.3% per annum for that crappy performance.

Hmm those are interesting points you brought up, what about the part on ut having active mgmt? would it also mean, that in the case of the stock market crash, a ut wouldn't move so much?

In the case of the sti etf, it drop from a 3.4ish to a 2.9 Ish now. That's a 14 pecent drop. However I don't think ut drop that much in that period. I guess over the longer period, the returns might be the same. However say for example if you are leveraging, and you have the option of pledging sti etf or a ut, am I right to say the ut would be more stable and have a less risk in margin call?

as for the hsbc one, I agree that product isn't ideal, it's a really a expensive way to invest in the index.

So if say the ut invests in high yield corporate bonds, would this be smth that isn't avaiable as an etf.

As for the Allianz one, although it has no cap gains, but it seems good for someone who wants a constant passive income or higher passive income, on the flip side you give up cap gain? Am I right?

 

[wahkao3]

https://secure.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=LGM046
https://secure.fundsupermart.com/main/admin/buy/prospectus/prospectusLGM046.pdf
even when buying UT, the same dividend principal applies

DONT BE HARD UP OVER DIVIDEND!!

 

[wahkao3]

Hmm those are interesting points you brought up, what about the part on ut having active mgmt? would it also mean, that in the case of the stock market crash, a ut wouldn't move so much?

In the case of the sti etf, it drop from a 3.4ish to a 2.9 Ish now. That's a 14 pecent drop. However I don't think ut drop that much in that period. I guess over the longer period, the returns might be the same. However say for example if you are leveraging, and you have the option of pledging sti etf or a ut, am I right to say the ut would be more stable and have a less risk in margin call?

as for the hsbc one, I agree that product isn't ideal, it's a really a expensive way to invest in the index.

So if say the ut invests in high yield corporate bonds, would this be smth that isn't avaiable as an etf.

As for the Allianz one, although it has no cap gains, but it seems good for someone who wants a constant passive income or higher passive income, on the flip side you give up cap gain? Am I right?

U REALLY think too highly of those fund managers.

I can tell u it will be even worse!

if they can predict market downturn, I will park all my money with them liao

crash come, they also plunge down and theres nothing u can do about it

 

[Shiny Things]

Hmm those are interesting points you brought up, what about the part on ut having active mgmt? would it also mean, that in the case of the stock market crash, a ut wouldn't move so much?

Nope. Active managers aren't usually any better than index funds when it comes to crash protection.

In the case of the sti etf, it drop from a 3.4ish to a 2.9 Ish now. That's a 14 pecent drop. However I don't think ut drop that much in that period.

We can check this.

Year-to-date, ES3's dropped from $3.40 to $2.94, but it's paid 10 cents in dividends... that's about an 11% drop when you include divs.

If we search FundSuperMart for SGD-denominated Singaporean equity funds, and get a list of all those funds, the average fund year-to-date has dropped... 11%.

So this is not conclusive, but it's certainly suggestive. I reckon you'll find all of these funds track the STI index pretty tightly (except for the REIT and small-cap funds, which will obviously track the REIT and smallcap markets).

I guess over the longer period, the returns might be the same. However say for example if you are leveraging, and you have the option of pledging sti etf or a ut, am I right to say the ut would be more stable and have a less risk in margin call?

Depends whether your broker does intraday margin calls, but I'd say it probably makes no difference.

So if say the ut invests in high yield corporate bonds, would this be smth that isn't avaiable as an etf.

Nope, there are plenty of high-yield bond ETFs. Basically everything has been ETF-ified by now.

As for the Allianz one, although it has no cap gains, but it seems good for someone who wants a constant passive income or higher passive income, on the flip side you give up cap gain? Am I right?

Not really. Don't forget, in Singapore, there's no tax on dividends or cap gains. So if you want to create "passive income", you can just sell some of your shares - keep your capital constant and take money off the top as a "dividend". You'd get to exactly the same place as the Allianz fund.

Their huge dividend is a marketing trick, like I said. A fund that pays an 8% dividend and 0% capital gains will get you to pretty much exactly the same place as a fund that has 0% dividend and 8% capital gains, but what looks better on a fund flier: "8% DIVIDEND YIELD" or "generally this thing returns 8% per annum but it might return more or maybe less"?

 

[koreanlover]

He gave up trying to sell to me when he looked at my Interactive Brokers statements and realised I was paying them less than zero.

Hi Shiny what do mean by you are paying IB less than zero ?
Are you lending out your shares ?

 

[Shiny Things]

Hi Shiny what do mean by you are paying IB less than zero ?
Are you lending out your shares ?

Yep. My stock-lending income isn't huge, but it pays for the monthly fees and the brokerage for my occasional rate-futures punt.