Unit Trust and ILP

Hi Kin Lian,

I have been reading your blog articles and found them to be useful. May I ask your expert advice on the following:

(1) What is the difference between buying unit trusts from insurance companies (i.e. investment link products) versus buying from banks? It appears that many people are buying ILP as the insurance agents are peddaling these products. The banks don't peddale these products because unit trusts are not their lifeblood.

Reply: For lump sum investments, the difference between ILP (from insurance company) and unit trust (from a bank) is quite small. The upfront charge is between 2.5% to 5%. The annual charge is similar.

For monthly investments, the ILP imposes an additional charge which can take up up to 18 months of the premium. Most of the charge goes to pay the commission of the insurance agent. There is no similar charge from unit trust.

(2) Is it worthwhile to pay for a financial adviser from a wealth company (not insurance company) to take care of our investment funds? Should I decide by myself?

Reply: For most people, it is better to choose a large, well diversified, low cost fund and invest for the long term, i.e. 10 years or longer. In this case, you do not need a financial adviser to advise you on when to buy or sell.

The additional charge impose by the financial adviser can take away an additional 0.5% to 1% a year. Read this FAQ:

http://www.tankinlian.com/faq/fptips.html