need advice on ILP

[rarenick]

Ask the FA if he or she got buy this policy or not

Of coz have, even the entire family, is helping him to hit sales target.

 

[saejyun]

I am for real and the FA is a guy. Just want to learn more from lao jiao over here.

so far I’ve been getting good advice so thank you everyone. EDMW so big but no one FA here bought the dividend extraction fund-switching strategy?

That FA strategy sounds BS to me.

'Dividend extraction' is just taking out your own capital while your fund NAV drops by the exact dividend amount.

Also this is an old FA marketing trick.

Dividends aren't free money—when a fund pays out $1, its unit price (NAV) drops by $1.
You're basically withdrawing your own principal to create the illusion of high returns.
Once you factor in market volatility during the 3-day fund switch delay plus heavy ILP fee drag, your capital value will end up down the drain.
Stay far away.

 

[win_man]

if you really want to know if good or not.. sign up the ILP and let us know in few years to come. Once you learn already you can start investing in S&P

 

[benobiwan]

Dca into vwra or even amova... Is better than ilp..same thing projected and u can liquid it anytime. Some dollars (coms) go to agent and some goes into insurance, u dun get 100% invested. For protection, I go for term.

 

[clipper]

Better stick to Independent Financial Advisors (IFAs). They are not representing a single insurance firm.
Good ones will charge you consultation fee or advisory fee. Good advices in life are not free.

Tied agents represent a single insurance firm who can only offer products from that firm.

 

[benobiwan]

1. He suggest 1k/ month but 15 year lock in period.
2. GE wealth advantage 4.
3. Good question. But he has shown dividend returns of even 30% from first year investment with his other client too.

How come he can show you the other "client"???

 

[tiopwndeepdeep]

How come he can show you the other "client"???

He blank out the name and show me first year performance. And the NAV of account maintains but the dividend is really 20%

 

[rarenick]

He blank out the name and show me first year performance. And the NAV of account maintains but the dividend is really 20%

1k/mth Ilp is alot alot of money but going down the drain. Wish u good luck

 

[Lao_Tiko]

He blank out the name and show me first year performance. And the NAV of account maintains but the dividend is really 20%

It is a trick when they pay out "guaranteed" returns yearly - they liquidate the funds to pay you the "dividends". So your NAV goes down gradually even if the fund is "growing" - this is masked in good times. But when the market is bad ..... When the tide goes out, you will see who has no underwear

 

[saejyun]

He blank out the name and show me first year performance. And the NAV of account maintains but the dividend is really 20%

It's simple math, if a fund pays 20% in dividends, that cash has to come from somewhere. It's either funded by Year 1 welcome unit bonuses or paid directly out of capital.
Ask the FA one question, 'If the market drops 15% next year, will my NAV still maintain while extracting 20% dividends?'

 

[bruiser69]

ILP is bad for the client no matter how one looks at it

Don’t be the silly one who funds your agent’s new Tesla

 

[tiopwndeepdeep]

ILP is bad for the client no matter how one looks at it

Don’t be the silly one who funds your agent’s new Tesla

any reason for the advice? I know agent earn commission from it but it’s still a good deal at 20% per annum right?

 

[reddevil0728]

ILP is bad for the client no matter how one looks at it

Don’t be the silly one who funds your agent’s new Tesla

Why those wealthy people buy to preserve wealth for next generation?

 

[BBCWatcher]

Hi everyone I have been approached by a GE FA for this ILP. The returns are 20% per annum and it works because they are using a dividend extraction strategy.

Yes, the insurance company and its salesperson will enjoy high returns and will extract hefty recurring dividends from your premium payments.

 

[BBCWatcher]

Does “dividend extraction“ work? Short answer: no. Slightly longer answer: no, the per share price falls ex-dividend.

It’s possibly easier to imagine how this works if you’re holding a bond that pays a coupon every 6 months. Let’s suppose a $100 coupon is paid every August 1 to everyone who held the bond on July 31. Rational, reasonably intelligent bond buyers and sellers know this, so the secondary market price of the bond is approximately $100 higher on July 31 than it is on August 1. Then the bond price rises slowly over the next 6 months as the next coupon approaches, then it falls again. Loop, repeat, until the bond matures. (The bond’s price is also continuously affected by market interest rates and evolving sentiments about the creditworthiness of the issuer.)

Now, does anyone want to make the argument that ILP (and high cost unit trust) holders aren’t rational and reasonably intelligent? And see where that goes?

 

[reddevil0728]

Does “dividend extraction“ work? Short answer: no. Slightly longer answer: no, the per share price falls ex-dividend.

It’s possibly easier to imagine how this works if you’re holding a bond that pays a coupon every 6 months. Let’s suppose a $100 coupon is paid every August 1 to everyone who held the bond on July 31. Rational, reasonably intelligent bond buyers and sellers know this, so the secondary market price of the bond is approximately $100 higher on July 31 than it is on August 1. Then the bond price rises slowly over the next 6 months as the next coupon approaches, then it falls again. Loop, repeat, until the bond matures. (The bond’s price is also continuously affected by market interest rates and evolving sentiments about the creditworthiness of the issuer.)

Now, does anyone want to make the argument that ILP (and high cost unit trust) holders aren’t rational and reasonably intelligent? And see where that goes?

What if it works like this…

use an ILP that pays 101% upon death to buy into those high yielding UT, that pays 7-8% dividend. Don’t care if capital depreciates, in fact it is better if capital depreciates because the fee will be lower given it’s a function of portfolio value.

upon death, the beneficiary gets 101% of initial capital even if it has dropped to 50% of value?

that’s apparently how many wealthy people structure their portfolio

 

[BBCWatcher]

What if it works like this…
use an ILP that pays 101% upon death to buy into those high yielding UT, that pays 7-8% dividend. Don’t care if capital depreciates, in fact it is better if capital depreciates because the fee will be lower given it’s a function of portfolio value.

The dividends also fall as the asset base falls even if the dividend rate stays the same. If for example your asset base is cut in half, so are your dividends. And it may be even worse than that since any fixed fees become a progressively bigger drag in percentage terms.

upon death, the beneficiary gets 101% of initial capital even if it has dropped to 50% of value?

If that clause applies, it's only a nominal guarantee. The real, inflation-adjusted value falls.

that’s apparently how many wealthy people structure their portfolio

I'm not sure that's true, but let's suppose for sake of argument it is. I think it's useful to look at what people do and why they do it, but I also think it's important not to worship wealthy people. Many of them are profoundly dumb, especially outside their fields of expertise.

I think it's notable that Providend, the fee-based financial advisor that's at least more likely to be representing only the personal financial interests of their typically well-to-do clients, advises them to avoid "101 ILPs" (and other ILPs).

 

[reddevil0728]

The dividends also fall as the asset base falls even if the dividend rate stays the same. If for example your asset base is cut in half, so are your dividends. And it may be even worse than that since any fixed fees become a progressively bigger drag in percentage terms.

Yep for sure it will be but as with all other things, yield is never guaranteed and hence price is never guaranteed, so make hay while the sun shines as hope that the high yield runs long enough and even if it eventually cuts, at least you "front load" the returns first so hopefully on average you are still getting quite a decent yield +

If that clause applies, it's only a nominal guarantee. The real, inflation-adjusted value falls.

yes nominal guarantee but still a guarantee that capital is "protected" at 101% vs other options out there.

I'm not sure that's true, but let's suppose for sake of argument it is. I think it's useful to look at what people do and why they do it, but I also think it's important not to worship wealthy people. Many of them are profoundly dumb, especially outside their fields of expertise.

I think it's notable that Providend, the fee-based financial advisor that's at least more likely to be representing only the personal financial interests of their typically well-to-do clients, advises them to avoid "101 ILPs" (and other ILPs).

yes for sure. but it's more about this "idea" of wealthy preservation for succession while still extracting yield in their lifetime.

that's how some people choose to leverage ILP for their use case.

 

[BBCWatcher]

OK, so we've spent several pages criticizing ILPs. What's an easy, "fire and forget" investment alternative? Here's one: a low cost Regular Savings Plan (RSP). For example, you could sign up for a Regular Savings Plan with POEMS and buy as little as S$100 per month (or S$250 quarterly) of a low cost index fund — automatically, just like making automatic insurance policy payments. But there's none of the nonsense with hefty sales charges, stratospheric fund management expenses (if you choose low cost funds), etc.

Which funds? Well, here's a strong candidate: the Amundi Index MSCI World unit trust with a superbly low annual management fee of 0.03%. This is an accumulating fund, so you don't even have to worry about reinvesting dividends. The fund does that for you, automatically. You could combine these monthly or quarterly buys with monthly or quarterly buys of MBH (the popular low cost Singapore corporate and quasi-sovereign exchange-traded bond index fund) and optionally GAB (a low cost accumulating Straits Times Index exchange-traded stock index fund). All "fire and forget," really. If you want convenience and low investment costs, there you go. Moreover, if you wish, all 3 of these funds can be purchased using unrestricted cash, Supplementary Retirement Scheme savings, and/or CPF Ordinary Account savings.

 

[bruiser69]

Why those wealthy people buy to preserve wealth for next generation?

Because, as one poster has also opined above, most of them are profoundly dumb outside their own fields of expertise.