Investment advice - surrender ILP?

[akwl88]

Moejoseph are you invested in ILP or do you sell them?

he just became an agent this month lol

 

[seannyboiboi]

It depends on individuals, really. There're always 2 sides to everything.

If ILPs are bad, why are there still High-NetWorth Individuals (HNWI) taking them up, especially those policies with startup bonus and access to Accredited Investors' Fund, to grow their wealth and do legacy planning?

Ultimately it depends on individual to see what you are looking for. If you are someone who don't like long-term and need cashflow, ILPs will not be suitable for you. But if you are someone who wants the convenience and don't mind paying the fees, albeit earning lesser than if you know how to invest yourself, then you will probably think ILPs is good.

sounds suspiciously like what an "IFA" said when she tried to sell me this ILP a couple of months ago... of course i didn't buy lol

 

[Maeda_Toshiie]

It depends on individuals, really. There're always 2 sides to everything.

If ILPs are bad, why are there still High-NetWorth Individuals (HNWI) taking them up, especially those policies with startup bonus and access to Accredited Investors' Fund, to grow their wealth and do legacy planning?

Ultimately it depends on individual to see what you are looking for. If you are someone who don't like long-term and need cashflow, ILPs will not be suitable for you. But if you are someone who wants the convenience and don't mind paying the fees, albeit earning lesser than if you know how to invest yourself, then you will probably think ILPs is good.

Contrary to popular opnion, many HNWI are not particularly financially savvy (eg. doctors), ie they get suckered into buying crap financial products by unscrupulous advisors. The HNWI who are financially savvy, don't buy ILPs.

 

[soneat]

It depends on individuals, really. There're always 2 sides to everything.

If ILPs are bad, why are there still High-NetWorth Individuals (HNWI) taking them up, especially those policies with startup bonus and access to Accredited Investors' Fund, to grow their wealth and do legacy planning?

Ultimately it depends on individual to see what you are looking for. If you are someone who don't like long-term and need cashflow, ILPs will not be suitable for you. But if you are someone who wants the convenience and don't mind paying the fees, albeit earning lesser than if you know how to invest yourself, then you will probably think ILPs is good.

There are different types of HNWI and they are many reasons why they buy the product. Some take it up for convenience, some take it up so as not to "lose face", some take it up to feel "privilege" because they are deemed as "Accredited".

IMHO, "accredited" is a double edged sword - you have exposure to more products (both good and bad).

Just because there are HNI people buying it does not means it is good.

IMHO, ILP is best suited for young agents with a short-term protection objective. Why?
1. Agent will incur less cost since they are "buying" from themselves.
2. Mortality charges, in some instances, can be very low at young age. However, this will rise rapidly as one grows older...so ILP is not ideal for long term protection.

 

[moejoseph]

he just became an agent this month lol

I am invested in ILP myself, and yes i took up the opportunity to enter the industry recently on a part-time/freelance basis, while still running my startup in the events industry at the same time.

My main focus is on commercial insurance, but if you ask me, there have been many misunderstanding on the products by the different insurers. Like many, i was against insurance previously, but i really learned a lot when i am in this industry, and am still learning as i go.

And as usual, only the negative reviews are making their way online, while those getting not bad returns usually keep quite about it.

Just providing my honest opinion out here.

 

[moejoseph]

Contrary to popular opnion, many HNWI are not particularly financially savvy (eg. doctors), ie they get suckered into buying crap financial products by unscrupulous advisors. The HNWI who are financially savvy, don't buy ILPs.

I agree with the last sentence, but for those who took up ILPs and hold till maturity, under the hands of a good adviser, may not have regret their decisions as well.

Of course as mentioned, for those who are financially savvy and have the time, by all means go ahead and invest themselves since they can get better returns.

 

[moejoseph]

It seems like Bro Akwl88 is very against agents, especially from his past posts.

I am not here to change anyone's opinion, but to provide advice and discussion. Of course some may feel that the advice provided may be invalid, but there are always 2 sides to everything.

I don't say something is good, but it is not entirely bad either. Ultimately, it is up to individuals to make their own decisions. Since everyone is here to learn and seek advice, we should all be more open about the different kind of advices we will receive.

While i do agree there are bad eggs out there, there are a lot more who are working hard and sincere. I saw agents assisting their clients for claims, going the extra miles, and all these are seldom mention online.

I believe the community will make a sound and balance judgement themselves.

 

[akwl88]

I am invested in ILP myself, and yes i took up the opportunity to enter the industry recently on a part-time/freelance basis, while still running my startup in the events industry at the same time.

My main focus is on commercial insurance, but if you ask me, there have been many misunderstanding on the products by the different insurers. Like many, i was against insurance previously, but i really learned a lot when i am in this industry, and am still learning as i go.

And as usual, only the negative reviews are making their way online, while those getting not bad returns usually keep quite about it.

Just providing my honest opinion out here.

sir, insurance and investment are 2 different things

seems like you got a lot to learn

 

[moejoseph]

sir, insurance and investment are 2 different things

seems like you got a lot to learn

I agree with Bro Akwl88.

There are too many terms out there which could be confusing. For me, i termed anything that are sold under insurance companies as "insurance" because there is still a small level of insurance component in there. If not, why call it ILP (Investment-Link Products) instead of just Investment?

 

[lingalong]

I am also quite against agents albeit having relatives in that field.

However, Moejoseph is not wrong to say that there are 2 sides to ILPs.

Firstly the point on HNWI and accredited investors putting money into ILP is because they have large disposable income and the money they put in every month is almost inconsequential to them. This is just a form of tucking away something for 25 years and scoring some gains upon maturity.

Likewise for the average person, If you asked me to put $100 out of $10,000 every month into an ILP, this money would be of little importance but after 25 years hey it very well became something.

Next, the issue comes when agents coerce individuals to portion a large portion of income into these products $1000-$2000 out of $10,000 and due to the lockup horizon then becomes a pain to fund. What is worse is in the case of retrenchment, you still have to pay monthly or be forced to terminate and bite the loss.

Lastly, the fees I agree are the ones that hit the hardest. Due to the layers of middleman between your money and these investment, a lot of capital/profit is lost in between. In any case, I just take it as a gong xi to my relative if I ever purchase a plan

Do I own an ILP? Nope. Because right now I have other priorities and do not want to commit to such a Long term plan. But who knows going forward I might get a simple one as part of my entire portfolio.

Like what many bros here has already said, there is no 1 size fit all investment vehicle. It all boils down to your risk appetite, your patience, your plans and of course wherever you are in life.

If you have the discipline to do your own research, pick your choices, invest your own money deligently and strategise the rebalancing then sure by all means do so. After all, there are so many tools out there’s like ETF auto invest or even robo advisory. But if you want to avoid all of that and just let someone else do it for you then ILP doesn’t seem that terrible after all, but bearing in mind how much you put and the commitment it takes.

 

[moejoseph]

One more thing about ILPs which i believe gives a better edge over self-investment:

Most ILPs give out a Death or Terminal Illness benefit, though not much, should death occur. At least you can still get back at least 101% of your capital or total account value at that point in time, should anything happen.

Whereas if you self-invest, you may have to ensure that your family members or someone knows what to do in time of unfortunate events. Proper planning have to be done, otherwise these investment may be lost forever.

 

[JuniorLion]

One more thing about ILPs which i believe gives a better edge over self-investment:

Most ILPs give out a Death or Terminal Illness benefit, though not much, should death occur. At least you can still get back at least 101% of your capital or total account value at that point in time, should anything happen.

Whereas if you self-invest, you may have to ensure that your family members or someone knows what to do in time of unfortunate events. Proper planning have to be done, otherwise these investment may be lost forever.

1% more is not a benefit worth mentioning.

 

[akwl88]

One more thing about ILPs which i believe gives a better edge over self-investment:

Most ILPs give out a Death or Terminal Illness benefit, though not much, should death occur. At least you can still get back at least 101% of your capital or total account value at that point in time, should anything happen.

Whereas if you self-invest, you may have to ensure that your family members or someone knows what to do in time of unfortunate events. Proper planning have to be done, otherwise these investment may be lost forever.

again, not mentioning about adequacy of coverage + affordability of premiums

what use is 101% of a 50k death benefit for someone with a lot of dependents?

 

[tangent314]

Trying to sell the 101% as a plus point is really grasping at straws.

ILP maybe was a decent choice 10 years ago when people don't really worry that much if the funds underlying instruments earn 10% and you get 7%, and there weren't really other easy ways to invest besides signing on the paper indicated by the insurance agent.

These days, online brokerages are easy to use, there are lots of ETFs to choose from, and the fees are as low as you can get. Even if you find that too hard and you 'don't have the discipline to RSP every month', robo-advisors are available now with fairly reasonable fees, and zero fee platforms like Poems and DollarDex allows you to set up RSPs.

Because with underlying instruments now returning maybe 4%, seeing only 1% from that is when people start to realize how ridiculous those fees are when there are alternatives with much lower fees.

 

[moejoseph]

Trying to sell the 101% as a plus point is really grasping at straws.

ILP maybe was a decent choice 10 years ago when people don't really worry that much if the funds underlying instruments earn 10% and you get 7%, and there weren't really other easy ways to invest besides signing on the paper indicated by the insurance agent.

These days, online brokerages are easy to use, there are lots of ETFs to choose from, and the fees are as low as you can get. Even if you find that too hard and you 'don't have the discipline to RSP every month', robo-advisors are available now with fairly reasonable fees, and zero fee platforms like Poems and DollarDex allows you to set up RSPs.

Because with underlying instruments now returning maybe 4%, seeing only 1% from that is when people start to realize how ridiculous those fees are when there are alternatives with much lower fees.

Not selling the 101% as a plus point, but at least if something happen, the family will be able to get back something.

To be frank, i haven't got time to tryout those mentioned platforms and see how they work, but i guess your dependents will have to login to them to "sell" away whatever you bought? What if they do not know you have these bokerage accounts?

Real question above. Am keen to find out as well, so i can better advise my client if these platforms are indeed better

 

[havetheveryfun]

Not selling the 101% as a plus point, but at least if something happen, the family will be able to get back something.

an old agent told me before it is even harder to get back whatever value is left in the policy if you didnt specify any beneficiary/dependent. even more complicated normal assets like property or cash if no will has been made.

what the previous posters are saying is what is the point of the 101% if we are buying ILP to invest + insure ourselves ? E.g if we pay $200 a month for ILP for a coverage for 200k, why would anyone care about the 101% of the premiums put in ? Shouldnt we care about the 200k that can be gotten instead ? Using the 101% as a selling point is just ?????? for an ILP, especially coming from an agent ?

using the 101% as a selling point should only be applied to endowment plans where you can't specify any dependents/beneficiary (brings back to my first point).

 

[moejoseph]

an old agent told me before it is even harder to get back whatever value is left in the policy if you didnt specify any beneficiary/dependent. even more complicated normal assets like property or cash if no will has been made.

what the previous posters are saying is what is the point of the 101% if we are buying ILP to invest + insure ourselves ? E.g if we pay $200 a month for ILP for a coverage for 200k, why would anyone care about the 101% of the premiums put in ? Shouldnt we care about the 200k that can be gotten instead ? Using the 101% as a selling point is just ?????? for an ILP, especially coming from an agent ?

using the 101% as a selling point should only be applied to endowment plans where you can't specify any dependents/beneficiary (brings back to my first point).

I think some may have misunderstood my point of the 101%. Some ILPs give 101% of the total account value or Sum Assured, whichever is higher, in time of death etc.., so it can be more than what the premiums put in. Of course, nothing is guaranteed in investment, so there will be chances that the total account value is lower if the ILP is not managed properly as well. But then do lookout for something that provides "whichever is higher", because that is the one i feel is much safer

 

[tangent314]

Look, the real reason why all the insurance companies are doing 101% ILPs is because the are required to by law. Insurance companies are not allowed to sell UTs without any insurance cover and the 101% is simply the minimum cover they have to provide.

Insurance agents can continue trying to justify why this 101% thing is 'good for the investors' but the fact is it's an extra cost to the insurance companies that is passed onto the investors as fees, for something that is of very little value to the investors.

 

[JuniorLion]

Some weeks back, I questioned if there is any need for ILP-wrapper around the fund, where you can just buy the fund direct via POEMS.

Searching through 10 insurers and 30+ ILP products later, the only ILP "worth" your time is TM Wealth Enhancer. This ILP invest 105.3% of the amount you put in. At surrender, you lose 5% (bid-sell spread. Backloaded). You gain very very marginally. But it's not really worth your time.

All other ILP products stack extra costs so much so that you are better off buying the fund direct.

And don't us started on the 101% nonsense.

Moejoseph, go peddle your wares elsewhere please.

 

[JuniorLion]

I think some may have misunderstood my point of the 101%. Some ILPs give 101% of the total account value or Sum Assured, whichever is higher, in time of death etc.., so it can be more than what the premiums put in. Of course, nothing is guaranteed in investment, so there will be chances that the total account value is lower if the ILP is not managed properly as well. But then do lookout for something that provides "whichever is higher", because that is the one i feel is much safer

Nothing is free please. You pay for the 101% death benefit through wrap fees, blah blah fees.