Hi Mr. Tan,I sold this policy to one of my good friends just a few short months back, and I went to re-download the BI from my company’s portal.Honestly, I thought that I was doing my friend a good deed, because he approached me and told me that he wanted to buy insurance while he was young and the premium is cheap. He was looking at investments, and since he was still young and inexperienced with trading equities and bonds/ETF’s, I suggested that he buy this ILP which keeps the mortality charge constant for the whole duration of the policy.I really thought I was giving my friend a good deal. I calculated the mortality charge for him, and it would remain slightly less than $9 per month all the way until the policy expires when he reaches 60. After inspection of the BI, I realised that a similar term policy with bonds/ETFs investments would do far better.I told him that the ILP would take about 7-10 years to break even, so he cannot terminate the policy beforehand. I was taught this by my manager. While this holds true, it is only a half truth. If you look at the 5% return column, he would only break even from the 21st year onwards!! The fault lies in the fact that we chose a high life coverage for him, whereby less premium would go into investment of units. However, looking at it from a macro perspective, no matter what kind of coverage we choose and how we mix and match the numbers, an ILP will never beat returns had you invest by yourself. The effect of deductions in this case is horrendous.Although my friend is not paying a large sum of money ($110/mth), and is willing to do this to support me, I think that I’m shortchanging him. And I’m very disappointed because I thought I was doing the right thing and it turns out that the company is eating a lot more money from him that I could ever imagine..Mr. Tan, agents are trained to sell, and trained in the manners of product knowledge. But we are not trained in the financial knowledge and how to boost our clients returns. I feel that the companies should upgrade our knowledge regarding increasing wealth for our clients the ethical way.
The CMFAS papers are structured in a way to boost the insurance companies’ profits. While the companies and agents keep saying that we are helping our clients; we are only boosting the company’s profits. I know this is the same for the banking industry as well, and that consumer interests are always placed below the company’s bottom line. While this probably can never change due to human greed, however I hope that FISCA is able to work with MAS to help the lay people generate more wealth the ethical way.I am more than willing to join the MAS to stamp out such practices, but I am a nobody. I hope that more things can be done for the finance industry in Singapore. I am getting disillusioned with the financial products sales line, and I don’t suppose I will be in sales for very much longer. However, I want to help as many people as possible know the industry better and for them to know better ways to boost their returns.
Derrick (not his real name)