Thursday, September 30, 2010

Case study: Poor yield on investment linked policy

This is the case of a young person who bought an investment linked policy from a life insurance company that has been very active in promoting this policy. The policy provides a poor yield.

My observation
Here is my advice to young people, especially those who have just started work. You will be approached by your friends, or your friend's friend, to buy an investment-linked policy, or a whole life policy with premiums payable for 10 or 15 years. You will be told that this is a good policy for financial planning.
Be careful. These policies will take away a large part of your future savings and leave little for you. You will be giving away your future financial security for the benefit of other people.

Read my book on Financial Planning (available at or attend the educational talk conducted by FISCA (see


Spur said...

This is a good counter-example for some agents who will claim that you can reduce the insurance cover to reduce the cost of insurance but still enjoy the investment benefits.

In this case, the various fund fees are already a whopping >9% p.a. The fund needs to perform at over 9+% every year just to break even!!

I've never seen any investment fund with so high charges. Even for unit trusts, if the expense ratios hit 3+%, the fund manager will be on notice to eventually de-list the unit trust as it is no longer to investor's benefit.

zhummmeng said...

I was pitched the NTUC Vivolink, a regular ILP by a ntuc salesman at a mall roadshow which I was told is a replacement of the ID2.
I was shocked to hear and to see the charges of this so called saving plan has shot up to 105% and with penalty if one should take a premature premium holiday or make a partial surrender. The agent tried to justify the high charges with insurance coverage.Who needs insurance when one wants to save and when one is already fully covered.
Worse, the agent told me the return of the Vivolink ranged from 5% to 9% which I realised the figures were standard 'what if' returns from the quotation.I then asked whether I would get this range of return if had picked a bond fund .The second shock is she, the agent replied that I would. So , that is her investment expertise.
You can see the agent was a product peddler and trafficking the features of the product.She had no inkling of what the product was . She just regurgitated what she learned from the product benefits and peddled it.
I was told by a friend from this social enterprise company that their salesmen have poor understanding of ILPs and some are just pushing them like other products. Somehow they managed to con some suckers into buying, perhaps with promise of quick high return.These salesmen hardly know anything about investment and yet they dare to peddle them, of course to some gullible and their own trusting policyholders. Well, these policyholders will get a rude shock one day to know that they were SOLD a product the salesman didn't even know.
MAS should disallow insurance salesmen from pushing or selling or however , investment products with a tikam tikam cert in ILPs.This is far far TOOOOO low a qualification for these salesmen to have proper grasp of the subject.As a result these salesmen disguised as financial consultants and misrepresent themselves as investment experts and they peddle the ILPs like any other products.
It is very dangerous and before consumers are financially hurt they must be stopped.

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