Saturday, August 08, 2015

Cheated of a few years of hard earned savings

A few years ago, a university professor approached me. She was a foreigner and had come to teach in Singapore. After a few years, she had saved about $80,000 from her salary.

An independent financial adviser recommend to her to invest in an investment plan from company Z. She did not realize that company Z was an insurance company and the investment was actually a investment linked life insurance policy and not a mutual fund.

The financial adviser had explained to her the detail of the investment. She was attracted by the bonus units that were offered under a promotion.

As she held a doctorate in economics, she knew what to look for. She was also very careful in scrutinizing the investment. The fund charges looked quite reasonable.

She received a monthly statement from Z that showed the progress of her investment. It all looked quite all right.

She got a shocked when the investment passed 18 months. She found that the investment started to deduct 4% of her monthly savings. The deduction during the first 18 months was a modest sum, which was acceptable.

When she checked with Z, she got a bigger shock. The 4% deduction would continue for 25 years, making a total of 100% of her annual savings. As she had invested about $50,000 a year, the amount that she would have lost when she terminated her investment was $50,000. This represented more than half of her hard earned savings for three years. This was the savings that she wanted to give to her husband to start a business in their home country.

How did she missed the high surrender charges, when she was very careful in scrutinizing the investment?

She found out that she had signed many pages of the benefit illustration to acknowledge that she was aware about the investment - but the page containing the fund charges was not given to her. The financial adviser had deliberately removed this page and asked her to signed all the other pages. She was not able to prove that she did not get the page containing the surrender charges.

She filed her complaint with the MAS, with company Z and with the financial adviser firm. She pursued her complaint through various sources, including FIDREC.

Recently, I checked with her about the outcome of her case. She replied "I did not win". She have lost $50,000 and could not get her money back. She was cheated by the financial adviser and by company Z. MAS did not lend a hand to address this issue.




8 comments:

RayNg said...

"She found out that she had signed many pages of the benefit illustration to acknowledge that she was aware about the investment - but the page containing the fund charges was not given to her."

So, to protect ourself, is best not to sign illustration?

Anonymous said...

If an economics professor can get cheated, what chances do ordinary Singaporeans have?

Kin Lian Tan said...

The best approach is to avoid all types of dubious products marketed by "advisers" who earn a commission selling them to you.

Anonymous said...

Hahahaha, they cheat by NOT disclosing all material information and this is the BEST PRACTICE of insurance industry. This is practised by insurance salesmen and women from all the companies and this is how they make quick and big commission from consumers.. Worse, the public is so naive and trusting and they pretend they understand the product information given in the half hour or so presentation. How to digest them. The insurance agents took at least 3 months to understand insurance and the customers can understand in half an hour...stupid,,,pretending to know when they don't know.Don't they deserve to be conned? The last survey by LIA says the consumers think the insurance salesmen are qualified and honest....it is a load of BS.
MAS must intervene before it gets out of hand. MAS must come down hard on these insurance salesmen and women like its UK or Australia counterpart which is a no nonsense regulator. Both are considering jail sentence in addition to fine and revocation of license.
For this product the salesmen or conmen empahasize the upfront FREE bonus and not the penalty during the LONG lock in.. Remember, if it is too good to be true it is.
Yes, MAS is to be blamed for all the happenings. MAS must hang a few heads of insurance agents at the beginning of Merdeka bridge and at the end of it to serve as warning to the rest.

Anonymous said...

The best protection is to suspect every insurance agent by whatever titles they call themselves....Never sign or buy immediately. Seek second opinion from an independent adviser, eg Mr Tan and his team of advisers. Take your time to consider. This is to eliminate conflict of interest.

Anonymous said...

This sounds like the Zurich Vista plan 25 year with bonus units in the first 18 months. Can fully understand her predicament.

Anonymous said...

All the insurance agents are the same putting their own interest first.
Why MAS is so gullible to beleive the insurance companies that they are putting the processes in place.
MAS , start enforcing or else lose your moral authority as a regulator.
Is MAS beholden to the insurance companies? Who is MAS protecting?
Looks like it is not the consumers; it must be the insurers and the agents whom MAS is protecting.

Bai Hu said...

MAS is useless! Instead of curbing malpractices like this, MAS actually supports them by not taking action against these companies.

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