An adviser's view about the V plan

Dear Mr. Tan,

Our company allows commission to be paid annualised upfront. For instance, if the client pays a cheque for the first month's premium of $3,200, our company will receive around $40,000 in commission. It's then split between company and advisor. That's why many advisors are selling this plan.

They sell it as investment. But the clients never realise that they for a contract of say 25 years, they are not able to surrender it in 3, 5 or 7 years. They will be penalised heavily.

But I believe the biggest con job of this is that they prey on the greed of people. The reason why advisors can sell big premiums and long tenure is because of the so-called 'bonus' allocation. The longer the term, the higher the 'bonus'. Last time the 'bonus' was 62.5%, now they even up it to 87.5%.

The clients got carried away by their greed. No doubt the 'bonus' is 87.5%, but it's only nominal. The clients thought they could immediately cash out 87.5% of gain from their first year of investment. But they forgot that this is an insurance contract, and they need to 'finish' the whole term to avoid heavy penalty. But sadly, once they got into this plan, they are already in for a huge loss and a bleak future.

Many people who bought this won't be able to 'finish' the plan, The insurer understands this. This is a win-win for the insurer and the advisors, but a BIG lose-lose for the clients and their families.

As this plan is only being distributed in Singapore for 3 years or so, I can expect more news of people surrendering, especially in this tough economic environment.

The insurer even allows premium to be paid using credit card. I heard of quite a number of people surrendering, but chose to keep quite.