Why Rich People Do Not Buy Insurance and Unit Trusts ?
Why did Warren Buffet buy an insurance company ?
Because _______________.
I just returned from a harrowing experience at this local insurance company and a morning of blank faces and passive responses to my torrent of questions.
Why have I been paying 7k per year and getting all these optimistic updates on fund performance and after 10 years I end up losing more than 40% of my premiums ?
Investment linked what ?
You see, I had blindly signed the papers when my mom suggested I buy a bunch of investment linked products over a decade ago, and had paid scant attention it until urged by an insurance adviser recently.
The realisation that I have been paying very very expensive term premiums over 10 years does not sit well with me and some introspection was required.
That amount that I had paid could have well gone into a term life policy such as the universal life, for example, buying me the same coverage for a fixed payment with loan of 70%.
If we assume that a Universal life premium of SGD 120 k buys SGD 1 mio cover for someone aged 30 ? [note that this is probablyfor international insurance firms and not the local companies that insist on ripping folks off with their simply exorbitant premiums that they force some local banks to fund]
So my premiums paid could have gone to buying a whole life coverage till 110 instead.
The blank faced staff gave me a scornful look and said if I continued paying I would reap the rewards from it too !!!
Yes, if I had an IQ of 50 maybe. If I continue paying another 10 years, I would perhaps breakeven ?
Why don’t the rich folks buy these products ?
Why don’t the private banks sell unit trusts ?
Because these are the black box priced deals that the public has no chance of fighting against. No transparency and no restitution (don’t even think of going to court).
Private bankers themselves only ever buy term life and medical policies leaving the investment bit out.
Investments are separate.
And all these articles in the papers telling people that insurance is the way to go for retirement and I just recently discovered that financial planner is another word for insurance agent. http://www.businesstimes.com.sg/banking-finance/retirement-the-business-opportunity
It makes me worried.
Because Warren Buffet knows how profitable it is.
Possible corruption at the higher levels.
Why would they pay you just the dividends and less but take all the profits?
plus….
There is no corruption in Singapore lah !
It’s just penalising the poor ! because they have no choice !
So you have been paying 7k for this on your mother’s advice.
Unless your mom is an experienced investor, you only have yourself to blame.
Yes. I fully agree that is why the cut loss. Sometimes we just forget about certain things and pay away because it does not seem like a large amount at that time and cannot be bothered about it over the years.
I totally agreed that for insurance just go for medical insurance and whole life for poor to ave people, high net worth go for universal. Don’t ever buy endowment plan, education plan etc, you only get back your premium at maturity, if lucky, get another 2-3% over the total premium but with a lock in period for say 21 years. Worst performance is endowment from AIA and prudential cos my mature next jan. Got into bcos sold by relative lah…….
Don’t worry.
I think more people are wising up so their profits are shrinking !
-43% EPS growth but share price is at historic highs.
Totally agree. I went through the same episode about 7 years ago after reviewing my investment-linked policy and realizing that after paying all that it was in the red when the markets had been going up. I asked for a way to determine how much of my payments was going to insurance vs investments so that I could calculate the returns. that could be provided to me.
I figured it was just one big scam to pay agents, fund managers and shareholders before paying me anything. Nowadays I only do term policies and medical coverage. That way I treat all as expense and life is so much simpler. Insurance is insurance, investment is investment and should be kept that way. Except everyone one else I know is still getting brainwashed.
Because it is all over the papers !!
Strait Times and Business Times –
Insurance is the way to go for retirement !
Reviewing different insurance schemes to suit you !
They will never give you the “formula” to calculate the returns !
There are so many problems here. No transparency because insurance and investment is blended together. Products being sold by people who are not trained in this, simply because it pays well. Why does it pay well? Because the sellers are taking too much profit. Same thing with the multitude of mobile bankers. They only want to sell you the products that they make money on. They don’t care about the client. If these products were transparent they wouldn’t sell, because everyone could see they are being cheated.
For insurance, only buy pure insurance products. They are pretty easy to compare. Always compare a few products. Only buy from experienced insurance brokers.
For investment, only go to experienced investment brokers who do investment and only investment.
Never buy from your family members to help them out. The fee they make is nothing compared to how much you will loose over time. If you want to help them, give them money. And then help yourself by investing the right way.
Agreed.
Agree, should only buy term insurance and invest the rest.
However many still buy various insurance types thinking that it is an important investment, not knowing that they are actually getting very low returns, after commissions to multi levels of agents and insurance company profits.
Have you seen financial planners (aka insurance agents) eating at restaurants almost every week? Even as a trader, I don’t spend this kind of money! They must be making sh*t-load of money without taking any risk.
Haha. Thought they are real estate agents ?
Well, it’s even better with private bankers !
1 universal life policy sold = trip to Paris plus free handbag
The big question mark is – what is the value add you are getting from them ?
The key takeaway is that traders like myself should consider switching career to become financial planners/private bankers.
1. Joining sales is the best reward/risk activity. You take no risk, but have unlimited reward. The skills learnt are transferable too.
2. You could always choose to trade on the sideline IF you really want to take risk. Trading less could be more profitable and less stressful if you operate with the right beliefs.
On your point, the value add could be to nudge those who did not buy any protection to do so. They may lose money due to being ripped off, but at least they are protected.
Haha.
First step – Convince yourself first.
As long as you are convinced you are helping others ahead of profiteering, I think you have a good start.
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