Martin Lee @ Sg
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Are ILPS a Conservative Investment?

I read with interest Genecia Luo’s interview with Lorna Tan which was published in the Sunday Times yesterday.

Inside the article, she was quoted as being “a conservative investor” and her portfolio consists mainly of insurance products.

These include a whole life policy which her mum bought for her when she was born, and two investment-linked insurance plans (ILP) which are invested in China, India and Singapore funds.

I want to point out to all my readers here that ILPs are definitely not a conservative investment!

Just because a policy is purchased as an insurance product does not mean it is low risk. Depending on the underlying funds that the ILP invests in, the policy can be as high risk as investing in stocks and shares. In the worst case scenario, the value of the funds can dwindle down to zero (if they perform badly) after paying off the mortality charges.

The 5% and 9% projections that you see in the benefit illustration are only projections and nothing else. They can be misleading and seriously, MAS should make it mandatory to include two columns for -5% and -9% as well.

There appears to be a mis-match between Genecia’s risk profile and what she is investing into.

I have seen many similar cases of conservative investors who have been exposed to more risks that they had expected because they had wanted to buy some life insurance but were sold an ILP instead of a traditional product.

Genetia herself mentioned her worst investment to date was buying a single premium ILP in 2006 for $10k, and subsequently selling it in 2009 for only $500. This is a 95% loss in just three years!

I hope Genetia knows (or someone can point out to her) the risks she is being exposed to.

Lastly, I want to clarify that I’m not bashing ILPs in general here but more to highlight that people need to know what they are buying or have bought. Because investment and insurance products are long term in nature, you don’t want to be in for a nasty surprise twenty or thirty years down the road because by then, it will be too late to repair the damage.

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4 comments
Daniel says 9 years ago

Most UTs have huge front end charges as well and annual charges too.

I believe that each of us have our own unique battle ground. Some are genius at corporate world while others are genius at their own businesses. You just got to know which battle ground you best fit in.

There is saying “there are no good or bad investment, only good or bad investors”.

Cheers

Reply
DanielP says 9 years ago

I think a big problem of many insurance products are the huge front end commissions.

Reply
Vincent says 9 years ago

You bother to read those rubbish interviews on Sunday Times?

Have you notice something very funny in those interviews:

1) 90% of interviewees will tell you that their best investment is in their own business. Hence ST is trying to tell you, don’t bother with unit trust, stocks, bonds etc, just go into business if you want the best returns.

2) Another 5%-7% will tell you they have invested in properties as their best investment. Usually they are the property guys or they had bought properties at super duper low prices ages ago.

3) Many of them will tell you their worst investment is some stocks, unit trust or alternative investment etc. Most will say they invest without research.

4) Almost 100% of them say they are savers. If not malu if they tell the whole world they are big spenders. It is part of Asian culture.

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    lioninvestor says 9 years ago

    Hi Vincent,

    Thanks for pointing out your observations.

    I skim through the report actually.

    Actually, a successful business can be a great multiplier of wealth. So it is not surprising that those (successful) people who are interviewed will say that their business is their greatest investment.

    And spenders will find it harder to grow their wealth, so….

    Anyway, just a side point. Being interviewed does not mean that person is wealthy/successful.

    Reply
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