Tan Kin Lian's Blog: Earn a higher return from an investment fund

Saturday, March 01, 2008

Earn a higher return from an investment fund

Dear Mr. Tan,

I am in my early 40s. Currently, I have a Living policy with an insured amount of $100,000. The insurance agent has recommended another policy for $100,000. It is a savings plan that also covers critical illness. Should I take up 20 or 25 year plan?

REPLY
I usually advice people to buy Term insurance and invest in a low cost, diversified investment fund.

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6 comments:

Anonymous said...: Don't waste your money, it is no saving plan but a stupid plan. You already have $100k living for whole life , it is already too much money spent on it.If you need to insure your income the right thing to do is buy living term as much as 5 years of your salary. Are you able to afford the premium for a whole life of sum assured equal to 5 years of your salary? This is exactly you need and not the $100k which I am sure is NOT equal to 5 years of your salary.
As a saving plan, I said at the beginning that it was a stupid plan.Do you think that after a 25 years YOU MAKE A LOSS is a good plan? Heed Mr. Tan's advice and don't waste your hard earned money
on rubbish.; March 02, 2008 12:06 AM
Anonymous said...: I think the product this 40+ old man is referring to is vivolife. Vivolife is a limited premium payment living policy. From the brief info you gave, your concern is both protection and saving.
#1.Whichever limited term you take
by the time you finish paying it is also the time to cancel. You will be in your sixties. You don't need it anymore.
#2.By the time you finish payment the saving is at best a refund of your premium if not a loss.But if you adjust for inflation it is a sure loss.
#3.if you add another $100K to the $100K you have , is it enough? Is $200K enough? You need 5 times your annual salary to protect your income. On top of this if you are married and have dependents you may need alot more of another plan that covers death and disability. If you buy whole life can you afford enough to take care of your needs?. If you think having some is enough you must as well don't buy because you are NOT protecting your family and dependents and yourself.
The purpose of insurance is protection and not some fanciful stuff your agent told you.
Remember you have other areas to think of too.Think of the most efficient and effective ways to address your needs. That is why Mr. Tan always advises to buy term and invest the rest.This is the most efficient way, of course not sufficient for your agent's pocket. Unless you are earning UNLIMITED INCOME, you need planning.To help you planning i suggest that you look for a qualified and honest adviser and not insurance salesman. Who is qualified? you can look for help from this Financial Planning Association of Singapore(FPAS) at www.fpas.org.sg If you have a preference of company you can request a Certified Financial Planner .; March 02, 2008 10:11 AM
Anonymous said...: The Certified Financial Planner(CFP) is a global trade mark for financial planning and is of the highest standard.Many universities offer financial planning course at Bachelor or Master degree level benchmark against this standard. ISO also adopts this standard of practice.
Anyone aspiring to be financial planners can visit the local affiliate licensee website at www.fpas.org.sg for more information.
In US, Australia, Uk and Japan consumers prefer to work with
CFPs only. The emphasis on code of ethics(like CFA) and the 6 steps makes it safe for consumers and is the hallmark of this accredited designation.
It is gaining popularity, like the CFA, in China and India and Asia where wealth is fast accumulating and consumers are looking for credible financial planners for responsible advice and planning on their personal finances like insurance ,investment, retirement planning, college funding and estate planning and tax planning.
A financial planner has knowledge and skills in all these areas. The next time if you are looking for an adviser it serves you well to look for one with the CFP designation.
Remember the website www.fpas.org.sg and find out more.

Zhumeng:o); March 02, 2008 3:45 PM
Anonymous said...: The plan your insurance salesman recommended must be vivolife. Don't just buy because it is a new product. Buy because you need it. In this case you don't need the vivo life becasue it fails to meet your needs,both protection and saving.
Was it the same agent who sold you the first $100K? If he or she was,there was conflict of interest.How on earth you have only $100K/ Has it occurred to you that if something really happened to you , you wouldn't have enough coverage?
What if you had a dread disease, the $100K would not been enough to take care of your needs. The agent had put you in a very dangerous position. Lucky that nothing happened and you still have time to
increase the cover. But don't make the same mistake as before.Remember you got only $100k because you couldn't afford more becuase it was whole life and it was expensive. People made this mistake because agents are greedy. They don't care whether you have enough.
Now you should find out how much you really need and use term to address it. Forget about the agent. He or she has shown that your interest was never in his or her mind.Get a qualified one who cares for you and not a so called sincere but unqualified and useless insurance agent.; March 02, 2008 11:20 PM
Anonymous said...: Zhumeng,

Is the CFP really useful for consumers like us? Honestly, I have my doubts. If an agent is unethical, dishonest and thinks only of his own pocket, I don't think any CFP/CFA/CPA etc will matter. Isn't this CFP just a matter of clearing examinations? Our Singapore candidates will definitely fare very well. Please correct me if I am wrong in any of my understanding.

To me, the litmus test is to ask the agent what insurance policies they have. If they also have whole life policies, ask them for the proof.

blackbox; March 04, 2008 9:52 PM
Anonymous said...: I have known many people who are not in the industry have CFP. Their reason is to have good understanding of personal finance.CFP course encompasses insurance, investment, retirement planning to property valuation.This course equips you to understand almost everything pertaining to your personal finances. This is from the consumers' perspective.
From the practitioners' perspective this course equips you to better serve and advise your cleints. You are competent. This course stresses on ethics and the 6 step approach to addressing the clients' needs .
You are right, another important element is HONESTY without which the customers will be let down terribly.
Yes, having qualifications is one thing but being honest and sincere without competency is even worse and disastrous. That is what is happening right now.Honest agents let down their clients. Sincere agents bullshit thier cleints.They always tell their clients that they are sincere and do their best.The question is How to help client when YOU ARE NOT QUALIFIED and do not know how.Don't you think their 'advice' can lead to disasters?
About clearing exams, it depends on the advisers. Some want skill and knowledge, some want letters after their names. Some even buy the letters, So be careful when agents show you their letters.
With CFP there is no compromise.
Blackbox, one day if you visit a heart specialist and you found out that he has a only plumber license which allows him to fix a different kind of pipelines, do you still want to see him? or If you found out that pilot who is flying the plane you are in has class 3 license ? Likewise you want you some one who is qualified, honest and competent to take charge of your personal finances, also an adviser and not a salesman.

Zhummmmeng:o); March 05, 2008 6:41 PM