Tan Kin Lian's Blog: Two sources of loss on your investment

Sunday, December 07, 2008

Two sources of loss on your investment

Hi Mr. Tan,

I was surfing the internet and came across your website. Recently, I feel very depressed becuase I realised I was conned by my own advisor who is also a friend of mine. I trusted her too much. I bought a few policies with her. Due to the bad market situation, I lost $X (my hard-earned money) for investing in unit trusts.

I would like to check with you on what I should do. The following is what i bought from her in 2006/2007:

(details deleted)

For the whole life policy, I have to pay 18 months of premiums to pay for her service. I really didn't know that till I clicked on the Askdrmoney link on your website.

For the pure unit trust with no insurance. I put in $1800 to try to average out the prices of my unit prices due to recession. I'm paying 3% for the comission. Now my unit trusts dropped from $Y to $Z. I feel stupid for paying 3% commission. So I terminated the monthly contribution of $1,800. Have i done the right thing?

After reading your website, i realised my agent really earning a lot. She can go for holiday every year. e.g. she just came back from California. As for me, I saved every single cent of my money...

I feel so frustrated that I really feel like terminating every single policy that i bought fr her. Should I do that?

D

REPLY

The loss that you have incurred come from the following sources:

a) Paper loss on your investments, due to the fall in the market
b) Loss due to the expenses charges deducted from your life insurance policies.

For (a), you will recover the paper loss when the market recovers in a few years' time. As a long term investor, you can wait for a better time to realise your investment.

For (b), you have already incurred the expense charges in the past. You should consider if the future expense charges compared to the alternative types of investments. If most of the charges have already been deducted, it is better to keep the investments and look towards the future. If there are still heavy charges to be deducted from the future, you can terminate the policies.

You should make your decision after getting the relevant facts.

If you need independent financial advice and is willing to pay a modest fee, you can consult the following:
http://tankinlian.blogspot.com/2008/12/financial-advice-for-fee.html

7 comments:

Anonymous said...: Never buy from friends or relatives. It is the worst deal because feelings are involved which is not good for making deals.
For me, I did not even buy from my own nephew. Of course relations are somewhat strained due to that but you have to get over it sometimes.
And when things turn bad, you think they care? Relations will still be strained all the same but now the loss is on you.; December 07, 2008 9:58 AM
Concerned said...: Friends, acquaintances and relatives are the worst insurance agents. Most of them become insurance agents when they are out of job or hoping to have a better income without going through the hard work of understanding the products they pushed or the suitability of the products their clients required. Products pushed are alway those that earned the highest commissions. Worse, when all they friends, acquaintances, relatives and other connections have dried up, they have problems selling any products to others and they just quit, leaving you without an agent to contact just when you need it most.; December 07, 2008 1:57 PM
zhummmeng said...: How much loss your regular UTs will depend on the portfolio but even with very risky portfolio if you are willing to invest for the long haul it will recover. Right now you may be buying at bargain price and this will lower the past prices. I recommend that you keep it. See it as short term volatility.THE 3% SALE CHARGE IS NOT EXPENSIVE.
For the whole life you may have paid the charges I would still recommend you to cancel it and reveiw your insurance needs. It is a cut loss decision you must make because in the long run it is better for you.Have your insurance reviewed by an independent financial adviser and have ALL your risks addressed.
These are the reasons against WL.
1.this might be the only insurance you have that the agent wants you to believe that it can take care of ALL YOUR NEEDS.The insurance agents sell them as the 'one size fits all' product.
The fact is you need more than one product to address all your needs. You can't because all your money is taken up by the WL already.
2.You don't need to transfer all your risks for wholelife.Till 65 is more than enough.Address whatever risks, eg,emergency needs, with self insurance, the most flexible insurance and medical needs with an H&S.
3.WL is the worst or most inefficent way of addressing risk and saving.
4.Don't let the agent bull shit you about discipline or 'forced saving'. It is not the product..It is YOU.
5.The return from whole life is about or less than 3% after 35 years ONLY. It is a very long time.
6.Invest regularly like what you are doing is better in the long term.The 3% upfront charge is NOT a lot.
More importantly is to get a honest
and competent adviser with the right qualifications.; December 07, 2008 3:12 PM
Anonymous said...: Your friend is likely a product pusher who have no intention of meeting your needs. She certainly put her needs first before yours. Product pushers' products are usually whole life or endowment or anticipated endowment or regular ILPs. These products earn them high commission. They are specialised in selling these products.MDRT , COT or TOT qualifiers only sell them. That is why they are known as cheats.These malpractitioners must be referred to MAS.
Miss-selling and misrepresenation inevitably arise from product pushing , like the minibond saga.
You can bring this up with the insurance company or the firm to complain against this agent for inappropriate recommendation and ask for refund or lodge with FIDREC.
Not only your agent has committed miss-selling but also breached section 27 of the FAA for failing to conduct a need analysis. You can complain against her to MAS.
Misconduct is punishable by fine of $25K or disciplinary actions.; December 07, 2008 4:20 PM
Anonymous said...: In any economic down turn, one had to judge and plan cash flow carefully. and if you cannot afford it, wise to exit.

Many people needs many ways to survive, and $ is the key. Learn smarter, better you lose money when you are young rather than after you retire then.; December 07, 2008 6:15 PM
Anonymous said...: For a moment I though your adviser is an agent from ntuc.Maybe I biased because all ntuc agents only sell this type of products. They sell only revosave and vivolife. With these 2 product you think they are able to address their customers needs? Just think about it.If they are not product pushers, what are they ? products smugglers?; December 07, 2008 7:33 PM
Anonymous said...: Even you have paid the first 6 years or in some cases commission is paid for whole life to the insurance agents, it is a VERY STUPID idea to buy this type of product.You will be locked for a very long with LOW protection and POOR return.Is is better to get cut losses and start with appropriate products.
Some agents argue that WL is not for return. In this case why pay so much for WL for low protection when term can take care of you for whole life too and with higher protection at lower cost.. Some companies have term plans that cover till 99 years old.There are limited payment for term plans too if you want to pay off fast.
Another argument is that WL can provide for retirement or option to convert to annuity like vivolife from ntuc. You see the contradictions? WL plans CANNOT HELP SAVE ENOUGH and is GUARANTEED LOSS if you adjust for inflation. Don't trust the glib tongue salesmen and women. They will stoop to anything to sell you the WL.
It is time MAS consider removing the commission as remuneration to fee based practice like the counterpart in UK FSA will be doing. TO STOP THE MALPRACTICES OF INSURANCE AGENTS MAS MUST CHANGE THE WAY INSURANCE AND INVESTEMNT PRODUCTS ARE SOLD AND HOW AGENTS ARE PAID.; December 08, 2008 10:16 AM