I was at one point wondering if Financial Advisers in Singapore are helping people or they are helping themselves by exploiting the people. I have been compiling portfolios over the years and I seldom come across a portfolio which in my opinion, proper… I’ll like to show one classic example on the type of portfolio that I frequently compiled. I’m sure that this supposedly IFA is making a very good income by such planning for his clients…
(Ps: I’m not saying that all Financial Advisers are bad. I am far from perfect either. However I have an interesting observation which is “Many(not all) of the Star Performers sell plans like those below” and they are termed “Successful” by the company, industry and public) Those who spend time analysing and thinking what best for clients cannot even hit sales quota for promotion or even earn a simple “Senior” title to his namecard, regardless of how much experiences he/she has. They are also treated like dirt by the company because they are likely not the one who brings in the big money.
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* Young Lady – 27 yrs old executive earning around $3+k/mth
* May have plan for marriage and getting a property in the near term
* In order not to get myself in trouble by posting this, I’d deleted many columns, including the insurer’s and policy names…
I do not expect her to get anything from me but I just gave my views…
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Risk Management
You are currently spending around $3,860/yr on Risk Management including ILP riders and Whole Life.
* The Insurance premium looks reasonable and kept within 10% of your income but this will keep increasing as the riders for your ILP gets higher yearly with your age. The premium can be quite amazing after 20-25 years down the road.
* This portfolio have not factored any form of disability Income coverage, Accidents and Hospitalisation coverage, which seems missing.
* In my opinion, you are on the high side for Critical Illnesses and I will prefer that you have lower Life Coverage to free up more for term and investments.
Wealth Accumulation
You are currently putting in around $13,315/yr on Wealth Accumulations.
* This amount is probably nearly 35% of your current take-home pay.
* Your Endowments are too long (all 25 years) and a bit too many based on your current income
* Your investments happens to be those with too high cost
* Your accumulation will get lesser over time when insurance premium for ILP increases. It is very hard to track your investment when you tag insurance with it.
* You are certainly a good saver and I commend you for it but you probably met an adviser (IFA) who cared for his own interest more than yours.
* I would have recommend a different strategy for you if I am your adviser…
LOL
Classic example of rubbish insurance. Two most important insurance – medical and disability income are completely missing. Adrain, looks like you have to sell her these two negative commissions (after net of expenses and vomit blood) insurances! Don’t be ashame to invoice her for your work rendered. Consumer also need to take some responsibility.
By: Wilfred Ling on April 4, 2011
at 8:01 am
DD accelerator rider looks very familiar to my TM Asia policy. DD here refers to critical illness ya? I think it is not a bad plan since I only need to pay for 25yrs and coverage is lifetime for death and CI.
I agree what is missing is a shield plan. The disability income should be a stand alone or at least be with a life plan. ILP will gets very expensive as u get older.
For savings and investment, I dun believe in using insurance. U can do the same using dollardex or FSM. If u really need that little bit of extra insurance coverage, just buy a term.
My two cents worth.
By: Derek on April 4, 2011
at 11:19 am
I do not want to name any insurance company or to discuss what she need next. I also do not want to say that Whole Life, Endowment or ILPs are bad.
My view is that if the person put in more than 10% of his income on insurance, it could be a sign that he/she is spending too much. Whole Life policies are usually the culprit in making people spending too much. As for Endowments, we must understand that they are very illiquid. For young professional with many short term needs on its way may not be recommended to put in too much of such savings. As for ILPs, there are some with 100% allocation, minimum insurance and relatively low cost and liquid but how many of such plans are recommended to their clients?
For this young lady with nearly 50% of her pay into all such illiquid plans will be highly not advisable… It is also rampant to see advisers recommending high commission plans and it is easily justifiable if they wants to.
By: akhiat on April 4, 2011
at 12:05 pm
Adrain, good advisers cannot earn much commission because they put their clients’ interest above theirs.
Only salesmen disguised as financial consultants will make tons of money.They are the cheats MAS is unable to see. Sometimes, I wonder.
By: The Watchman on April 4, 2011
at 11:01 pm
You know I’ve seen worst. One example I saw was a person who was asked by his banker to “transfer” his bank savings aka. emergency funds into some lousy endowment plan which locked him up for 15 years. Worst of all, he has no surplus or barely any savings (after expenses and insurance). The projected rate of return for the endowment plan is only around 1.2-1.5%.
That person earns only around $2000 per month and has a family with one child to take care. The premium for that stupid plan cost $550 per month.
Fortunately, he only started 1 year ago and I told him to cancel the policy immediately. Didn’t bear to propose any alternative, not even a $100 per month RSP because honestly, it’s quite heart-wrenching.
By: Jack on April 5, 2011
at 2:38 am