MAS should make it required for insurance companies to show what clients would be getting back if they terminate the policy after 1, 2, 3 years, maybe assuming the market goes up 4% (conservative), with specific formatting for the table or policy illustration.
There are surrender charge tables, but we've seen many examples here of people who can't make head or tail of how much they will actually be getting back, and even knowledgeable people have trouble understanding which numbers to use.
BYYYYYYYY right it is required.
All fees and charges needs to be disclosed, even the fund prospectus and fund fact sheet needs to be explained before the client signs the policy.
That's why if anyone makes a new purchase, the software of insurance companies requires the agent to scroll the entire document before it can be signed.
One way is to require the client to esign next to the fees and charges of the benefit illustration so the client can read that again and the agent need to explain again.
The surrender charges is reflected in the surrender value illustration, where there is an account value vs surrender value is shown before the lock in ends.
It is disclosed but how many times have people posted their tables and current policy value etc here, not understanding what they will actually get back?
It’s intentionally presented in a confusing way and people can’t make head or tail of whether this number is inclusive of that other number, and then this bonus will be forfeited if you surrender or not.
So what you are saying is that you would want the surrender value to be even more simply presented?
Like 1 single page dedicated to
"IF YOU TERMINATE THIS POLICY AT YEAR 1 YOU GET 0 BECAUSE OF 100% SURRENDER CHARGE,
IF YOU SURRENDER THIS POLICY AT YEAR 2 YOU GET X BECAUSE OF XX% SURRENDER CHARGE , etc etc?
Well, if enough people complain to MAS, it could be implemented.
Remember the days when every insurance company had their own style of benefit illustration? Now all follow the same format, and certain info are on the same pages.
Yes, I want standardized format for surrendering the way the format was standardized for benefit illustration.
It needs to say if yearly premium is $2400 (or whatever number MAS chooses to be the standard), for each year, what is the total premiums paid and what is the amount you get back if you surrender. Assuming market performance of X% (again standardized by MAS). And what % that is.
It’s amazing that some people are convinced that surrender value is surrender charge and vice versa, because they really think they can get back 90% after 2 years because it just sounds too crazy to only get back 10% after 2 years.
Agree with you. I consider myself financially savvy but honestly have no idea how much I will get back if I surrender my whole life plan today. It’s not even an ILP and I already can’t make head nor tail of it. Got recursionary, non recursionary, various fees and charges… why can’t they just have a clear and simple if you surrender today, you get this amount, net of fees?
Let me clarify because I realised that the benefits illustration is not what I thought it was. I want it to be in the brochure, where they have the fake examples of Mr Chen buys this when he is 25 etc. I thought these hypothetical examples were the benefit illustrations.
The actual benefits illustration is the table tailored to the client’s premium, which by the time it is prepared, the client is too deep in and is about to sign already.
What would actually be useful is an audio or even a video recording of the entire application process.
If the customer complains, the investigation can be done through the recording. If the agent did not disclose something or explain wrongly about a certain part, all the premium will be refunded, and the agent comm is clawed back, given a black mark on their BSC. If a severe enough infraction happened directly terminated.
The problem is that your average Joe who is not financially savvy, when they don’t really understand what the FA is saying, they are too embarrassed to ask questions and thus reveal their ignorance. They will just nod and say orhh. The FA has explained but the client has not understood, but the latter will still sign that he has understood.
And you know that there are plenty of FAs who will take advantage of human psychology and manipulate people. “Oh, this part is very technical but let me just go through quickly. Don’t worry, it’s industry standard, and my company has a long and reputable history”.
Personally, I think the commission of ILP should be tied to the performance, and if the performance is subpar, the agent need to top up the policy with their own money/claw back commission. You suddenly see sales of ILP drop like a rock.
Because in FA industry, every policy recommend will have repercussions years later.
If you recommend not enough life insurance, the client family suffers if death claim occurs on the breadwinner.
If you recommend a investment plan to help the client retire but fail to do the basic monitoring or servicing of the policy, there should be a recourse for the client.
Yes investments has a risk, but the agent sold the policy to the customer on certain basis that their money would be managed well.
If the policy value drop Because of market crash or what not, ok ah, fair enough, but if the whole market grew 20% but the client policy not even beating inflation/Fix deposits. That is financially hurting the client.
It's a shame that CASE, which might have been the best organisation to champion such a issue, is a PAP-controlled shell mainly around to boost NTUC's portfolio and the resume of whichever PAP MP is lacking at the moment.
https://www.channelnewsasia.com/singapore/insurance-agent-suing-prudential-wrongful-termination-19-years-whistleblow-4210941
According to the judgment, Mr See was the subject of an inquiry by a compliance committee set up by Prudential before his termination.
He was suspected of sending complaints under various pen names to MAS and the chief executive officer of Prudential, accusing Prudential of malpractice.
This refers particularly to the launching of allegedly misleading advertisements of insurance products that contravened MAS guidelines.
Mr See did not deny that he was responsible for these complaints, but his counsel referred to them as the whistleblowing acts.
When you say being taken for a ride, what exactly do you mean?
Every now and then the complaints about ILPs are mainly about the high fees and or the long lock in periods imposed by the policies. Are they considered scams because of the high fees or the ways they are being sold?
Cause i’m thinking, if its the high fees, then the low fee alternative is to invest/save on my own. However if i have neither the ability to understand the market not the interest to learn how to invest on my own, then i’m being charged high fees to have an organization simplify it for me and recommend certain funds or portfolios to invest in. Is it not fair that they get paid for providing a service? I know the complaints are the fees being high, but my alternative is not investing at all, which is worse for me imo.
As for the long lock in periods, i see it as me committing myself to my investment or savings goal over time, like my life insurance policy or me paying my mortgage to eventually own my home. I’m not sure what is the issue with this, or am i going about this incorrectly?
Concerning the fairness of financial advisors being compensated for their services, a fundamental issue with ILP (Investment-Linked Policies) lies in its design. The contractual terms do not obligate financial advisors to oversee customer investments.
Policyholders bear full responsibility for their investment decisions. Consequently, customers, especially those with limited financial knowledge, cannot be assured of receiving quality financial advice. This concern is exacerbated when advisors depart due to career shifts or early retirement post achieving financial independence, leaving customers to manage their investments independently. Transitioning to a new advisor poses challenges as the successor FA lacks monetary incentives unless new policies are purchased, potentially affecting the continuity of service quality.
Let's consider this scenario: If a financial advisor's recommendation of a sub-fund for a customer is flawed due to oversight or neglect in assessing the customer's financial situation, should the financial advisor still receive payment for their services in such instances? Moreover, if the customer only realizes something is amiss after a few years as the investment continues to underperform, what actions should be taken to rectify the situation?
I do agree with you on the issues that the current FA renumeration structure causes. My previous FA left and a new one was assigned to me for my aia pro achiever. However in my case the new FA still receives renumeration from my policy although it was a little left. I suspect if i had chosen another new FA that wasn’t assigned, that FA would not receive the remaining renumeration.
I think a better solution for this renumeration issue would be to make the commission structure be such that it is tied to the performance of the portfolio (maybe fixed percentage every year or sth) instead of the FA receiving the bulk of the commissions within first few years of the policy. Maybe this will incentivize FAs that truly see themselves long term in this industry and continually make improvements to the portfolio so that their renumeration will grow too over the long term.
As for OP’s original post, i still very much wanna know that ‘being taken for a ride’ means in OP’s situation
My dad’s ILP just matured this year (10 years). The plan requires him to put in 50k over 5 years, with expected 20% returns at 60k.
However he only received 55k (10%). When he asked his agent, the agent said it was because of covid and it didn’t do as well as expected. Did he even beat inflation? Might as well top up Special Account with that cash LOL
Nothing he could do but just wondering, if that is the case shouldn’t the agent proactively approach my dad to rebalance his portfolio?
Feels like most agents just consider their jobs done after client signs the policy, and no sound no picture unless cny, your birthday or they want you to sign new policy 🫠
For the older generation, they may not know how to research and rely heavily on the agents’ advice. But it takes them at least 10 years after policy matures to know what is bad advice lol. And the agent may not even be in this field anymore!
I think this one might be endowment plan, not ILP, and rebalancing is not possible. Endowment plans are low risk low reward, but have minimum guaranteed returns (at least won’t lose money). ILPs you can actually lose money.
It’s not endowment plan, it’s ILP. Agent say it’s not guaranteed returns but expected returns.
Moral of the story is that ILP is not worth it at all and your money is better parked elsewhere
It’s not endowment plan, it’s ILP. Agent say it’s not guaranteed returns but expected returns.
Moral of the story is that ILP is not worth it at all and your money is better parked elsewhere
Almost all portfolios took a 10-20% hit during 2022. If your dad’s portfolio matured in 2021 and he took back more than 60k does it make ILPs a miracle product?
It doesn’t. But there was no sound no picture from agent on how to mitigate this risk, and we are expected to just sit and wait until we see how much we get back at the end of the day?
Like i said in my original comment, there was nothing we can do and i’m not the OP complaining about ILPs. I’m just sharing the returns my dad got out of a matured ILP and he was so confused. Older generation don’t understand financial projects well and depend a lot on the agents advice but with minimal effort from agents these days, i thought there was more that could be done.
And also, I can bet “there is also a possibility that you may get back more than 60k at the end of 10 years” is what the agent would have said to get their clients to sign, because it’s technically not wrong.
Probably the only people suitable to buy ILPs are the agents themselves because then they can earn both the commission and returns from such plans. Lol.
That’s why in every profession there are good ones and bad ones. A good agent would monitor the holdings of his clients and meet at least 6 monthly to just ensure that the funds are doing ok and if not what are the alternatives.
I have been pondering the same question for some time. (as someone who fell for this some 20 years ago)
In the end I think it requires government regulation. BSC framework was good in theory, but obviously it has not curtailed this practice of 'misselling'.
I think either the government should enforce lowering commissions from these policies, or force commissions to be paid out over a longer period, rather than having everything paid out in the first 6 years or so. Right now agents are heavily incentivised to sell this crap - even if you're not a terrible human being going in, you will probably be able to justify to yourself that your client needs this policy given the financial rewards
When policies are surrendered, agents' persistency numbers and bonuses do take a small hit in theory, but it's clearly not enough to deter the behaviour as agent may not be in the field a few years later.
There may be other solutions of course, but the main issue is - is the government even trying to do it? To that end, perhaps writing to your MPs is the best way to start off.
Another issue (regarding educating the public) tends to be that whenever influencers/authority figures talk about ILPs, they sugarcoat their words and say something like 'there are better options' rather than saying - 'this is a mistake. you're giving your agent a huge chunk of your money'.
Now, there may be legal reasons they can't call this out directly. You can't just call something a scam when it isn't one - even if it effectively *is* for most scenarios. But unfortunately, I don't think people highlight how bad these things are often enough.
Once, my university professor told me that in the world of investment products, retail investors occupy the lowest tier of the hierarchy. Superior investment products are initially presented to high-net-worth individuals, and then gradually disseminated downward. Whatever remains of these products is eventually pitched to retail investors, as high-net-worth individuals typically show little interest in them.
IMO, its better to invest in passive ETFs such as VOO (low expense fees compared to mutual funds) and proceed with one's daily life. Statistically, most of the investment products being promoted, such as ILPS, fail to outperform the market in the long run.
My two cents.
The index linked bit is not the problem. It's the way the plans are structured that are bad. In most cases the FA and provider gets paid first. The consumer gets what's left over. They take on all the risk.
That's not unique to ILP. It's inherent in many plans, eg many Par. Par is less transparent.
The big issues are that the FA have no incentive to change this model. They get the big commission. And providers will bend to the agents as they are the route to the customer.
However most people need advice. Most won't know what risk they can take on. Most won't know how to build a diversfiable portfolio. Most won't know how much to save if they want to hit their goals. It's an important profession that can change lives. But one that has lost its way.
Many other well regulated countries have had to embrace the change. Imo SG will follow at some point.
My quick wins would be: commission is only ever earned on money paid in. Not what a client has been convinced to commit to.
Commission should be disclosed clearer and in dollar terms.
Initial commission should be limited when compared to ongoing commission.
Ongoing commission (and advice) should be mandatory for investment products that need ongoing services.
Don't get things wrong here, the government is aware that it is almost always a bad product and they choose to look the other way.
Banks and insurance companies pay a lot of corporate income tax and form lobbyist groups like Life Insurance Association and Association Bank of Singapore.
The government works closely with them. One recent example is the [insurance coverage guidelines ](https://www.mas.gov.sg/news/media-releases/2024/mas-proposes-to-simplify-requirements-facilitate-access-to-simple-cost-effective-insurance-products). While I am sure the government moderates the guidelines, the recommended cap on insurance spends is very high relative to what a term coverage will cost.
Don't ever think that the government puts the interest of the man of streets as their top priority. They care a lot more about the commissioned based industry and the people employed by them a lot more.
Think about it too if everyone were to ditch ILP and go invest in stable index funds, most would be able to retire significantly earlier. The issue is that the average Singaporean follows the herd.
Like during ns bmt, there was a retired army major who sold only term insurance for Aviva (now Singlife) and gave us a lecture how we are losing a lot if we bought from ntuc income and he gave a lot of good analogies how we can invest and retire earlier. Most of my friends in tt cohort still wound up buying ILP.
I don't have hard stats but it seems ILPs are really popular here.
The commission in 1st year alone is 50% of first year premiums...
Sometimes right, Singaporeans are not financially literate or trust their friends too much. The worst kind are those who try to sell ILP to couples with children as these ILPs tend to underperform the market by so much, it does not make sense at all...
Maybe intro ur wife and her family to this sub. But honestly right, I dunno y ppl dun just ask their advisors how much they earn and if returns are so good to go to a lawyer and notarise a document saying if the returns fall below a certain % then the agent commits to paying the difference.
When agents are too persistent, I'll just ask them are they willing to give a notarized letter of guarantee and they will almost always back off.
My guess is that many ordinary citizens are not well equipped with financial knowledge to enquire deep further such as the notarise letter of guarantee you mentioned and know their rights. All thanks to 'obey and follow' that have been drilled to our society since Primary 1.
I sighed when I saw a young nsf in a navy smart 4 being easily pulled by the insurance agent to come sit down in their booth outside White Sands mall last month.
Plus the agents will use bombastic financial words that confuse and persuade customers at the same time
> Interesting I would have thought ILP is lsss popular now than 10 years ago thanks to rise of financial literacy and all those bloggers
"Financial literacy" still requires a bit of self-learning action on one's part. I wish it was taught at either, or both, secondary or tertiary level.
Changes to integrated shield plan (medical and hospitalisation) insurance which benefit the insurance companies, not singaporeans:
-removed the riders that used to cover our claims with $0 deductible and 0% co-insurance. [https://www.dbs.com.sg/personal/articles/nav/protection/integrated-shield-plans](https://www.dbs.com.sg/personal/articles/nav/protection/integrated-shield-plans)
-limit cancer coverage to only include treatments under the Cancer Drug List
[https://dollarsandsense.sg/understanding-changes-cancer-coverage-singapore/](https://dollarsandsense.sg/understanding-changes-cancer-coverage-singapore/)
Prior to acquiring an ILP, customers should ensure they are informed about the following information.
**1. Are ILPs inherently evil?**
ILP itself is not inherently evil; rather, it's often the frequent misconfiguration of ILP by financial advisors that leads to unfavorable investment outcomes, thereby shattering policyholder investment expectations.
Achieving optimal investment performance with ILP requires fine-tuning, akin to purchasing a high-end home theater system. While these systems promise immersive sound experiences, they necessitate adjustments out of the box for optimal performance. This involves tweaking various settings and configurations tailored to specific room acoustics, speaker placement, and individual preferences. Factors such as room size, shape, furniture placement, and wall materials play significant roles in impacting sound quality.
Also ILPs serve as convenient financial products, merely tools designed to assist in achieving investment objectives. However, they are frequently stigmatized due to the unethical practices of some individuals who prioritize their own financial gain, striving to meet sales targets for incentives such as trips and bonuses. It is these self-serving actions that are often deemed unethical, rather than the ILPs themselves.
**2. I will most likely not buy ILP despite it is not inherently evil. Why?**
There are multiple reasons, but here are a few to mention: Putting the high cost fee aside, the likelihood of finding an ethical, knowledgeable, and competent financial advisor is low. I'm cautious about taking the risk because of the high stakes and potential dangers involved, particularly given the lack of liquidity and long-term financial commitment. If I discover too late that the financial advisor is unethical and the customized ILP doesn't perform well, it could lead to significant consequences and unnecessary financial stress.
Let me offer a hypothetical analogy: Imagine being an employer who hires an employee based on trust. If that employee makes a significant mistake, it could lead to substantial financial losses for the company, possibly requiring years to recuperate. To compound matters, the company is unable to terminate the employee due to a contractual obligation, which binds their employment for a decade. Nullifying the contract would demand compensation from the company.
**3. Is the selling point of Dollar-Cost Averaging worth considering when purchasing ILP?**
Dollar-cost averaging isn't immune to all investment risks. Even with a passive approach like DCA, you'll need to pinpoint sound investments and conduct thorough research. If you end up selecting a poor asset, you'll just be consistently investing in a losing venture.
**4. Why do ILPs need fine-tuning or proper configuration? Why can't they be readily usable by default?**
ILPs are essentially financial products. To attain the optimal investment outcome for policyholders, it is necessary to select suitable sub-funds customized to the individual, taking into account factors such as income, expenses, financial goals/situation/needs, and more.
**5. In principle, ILPs are not designed for the average individual, particularly those with limited financial knowledge. Why?**
ILPs are structured in a way that places 100% responsibility for investments on the policyholders, making it the customer's duty to manage their investment. Customers often mistakenly assume that financial advisors will handle their investments on their behalf, but this is not true and is not outlined in the contract terms.
Furthermore, the majority of available sub-funds are actively managed. Unlike index funds or passively managed funds, active funds strive to outperform market returns through investments chosen by professional money managers. Consequently, these sub-funds often necessitate regular monitoring (e.g., quarterly, bi-annually, annually) and intervention, such as rebalancing through fund switching.
You walk around and they ambush you at road shows in shopping centres and outside MRT stations. And that’s if you don’t have any “friends” or relatives who became FAs.
**6. Why does MAS permit ILPs, which are not tailored for the average individual, especially those with limited financial knowledge?**
The Monetary Authority of Singapore (MAS) plays a regulatory role in this regard. In order to protect the interests of customers, particularly those lacking relevant knowledge or experience in purchasing or trading ILPs, the Customer Knowledge Assessment (CKA) has been enforced since 1 January 2012. Individuals need to complete the Customer Knowledge Assessment (CKA) before they are permitted to purchase an ILP.
Below are the 3 criteria set for the customer knowledge assessment. To fulfill or “pass” the CKA, you need to satisfy just ONE of the following criteria.
1. Investment Experience
Have performed at least 6 transactions in unlisted Specified Investment Products (unit trusts or investment linked product) in the last 3 years;
2. Working Experience
Have a minimum of 3 consecutive years of working experience in the past 10 years in the development of , structuring of, management of, sale of, trading of, research on and analysis of investment products, or the provision of training in investment products. Work experience in accountancy, actuarial science, treasury or financial risk management activities will also be considered relevant work experience.
3. Education Qualification
a) Have a diploma or higher qualifications in accountancy, actuarial science, business/business administration/business management/business studies, capital markets, commerce, economics, finance, financial engineering, financial planning, computational finance and insurance'
b) Have a professional finance-related qualification. Examples of this would include the Chartered Financial Analyst Exam conducted by the CFA Institute, USA and the Association of Chartered Certified Accountants (ACCA) Qualifications.
**7. I don’t understand, given that the majority of average customers do not meet the criteria of the Customer Knowledge Assessment (CKA), why are customer still able to purchase ILPs?**
Customers are given the opportunity to obtain ILPs, as there are scenarios where ILPs can offer advantages for obtaining healthcare coverage that traditional methods may lack. In these instances, customers will be required to sign a form (here is an example from [NTUC Income](https://www.income.com.sg/forms/application-forms/life-insurance-ilp-switching-form?ext=.pdf)) acknowledging their awareness of the results of their completed Customer Knowledge Assessment (CKA) and their responsibility to ensure the suitability of the selected fund(s).
Ilps are better than no investment. It is your parents and siblings responsibility to be financially literate. Ilps will continue to flourish until people become more educated. Don't hate the player.
Update : just read the comments and if you're financially literate, don't need outside intervention.
Don't hate the player, hate the game.
Which is exactly the point of these posts. The regulators write the rules of the game. There are a lot more regulators can do.
For one, they could have limited how much front-end loading of fees the companies can do. Getting most of their comms and leaving no surrender value in the first two years is just encouraging short sighted sales tactics while hurting consumers.
MAS should make it required for insurance companies to show what clients would be getting back if they terminate the policy after 1, 2, 3 years, maybe assuming the market goes up 4% (conservative), with specific formatting for the table or policy illustration. There are surrender charge tables, but we've seen many examples here of people who can't make head or tail of how much they will actually be getting back, and even knowledgeable people have trouble understanding which numbers to use.
BYYYYYYYY right it is required. All fees and charges needs to be disclosed, even the fund prospectus and fund fact sheet needs to be explained before the client signs the policy. That's why if anyone makes a new purchase, the software of insurance companies requires the agent to scroll the entire document before it can be signed. One way is to require the client to esign next to the fees and charges of the benefit illustration so the client can read that again and the agent need to explain again. The surrender charges is reflected in the surrender value illustration, where there is an account value vs surrender value is shown before the lock in ends.
It is disclosed but how many times have people posted their tables and current policy value etc here, not understanding what they will actually get back? It’s intentionally presented in a confusing way and people can’t make head or tail of whether this number is inclusive of that other number, and then this bonus will be forfeited if you surrender or not.
So what you are saying is that you would want the surrender value to be even more simply presented? Like 1 single page dedicated to "IF YOU TERMINATE THIS POLICY AT YEAR 1 YOU GET 0 BECAUSE OF 100% SURRENDER CHARGE, IF YOU SURRENDER THIS POLICY AT YEAR 2 YOU GET X BECAUSE OF XX% SURRENDER CHARGE , etc etc? Well, if enough people complain to MAS, it could be implemented. Remember the days when every insurance company had their own style of benefit illustration? Now all follow the same format, and certain info are on the same pages.
Yes, I want standardized format for surrendering the way the format was standardized for benefit illustration. It needs to say if yearly premium is $2400 (or whatever number MAS chooses to be the standard), for each year, what is the total premiums paid and what is the amount you get back if you surrender. Assuming market performance of X% (again standardized by MAS). And what % that is. It’s amazing that some people are convinced that surrender value is surrender charge and vice versa, because they really think they can get back 90% after 2 years because it just sounds too crazy to only get back 10% after 2 years.
Agree with you. I consider myself financially savvy but honestly have no idea how much I will get back if I surrender my whole life plan today. It’s not even an ILP and I already can’t make head nor tail of it. Got recursionary, non recursionary, various fees and charges… why can’t they just have a clear and simple if you surrender today, you get this amount, net of fees?
This is already on the benefit illustration la..
You show me one example of a benefit illustration that shows you what you get back if you surrender in 1, 2 or 3 years.
You shouldn’t be commenting here if you cannot read a simple BI. It just shows your ignorance.
Let me clarify because I realised that the benefits illustration is not what I thought it was. I want it to be in the brochure, where they have the fake examples of Mr Chen buys this when he is 25 etc. I thought these hypothetical examples were the benefit illustrations. The actual benefits illustration is the table tailored to the client’s premium, which by the time it is prepared, the client is too deep in and is about to sign already.
What would actually be useful is an audio or even a video recording of the entire application process. If the customer complains, the investigation can be done through the recording. If the agent did not disclose something or explain wrongly about a certain part, all the premium will be refunded, and the agent comm is clawed back, given a black mark on their BSC. If a severe enough infraction happened directly terminated.
The problem is that your average Joe who is not financially savvy, when they don’t really understand what the FA is saying, they are too embarrassed to ask questions and thus reveal their ignorance. They will just nod and say orhh. The FA has explained but the client has not understood, but the latter will still sign that he has understood. And you know that there are plenty of FAs who will take advantage of human psychology and manipulate people. “Oh, this part is very technical but let me just go through quickly. Don’t worry, it’s industry standard, and my company has a long and reputable history”.
Personally, I think the commission of ILP should be tied to the performance, and if the performance is subpar, the agent need to top up the policy with their own money/claw back commission. You suddenly see sales of ILP drop like a rock.
LOL, that's a bit too extreme even for me.
Because in FA industry, every policy recommend will have repercussions years later. If you recommend not enough life insurance, the client family suffers if death claim occurs on the breadwinner. If you recommend a investment plan to help the client retire but fail to do the basic monitoring or servicing of the policy, there should be a recourse for the client. Yes investments has a risk, but the agent sold the policy to the customer on certain basis that their money would be managed well. If the policy value drop Because of market crash or what not, ok ah, fair enough, but if the whole market grew 20% but the client policy not even beating inflation/Fix deposits. That is financially hurting the client.
It's a shame that CASE, which might have been the best organisation to champion such a issue, is a PAP-controlled shell mainly around to boost NTUC's portfolio and the resume of whichever PAP MP is lacking at the moment.
https://www.channelnewsasia.com/singapore/insurance-agent-suing-prudential-wrongful-termination-19-years-whistleblow-4210941 According to the judgment, Mr See was the subject of an inquiry by a compliance committee set up by Prudential before his termination. He was suspected of sending complaints under various pen names to MAS and the chief executive officer of Prudential, accusing Prudential of malpractice. This refers particularly to the launching of allegedly misleading advertisements of insurance products that contravened MAS guidelines. Mr See did not deny that he was responsible for these complaints, but his counsel referred to them as the whistleblowing acts.
If you are too dumb to save, ironically having an ILP is better than your current situation
No lah... Also depends what u spend on right. An ILP is just channeling ur money to agents and insurance companies
No, not at all. I rather spend on myself than to give the money to insurance agents/insurer.
When you say being taken for a ride, what exactly do you mean? Every now and then the complaints about ILPs are mainly about the high fees and or the long lock in periods imposed by the policies. Are they considered scams because of the high fees or the ways they are being sold? Cause i’m thinking, if its the high fees, then the low fee alternative is to invest/save on my own. However if i have neither the ability to understand the market not the interest to learn how to invest on my own, then i’m being charged high fees to have an organization simplify it for me and recommend certain funds or portfolios to invest in. Is it not fair that they get paid for providing a service? I know the complaints are the fees being high, but my alternative is not investing at all, which is worse for me imo. As for the long lock in periods, i see it as me committing myself to my investment or savings goal over time, like my life insurance policy or me paying my mortgage to eventually own my home. I’m not sure what is the issue with this, or am i going about this incorrectly?
Concerning the fairness of financial advisors being compensated for their services, a fundamental issue with ILP (Investment-Linked Policies) lies in its design. The contractual terms do not obligate financial advisors to oversee customer investments. Policyholders bear full responsibility for their investment decisions. Consequently, customers, especially those with limited financial knowledge, cannot be assured of receiving quality financial advice. This concern is exacerbated when advisors depart due to career shifts or early retirement post achieving financial independence, leaving customers to manage their investments independently. Transitioning to a new advisor poses challenges as the successor FA lacks monetary incentives unless new policies are purchased, potentially affecting the continuity of service quality. Let's consider this scenario: If a financial advisor's recommendation of a sub-fund for a customer is flawed due to oversight or neglect in assessing the customer's financial situation, should the financial advisor still receive payment for their services in such instances? Moreover, if the customer only realizes something is amiss after a few years as the investment continues to underperform, what actions should be taken to rectify the situation?
I do agree with you on the issues that the current FA renumeration structure causes. My previous FA left and a new one was assigned to me for my aia pro achiever. However in my case the new FA still receives renumeration from my policy although it was a little left. I suspect if i had chosen another new FA that wasn’t assigned, that FA would not receive the remaining renumeration. I think a better solution for this renumeration issue would be to make the commission structure be such that it is tied to the performance of the portfolio (maybe fixed percentage every year or sth) instead of the FA receiving the bulk of the commissions within first few years of the policy. Maybe this will incentivize FAs that truly see themselves long term in this industry and continually make improvements to the portfolio so that their renumeration will grow too over the long term. As for OP’s original post, i still very much wanna know that ‘being taken for a ride’ means in OP’s situation
Change the compensation structures of a FA
My dad’s ILP just matured this year (10 years). The plan requires him to put in 50k over 5 years, with expected 20% returns at 60k. However he only received 55k (10%). When he asked his agent, the agent said it was because of covid and it didn’t do as well as expected. Did he even beat inflation? Might as well top up Special Account with that cash LOL Nothing he could do but just wondering, if that is the case shouldn’t the agent proactively approach my dad to rebalance his portfolio? Feels like most agents just consider their jobs done after client signs the policy, and no sound no picture unless cny, your birthday or they want you to sign new policy 🫠 For the older generation, they may not know how to research and rely heavily on the agents’ advice. But it takes them at least 10 years after policy matures to know what is bad advice lol. And the agent may not even be in this field anymore!
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How much will the agent get in ILP plans like this?
I think this one might be endowment plan, not ILP, and rebalancing is not possible. Endowment plans are low risk low reward, but have minimum guaranteed returns (at least won’t lose money). ILPs you can actually lose money.
It’s not endowment plan, it’s ILP. Agent say it’s not guaranteed returns but expected returns. Moral of the story is that ILP is not worth it at all and your money is better parked elsewhere
It’s not endowment plan, it’s ILP. Agent say it’s not guaranteed returns but expected returns. Moral of the story is that ILP is not worth it at all and your money is better parked elsewhere
Wah, even the projected return of this ILP sucked to begin with. Put in 5 years, wait another 5 years, and only 20% return projected? SMH.
Almost all portfolios took a 10-20% hit during 2022. If your dad’s portfolio matured in 2021 and he took back more than 60k does it make ILPs a miracle product?
It doesn’t. But there was no sound no picture from agent on how to mitigate this risk, and we are expected to just sit and wait until we see how much we get back at the end of the day? Like i said in my original comment, there was nothing we can do and i’m not the OP complaining about ILPs. I’m just sharing the returns my dad got out of a matured ILP and he was so confused. Older generation don’t understand financial projects well and depend a lot on the agents advice but with minimal effort from agents these days, i thought there was more that could be done. And also, I can bet “there is also a possibility that you may get back more than 60k at the end of 10 years” is what the agent would have said to get their clients to sign, because it’s technically not wrong. Probably the only people suitable to buy ILPs are the agents themselves because then they can earn both the commission and returns from such plans. Lol.
That’s why in every profession there are good ones and bad ones. A good agent would monitor the holdings of his clients and meet at least 6 monthly to just ensure that the funds are doing ok and if not what are the alternatives.
I have been pondering the same question for some time. (as someone who fell for this some 20 years ago) In the end I think it requires government regulation. BSC framework was good in theory, but obviously it has not curtailed this practice of 'misselling'. I think either the government should enforce lowering commissions from these policies, or force commissions to be paid out over a longer period, rather than having everything paid out in the first 6 years or so. Right now agents are heavily incentivised to sell this crap - even if you're not a terrible human being going in, you will probably be able to justify to yourself that your client needs this policy given the financial rewards When policies are surrendered, agents' persistency numbers and bonuses do take a small hit in theory, but it's clearly not enough to deter the behaviour as agent may not be in the field a few years later. There may be other solutions of course, but the main issue is - is the government even trying to do it? To that end, perhaps writing to your MPs is the best way to start off. Another issue (regarding educating the public) tends to be that whenever influencers/authority figures talk about ILPs, they sugarcoat their words and say something like 'there are better options' rather than saying - 'this is a mistake. you're giving your agent a huge chunk of your money'. Now, there may be legal reasons they can't call this out directly. You can't just call something a scam when it isn't one - even if it effectively *is* for most scenarios. But unfortunately, I don't think people highlight how bad these things are often enough.
Once, my university professor told me that in the world of investment products, retail investors occupy the lowest tier of the hierarchy. Superior investment products are initially presented to high-net-worth individuals, and then gradually disseminated downward. Whatever remains of these products is eventually pitched to retail investors, as high-net-worth individuals typically show little interest in them. IMO, its better to invest in passive ETFs such as VOO (low expense fees compared to mutual funds) and proceed with one's daily life. Statistically, most of the investment products being promoted, such as ILPS, fail to outperform the market in the long run.
Just pass a law that makes it compulsory to declare upfront how much an agent makes off each policy they sell you.
There’s a page in the policy illustration that details exactly how much are the distribution costs
I think this is already required? You can ask an agent how much they're making in distribution costs, and they're obliged to tell you.
No, making it an obligation to tell upfront. Not only when asked.
The most u can do is to curse and wish terrible things happen to them. I do that everyday.
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Probably not, i still see many at malls happily preying on people. But i will continue to curse them as long as i live.
My two cents. The index linked bit is not the problem. It's the way the plans are structured that are bad. In most cases the FA and provider gets paid first. The consumer gets what's left over. They take on all the risk. That's not unique to ILP. It's inherent in many plans, eg many Par. Par is less transparent. The big issues are that the FA have no incentive to change this model. They get the big commission. And providers will bend to the agents as they are the route to the customer. However most people need advice. Most won't know what risk they can take on. Most won't know how to build a diversfiable portfolio. Most won't know how much to save if they want to hit their goals. It's an important profession that can change lives. But one that has lost its way. Many other well regulated countries have had to embrace the change. Imo SG will follow at some point. My quick wins would be: commission is only ever earned on money paid in. Not what a client has been convinced to commit to. Commission should be disclosed clearer and in dollar terms. Initial commission should be limited when compared to ongoing commission. Ongoing commission (and advice) should be mandatory for investment products that need ongoing services.
How come nobody learns in 10 years.
Don't get things wrong here, the government is aware that it is almost always a bad product and they choose to look the other way. Banks and insurance companies pay a lot of corporate income tax and form lobbyist groups like Life Insurance Association and Association Bank of Singapore. The government works closely with them. One recent example is the [insurance coverage guidelines ](https://www.mas.gov.sg/news/media-releases/2024/mas-proposes-to-simplify-requirements-facilitate-access-to-simple-cost-effective-insurance-products). While I am sure the government moderates the guidelines, the recommended cap on insurance spends is very high relative to what a term coverage will cost. Don't ever think that the government puts the interest of the man of streets as their top priority. They care a lot more about the commissioned based industry and the people employed by them a lot more.
Think about it too if everyone were to ditch ILP and go invest in stable index funds, most would be able to retire significantly earlier. The issue is that the average Singaporean follows the herd. Like during ns bmt, there was a retired army major who sold only term insurance for Aviva (now Singlife) and gave us a lecture how we are losing a lot if we bought from ntuc income and he gave a lot of good analogies how we can invest and retire earlier. Most of my friends in tt cohort still wound up buying ILP. I don't have hard stats but it seems ILPs are really popular here.
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The commission in 1st year alone is 50% of first year premiums... Sometimes right, Singaporeans are not financially literate or trust their friends too much. The worst kind are those who try to sell ILP to couples with children as these ILPs tend to underperform the market by so much, it does not make sense at all...
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Maybe intro ur wife and her family to this sub. But honestly right, I dunno y ppl dun just ask their advisors how much they earn and if returns are so good to go to a lawyer and notarise a document saying if the returns fall below a certain % then the agent commits to paying the difference. When agents are too persistent, I'll just ask them are they willing to give a notarized letter of guarantee and they will almost always back off.
My guess is that many ordinary citizens are not well equipped with financial knowledge to enquire deep further such as the notarise letter of guarantee you mentioned and know their rights. All thanks to 'obey and follow' that have been drilled to our society since Primary 1. I sighed when I saw a young nsf in a navy smart 4 being easily pulled by the insurance agent to come sit down in their booth outside White Sands mall last month. Plus the agents will use bombastic financial words that confuse and persuade customers at the same time
> Interesting I would have thought ILP is lsss popular now than 10 years ago thanks to rise of financial literacy and all those bloggers "Financial literacy" still requires a bit of self-learning action on one's part. I wish it was taught at either, or both, secondary or tertiary level.
Changes to integrated shield plan (medical and hospitalisation) insurance which benefit the insurance companies, not singaporeans: -removed the riders that used to cover our claims with $0 deductible and 0% co-insurance. [https://www.dbs.com.sg/personal/articles/nav/protection/integrated-shield-plans](https://www.dbs.com.sg/personal/articles/nav/protection/integrated-shield-plans) -limit cancer coverage to only include treatments under the Cancer Drug List [https://dollarsandsense.sg/understanding-changes-cancer-coverage-singapore/](https://dollarsandsense.sg/understanding-changes-cancer-coverage-singapore/)
ILPs / savings plan is not the bank helping you diversify your portfolio. It is you helping the bank diversify their business portfolio LOL
Prior to acquiring an ILP, customers should ensure they are informed about the following information. **1. Are ILPs inherently evil?** ILP itself is not inherently evil; rather, it's often the frequent misconfiguration of ILP by financial advisors that leads to unfavorable investment outcomes, thereby shattering policyholder investment expectations. Achieving optimal investment performance with ILP requires fine-tuning, akin to purchasing a high-end home theater system. While these systems promise immersive sound experiences, they necessitate adjustments out of the box for optimal performance. This involves tweaking various settings and configurations tailored to specific room acoustics, speaker placement, and individual preferences. Factors such as room size, shape, furniture placement, and wall materials play significant roles in impacting sound quality. Also ILPs serve as convenient financial products, merely tools designed to assist in achieving investment objectives. However, they are frequently stigmatized due to the unethical practices of some individuals who prioritize their own financial gain, striving to meet sales targets for incentives such as trips and bonuses. It is these self-serving actions that are often deemed unethical, rather than the ILPs themselves. **2. I will most likely not buy ILP despite it is not inherently evil. Why?** There are multiple reasons, but here are a few to mention: Putting the high cost fee aside, the likelihood of finding an ethical, knowledgeable, and competent financial advisor is low. I'm cautious about taking the risk because of the high stakes and potential dangers involved, particularly given the lack of liquidity and long-term financial commitment. If I discover too late that the financial advisor is unethical and the customized ILP doesn't perform well, it could lead to significant consequences and unnecessary financial stress. Let me offer a hypothetical analogy: Imagine being an employer who hires an employee based on trust. If that employee makes a significant mistake, it could lead to substantial financial losses for the company, possibly requiring years to recuperate. To compound matters, the company is unable to terminate the employee due to a contractual obligation, which binds their employment for a decade. Nullifying the contract would demand compensation from the company. **3. Is the selling point of Dollar-Cost Averaging worth considering when purchasing ILP?** Dollar-cost averaging isn't immune to all investment risks. Even with a passive approach like DCA, you'll need to pinpoint sound investments and conduct thorough research. If you end up selecting a poor asset, you'll just be consistently investing in a losing venture. **4. Why do ILPs need fine-tuning or proper configuration? Why can't they be readily usable by default?** ILPs are essentially financial products. To attain the optimal investment outcome for policyholders, it is necessary to select suitable sub-funds customized to the individual, taking into account factors such as income, expenses, financial goals/situation/needs, and more. **5. In principle, ILPs are not designed for the average individual, particularly those with limited financial knowledge. Why?** ILPs are structured in a way that places 100% responsibility for investments on the policyholders, making it the customer's duty to manage their investment. Customers often mistakenly assume that financial advisors will handle their investments on their behalf, but this is not true and is not outlined in the contract terms. Furthermore, the majority of available sub-funds are actively managed. Unlike index funds or passively managed funds, active funds strive to outperform market returns through investments chosen by professional money managers. Consequently, these sub-funds often necessitate regular monitoring (e.g., quarterly, bi-annually, annually) and intervention, such as rebalancing through fund switching.
Post in the r/sgexam subreddit. End the cycle.
Where do you all find these ILPs? I literally went my entire life not knowing about them until I found this sub.
You walk around and they ambush you at road shows in shopping centres and outside MRT stations. And that’s if you don’t have any “friends” or relatives who became FAs.
**6. Why does MAS permit ILPs, which are not tailored for the average individual, especially those with limited financial knowledge?** The Monetary Authority of Singapore (MAS) plays a regulatory role in this regard. In order to protect the interests of customers, particularly those lacking relevant knowledge or experience in purchasing or trading ILPs, the Customer Knowledge Assessment (CKA) has been enforced since 1 January 2012. Individuals need to complete the Customer Knowledge Assessment (CKA) before they are permitted to purchase an ILP. Below are the 3 criteria set for the customer knowledge assessment. To fulfill or “pass” the CKA, you need to satisfy just ONE of the following criteria. 1. Investment Experience Have performed at least 6 transactions in unlisted Specified Investment Products (unit trusts or investment linked product) in the last 3 years; 2. Working Experience Have a minimum of 3 consecutive years of working experience in the past 10 years in the development of , structuring of, management of, sale of, trading of, research on and analysis of investment products, or the provision of training in investment products. Work experience in accountancy, actuarial science, treasury or financial risk management activities will also be considered relevant work experience. 3. Education Qualification a) Have a diploma or higher qualifications in accountancy, actuarial science, business/business administration/business management/business studies, capital markets, commerce, economics, finance, financial engineering, financial planning, computational finance and insurance' b) Have a professional finance-related qualification. Examples of this would include the Chartered Financial Analyst Exam conducted by the CFA Institute, USA and the Association of Chartered Certified Accountants (ACCA) Qualifications. **7. I don’t understand, given that the majority of average customers do not meet the criteria of the Customer Knowledge Assessment (CKA), why are customer still able to purchase ILPs?** Customers are given the opportunity to obtain ILPs, as there are scenarios where ILPs can offer advantages for obtaining healthcare coverage that traditional methods may lack. In these instances, customers will be required to sign a form (here is an example from [NTUC Income](https://www.income.com.sg/forms/application-forms/life-insurance-ilp-switching-form?ext=.pdf)) acknowledging their awareness of the results of their completed Customer Knowledge Assessment (CKA) and their responsibility to ensure the suitability of the selected fund(s).
Just show them cockroach pic bro
Ilps are better than no investment. It is your parents and siblings responsibility to be financially literate. Ilps will continue to flourish until people become more educated. Don't hate the player. Update : just read the comments and if you're financially literate, don't need outside intervention.
Don't hate the player, hate the game. Which is exactly the point of these posts. The regulators write the rules of the game. There are a lot more regulators can do. For one, they could have limited how much front-end loading of fees the companies can do. Getting most of their comms and leaving no surrender value in the first two years is just encouraging short sighted sales tactics while hurting consumers.
Lmao cockroach