Newbie Guide: How to Find a Good Agent for Investment & Insurance?

[xiaoevil]

Rommie2k6 wrote:

I think after so many posts, you still either don't understand or choose to misrepresent what BTIR is.
The point is whatever you invest in your ILP-fund, I am confident and pretty sure I can find a cheaper non-Prudential alternative either in the form of UT or ETF. So for e.g. if your client is invested in some Prudential Singapore Equity Fund, I can use STI ETF which has probably has a 1%+ lower expense ratio than your prudential fund. This means that over time, I will earn +1% more than the person who holds that Prudential Singapore Equity fund.

Note that I am not just talking about the fund expense ratio. I haven't even added the other hidden charges of ILP.

I've explained this above. If you are trying to tell me you BTIR concept is buy term till 65 and invest in anything under the sun. Let me tell you this, I've got a better one - Buy SP-Term life and invest in anything under the sun.

Standalone DI premium is also in the region of what you quoted for your DI rider, but to make a true comparison:
1) What is the sum insured for your DI rider? How much % of the income does it replace?
2) Under what condition can one claim from your DI rider? Standalone DI policy uses own-occupation definition. Does your DI rider use that definition or the traditional "disabled" definition?
3) Is the DI rider tied to the main plan (i.e. if main plan terminates or reaches zero cash value is it still in force)? Another reason to have separate insurance policy is that IF you ever come to the situation whereby you really have no money, at least you can pick and choose what policy to terminate.

Please clarify... my guess is that Prudential DI rider is nothing but some patchwork half-past-six DI policy. I might be wrong, so please clarify the above pts.[/QUOTE]

I won't be telling you the exact rates and benefits. Like you said, only 2 companies offer and I'm telling you it's not gonna be just 2 anymore. This is the very reason why product comparison always fail. Today you have analysed and compared TM Asia to be the best WL policy. Tomorrow it changed to Great Eastern, are you going to cancel and switch over?

 

[Rommie2k6]

Since Prudential is coming up so often, I decided to do a quick analysis of the ILP-funds offered by Prudential. This is one example.

http://pruaccess.prudential.com.sg/prulinkfund/viewFundPricing.do

Prulink Emerging Market Fund
http://www.prudential.com.sg/corporate_sg/misc/downloads/factsheets/PEMF.pdf

Initial Investment Charge: 5% (WOW!!!)
Continuing Investment Charge: 1.6% (Is this the total expense ratio? I can't tell, but assuming that it is this is quite high.)
Fund performance vs Benchmark: Underperformance by -3.5% since inception, from 2005 to 2010. (That's terrible!!!)

Now compare to the DIY BTIR person who uses

iShares MSCI Emerging Markets (IEEM)
http://uk.ishares.com/en/rc/funds/IEEM

Saxo Capital Commision Rate: 8GBP (To match the 5% sales charge we need to invest 160GBP or 330SGD per time period. I prefer to invest on a quarterly basis since I can accumulate more and make the % sales charge lower.)
Total Expense Ratio: 0.75%
Fund performance vs Benchmark: It's an index fund so not need to worry about management performance. At some there will be some tracking error, but it is not very high (about ~0.5% for bad index funds).

What does this means?

Prudential ILP fund has an expense ratio that is (1.60 - 0.75) = 0.85% higher than iShares IEEM ETF. If both Prudential and iShares track their benchmark without any under or over performance, Prudential returns will still be lower by 0.85% compared to iShares. But the past 5-year data has shown that it has underperformed by 3.5%!!! Why? Active management... and in the long run it has been shown that actively managed fund have a very low probability of outperforming the benchmark they track.

What does this means? Assuming a person invest $1000/yr for the next 40 years into these 2 funds only and that the MSCI Emerging Market Index returns a gross 7% returns, then:
1) The iShares person will get 6.25% net returns and have $175k at the end.
2) The Prudential person assuming the fund does not underperformthe benchmark gets 5.40% net returns and have $140k at the end.
3) The Prudential person assuming that the fund continues to underperform as it has at the same rate will get 3.50% net returns and have $87k at the end.

Bottomline? Minimizing costs is VERY important. And note that since we are talking about the same asset class invested in the same sector/category (emerging market), the iShares and Prudential person takes the same amount of risk.

 

[Rommie2k6]

I've explained this above. If you are trying to tell me you BTIR concept is buy term till 65 and invest in anything under the sun. Let me tell you this, I've got a better one - Buy SP-Term life and invest in anything under the sun.

If SP Term is indeed more cost effective than RP Term and you prove it providing proper examples, then yes it is good. But as you mentioned SP Term is expensive ya and most young people can never afford it?

I won't be telling you the exact rates and benefits. Like you said, only 2 companies offer and I'm telling you it's not gonna be just 2 anymore. This is the very reason why product comparison always fail. Today you have analysed and compared TM Asia to be the best WL policy. Tomorrow it changed to Great Eastern, are you going to cancel and switch over?

Of course you won't tell... because if unethical agents like you work in a transparent manner, you will easily get chewed up by people like me. Perhaps I should reclarify my statement, buy the best and most competitive term policy at the time of purchase. I couldn't care less what happens afterwards. TM Asia has always maintained their bonus payout, and as much as I hate to rate them by past performance, they would be obvious choice to go. I think their premium rates are not unreasonably high too.

 

[xiaoevil]

Rommie2k6 wrote:

Since Prudential is coming up so often, I decided to do a quick analysis of the ILP-funds offered by Prudential. This is one example.

http://pruaccess.prudential.com.sg/prulinkfund/viewFundPricing.do

Prulink Emerging Market Fund
http://www.prudential.com.sg/corporate_sg/misc/downloads/factsheets/PEMF.pdf

Initial Investment Charge: 5% (WOW!!!)
This is sales charge per buy in, when attached to product can be reduced to 3%.
Continuing Investment Charge: 1.6% (Is this the total expense ratio? I can't tell, but assuming that it is this is quite high.)
Yes, it is relatively high that's why the underlying fund manager was changed to reduce this.
Fund performance vs Benchmark: Underperformance by -3.5% since inception, from 2005 to 2010. (That's terrible!!!)
You are looking at a new fund which went through the crisis period. And I'm not sure if you have referred to the wrong factsheet because it is 6.2% Bid-Bid since inception and 8.8% above benchmark.
Now compare to the DIY BTIR person who uses

iShares MSCI Emerging Markets (IEEM)
http://uk.ishares.com/en/rc/funds/IEEM

Saxo Capital Commision Rate: 8GBP (To match the 5% sales charge we need to invest 160GBP or 330SGD per time period. I prefer to invest on a quarterly basis since I can accumulate more and make the % sales charge lower.)
Total Expense Ratio: 0.75%
Fund performance vs Benchmark: It's an index fund so not need to worry about management performance. At some there will be some tracking error, but it is not very high (about ~0.5% for bad index funds).

What does this means?

Prudential ILP fund has an expense ratio that is (1.60 - 0.75) = 0.85% higher than iShares IEEM ETF. If both Prudential and iShares track their benchmark without any under or over performance, Prudential returns will still be lower by 0.85% compared to iShares. But the past 5-year data has shown that it has underperformed by 3.5%!!! Why? Active management... and in the long run it has been shown that actively managed fund have a very low probability of outperforming the benchmark they track.

What does this means? Assuming a person invest $1000/yr for the next 40 years into these 2 funds only and that the MSCI Emerging Market Index returns a gross 7% returns, then:
1) The iShares person will get 6.25% net returns and have $175k at the end.
2) The Prudential person assuming the fund does not underperformthe benchmark gets 5.40% net returns and have $140k at the end.
3) The Prudential person assuming that the fund continues to underperform as it has at the same rate will get 3.50% net returns and have $87k at the end.

Bottomline? Minimizing costs is VERY important. And note that since we are talking about the same asset class invested in the same sector/category (emerging market), the iShares and Prudential person takes the same amount of risk.

Please check again on the performance of the fund. If you must, you can pull out China-India Fund or Singapore Managed Fund, which are older funds that have more things for you to analyse since you like to do it so much.

 

[xiaoevil]

Rommie2k6 wrote:

If SP Term is indeed more cost effective than RP Term and you prove it providing proper examples, then yes it is good. But as you mentioned SP Term is expensive ya and most young people can never afford it?

Buy shorter contract term or even renewable lor, can save more and invest more. Then buy SP term.

Of course you won't tell... because if unethical agents like you work in a transparent manner, you will easily get chewed up by people like me. Perhaps I should reclarify my statement, buy the best and most competitive term policy at the time of purchase. I couldn't care less what happens afterwards. TM Asia has always maintained their bonus payout, and as much as I hate to rate them by past performance, they would be obvious choice to go. I think their premium rates are not unreasonably high too.[/QUOTE]

I can't tell you because I won't be sharing unreleased product. If you have gone into so much research, you would know existing Prudential's Disability Provider is based on the TPD definition and not quality of life. You can wait on feb 14 for more info on this new rider because whatever I know, Prudential can change the final product last minute. Even when released, product can be revised.

And I'm not sure how you compare bonuses. By maintaining bonuses declared yearly, is there any change in other bonuses? There are reversionary bonus, performance bonus and maturity bonus. From my understand, many insurance companies reduced performance bonus declared yearly for the surrender value but have increase maturity bonus (endowment) or reversionary bonus for the sum assured. They are giving lesser for the short term but more for the long term. Your projected maturity value for endowment or sum assured for WL should have seen better figures compared to when you first bought it.

 

[Rommie2k6]

Initial Investment Charge: 5% (WOW!!!)
This is sales charge per buy in, when attached to product can be reduced to 3%.

3% is still higher than the 2% sales charge of unit trust. ETFs sales charge can be minimized the more your invest every quarter.

Continuing Investment Charge: 1.6% (Is this the total expense ratio? I can't tell, but assuming that it is this is quite high.)
Yes, it is relatively high that's why the underlying fund manager was changed to reduce this.

The factsheet is 1mth old... unless you just told me you changed your fund manager this year?

Fund performance vs Benchmark: Underperformance by -3.5% since inception, from 2005 to 2010. (That's terrible!!!)
You are looking at a new fund which went through the crisis period. And I'm not sure if you have referred to the wrong factsheet because it is 6.2% Bid-Bid since inception and 8.8% above benchmark.

One should look at the offer-bid return since inception, which includes bid-ask spread (which is quite large for this Prudential ILP fund) and sales charge. You are looking at the wrong column. For liquid ETFs like IEEM the bid-ask spread is almost zero

Please check again on the performance of the fund. If you must, you can pull out China-India Fund or Singapore Managed Fund, which are older funds that have more things for you to analyse since you like to do it so much.

Investing in a two-country China-India fund is too much of a speculation than investment. Do you still remember our conservation about the difference between the two? Stop chasing hot funds!!! Not to mention your Prulink China-India fund has underperformed the benchmark by ~4% since inception. Ughhh...

I'll give you credit that the Singapore Managed Fund has outperformed the benchmark by ~1% since inception. But for active-managed funds such as these past performance is no guarantee of future performance. Looking at the performance chart, the outperformance is due to the 2000-2001 period and in recent years it looks like it is only tracking the benchmark. So can you guarantee that your Prulink SG Managed Fund will continue to outperform? No... in fact studies has shown that today's winners will often become tomorrow losers. In the case of an index fund like the STI ETF, I can "guarantee" that it will track the benchmark.

 

[Rommie2k6]

Buy shorter contract term or even renewable lor, can save more and invest more. Then buy SP term.

You'll need to give a figure how large a premium a SP term is for before consumers can make a decision of YR Term -> SP Term vs Level Term. However, there is something wrong with your plan. Change in health and insurability of the client. Personally, I wouldn't take the risk of insurability later in life and just by Level Term, unless you can show that the cost-savings of YR Term -> SP Term is MUCH higher than Level Term.

I can't tell you because I won't be sharing unreleased product. If you have gone into so much research, you would know existing Prudential's Disability Provider is based on the TPD definition and not quality of life. You can wait on feb 14 for more info on this new rider because whatever I know, Prudential can change the final product last minute. Even when released, product can be revised.

Your DI rider only covers TPD definition? That's terrible! Do you know that TPD is the MOST DIFFICULT to claim condition? Again consumers do not be mislead, get a proper Disability Income insurance and not some half-past-six rider. Make sure the DI insurance pays out on OWN-OCCUPATION disability. Read the first few posts if you are lost.

And I'm not sure how you compare bonuses. By maintaining bonuses declared yearly, is there any change in other bonuses? There are reversionary bonus, performance bonus and maturity bonus. From my understand, many insurance companies reduced performance bonus declared yearly for the surrender value but have increase maturity bonus (endowment) or reversionary bonus for the sum assured. They are giving lesser for the short term but more for the long term. Your projected maturity value for endowment or sum assured for WL should have seen better figures compared to when you first bought it.

I do not have the details, you'll need to consult a IFA. But I have heard from multiple IFA sources that TM Asia is generally regarded the best WL insurer because of its competitive price and history of not cutting bonus. I believe the no cut bonus may have been published in the ST before as well.

 

[Rommie2k6]

Ok... so what have we discussed and concluded so far?

It's time to wrap things up on this ILP/WL vs BTIR. I'm not going to entertain xiaoevil's arguments because it is degenerating into excuses and fear-mongering tactics.

Point #1

Even agents like xiaoevil at the end, have to concede that the BTIR strategy is superior WL (if you look at the mathematics). I have stated that the case for the young aggressive BTIR investor it is pretty clear cut, and probably a bit ambiguous for a young conservative BTIR investor because the expected returns are too close to WL returns. However, in both cases I highlight my preference for BTIR because of its simplicity and transparency, and self-claim of own money during retirement.

Point #2

Agents against BTIR will cite the difficulty in implementing BTIR. Honestly, I find these are just excuses. I have seen many crappy excuses ranging from:
1) Client too lazy to pay premium and term policy lapse.
2) Client too lazy to manage finances even though it can be automated through GIRO or at most need to login 4 times per year to buy ETFs.
3) Client have no discipline and will stop investing.
4) Client don't like to save.

I'll just state my opinion that all these concerns are exaggerated to sway consumers to buy expensive WL and ILP products from these agents, and I hope that the young consumers are not as pathetic as these agents have described.

But... just as a patient who is too lazy to take his own medicine, suffers and dies in the end... then I'll say if the consumer is so pathetically lazy and unconcerned about his/her finances, then I guess he deserves to be milked dry by these agents... and shouldn't complain when they have not enough money at retirement.

Point #3

Many agents will also like to use scare-mongering tactics like
1) Run out of money to pay premium
2) Stock market crash will lose money so there is no "guarantee"

Many of these reflect the misrepresentation of facts, and the preying of common misconceptions of investment. Many scare tactics can be mitigated with proper financial planning (the whole package including emergency fund, budgeting, etc...) so that you are not caught with your pants down so to speak. Other scare tactics are just plain untruth... market crash so what? It's paper loss only. But what if you need the money then? Then I would say why do you have such an aggressive portfolio when you know you'll need the money in the near future?

Again... it all boils down to proper financial planning, and to a certain extent consumers have to start changing their mindset from "guaranteed" to "non-guaranteed" to probabilities (admittedly this can be hard for some especially for the older generation). Stop thinking in such black and white terms. Use a greyscale.


Point #4

Finally, at the end, some have suggested minimizing the protection component of ILP, to use it to simulate UT/ETF, and then do a WL+ILP combo instead of a WL+BTIR combo. My only comment is why bother? The additional perks like +10% death payout is trivial at best, and these perks become negligible as time passes due to the effect of compounding returns. Not to mention that in ILP you are restricted to fund choices from that insurer, and most of them are actively-managed underperforming lemon products.

 

[HandsTied]

I have not mentioned any strategy to be superior in all situations. If there is one strategy that can be constantly applied to all situations, then this product can be purchased off the shelves, no need for consultant.

You're really fond of your straw-man arguments eh? No one is saying that BTIR is the only strategy everyone must go. We are now focussed on the argument that ILP is inferior to BTIR.

I've already said ILP to be covered until 55yo with reducing sum assured before 55.

Just like a term policy, except grossly more expensive.

I think you just can't comprehend the whole calculation I've done. The figures may be expensive compared to other companies but I'm not comparing company A way of BTIR to company B of ILP. I have taken products only from 1 company to make a fair illustration.

Fair my foot. You have only taken products from your company because you are merely a product promoter. A fair scenario is from the standpoint of the client who has access to the entire market. For convenience's sake he can engage just a single IFA and have access to majority of the market.

A true convenience won't even be a non-tied agent but one who is a broker and a planner.

Oh yes my sentiments exactly. I was referring to IFA when I said "non-tied", which may not be a very appropriate term.

Crisis Waiver is just a repackaged form of term policy now used to "insure your premiums". One can use decreasing term insurance to the same effect except the payout is in lump sum. Waivering off investment costs is another gimmick "feature" that has to be paid for anyway. A proper BTIR strategy will net the insured much better payout that obviates the need for the continued RSP investments.

So are you saying if I'm getting a $3600/year ILP and I'm diagnosed with CI the next year and waived my premium my entire life, with me adjusting the sum assured of Death/TPD to zero at age 55 - the total premium of I should be paying from now (now 24yo) to my retirement (65yo) is $144,000, and with the Cash Value in the ILP is actually less than the amount I get from BTIR?

Correct, because with a $3,600 ILP and the person gets CI the very next day at age 24, the person is likely to be underinsured. Even if ILP gives greater returns than BTIR (which is not the case), it leaves the person underinsured at his budget. The CI cover is probably $250,000 or maybe $300,000 even if you do the doubling of CI (which then leaves him underinsured for TPD and possibly death). With BTIR, he will be insured adequately from the start. I'll take $500,000 as the figure which is the average amount needed according to that 2007 survey. $500,000 PV > $300,000 PV + $144,000 over 40 years.

Term satisfies a person's insurance coverage while solely ILP cannot do it because term policies are simply more cost-effective. This is the thing that you do not get, or do not wish to get. To you it's all the same, you are okay with underinsuring him by hundreds of thousands of dollars, because to you "commission will come in sooner or later" when you go back to him and sell another policy.

Disability Income to what I was referring to carries the same definition as TPD benefit. If you are referring to reduced in quality of life or temporary disability for an insurance payout - don't worry, more companies will be offering that soon. The disability income i was referring to was to increase your TPD benefit in a cheaper way when budget is a constraint.

I know fully well what you are referring to and you are misrepresenting your product when you use the term Disability Income.

Meanwhile all your clients are missing an important policy. What to do right, product promoter?

TPD and this rider both expires at age 65, same for all insurance companies. even term. What matters is the CI coverage that can continue for life but terminated due to the term plan max age attained.

What CI coverage are you talking about?

Go calculate the increase in premium of crisis waiver between term and ILP and this increment, which waive off your need to invest in a crisis, is not benefiting to customers. You are asking someone who is diagnosed with CI to continue investing, even after 1 year from purchased of BTIR.

If one already has a sufficient payout from BTIR, why would he need to continue with an RSP?

Unnecessary? I think not. A lot of commission from these riders? No, WL and basic ILP i earn more. Why ask my clients put riders? Just get basic, got money then keep increasing the premium for the basic coverage la. That would earn me the most commission but that's not what i'm doing.

The riders may not earn you much money but you're using them as an excuse to peddle your ILP products.

I will not even recommend BTIR to my clients. If my clients insist on ILP and goes to you, you probably screw their lives with no riders added.

Finally admit that you do not recommend BTIR. Thought someone said he recommended but client doesn't want? I'm not surprised you resort to lying to justify your claims that customers want to buy ILP.

And again talking about riders which serve little purpose. Premium waiver - good to have? Yes. Free? No. Must have? No.

Disability Income Insurance on the other hand is important. Eldershield supplement is important. Affordable term policies are important. All you can do is to talk about riders that waive premiums.. But oh well, limitations of a tied product promoter.. Wouldn't expect anything more.

K, plan for your clients this way. My way suits common people. Your way suit, well.. just yourself.

I won't be taking you either.

Wah, getting ripped off by you is a privilege ar?

 

[iAdvisor]

iAdvisor wrote:

You have point out some of the pitfal I feel about BTIR, but advantage of having insurance should be with WLP and not ILP. And also, please do not put 'ILP/WLP' as they are not the same. Its misleading as this 2 product is cater to 2 very different need.

I putting ILP/WL together to compare against BTIR in terms of the riders and extensive cover it offers compared to BTIR. Of course WL would be better for a TRUE whole life coverage.

Your project with ILP vs term + investment, I think its crap.
3600 for 600k++, you are allocating a large amount of amount into the protection and not investment, at 55 (should be 31 not 41 yrs) its questionable if can achieve the mention cash value.

It is not crap because I removed all riders for both ILP and term, just the very basic Death/TPD benefit.
The investment is both the same funds and same projection but in different products. It is based on 55yo, which is 31years later. Sorry for the typo. But the values still stand.

For the term plan, i guess you are using term for life, you should be using term till 55 or 60. the cost should be around 4 times lesser. But if u already base on 55/60, then again, just expensive product. Even at 2000 yearly for 31years, compunded at 9%pa, should also be 299150.43.
the term i used will expires at age 65. the figures that i've provided are all assumed at 9% ROI AFTER charges.


And lastly, i do not know how you prep to plan for a youngster without proper protection to go for ILP. As I have pointed out, many chances that you will be stuck in situation not being able to reduce the coverage. I do not know how are you going to live on, and serve others... I seen so many of my client who bought into ILP and developed medical condition and become a hard decision whether to reduce coverage or terminate the plan. both way will not benefit the client... think hard again...

What kind of medical conditions are you referring to? This policy is meant for a few purposes only. If you develop conditions not covered in any insurance products on market, you have to use emergency funds. If you get retrenched, you have to use emergency funds. If you this If you that, insurance don't cover everything but it transfer some of your risk to insurance companies.If you clients are not aware of the limitations of the portfolio he has, please warn him. I have always highlighted the very important limitations of insurance products and this has been made compulsory this year by MAS. Please check with your company what is needed to be disclosed. I do not need to wait for MAS to tell me what to do and I'm already doing it.

I really can't see the degree of accuracy in ur projection, anw, those projections are also base on expensive terms plan.

Its not about the emergency funds, its about the insurability. You advise young client with tight budget to go for ILP. what if this client was diagnosed with diabetic? He won't be able to get himself CI coverage in the future. So advise to reduce his ILP to coverage to 0 at 55? or keep coverage and pay for the high mortality charges. I do not need MAS to tell me either, Im a licensed advisor as well. Im cleared what I need to disclose under the law, but Im also clear on what I should let my client noe, and educate them accordingly under my conscious as well.

I have now an existing case, client with diabetic, only have a 100k prulink, though his objective is protection, agent still sold him ILP. He has limited budget then as well. Exact same situation like you mention for your young client. So what is your advise now?

Not sure y TM strength is mention as well. Yes, its on papers as well, 60 years no cutting on any bonuses on any sense.

There are bound to have new products, better products launch as times goes by. At least being an IFA, give me the ability to provide advise and recommendation on products that are the best suitable product for my client.

 

[HandsTied]

Ok... so what have we discussed and concluded so far?

One more thing - I believe this discussion has allowed readers to know much better who to engage as a planner or where to engage a planner from.

 

[xiaoevil]

Rommie2k6 wrote:

Ok... so what have we discussed and concluded so far?

It's time to wrap things up on this ILP/WL vs BTIR. I'm not going to entertain xiaoevil's arguments because it is degenerating into excuses and fear-mongering tactics.

Point #1

Even agents like xiaoevil at the end, have to concede that the BTIR strategy is superior WL (if you look at the mathematics).
I have not. It is benefit one only if one wish to be more aggressive in investment.

I have stated that the case for the young aggressive BTIR investor it is pretty clear cut, and probably a bit ambiguous for a young conservative BTIR investor because the expected returns are too close to WL returns. However, in both cases I highlight my preference for BTIR because of its simplicity and transparency, and self-claim of own money during retirement.

So why go through the trouble of doing everything yourself? You are asking consumers to remember to do step 1, 2, 3, 4,... when something happens.


Point #2

Agents against BTIR will cite the difficulty in implementing BTIR. Honestly, I find these are just excuses. I have seen many crappy excuses ranging from:
Crappy excuses but the fact is it is there.

1) Client too lazy to pay premium and term policy lapse.
Not lazy, but rather something which is very real is - Client paying through credit card. Client overspent on credit without leaving sufficient balance for premium deduction. Client keep "forgetting" to clear credit bills. 30 days grace for premium, 30 days grace for credit. There in lie this risk of lapse if it's term.

2) Client too lazy to manage finances even though it can be automated through GIRO or at most need to login 4 times per year to buy ETFs.
Not too lazy, but rather don't want to face the worries of planning his/her finances. Do you know that there are many people who do not want to go through financial planning and just get something first and decide later? You're not in sales, you won't know. Not everybody appreciate financial check up just like many who don't go for regular medical check up.

3) Client have no discipline and will stop investing.
Client have no discipline to invest/saves systematically. He/She won't stop investing or paying insurance premium but when he/she wanna buy something, he may stop. There is very high lapse rate found in policyholders below 25yo. And majority of those who pay annual premiums are above 30yo. There is a savings of around 2% for annual premium.

4) Client don't like to save.
This is not true. There are many who wants to save but just not willing to start. There are many who earn $1, spend $1 - whatever they have. I've even met some people who jokingly said they won't live long, or if resources run out just die lor.

I'll just state my opinion that all these concerns are exaggerated to sway consumers to buy expensive WL and ILP products from these agents, and I hope that the young consumers are not as pathetic as these agents have described.
You hope only, go on the ground and experience it yourself. You can join HandsTied to sit in his appointments.


But... just as a patient who is too lazy to take his own medicine, suffers and dies in the end... then I'll say if the consumer is so pathetically lazy and unconcerned about his/her finances, then I guess he deserves to be milked dry by these agents... and shouldn't complain when they have not enough money at retirement.
Have you seen elderly who refuse to go see doctor when sick? There's why i said you live in an ideal world. If one is like you who prioritise financial planning and investing, yes.. don't need to get a middleman to do the planning.


Point #3

Many agents will also like to use scare-mongering tactics like
1) Run out of money to pay premium
This is because you have not seen their cash flow and liabilities. Do you know the worst case is suddenly stop premium payment?

2) Stock market crash will lose money so there is no "guarantee"
not losing money. there is no guarantee as to properly plan the exact amount in your investment at specific years. One has to really give sufficient time and benchmark when investing. A reasonable gain in a reasonable timeframe. There is always a choice for my clients whether to have that miserable 110% death benefit by paying 1% more or don't, freedom to choose.

Many of these reflect the misrepresentation of facts, and the preying of common misconceptions of investment. Many scare tactics can be mitigated with proper financial planning (the whole package including emergency fund, budgeting, etc...) so that you are not caught with your pants down so to speak. Other scare tactics are just plain untruth... market crash so what? It's paper loss only. But what if you need the money then? Then I would say why do you have such an aggressive portfolio when you know you'll need the money in the near future?

Have you met anyone even after explaining paper lost they are still afraid of entering the market? such people cannot invest into ILP or ETFs. They should stick with WL and Endowment plans. If you tell them bonds have guarantee they also scare because it is not written in the policy contract unless they go directly to the broker and read through everything, but I can tell you - chances are these group will still come back to just WL and it is already very hard to convince them into getting endowment plans. But when Prudential had this miserable but guaranteed returns of 2.5% p.a. 2 years back, all the aunties suddenly throw out their cash. Educating clients take time, if you think it's so easy - go be a financial consultant yourself.

Again... it all boils down to proper financial planning, and to a certain extent consumers have to start changing their mindset from "guaranteed" to "non-guaranteed" to probabilities (admittedly this can be hard for some especially for the older generation). Stop thinking in such black and white terms. Use a greyscale.
Not just the older generation.



Point #4

Finally, at the end, some have suggested minimizing the protection component of ILP, to use it to simulate UT/ETF, and then do a WL+ILP combo instead of a WL+BTIR combo. My only comment is why bother? The additional perks like +10% death payout is trivial at best, and these perks become negligible as time passes due to the effect of compounding returns. Not to mention that in ILP you are restricted to fund choices from that insurer, and most of them are actively-managed underperforming lemon products.

Then don't, people are happy to have people managing it for them. I advise such people to invest in CPF A List ILP funds.

 

[xiaoevil]

HandsTied wrote:

You're really fond of your straw-man arguments eh? No one is saying that BTIR is the only strategy everyone must go. We are now focussed on the argument that ILP is inferior to BTIR.

Apparently Rommie2k6 thinks everyone should go BTIR. ILP has its own advantages no matter how much disadvantage there may be. If the only way to cure this particular variant of disease is to use this drug but comes with many side effects, aren't you going take it?

Just like a term policy, except grossly more expensive.

You can always do a comparison with other comapnies ILP vs the best term and see if the young people really benefit from BTIR.

Fair my foot. You have only taken products from your company because you are merely a product promoter. A fair scenario is from the standpoint of the client who has access to the entire market. For convenience's sake he can engage just a single IFA and have access to majority of the market.

What is it about your foot? For convenience sake, if you really think IFA is so good so be it. There is a reason why IFA has been trying to get Prudential/GE/AIA to open up their products to IFA and failed. Why does IFA wants Prudential's so-called "expensive" products? People inside knows why and i'm happy you stay on your side.

Oh yes my sentiments exactly. I was referring to IFA when I said "non-tied", which may not be a very appropriate term.

Yes a very busy person who don't specialise in both field. Why don't you ask all financial consultants to be coffin sellers, and property agents too? Or perhaps even higher level of operating his own investment firm?

Crisis Waiver is just a repackaged form of term policy now used to "insure your premiums". One can use decreasing term insurance to the same effect except the payout is in lump sum. Waivering off investment costs is another gimmick "feature" that has to be paid for anyway. A proper BTIR strategy will net the insured much better payout that obviates the need for the continued RSP investments.

Correct, because with a $3,600 ILP and the person gets CI the very next day at age 24, the person is likely to be underinsured. Even if ILP gives greater returns than BTIR (which is not the case), it leaves the person underinsured at his budget. The CI cover is probably $250,000 or maybe $300,000 even if you do the doubling of CI (which then leaves him underinsured for TPD and possibly death). With BTIR, he will be insured adequately from the start. I'll take $500,000 as the figure which is the average amount needed according to that 2007 survey. $500,000 PV > $300,000 PV + $144,000 over 40 years.

I can tell it's not cheap even for a $500,000 term life + TPD + CI + Early CI + DI + Waiver on CI/Reducing Term. If client only willing to spend $50 on insurance and $150 on investment he is still going to be underinsured. Based on Prudential's term vs ILP, that's the conclusion I'm giving you. If you want to compare with the best term and professionally managed funds or not professionally managed funds, go ahead.

Term satisfies a person's insurance coverage while solely ILP cannot do it because term policies are simply more cost-effective. This is the thing that you do not get, or do not wish to get.
Well, as a tied-agent to prudential. ILP is more cost effective over term + RP-ILP funds

To you it's all the same, you are okay with underinsuring him by hundreds of thousands of dollars, because to you "commission will come in sooner or later" when you go back to him and sell another policy.

To me commission don't matter but what matter most is striking a balance between client's needs and wants. If you never fulfill any of his wants and tell him "buy everything into term because your budget don't allow you for investment yet" You think he will listen to you? He probably call you siao ah!

I know fully well what you are referring to and you are misrepresenting your product when you use the term Disability Income.
Then I shall use Disability Provider, and its not misrepresenting because there's no standard definition by LIA. Only standard definition across all insurance companies is the 37 critical illnesses.

Meanwhile all your clients are missing an important policy. What to do right, product promoter?

Add on lar, duh~

What CI coverage are you talking about?

Critical illness, more and more people are recovering from critical illnesses and they don't want to pay so much for Death/TPD benefit. They want payout that they can use while going through CI treatment. If you only cover CI till 65, what if CI strikes on 66yo? I rather pay that higher premium for for ILP to attached my CI for life or get a WL with CI. Unless term plan extends its maximum term to whole life without minimum sum assured of 1m or $100,000 SP, as of now WL and ILP are the only plans to cover CI for life.
There are standalones out there offering multiple CI claims or Early CI claims, both at higher premium rate compared to just the normal CI.

If one already has a sufficient payout from BTIR, why would he need to continue with an RSP?

If it is really sufficient, then don't need to add and go consider it as you strike toto can, can? If it's budget constraint, it will definitely come in handy.

The riders may not earn you much money but you're using them as an excuse to peddle your ILP products.

You can say that because companies also want its agents to earn what. There are product limitations that I have pointed out. But it still benefit client if premium waiver rider is attached for not just term but the entire premium for insurance and investment.

Finally admit that you do not recommend BTIR. Thought someone said he recommended but client doesn't want? I'm not surprised you resort to lying to justify your claims that customers want to buy ILP.

Lying to who? Nobody asked me about BTIR before. I will not recommend because of many reasons that I stated above. One of the biggest reason that differentiate insurance companies from banks or investment firms is premium waiver on whatever you do with the insurance company, except for accident plans.

And again talking about riders which serve little purpose. Premium waiver - good to have? Yes. Free? No. Must have? No.
All my clients have premium waiver attached. I missed out this point from the start because it is a must have if anyone purchase insurance-based products to begin with - It is a automatically packaged in unless somebody insist of taking it out because it's only so cheap but big big benefit.

Disability Income Insurance on the other hand is important. Eldershield supplement is important. Affordable term policies are important. All you can do is to talk about riders that waive premiums.. But oh well, limitations of a tied product promoter.. Wouldn't expect anything more.

You want me to elaborate further in then now you want to zoom out and talk in the bigger picture? fine. WL + H&S + ILP or if budget constraint, change ILP to 10-20yr term that can be converted to ILP or WL (depending on individual sum assured, meaning to say the sum assured amt assuming no dependents). I think you probably dunno what I'm talking here but I have illustration for my client, not for you.



Wah, getting ripped off by you is a privilege ar?

Not listening to you will result in names being called, poor thing to future clients who can't internalise your concept.

 

[xiaoevil]

iAdvisor wrote:

I really can't see the degree of accuracy in ur projection, anw, those projections are also base on expensive terms plan.

They are all non-guaranteed projected returns, only guaranteed sum assured.

Its not about the emergency funds, its about the insurability. You advise young client with tight budget to go for ILP. what if this client was diagnosed with diabetic? He won't be able to get himself CI coverage in the future. So advise to reduce his ILP to coverage to 0 at 55? or keep coverage and pay for the high mortality charges. I do not need MAS to tell me either, Im a licensed advisor as well. Im cleared what I need to disclose under the law, but Im also clear on what I should let my client noe, and educate them accordingly under my conscious as well.
It really depend how the client priorise his needs. A WL limited pay + 10 year term would be a good start. But this means cannot take out any cash value, so some people prefer to get ILP first, especially when budget is an issue.I would usually tell them to max out the ILP sum assured which result in lower returns but if they don't want, i cannot force them too. If it's already a trouble convincing someone to max out the ILP sum assured, how likely is it to tell them get term to add on?

I have now an existing case, client with diabetic, only have a 100k prulink, though his objective is protection, agent still sold him ILP. He has limited budget then as well. Exact same situation like you mention for your young client. So what is your advise now?

Same situation? Since he already has diabetic, convert the 100k prulink to WL limited pay first. Because PPA is not meant for wholife protection. Then try to increase protection with term, and get it even if there is loading or exclusion, so that can be converted to WL when he can afford. If his condition gets better then just dump the term and buy standard WL.

Not sure y TM strength is mention as well. Yes, its on papers as well, 60 years no cutting on any bonuses on any sense.

There are bound to have new products, better products launch as times goes by. At least being an IFA, give me the ability to provide advise and recommendation on products that are the best suitable product for my client.

Since you mentioned you are IFA, then who's shield plan do you carry? I believe the most competitive ones are Prudential and Great Eastern, which I don't think you can sell, at least not under your name.

 

[iAdvisor]

iAdvisor wrote:
What is it about your foot? For convenience sake, if you really think IFA is so good so be it. There is a reason why IFA has been trying to get Prudential/GE/AIA to open up their products to IFA and failed. Why does IFA wants Prudential's so-called "expensive" products? People inside knows why and i'm happy you stay on your side..

That is your side of story, and I have my side as well. But I see no reason till now y would I wan to carry prudential stuff when I have all the alternative and cost effective options.

Same situation? Since he already has diabetic, convert the 100k prulink to WL limited pay first. Because PPA is not meant for wholife protection. Then try to increase protection with term, and get it even if there is loading or exclusion, so that can be converted to WL when he can afford. If his condition gets better then just dump the term and buy standard WL.

That is an option, but it will be a waste to pay so much into a product that is so expensive and still not include a 'incontestability' clause to protect the client interest. Are you sure u noe what you saying? with diabetic condition he can only buy more death coverage, but no more CI.

Since you mentioned you are IFA, then who's shield plan do you carry? I believe the most competitive ones are Prudential and Great Eastern, which I don't think you can sell, at least not under your name.

I think u have the wrong believe. if I wan to compare the usual 3, I will at least say AIA is better than pru or GE. But as a whole, Aviva and NTUC's shield are so much better than any other.

Are you sure you are in the right track to challenge an IFA on the product we can offer?

Yes a very busy person who don't specialise in both field. Why don't you ask all financial consultants to be coffin sellers, and property agents too? Or perhaps even higher level of operating his own investment firm?

So we are not specialise in both field and you are? You can be a skilled tied agent, compare to a weaker IFA. So u generalize that you are superior? I think the people are just comparing the ability to offer unbiased advise compare to someone who only can advise on own product. Someone who represent clients, and place client interest as utmost importance compare to another who is tied to 1 company and even have to sign contract to state that company's interest is of top priority.

I do not wish to add on to this thread to compare profession, since this is a thread to discuss on BTIR vs ILP, lets keep it that way.

 

[Cashcow]

Product comparison can never end cos the company will time to time enahnce the coverage of the products and come out with the most competitive one.

Most impt is buy based on your needs and priorities, not on impulse. I see some companies like P and M always give free gifts to lure clients to sign up on the spot. MAS also highly discourage this kind of practice.

 

[silversurf85]

towards this argument, i will simply point out a few factors. number 1, term policies only covers u till the age of 65 and thus there after u r effectively left with no coverage. number two, investments are meant to be a source of retirement income at age of 65, not as a source of back up funding for sickness and illness. number 3, health policies for hospitalisation only covers for treatment within confinement of the hospital but once you r out of the hospital, u will still be sufferring from loss of income with the addition of using the investment money to fund through your recovery period. number 4, chances of falling sick and contracting CI will definitely be higher as a person get older. not to say that we will get but the chance is there and decent amount of protection will thus be needed. which ever the case will be, its up to each individual decision. but to just simply use a term to reduce the risk up to age 65 does not solve the problem totally. its only temporary. end of the day, when term ends, any form of protection or backup will only be on the accumulated investment value which sad to say, can be wiped out in a year considering that treatment for cancer on average costs 300k.

 

[madnessguy]

all your these points/comments have been raised previously and these are very much biased comments.

towards this argument, i will simply point out a few factors. number 1, term policies only covers u till the age of 65 and thus there after u r effectively left with no coverage. number two, investments are meant to be a source of retirement income at age of 65, not as a source of back up funding for sickness and illness. number 3, health policies for hospitalisation only covers for treatment within confinement of the hospital but once you r out of the hospital, u will still be sufferring from loss of income with the addition of using the investment money to fund through your recovery period. number 4, chances of falling sick and contracting CI will definitely be higher as a person get older. not to say that we will get but the chance is there and decent amount of protection will thus be needed. which ever the case will be, its up to each individual decision. but to just simply use a term to reduce the risk up to age 65 does not solve the problem totally. its only temporary. end of the day, when term ends, any form of protection or backup will only be on the accumulated investment value which sad to say, can be wiped out in a year considering that treatment for cancer on average costs 300k.

 

[Rommie2k6]

towards this argument, i will simply point out a few factors. number 1, term policies only covers u till the age of 65 and thus there after u r effectively left with no coverage. number two, investments are meant to be a source of retirement income at age of 65, not as a source of back up funding for sickness and illness. number 3, health policies for hospitalisation only covers for treatment within confinement of the hospital but once you r out of the hospital, u will still be sufferring from loss of income with the addition of using the investment money to fund through your recovery period. number 4, chances of falling sick and contracting CI will definitely be higher as a person get older. not to say that we will get but the chance is there and decent amount of protection will thus be needed. which ever the case will be, its up to each individual decision. but to just simply use a term to reduce the risk up to age 65 does not solve the problem totally. its only temporary. end of the day, when term ends, any form of protection or backup will only be on the accumulated investment value which sad to say, can be wiped out in a year considering that treatment for cancer on average costs 300k.

I think you do not understand BTIR properly:
1) After 65, there is self-insured coverage from the "invest the rest portion".
2) True, which is why besides ITR savings/investment, one has to maintain a separate sum for retirement expenses
3) Loss of income during working years is covered by a proper Disability Income insurance. Loss of income during retirement is not so much of an issue since you your retirement money accumulated is your "income", and there is also a separate portion of self-claim CI money from the ITR component.
4) True, but what is the point of raising this? We already know that...

 

[LancelotDuLac]

Rommie2k6 has raised some very good points in this discussion thread but perhaps a little too strong/biased in some ways.

1) $ for coverage, a term plan will outrank a WL or ILP anytime. But there are some pointers raised by some other forum guys which can be valid.

In an event of cash-flow problems, by missing the due premiums, the term plan may be lapsed without any chance of reinstatement which a WL would be sustained by it's APL function. One may argue that there is the 6-mths of emergency cash but the reason for the cash-flow problem would be an unanticipated big cash problem that has sucked up all if not most of your funds.

I would rather take a more balanced approach and go for term+WL, how the combination goes would depend on the indiviual.

ILPs are pretty useless as it is a hybird of term and regular investing with a certain % going to protection (with increasing mortality charges)

One would be better off doing term plan and regular unit trust investment (wider choices of funds as well)

2) Points out that term+ self-investment is the BEST way to go would be a very skewed way to look at things. I remember a certain post by Rommie2k6 along the lines of "either get educated or be poor". While I would agree that being exposed and educated is definately the way to go, there ARE people in the world who

a) have absoulutely no interest to learn
b) no time (due to their own day job and family needs)
c) mindset issue of fear of "losses", they can't stand the thought of investing as their poor hearts just cannot take the ups and downs of the market

While I myself would never do things like structured deposits, ILPs or endowments, they do still serve a purpose for a certain group of people in society (beats the 0.1 to 1% in bank deposits)

3) Ranking of the various groups of financial advisors from the bankers to agents and IFA. Primarily, all 3 groups of people benefits from comissions (unless they are fee-based consultation) hence it is a matter of meeting the right person with correct values and ethics. I do however agree that a HUGE MAJORITY work for their own pockets.

4) Sometimes clients may not be penny-pinching in terms of products as well, take for example a term plan or WL or even the sales charges for investment products. The charges/fees incurred could be higher than a competitor but because of the excellent service/ relationship you have with them, they will still take up with you even though you have shared with them and they know it.

I have suggested to clients to take up other products before as either I did not have something suitable for them or it was better. There are times I lose that particular business but I gain back in returning deals and referrals. It's about long term growth and not short term gain

TO Rommie2k6,

I work in a bank, under your "WORST" category.
I am perhaps a rare species in my industry but a sweeping statement in your many posts suggest a too biased view in my humble opinion.

A true professional financial planner in my opinion
1) deals fairly and honestly
2) understand the client's financial goals and needs
3) and plans for the client in a holistic manner