Zurich International and Friends Provident… Should You Invest With Them?



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 Zurich International and Friends Provident are two large investment firms selling Offshore Pensions, otherwise known as Investment Linked Assurance Schemes.  

zurich warning

I’ll explain how the products work, using the Friends Provident Zenith account:

 “A single premium life assurance policy specially designed to allow access to international investment opportunities.”

First of all, they offer a death benefit.  This comes into effect if you die, and your money is worth less than what you initially invested. It’s equal to “101% of the cash-in value”.

This means if you had invested $100 and got hit by a bus, your heirs would receive the $100 back, plus a $1 bonus. There’s no upward adjustment to cover inflation.

Investment Charges:

Friends Provident offshore pensions cost as much as 9% per year for the first 18 months, dropping to roughly 4% per year thereafter. But there’s always the possibility they could lower them significantly.  As mentioned on the company website:

“Friends Provident International Limited reserves the right to change its charges at any time at its discretion upon three months’ written notice to you”

A slew of economic Nobel Prize winners suggest investors shouldn’t pay high fees, recommending low cost index funds that charge 0.15% per year or less;

Warren Buffett also suggests investors should keep investment costs low.  “Buy index funds,” he says, when lambasting high cost financial “helpers” that (in his view) take more than their fare share of investment spoils.

Yale University’s endowment fund manager, David Swensen, echoes the same premise, also suggesting that “government intervention is required” to lower retail investment costs. 

Harvard University’s endowment fund leader agrees, with a particularly harsh sentiment:  

“The investment business is a giant scam.  It deletes billions of dollars every year in transaction costs and fees…You should simply hold index funds”

But there are no certainties in life.

 

It’s entirely possible that an advisor selling a Friends Provident Pension might know more about investing than these guys.

While Buffett and a slew of Ivy League economists recommend using investments costing 0.15% per year or less, perhaps the higher costs of a Friends Provident plan are still worth the money.

 

Here are the costs from the company website:

Administration charge 1.2% each year, debited directly to your unit value on the valuation day Bid/Offer spread Nil

Each year, your investments would incur a charge of 1.2 percent.  In a year where your investments made 4.4 percent, you would be giving slightly more than 30 percent of your profits to Friends Provident.  

 

There’s also an establishment charge, as pasted from their website below.

Establishment charge 0.4% each quarter (1.6% each year) of the premium for the first five years

When adding the administration charge to the establishment charge, your investments could make 5.6 percent a year for the first five years, and you would be giving away 50 percent of your profits to the firm.

Salespeople for Zurich International and Friends Provident also choose actively managed mutual funds (unit trusts) for their clients.

These are the very products that Princeton Economics professor, Burton Malkiel, suggests you avoid.

 

Taken from their website again, these products have internal fees costing up to:

3.35% per year of the fund value, dependent upon the fund chosen

 

It’s also important to understand what happens if you sell a Friends Provident Pension early.  

From their website again:

Early cash-in charge (applies for first five years only): of more than 10% of initial premium 5.0% of bid value of the amount of withdrawal or partial cash-in, in excess of the 10% withdrawal allowance, in year one, reducing by 1.0% each year to nil after year five.

Cashing-in Early cash-in charge (applies for first five years only):  5.0% of the cash-in value, in excess of the 10% allowance, in year one, reducing by 1.0% each year to nil after year five.

 

The Friends Provident account I recently saw had external fund charges (expense ratios) averaging 1.8 percent annually. 

Adding the annual admission charge of 1.2% provides an annual expense of 3 percent annually.  After adding establishment charges, investors would likely pay 4% or more each year in fees.  

In 1999, Fortune magazine named John Bogle as one of the four investment giants of the 20th century.  He earned his fame by championing low cost index investing, costing 0.15% per year or less.  

In his book, Common Sense on Mutual Fundshe explains that investors should keep costs low.  Total investment expenses of 1.5% per year are simply too high, according to Bogle.  And he strongly criticizes high cost equity linked schemes, calling for regulatory authorities to protect investors from such products.

“Equity-linked annuities, where downside protection is provided—at a grossly excessive cost—are but one more way to escape NASD regulations on the technicality that they are actually (exempt) insured products, not securities subject to federal oversight.  A BusinessWeek article describes them as a ‘suckers game dressed up to look like a free lunch.’  I hope the SEC [Securities Exchange Commission] will demand investor protection.”

While Friends Provident Pensions are popularly sold, Bogle disagrees with high cost structures. A 4% fee difference could do tremendous damage over time.  It can mean the difference between earning 3% per year, and 7% per year.

In the compounding interest example below, it could cost more than a million dollars.

  • $200,000 invested at 3% for 30 years =  $485,452
  • $200,000 invested at 7% for 30 years = $1,522,451

 

This doesn’t mean you shouldn’t buy a Friends Provident pension. The world’s financial academics could be wrong.  You need to make the decision yourself.  

 

Further Reading:

Royal Skandia’s high commissioned Investment Linked Assurance Schemes are similar to those sold by Friends Provident and Zurich International



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andrew hallam

andrew hallam

I'm a freelance finance writer, lucky enough to have been nominated as a finalist for two Canadian National Publishing Awards. I'm also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, a book explaining how I became a millionaire on a teacher's salary, while still in my 30s. Working to empower people financially, I'm available to motivate and inspire people on basic retirement planning and index investing. I'm happy to comment on your questions, first, please read the Terms of Use.

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409 Responses

  1. Jesse says:

    Hey I think you just saved me a lot of money. Thank you! I am a teacher in Japan 37 years old (American Citizenship) I don't know where I will end up down the road back in the states or maybe stay in Japan or perhaps another country in SE Asia. How does your ultimate final destination effect your choice of investments? or does it? I am a newbie and need to make up for lost time and start planning for retirement. Thanks, Jesse

    • Karen Russon says:

      Hi Andrew

      I took out a Vista policy with Zurich International Life (ZIL) on 1 May 2008. The investment strategy was 100 per cent Euro Blue Chip Fund (EBCF). On 4 January 2011, I took out a loan against my policy that has led to two problems that I have not been able to resolve.

      First, the Loan Agreement that I signed, states “Sufficient funds will be switched to the Guaranteed Accumulation Fund to cover the value of the loan”. The value of the loan was US$40,000; ZIL took an excessive US$62,624.40.

      Second, the loan agreement also gave ZIL the right to take my money out of the EBCF and put it into a fund of its choice. It chose the US Guaranteed Fund.

      I repaid the loan on 12 March 2012. Upon that date, the investment strategy of record should have gone back in force–however, it did not. ZIL kept my money in USFG. As a result, I have lost substantial return on my investment.

      I brought this matter to the attention of ZIL’s CEO Clive Baker. In his response, Mr Baker stated that, upon repayment of the loan, I was obliged to submit a written request to repurchase units in the Euro Blue Chip fund.

      My investment strategy has been the same since I took out the policy. The notion that I should have to buy back into a fund (EBCF) that I never left is absurd.

      The Board of Directors supports the position of management. Mediation has been ineffective. I filed a complaint with the Isle of Man and Swiss regulators. Both indicated that their mandate is enforcing legislation, not consumer protection. Typical.

      As an American living in Europe, I have also filed complaints with the Federal Trade Commission and the Securities and Exchange Commission. I may lose money, but not without a fight.

      Regards,

      CR

      • Anonymous says:

        Karen, You have bigger problems than the lost return you’re complaining about. These are taxed horribly for Americans. And aside for the tax mess this put you in, your real loss is your surrender charge – much bigger than the lost return you’re complaining about. Stay in and get bled slowly or get out and see it taken all at once – you lost that money as soon as your initial period ended.

        • New Guy says:

          I guess my original post didn’t go through. Just want to chip in for a share of comments

          1. If you go ask around and you should be able to find out that when come to financial adviser earnings, term plan give them the most income as their company earn every single cents of your money and their agents get a bigger share from that nice cakes.

          2. When come to charges, everyone know nothing come free. You judge for yourself whether worth the value or not. Whether it’s a plan from vista, prudential, or any insurance company, judge on the fees charged versus what you get in return. I read some of the comments mentioned here and i did a google myself on Vista, if vista are true to offer opportunity to own up to 30 funds from worldwide funds, i personally feel it’s not really a big deal. If you walk into Fund-Supermart and buy 30 funds in 1 go, you might be paying more as an individual investor and some more some of the funds are exclusive funds which require minimum investment amount of $1 million

          3. How the charges being charge, get your financial adviser to explain in details on it. He should know else you shouldn’t engage him and pay him what he deserve. After all, his role is to advise you in financial planning. From what i understand, the charges is not as simple as what is shown by Andrew (Hi Andrew, i’m not targeting you in this). If you can, work it out in excel on yearly / monthly breakdown. It’s something fairly similar to stock or forex investment (By the way, I’m a Forex day trader that generate around 30% return per annum). To cut it short, you need to take your premium divide by the unit price at the time you purchase to get then unit you own. Then multiple the unit you own with the price at the time the charges is incurred to get your net asset value then multiple that 4% or 0.75%. If your fund is growing, then the charges is high, if not, then it might be quite low.

          4. When i read that a lot of people are pulling short of their investment, this is actually a very bad move. You’ll be a very sad person and your insurance company will be very happy cause they’ll charge you that penalty charges for early redemption. When your fund is not doing well, ask your adviser why is it so. Pester him as he should be the one to advise you on this and not google in the internet and get random advise which is disastrous. For all you know, the bad time are usually the good time for regular investors. This is Warren Buffet philosophy – dollar cost averaging. When you do a regular investment, you basically don’t look at the market performance, you wait till your planned “expire date”. You throw in money in fixed intervals. When the market is good, that’s great, your investment is growing. When the market is bad. That’s even better, cause the same amount you invest, you are getting more units in return. And this way, your fund don’t have to grow back to original point for you to break even, your fund will break even at even low points. If you don’t understand what i’m saying, go read Warren Buffet books. Get advise from real investors.

          5. Long term investment plan are not for everyone. You’ll have to ride it out for the full terms to enjoy the benefits. Although i’m a day trader, some of my investment are in for long terms. That’s the best way to ride the wave. If you can’t hold it out. Don’t buy in the first place. Usually for long term investment, you’ll only see a real returns at least 5 / 6 years into the plan. You won’t see much gain in the first 3 years.

          6. Diversify your nest. Even i’m a day trader, i don’t put all my money into Forex even though i know i can make 30% per annum. I will diversify my investment to reduce my risk. Similar to investment. Never put your investment into single fund, if you have options to get more funds in 1 go, do so, then your risk are actually reduce. Choose from low risk to protect your capital, medium risk to get you that basic returns and higher risks funds to get you your full earnings. Usually the higher risks funds are those that can generate you most returns but fluctuation are very wide as well.

          7. The main topic here discuss about charges, be fair to everyone. Everyone is out to earn a living. The only question, is it worth to pay that amount. You are basically hiring a person and in this case, many persons to do your investment for you. If you can invest yourself, can you monitor that many funds everyday. I myself can only manage 4 accounts with single investment in 1 go. These guys are monitoring multiple investment in single funds and in vista case, up to 30 funds in 1 go. You can do the maths yourself, how many investors / fund managers you are hiring to take care of your investment. You are not buying a policy, you are buying an investment so you need to pay the salary. Also, is your adviser doing his job by giving you correct advise? If they are doing a good job, why not? For all you know, when you plan mature, you might be earning few times more that what you have to pay.

          In conclusion, make a wise decision and ask around first before regretting for life.

          Don’t ask me how to invest in Forex as this is not the discussion in this topic and i don’t invest for people. Even if i do, i might charge at a even higher rate than insurance companies and likely i’ll ended up in another tread for charging people too high…:)

          • New Guy:

            You aren’t considering the biggest issue here. When in investing in funds, people lose to their respective indexed benchmarks in equal proportion to the fees paid. Plans such as these carry costs of roughly 4% per year. As such, over a long term, they will lose 4% per year to their respective benchmarks, on aggregate. Actively managed portfolios have very little chance of keeping pace with passive (indexed) portfolios. There’s no academic debate on that–it’s an unchallenged truism in every academic study. And when paying 4% per year to hold those active products (this includes all expenses and unit trust costs with a plan such as Zurich’s and Friends Provident) then yes, the investor will certainly under-perform over a long period of time. And by a lot.

          • New Guy says:

            Hi Andrew,
            I’m no Guru like Warren Buffet when come to investment. I’m just making my fair earning using his philosophy.

            One thing i do know is it’s not wise to ask people to cancel their long term investment especially those with insurance companies when the penalty charges are superbly high during the initial years. You are not losing the charges you paid but also penalty charges and it can cost more than half of your money. You didn’t even let their investment to have a chance to perform and make some returns through dollar cost averaging and you have ask them to cancel. This is disastrous. These people will be highly affected and insurance will be laughing with the fat earnings from the penalty. You are not helping the people but the insurance companies.

            From what i read in the internet on the charges incurred, it’s actually not 4%. If you do your maths correctly, it’s average out to range around 2-3% annually. Bank are charging about the same rate for their loans…

          • New Guy,

            You are forgetting unit trust expense ratio costs in your calculations. Total fees amount to 3-4% per year with these schemes. If you see the response I had for Mike, earlier today, you’ll note that I suggested he do the math to determine whether he should sell (and take the hit) or hang on.

            These schemes, let’s hope, will eventually go the way of the dinosaur when people figure out that they can passively invest in a diversified global portfolio and pay 0.2% per year, instead of 3.5% plus–while allowing them the flexibility to sell their investments when they want. You never know when a family member is going to need help with medical expenses, or a home rebuild after a disaster. Having funds wrapped up (and bleeding from fees) is a shame.

            You may not be Warren Buffett, but if you keep up your 30% FOREX investment returns, you will grow far richer than Buffett and Gates. This exceeds Buffett’s long term performance.

            Andrew

          • New Guy says:

            Agree that there’s other investments in the market that charge lower but you need to have the time and know how to do it. If not, you need to hire someone to do it for you else you might lose even more if you don’t have the know how.

            If you are depending on people to manage your investment for you. They are definitely going to charge you higher for doing it. You can’t expect people to manage your investment for you and charge peanuts for doing so.

            Go check around the market and see how much brokers are charging their client to manage their investment for them….:)

          • New Guy,

            You’ll learn, as you start comparing fee structures, that ILAS products such as these charge the highest fees in the world. Non ILAS advisors usually charge significantly less. I’m starting to think that you actually sell these products. I know the conflicts you must feel. You can earn a high income by selling ILAS products, but your clients (as you may be learning) will suffer. People can find great advisors charging just 1% on assets (or less) to build passive portfolios for clients with expense ratios of 0.2% or less. All told, fees would amount to 1.2% per year, compared to 3.5-4% for an ILAS product. And unlike the ILAS products, investors would have full flexibility to sell their investments, should they need to (without getting hammered by redemption costs). The compounding performance difference is exponential. What’s more, most non ILAS advisors tend to be much more educated than most ILAS sales reps. Take Tony Noto for example. He’s a CFP (Certified Financial Planner) and has his CFA. (Chartered Financial Analyst) Here’s a link his website http://www.notofp.com/

            At some point, New Guy, you will come to a moral crossroad. Most ILAS reps don’t realize the damage they do. The advisor profiled in this ILAS story is a case in point: http://www.scmp.com/business/money/investment-products/article/1262327/hong-kong-consumers-angry-after-being-sold?page=all

            They aren’t bad people, but they’re susceptible to selling expensive products for massive commissions–and this can have comparatively destructive results when juxtaposed with a lower cost, more flexible framework, managed by a (typically) more educated advisor.

            You can manage people’s money ethically. It’s not as lucrative as selling ILAS products, but it adds (rather than subtracts) value. And as more people become financially educated, ILAS platforms, which are under serious scrutiny already, will go the way of the dinosaur.

          • New Guy says:

            Andrew,

            I just based on my experiences and what i know to share…:) It’s still up to everyone to decide what to do with their money. I’m a no person to tell them what to do. What i won’t do is ask people to sell their plans when it’s the worst period to do so.

            I have friends as adviser, in fact my best friend is a adviser..:) that’s how i came across your website as we were talking about it and that’s how i know what is their earnings.

            What i do want to advise folks here is that just get your adviser to break down the cost in details for you before you sign your papers. You are paying them to do this, if they are not doing it, then he/she is not fit to be your advisers. Like Andrew was saying, not all adviser are fit to do the job and not all of them know what they are selling but it doesn’t mean all adviser are rotten eggs.

            Never sell your funds when it’s in the negative region. Most investment plan, if you diversify it well enough (provided your advisor do a good job for you) should break even half way through your plan. When i say break even, it’s the break even point whereby your surrender value equal to what you have already paid. Then cancel your contract. That way you will not be wasting your money.

            My broker charge me between $25 to $40 per transaction as my each investment is less than $50K. If i do a single $1K transaction per month, it work out to be around 2.5% to 4% annually. And that is for single investment, if i diversify my investment further, this figure will no longer stay in the 2.5% to 4% region.

            Do tell me that my calculation is wrong in the above as this is the amount i have been paying to my broker.

          • New Guy, a commission of 3% is not the same as an annual expense of 3%. The first is a commission taking 3% of what you deposited, but it’s just a one time fee. Annual expenses are forever.

            Using some small numbers for example:

            You invest $100 with a 3% commission. This leaves you with $97 to invest. Assume the investment makes 8% per year before fees, and 7.8% after fees. Your $97 would compound at 7.8%.

            If you invested the same $100 and paid no commission, but paid annual expenses of 3% each year, your $100 investment (assuming the investment made 8% before costs) would only make 5% per year.

            Over a lifetime, the second scenario would make far less money than the first.

            Annual expenses are a killer. Commissions costs, although a pain in the butt, have far lower consequences when the transactions are kept to 12 or so a year.

          • New Guy says:

            I guess i used a wrong example in this…:)

            Anyway, i’ll leave it at that for the folks here to think. This’ll be my last post here. I have no obligation to continue anyway. Everyone here is mature enough to do their own thinking.

            My initial intention posting in this forum is to get everyone aware that it’s disastrous to cancel your investment in the early years. Find out more before you do so.

            Always ask what are the charges incurred, be it insurance plans or saving account with bank before you sign on the papers (just a side note, Citibank are charging $10 a month if you don’t maintain the minimum amount in your saving account).

            Judge it for yourself whether is it worth it to pay whom you hire to manage your investment or saving.

            Bad time might actually be a good time for your investment if you play in the dollar cost averaging formula. This has been proven by many famous investors.

            Warren Buffet advise from http://www.aarp.org/money/investing/info-08-2013/warren-buffett-on-money-success.html

            On Thinking Independently

            You’re neither right nor wrong because people agree with you. You’re right because your facts and your reasoning are right.

            On Investing

            The first rule of investing is not to lose money. The second rule is not to forget the first rule.

            On Picking Stocks for the Long Term

            You should invest in businesses so good that even a fool can run them, because someday a fool will.

            On Bonds

            Bonds should come with a warning label. Most currency-based investments, such as money market funds and mortgages, are among the most dangerous of assets. Their beta [price volatility] may be zero, but their risk is huge. The dollar has fallen 86 percent in value since 1965, when I took over Berkshire Hathaway. It takes $7 today to buy what $1 did at that time. For taxpaying investors like you and me, over the past 47 years, the continuous rolling [over] of U.S. Treasury bills has produced … no real income after taxes and inflation.

            On Investing in America

            Investors need to avoid the negatives of buying fads, crummy companies and timing the market. … [For most investors] buying an index fund over a long period of time makes the most sense. Just make sure you own a piece of American business.

            Whether the currency a century from now is based on gold, shark teeth or a piece of paper, our country’s businesses will continue to deliver goods and services. These commercial “cows” will live for centuries, and proceeds from the sale of their “milk” will compound for the cows’ owners — just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well).

    • Zurich Customer says:

      I do not understand, why so many educated people, who know finance and basic math still buy such product.

      Just do simple compound interest calcualtions on your investments with fund based charges of 3%, then insurance company charges of (avg) 3% to 4%.

      Your monies are actually depleting at the rate of 6% to 7% every year. And all that special bonus schemes or promotions you see are actually not there. They are linked to you stay invested for 25 years means you have to bleed for 25 years. Now calculate the cost of charges you will pay on any such flimsy campaigns these companies are running.

      In my opinion even money under your pillow should worth more than investing in these products after adjusting for inflation.

      I just feel laughing when these companies in their AGM boast about ‘customer centricity’ which is modern day mantra to make dow jones sustainability index happy.

      You only need to answer if you have seen any customer centricity in this product and approach of these companies.

  2. Hi Jesse!

    I'm so glad that you found this post.

    As an American, you must declare all of your investments with the IRS. As such, opening an account with a company like Vanguard or Assetbuilder (based in the U.S.) makes the most sense.

    Both of these companies use indexed investing strategies (as recommended by my book and streams of academics) and they are highly tax efficient and very low cost (unlike Zurich and Friends Provident)

    You will need to give a U.S. address when opening the account, even if you live overseas. It could be the address of a friend or relative. Vanguard can be sticky about expats, but Assetbuilder will welcome you.

    Here are their links:

    http://www.vanguard.com http://www.assetbuilder.com

    Keep me posted on any interactions you have with them Jesse. You can lead the way for many of your expat American friends in Japan.

  3. MATHEW WILLIAMS says:

    Hi Andrew,

    Great (yet frightening) post. To my regret, i am currently invested in a zurich vista plan. What is your advice on getting out – take the penalty and pull out, stop any additional bleeding and leave as is or something else.

    Thanks,

    ~a fellow Canadian in Singapore

    • I did the math on that question Matthew. And it wasn't pretty. But each person’s situation and goals are unique.

      If you've read my book, Millionaire Teacher, you'll see that I profiled a Canadian in Singapore (Gordon Cyr) who did cut his losses. He cut his losses with Zurich and set up an account of exchange traded funds with DBS Vickers. But that may or may not suit you.

      • MATHEW WILLIAMS says:

        Hi Andrew,

        Thanks again for the thoughts. I do have your book and have seen the part on Gordon – seems we both are in the same boat. For me, I am 20 months in, so according to my agent, I can stop contributions now (for up to a three year period). If that is the case, it seems like a better idea to stay put (as the heavy surrender fees at the moment would take an epic hit). Just for my information, how are you 'crunching' the numbers that get you to the outcome that it's better to leave? What are some of the big determining factors (outstanding term, total contribution so far or is it purely the fees)? I'd be curious to get your views.

        In the meantime, I've set the steps in motion for DBS.

        Best regards,

        Mathew

  4. Hey Matthew,

    I can’t suggest what you should do. But I will show you how fees hurt returns:

    Take a $10,000 investment making 6 percent a year for 30 years:

    Result: $57,434.91

    Scenario 2:

    Take $10,000, but erase $4000 of it.

    Take that $6000 remaining and make 9 percent a year for 30 years:

    Result: $79,606.07

    Zurich's annual fees (including their fund costs) wil be at least 3 percent per year higher than what I pay for investment fees. But you must make your decision on your own.

    Cheers,

    Andrew

  5. WTF?! says:

    Andrew, Andrew, Andrew,

    I've just finished your book, went here to your blog, found this post…and feel-like-a-sucker. Total sucker! It's embarrassing. I'm stuck in a Friends Provident plan valued around 75,000USD and in a Hansard one valued around 80,000USD. I was struggling with the thought of cashing them both in and accepting the penalties (with tears), or reducing them to minimum, minimum monthly payments. However, reading your above description puts it all in perspective. Ouch.

    Did I mention I feel like a sucker?

    I am filed as a non-resident of Canada (living in Japan) and was wondering if there were any issues re: tax I should be aware of before I jump into the coach potato scheme?

    Lastly, when is the book coming out on saving for a university fund for the kids?

    Thanks again for the book!

    Regards,

    WTF

  6. Mathew says:

    Hi Andrew –

    I am in a continued discussion with a Zurich advisor (well, 'independent' – but we doubt that). He has provided a document that states that with a $2000 premium, the expense charge equates to 1.3%. Admittedly it is still more than the low fees attached to index funds – but how can they make such a claim when you mention they are at least 3% higher?

    Another one: I am being provided with a few fund prospectus – and the growth figures are:

    1 mth: 17.07%,

    3 mths: -1.16%,

    6 mths: -16.3%,

    1 year: -17.91%,

    3 years: 134.94%

    Since inception (Jan 1, 2008) -18.24%

    How can they claim that the three year growth is over 100%, but then since inception (4 years ago) it's down almost 20?

    They state this is 'cumulative performance' – but I have also seen figures around compound performance. Should I pay more attention to that (which looks a lot lower of course).

    Thanks,

    Mathew

    • Hi Mathew,

      Your sales rep, unfortunately, has not added the hidden expense ratios for the unit trusts (actively managed mutual funds) that you own through this company, in addition to the extra costs charged to the account itself. You can't blame the rep for that, considering that he/she probably doesn't really know that those mutual fund expense ratio costs exist. The average investor doesn't bother to ask. Yes, your total costs do likely exceed 3% annually.

      I don't know why your fund returns on the prospectus are so oddly reported. But it doesn't really matter, either. Your costs are high; consequently, your returns will be lower. Unfortunately, since January 2008, you should have made a decent return, instead of experiencing a loss. For a benchmark, here's a link providing a variety of Assetbuilder's indexed portfolio returns. http://assetbuilder.com/GrowthofWealth/AssetBuild

      Each of the Assetbuilder model portfolios have different risk tolerances (some have more stocks than bonds and vice versa) but they have all made money since January 2008. Sadly, for you to recover from an 18.24% decline, you have to make more than 20% to get back to even. It might sound like strange math, but a 100% gain is required to recover from a 50% drop.

      I'm really sorry that you stumbled into this company's investment products, but there's a single silver lining: you're now aware of it, and you have an option.

  7. Hey WTF,

    I'm really sorry to hear about your investment plan. But don't be too hard on yourself. You didn't learn this stuff in school, and our world (for better or worse) is based on free enterprise, so many investment firms will try to bleed its clients, if they can get away with it.

    As a non resident, you won't be able to invest in Canadian brokerages without potentially harming your residency status. But you may be able to open a brokerage account in Japan that gives you access to other international stock exchanges, allowing you to build a couch potato portfolio from Japan. For example, I live in Singapore, but my brokerage allows me access to the Toronto, New York, Singapore and Tokyo exchanges.

    Through my brokerage here, I can build a Canadian couch potato portfolio quite easily. Singapore doesn't charge capital gains taxes on investments. If Japan does, the percentage is likely to be low. As an expat Canadian, you can even open an account with the same brokerage I use, but you would have to fly here and open that account in person. From then, you would manage the account online, much as I would with my account.

  8. Lisa says:

    Hi Andrew,

    I am a Canadian teaching at Saigon South International School in Vietnam. I am in the same boat as Matthew. I have been investing with a company called Generali International, Guernsey, Channel Islands. In 2007, I opened up a 30 year VISION retirement plan. Recently, I stumbled on to your website and then read your book. I immediately got in contact with Generali and basically all the 'administrative fees' and extra charges are almost identical to what was outlined in this post. I am in a state of shock. I will basically be getting half of what I put into this plan. I am cashing out this plan immediately. I have also stopped contributing to my Raymond James fund. I will now have a bit of money to send somewhere to invest in a couch potato portfolio.

    I am a non resident of Canada. I won't be able to invest in Canadian brokerages without potentially harming my residency status as you stated. I want to build a Canadian couch potato portfolio. I want to open an account with the same brokerage you use. That way I can manage my account online from Vietnam. What brokerage do you use?

    Andrew, I am so happy that I stumbled upon you. Thank you for any guidance you can provide.

    Sincerely,

    Lisa

    • Hi Lisa,

      I spoke at the EARCOS teachers conference in March, 2011, and there was a teacher from Vietnam who I was in touch with for a short while after. Unfortunately, I can't recall his name, but he flew to Singapore to open an account with DBS Vickers, which is the same brokerage I use. Through DBS Vickers, you could buy the couch potato ETFs, and your account wouldn't accrue capital gains taxes because Singapore doesn't charge capital gains taxes. Another Canadian teacher, from ISB at Bangkok, recently did the same thing. Give the brokerage a call and let them know that you would like to open a "trading account which would give you access to the Toronto Stock exchange" At some point, you will need to fly here in person to fill out the paperwork. It won't be, initially, very convenient to set up, but it will be much better than the expensive road you have currently started down. I'm really sorry to hear about the firm you got involved in.

  9. Neil says:

    As I Canadian working in mainland China, I looked into opening an account with DBS Vickers Hong Kong, who turned me down. They do not open accounts for Canadian citizens, even though their website does not mention this. Saxo Bank Hong Kong have said that I can open an account with them, online. This might be an option for other Canadians who do not want to fly down to Singapore. Have you heard anything bad about Saxo Bank?

    PS. Bought the book and found it very informative. Like an above poster, I had an account with Generali but it was only a 10 year term with the lowest monthly deposits possible. I cashed it in last week and am waiting for the funds to be sent to my bank. Thanks Andrew for opening my eyes about this.

  10. Hi Neil,

    I haven't heard anything bad about Saxo. Here are some questions to ask:

    1. Will I have access to the New York Stock exchange when making purchases?

    2. How about the Toronto stock exchange?

    You can make do without the Toronto, but you'll need the New York if you can't have Toronto.

    3. Any annual account fees?

    4. What are the commission charges?

    Good luck with this Neil, and please keep me posted. Also, if you have a few minutes, I'd be thrilled if you could review my book on Amazon! Here's the link: http://www.amazon.com/Millionaire-Teacher-Wealth-

    Thanks Neil!

    Andrew

  11. Karenne G says:

    I have a Vista from Zurich which seems a killer to me. I want to make some partial withdrawal but the agent tells me I can take only 50% of my value today as they have to retain a bit.. I also took a Futura for which he told me Nil allocation period is 24 months. But I saw no allocation for atleast 28 months.. I think this whole thing is a scam where only ZURICH makes money..

  12. M.G. says:

    Looks like this is the blog post comment section where all of us regretful ex-pats come for some advice.

    Bought the Kindle version over the weekend and plowed my way through it all the while kicking myself for not listening to other people's warnings about my financial advisor. Now I'm six years into his "plan" and I know that I've lost a lot of money due to management costs.

    I currently have about $20,500 in one of my managed funds. The surrender value will yield about $19,500. Looking at the advice you gave above, I think I'm going to cash this out and get into a Vanguard fund.

    The real problem is that I have another fund with my guy that is valued at around $55,490. I've paid into this about $49,000 in premiums since Feb. 2009. Hmmmmm . . . not exactly the return I was hoping for! Spoke to their rep. today and he said I would have a surrender value of $52,133. My fees are 1.55% per year. Should I:

    1) Cut my losses, cash it out and roll all of the above into the Couch Potato fund you reference in the book?

    2) Start The Vanguard with the $19,500 and then dial back my contributions to the other fund, only paying the minimum? If I am doing the math right, I would take a 6% loss on my money in the second fund if I cash in early. But I need to keep this money in for at least another 4 years, which is more than the 6%. Am I right?

    3) When I move this money over, am I incurring any other costs? Such as taxes? Or will all of that come later on down the road?

    Looking forward to fixing my finances and so glad that I was only a few years into this before I found your book. I also work at an international school here in Europe. And I will definitely be selling a few more book for you!

    Thanks for all of the great advice!

  13. James D says:

    Andrew,

    I'm a 25 Irish engineer working in the UK. I've read your book a couple of times & I'm starting to read a couple of the other books you've recommended. Your book was an eye-opener. Thanks!

    I'd like to start investing with the index stock & index bond mix you've recommended but it seems a bit trickier in the UK – particularly when trying to deal with Vanguard as you have to use a "platform". Could you provide some advice on a "coach potatoe" type solution for the UK.

    Any help would be greatly appreciated… I'm 25 & fast running out of investment time! 😉

    To make matters more complicated, I'll be seconded to France over the next couple of years so I'd also be interested to know if you'd have similar advice for investing in France.

    Thanks,

    James

  14. YK Sharma says:

    Hi Andrew,

    I am working in Singapore. Wanted to present my son with a good book on Money/Finance on his 13th birthday. Stumbled upon yours, liked what I read about it and ordered it online on fishpond.com.sg. It arrived on time. Finished reading it two days back. Truly an eye-opener. But you know what ? I have committed every single mistake that you have warned against in your book.

    1) From Apr 2011 onwards I am investing S$ 2000 per month in Zurich Vista. 10 year 'policy'. Premium for the first 18 months will remain 'blocked; Getting 5% more units on my first year premiums (12 months)

    2) Investing S$ 750 per month in Friends since Dec 2009. 7 year policy.

    What do you think is the best thing to do ? Get out of both ? Complete the 18 month period in Zurich, stay put with this and not pay anything more ? Or to pay maybe one or two premiums every year just to keep it going to minimize losses (though do not know if this is possible).

    3) Even bigger mistake is the Universal life policy I took last June – AIA Platinum Legacy, US$ 500k sum assured. Since I have a 'risky' job, decided to pay all the premiums in 5 years (my definition of forseeable future) and be 'tension-free' thereafter. You know it was the 'emotional' thing – what happens if your wife survives you ? She will not be dependent on anyone else….and all that stuff. Pemium is close to US$ 33,000 per year and have paid 2 premiums so far. Three more to go. What to do ? Do you know if anyone would 'trade' this policy …if thats the best way to minimize losses ?

    Best Regards,

    YK

    • YK Sharma,

      I'm sorry to hear about the products you were sold. I don't know what you could do about your life policy. Wow…I've never dreamed that anything could be so expensive. As for the "investments", you may want to look at the withdraw penalties before making a decision. Fees will amount to roughly 3% per year, including expense ratios for the funds. This is going to be a killer long term drag on your money, so keep that in mind when figuring out whether it's worth taking it on the chin with these redemptions. If you run comparative returns: 5% per year vs. 8% per year in a compound interest calculator over many years, you'll see what I mean. Keep this difference in mind when determining whether to pull the plug or not. I wish there was more I could do to help. What you could do, of coure, is tell as many people as possible about these products. One of the reasons so many people get caught in these webs is because people don't talk about money and share what they've learned/mistakes they've made, etc. Thank you for being so honest on this site. There will be others who read this. And ironically, you will be saving someone else from going down the same path.

  15. David John says:

    Dear Andrew,

    I am working in a private company in Abu dhabi,my friend recommeded me for a whole of life protection plan fron zurich international life" Futura" on the aspect for protection;life cover and"Critical Illness". i had paid the premium for last 2 years.what is your suggestion on the product from your experience,i am an Indian Citizen…please advice……….

    • Whole life insurance, unfortunately, is a rip off. If you want insurance, you should buy insurance. If you want to invest, you should buy investments. The two should never be coupled. Unfortunately, they often are. Whole life insurance policies aren't as common as they used to be because many people have caught on. Google whole life insurance and read everything you can (that isn't put out by insurance companies). You'll see what I mean.

  16. Rese says:

    Hi! Andrew,

    i have FPI Premium account which i paid 18months way back 2years. I transferred my account to the different broker which i saw that there is no development on the cash value of my policy. and now i am thinking to continue my payment. Which do you think is the best i can do?

    Thank you!

    Rese

  17. Fahed says:

    Hi Andrew,

    Many thanks for your active contributions and the visitors’ feedback this will for sure someone from diving in a long term plan with tiny return investment at the end.

    I am based in Dubai and would like to join Vista for investment on a monthly regular premium of 1,000 USD for a period of 10 years. From what I understood that Zurich hidden fees and surrender fees are both extremely high this will impact the return of investment investment therefore. Example 8% vs. 5% actual.

    I am not a financial expert here, but my financial advisor stated the below regarding the charges, May you please recommend if this true?

    1. 4% setting up the policy of net 18 months amount of initial units (1000 per month*18*0.04= 720 USD Is this will be paid once at set up the policy? Or I will pay the same amount of 720 USD per year for 10 years ?

    2. Policy management charge 0.75 % A YEAR , again 0.75% of the 18 month amount? Will this be paid on yearly basis for 10 years?

    3. Monthly fee to administer your policy 7.5 USD Fixed MONTHLY

    4. Management charges of each fund purchased (Gray Area)

    5. fund investment advice fee, this will be required to have a financial advisor to recommend what to invest and when to sell and buy (1.5 % per year) again 0.75% of the 18 month amount? Will this be paid on yearly basis for 10 years?

    The Vista designed for a long term investment so if you are thinking to withdrawal before 5 years just forget and don’t enrol from day 1 due to high surrender charges

    There is a bonus of 1.5*10 years=15% will be added to the first year, is this true ? how I can predict the growth per year ?

    Last question please, Zurich having 3 types of investment fund including Low Risk, Managed and Mirror funds, which one you recommend in terms of moderate to higher risk. I guess the best will be managed funds as there is a tolerance and trade off in selecting between equities and bonds. In my case I will go for the one with more bonds rather more equities

    Appreciate your kind assistance on the above.

  18. Steve says:

    Hi, well I stumbled across this site whilst trying to search how to sell my underperforming Zurich fund I committed to when living in Singapore! I now know I am unlikely to find an active market of investors keen to take on board my fund. I was enticed by the silver tongue, the upfront bonuses, the wonderful projections and am now completely gutted that the 60% upfront bonus has been eroded and my redemption value is less than a quarter of my principal.. I will (have to) take it on the chin and I suppose I will take solace in the fact I have not contributed to it in 2-3 years and this will be the last time I will be fleeced so badly.

    • Hey Steve,

      I'm sorry you had such a terrible experience. Spread the word if you can, to ensure that none of your friends and family fall for such a venture. You could end up saving other people hundreds of thousands of dollars. It's some consolation, perhaps, for the money that the company took from you; it's a silver lining of sorts. Post your experience on Facebook. It's a small gesture that could save plenty of others, plenty of money.

      Cheers, and good luck.

  19. Farah says:

    Hi Andrew,

    This isn't abt Zurich per se, but I was wondering what kind of insurance planning you've done for yourself?

    I'm almost one year into an ILP and starting to get cold feet, especially after reading your book. I'm convinced that channeling the $ otherwise spent on premiums into index funds would give me better returns. But there are all these barriers to exit, incl my boyfriend-agent having to return back the approx 50% commission of my first year premium, so I'm confused between getting out of the product completely or compromising by taking a premium holiday.

    • Hi Farah,

      While I can’t advise you, I can say that most fee-based advisors suggest that if you want to buy insurance, buy term insurance, not whole insurance. I don't have children, so I don't require life insurance. My wife is able to work, so she wouldn't need money from a policy if I die. Plus, the best insurance is money in the bank (or investments, in our case) and no debts.

  20. Noor says:

    Hi,

    I am 42 years old, enrolled in the Zurch Vista plan since 2008. I have made regular contributions of USD 750 per month and in between even higher. I contributed cover USD 60,000 so far and have withdrawn about USD 24,000. In case I surrender I stand to lose up to USD 21,000/ of my contributions today and in case I continue I still have over 15 years to go. Besides the forced savings, I do not see much benefit so far and I bought the policy on trust without really investigating the penalties. I do feel I can do the saving in a better way without relying on such a mechanism which is long drawn and has so much penalty involved. My basic query now is should I just stop and pull out now and cut further losses? Thank you

    • Hi Noor,

      It literally breaks my heart every time I hear such a story. I'm so sorry this has happened to you.

      If you started investing in 2008, you should have made money by now. The stock and bond markets are higher today than they were in mid 2008, and if you were dollar cost averaging, you would certainly have made money, if you weren't paying high fees. You can see the results of a blended Vanguard index fund here: http://quote.morningstar.com/fund/chart.aspx?t=VT… Check its level since mid 2008. You would be up roughly 11%.

      • Noor says:

        Hi Andrew,

        Thank you for your concern and valuable comments. I am looking at this now as a lesson (albeit costly) in investments. If I could save a few people from the same mistake, by this lesson, I would consider the loss worth it..

        The simple thing I have learnt now is never enter into any financial agreement or contract that is not equal to both parties.

        For me now it is not about how much money I make with a different route. I may make much less. At least I do not want to be one who continues to fund corporate greed.

        Thanks again.

        • I'm very inspired and impressed by your attitude Noor! You're amazing! Keep spreading what you know and it will benefit many others. Thank you for posting your story on this blog. It will help people; I guarantee that.

  21. Steve says:

    Andrew,

    can anything be done to bring Zurich et al to task and accountability for unethical sales other than making the individual sales person accountable? Is anything being done to get fleeced investors redress? My sentiment on this is if I knew everything that was needed to know about the twists and turns blah blah, I would be a financial guru and not need a trusted advisor

    • Hey Steve,

      It's interesting you ask, and I certainly don't have an answer. Recently, Scott Burns (the American syndicated finance columnist) sent me an email lamenting about unscrupulous practices in the banking system. He has been writing for 40 years and seemed to suggest that we have hit all-time lows. Then earlier today, a colleague from work (a widow) was convinced by DBS bank to allow the bank to trade currencies with her husband's life insurance money. As of now, that's what the bank is doing. What can we do? Again, I don't know. I will be calling this particular rep myself on Monday and I'm going to calmly ask enough questions to make him feel very shameful (I hope) but greed appears to have no boundaries.

      As for groups like Zurich and Friends Provident, the best we can do is talk about it and share what we learn. I've been thrilled (and saddened) to see how many Singaporean based expats have searched (googled) these companies and found this article. People like you are doing a service when sharing your stories on this blog thread. Together, we can prevent this from happening to others. True, only a small percentage will be benefit, but for those people, this will be worth it.

  22. Hi MG,

    I'm terribly sorry for missing your question. What nationality are you? And where do you live? Your investment options are dependent on these factors.

    Unfortunately, the fees you mentioned did not include the expense ratios of your funds. Coupled together, you are paying more than 3% annually in fees.

    • M.G. says:

      An update:

      Hi Andrew . . .

      Just scanning through your site and saw that you replied to my comment. Yes, a year ago I was in a dark place, financially speaking. Like others, I felt so naive for signing my name on the dotted line with one of “those guys” who are supposed to be so much smarter about managing money than the rest of us financial idiots.

      Fast forward almost a year . . . the clouds have parted and the financial sun is shining quite brightly. I cashed out both of my funds and put them into Vanguard indexed funds as you suggested in the book. This took some convincing when I talked to the Vanguard rep. on the phone until I said that I had 70K for my initial investment. I was told by my initial contact that because I was an expat I couldn’t invest with them but her supervisor was receptive to me putting this account under my mpther’s address in the U.S. and having all correspondence mailed there. My advice to any U.S. expat is not to even mention how many years you have been abroad. Just use your U.S. address.

      Anyhow, after seeing how much better my returns are after a little less than a year, I can’t express enough gratitude to you for saving me before I was too far gone down the road with “my guy” who used to manage my money for me. Having the ability to visit the Vanguard website and see everything in simple, transparent language gives me a sense of calm and so much piece of mind. I no longer worry about having enough money for retirement.

      I have preached far and wide about your book and the investment strategies you recommend but most people view it as too much of a hassle to cash out their current funds and move their money. This makes me want to pull my hair out since people are so satisfied with the status quo and aren’t willing to make a small time investment that will pay big dividends in the future. Do you have any advice on how to lead these stubborn horses to water and make them drink?

      Once again . . . a HUGE THANK YOU!

    • Fahed says:

      Hi Andrew,

      Thank you for your reply and sorry for my late response. i understood that up front fees of 2.5 % per year taken from something called ICP (1000*18=18,000 USD) and this is fixed all over the period. Is this right?

      May you please tell me what you mean by My ETF investments?

      Again many thanks for your support.

      Looking forward to hear from you .

  23. Neil says:

    Hi Andrew. I mentioned before that I dropped my account with Generali, since it is so similar to Zurich. I am feeling somewhat guilty because I thought it was a good system, especially living in China. We do not have easy access to investment opportunities and Generali lets you pay monthly with a Chinese credit card. I still am going through the process of setting up an investment plan in Hong Kong but that means me flying down with the paperwork and then figuring out an easy way to send money down there. Anyone who has had to deal with a Chinese bank knows how frustrating it is to deal with the Chinese banking system. Over an hour at the bank just for a wire transfer, which does not include the 34 minutes waiting for the one teller to finally get to you. I am now dealing with black-market money exchangers privately, which give almost equivalent exchange rates as the banks, and will be flying down to HK periodically with cash stuffed in my underwear.

    This is why I am torn over my assistance with other teachers, especially new ones. What surprised me is that so many set up 20 years plans for thousands each month, while I started out with a 10 year plan at the minimum amount. Should I continue to advise them, given the difficulty of investing here in China? I have told people that I dropped mine due to the fees but it did not faze them. They like the convenience, especially when they hear what I have to go through to invest overseas. It is much easier in a modern country like Singapore but China is still sufficiently backwards enough to make things difficult.

    I know new teachers will ask me what to do in September and I don't want to piss off the other older teachers, who I introduced to the Generali salesman. Then again, they are adults who should also do some investigations on their own. I'm torn.

  24. Grace says:

    Hi Andrew, I chanced upon ur entry while googling of FPI cuz I m worried abt my investment… Sad to say… I have a plan with FPI and I m currently 1.5yrs into a 25years plan…. I not too sure but the policy is still gaining~22%.. Not too sure if it's those bonus they are giving out in the 1st 18months.. I started in jan10 @800/month and increased by another 1500/month.. Total 2.3k/month… Total premium paid to date is 28k and valued at ~34k.. The surrender penalty for 1yr is ~89%.. So.. I m not sure what to do… Should I pull out now and take whatever losses or I should jus decrease it to minimum? What are the options I have… How do I keep my investment cost low? I m not too sure how to start investing….. Any advice is much appreciated.. Thanks!!

    • Hi Grace,

      You are likely in the bonus phase of their Gold Plan, based on the high sums you are depositing. There is a psychological incentive when selling investments to give the client a good return right away. Then, they are less likely to ever switch, based on their first impression. And Zurich makes this happen right away with their incentive bonuses.

      In the first two years, it looks amazing, as does your account's added value. But if you look progressively at the Gold bonus plan over many years, you'll see that they "please you early" and then hardly give you anything as the years progress. Check out the link here: http://www.csmltd.com/Zurich_International_Life_N

      It's a nice little short term magical trick, but if you apply the drag of their costs over time, the bonus (which you can see from their site is small over the long term) is paltry compensation relative to an alternative lower fee structure which would ensure you make twice as much money over a 30 year period. You may consider just paying the minimum and finding a lower cost investment option. It's up to you.

      • Grace says:

        Hi Andrew.. My plan is actually the global wealth builder by friend provident.. The closest I can find online is http://www.friendslife.co.uk/doclib/gwb_plus_prod

        mine is not the Plus version….. But the summary of charges is as below

        Summary of charges

        Initial Charge

        Quarterly charge of 1.5% of the then value of

        the Initial Unit holding, taken by cancelling Initial Units on the quarterly anniversary of the plan commencement. The Initial Unit Period is 18 months on all Global Wealth Builder Plus Plans. The initial charge continues until the Option Date.

        Plan Fee

        Taken monthly by cancellation of Accumulation Units. The Plan Fee is USD 6 (or SGD 9, GBP 4, EUR 6, HKD 48) per month. During periods where there may be no Accumulation Units the Plan

        Fee will be accrued. When Accumulation Units become available any accrued Plan Fees will be systematically cleared.

        Premium Charge

        Additional single premiums are subject to a charge of 7% of the premium which will be deducted before the premium is applied to Accumulation Units.

        Administration Charge

        An Administration Charge is taken at a rate of 1.2% per year (0.1% per month) of the bid value of each fund each year, debited directly to the fund on each valuation day.

        My financial adviser was telling me the bonus they give will be able to cover the charges they have.. And also after netting off the charges.. Should be able to see a 7% return… It's too late to say anything now.. Jus thinking wat to do for now.. Any idea how the currency conversion rate will affect the value? I thought if its a monthly thingy then it wouldn't affect too much at the end of 25yrs?

  25. Ramesh says:

    Hello Andrew,

    I bought Vista policy in Dec 2008, I pay $300/month, till now I have paid $14169 as premium and current value is $13900, I dont watch my funds regularly, I did a little comparision in Jan 2012 premium paid was $10864 and fund value was $9436, here is what happened to one of the fund invested Jan2012 value 2.2750 value of same fund in Aug2012 is 2.6420 that is 16% increase, these figures just confirm what mentioned in your blog, even when individual fund value has gone up (in portfolio of my investment, I have shown performance one of 4 funds that I have asked Zurich to invest in, NAV of all four funds has gome up by 4-16%), current value of my portfolio has gone down by -3.8% ! where did all money go! it has to be fund management fee of some kind, for value of my fund to go up by say 9%( as shown in broture of Zurich) then performance of individual fund should give return of say 12%. Please confirm if my math is right, if it so I have my answer, get out or watch daily for next 6 years.

  26. BIJOY says:

    DEAR ANDREW,

    I AM A LOWER MIDDLE CLASS GUY WHO TURNS BLOOD TO SWEAT, TO HAVE GOOD A SAVING IN A GULF COUNTRY. ACTUALLY I AM FROM INDIA, WORKING IN UAE. THE "Friends Provident International" HAS CHEATED ME.I HAVE PUT AN AMOUNT OF 2900 USD AND NOW THEY SAY THEY CAN GIVE ONLY 45%. REMAINING 55% THEY DEDUCTED AS SURRENDERING PENALTY. I HUMBLY ADVISE YOU TO STAY ALOOF FROM THIS COMPANY..WHICH WILL CHEAT YOU IN ALL POSSIBLE WAYS.

    I AM THINKING OF TAKING LEGAL ACTION AGAINST THEM.

    • Dear Bijoy,

      I'm so sorry to hear that Zurich International has hurt you financially. If you do challenge the company, please keep me posted! And help to spread the word about the unscrupulous salespeople who give very selective information when selling these products. As mentioned, please keep me posted.

      Wishing you the very best,

      Andrew

  27. Curt Mann says:

    Hi Andrew,

    I was going through your explanation here. Not 100% into it but just going over the stuff you've written. Isn't the calculation in your first illustration wrong? (If you invested $2000 per year over 20 years, the market value of the investments would be $861,667.20.) and (If you invested $2000 per month for 20 years, you would have invested a total of $240,000 ($2000 per month X 12 months x 20 years = $240,000).

    Correct me if i'm wrong… Gota go…

    Thank you,

    Curt

    • Ha! I should hire you as my editor! Thanks Curt, I made the change. I meant $2000 per month, and it comes to just over a million dollars after 20 years at 7% per year. Thanks again!

  28. Chef Shane says:

    Thanks for your website Andrew.

    I was recommended FIPL last week by an expat advisor taking care of many colleagues, and I was going to sign with them this coming Tuesday.

    I didn't understand a few things, and thought I'd better check things out myself beforehand.

    Spent this weekend researching and your site kicked off a slew of murky discoveries.

    You've saved me a fortune in money and heartache before I've even started.

    If I'd committed and lost that much, I'd be in the mood to murder somebody.

    Just bought your book on Kindle 10 minutes ago as a way of saying thanks – and to assist in reconsidering my strategy.

    I'm a NZ working and living in Vietnam, no intention to return home.

    Any good reliable offshore solution for bank, visa/MC, and reco for Intl transfers and index funds?

    • Hey Chef Shane,

      I'm thrilled that you googled this financial company before wading into the mess. You can see the stories of heart-ache above. You might consider an account with Standard Chartered's brokerage. I wrote about them in this post: http://andrewhallam.com/2012/09/expat-australian-

      Through this brokerage, above, you could buy an international bond ETF, a world stock market ETF and a NZ stock market ETF. This would make a very nice, complete portfolio….at a fraction of the Zurich/Friends Provident cost. And you could sell at any time without getting raked over the coals.

      There are many low cost brokerage options in Singapore.

      Andrew

      • Chef Shane,

        I forgot to mention that you would have to come to Singapore to open your account. Other expats living in Vietnam have had to do the same. Financially speaking, it would certainly be worth it. But I know that the flight (and such) is a hassle. If you'd like a place to stay while here, my wife and I have an extra room.

        Cheers,

        Andrew

  29. Financial Adviser says:

    Dear Andrew

    I'm a financial adviser and I have recommended this product to some of my clients as I feel that for layman investor, this plan serves as a good entry for offshore, private funds with low entry requirement. 

    In Zurich and Friends, it allows customers to buy many mirror funds from JP Morgan, BlackRock and UBS, and then dollar cost on a monthly amount of $675 per Annum, with free switching options of changing from funds to funds anytime. From my understanding, to buy into a JP Morgan fund, the minimum entry is $100k and upfront fee is 5% and 1.5% per annum management fee. And everytime I switch that $100k from JP Morgan to BlackRock, the fund manager from BlackRock will charge me another 5% upfront fee. If this gets repeated through an actively managed portfolio, the upfront charges can be a large concern. So I always thought that this type of product is good to achieve a low entry, dollar cost, diversification. 

    That's my personal opinion and as much as ETFs being good, it is still an index and I thought its good to have exposure in both ETFs and UTs too, with UT Fund Managers trying to beat the index.

    But after reading your thread, I'm very concern, because if my clients are reading this thread and terminate their plans today, they will lose a lot of money due to the high surrender penalty, despite their initial understanding that they started this for long term. An alternative when they need money is to do partial withdrawal which do not have any surrender penalty as long they don't touch the lock in portion of the invested money. I only advise clients to invest into this product if the tenure of investment stretches above 15 years as I feel the charges will be significantly lowered due to the longer term. If everyone cancel with high surrender penalty, then companies like Zurich and Friends will be earn lots of monies from charging the high surrender penalties on clients. Isn't this much more detrimental to clients and rewarding for financial companies?

    In my opinion, asking people to avoid financial companies like Zurich / Friends is the same as asking people to make their own coffee rather than buying Starbucks Coffee or asking people to cook instant noodles at home rather than going for dining at the restaurants. It's very true that the financial companies take a cut of the profits of the investments and financial advisers take a cut on commissions when managing the monies for clients, but I feel this is just how the business environment operates. Layman investors may just requires this kind of services. 

    It's the same as writing books and selling them at the bookshops. No book writers will write a book and publish it and starts giving it away for free. And no bookshops will sell your books without getting a cut of profit. I thought I just wanted to share my thoughts and hear your opinions on my sharing. 

    Financial Adviser

    • Financial Adviser,

      Thank you for leaving your comments.

      It breaks my heart to hear about new investors jumping on board with Zurich International and Friends Provident. Your organization isn't the same as most financial service companies selling actively managed products. Investors with Zurich and FP, for example, pay double the fees that groups like (say) Fidelity or American Funds would charge for actively managed mutual funds, and 12 times the fees that a group like Vanguard would charge.

      What's worse is the massive redemption fee to leave the company early, if you're not pleased by paying such high internal costs each and every year.

      The questions for current investors are difficult: to jump ship and pay huge redemption costs or to stick it out and underperform?

      Much easier, I think, is for people to spread the word about companies like Zurich International, and do their best to ensure that new investors don't get snared.

      You actually sound like a really nice guy. Your conscience, perhaps, might lead you to a different financial service company from which to make your living.

      Cheers,

      Andrew

  30. steve says:

    Hi Andrew,

    Please let me know how you got on with your emotive negotiation with the banksters.

    I pulled the plug on Zurich and expect my paltry redemption soon.

    Best regards

    Steve

  31. Thomas Hughes says:

    Hi Andrew,

    I have just turned 27 and finally took my parents advice to to start saving. I am a British Expat in Qatar and for my age earn a good salary. 7 months ago i started saving with Zurich, investing $1400 every month. My policy is now at $16k with bonuses.

    I have been walking around for the last 7 months thinking i had set myself up for life but now im worrying that i have made a mistake. Do you have any suggestions for me?

    Many thanks in advance.

    • Hi Thomas,

      This is going to be a personal decision for you, of course, but I know that I would pay the penalty and get out if it were me. The overall drag on your fees over the next 25 years would devastate your portfolio's potential. You can read about a few other people who are in similar situations. I'm really sorry to hear that you got involved with this group, but the great news is that you're relatively new to the plan so the surrender penalty won't be as large, in dollar terms. Having said that, I’m not giving you direct advice. The decision is yours.

      Andrew

  32. Neil,

    My two cents: I agree with Andrew on his comments/analysis about Friends Provident Int. and Zurich Int., both based on Isle of Man. But I would not put Generali Vision (I assume that's what you have) in the same bag.

    I am a certified Financial Planner in Singapore and use Vision for myself because I receive a bonus of 3% on each deposit –I deposit 540 euros per month– and a 5% bonus on the total of all deposits made at the end of 10 years.

    True, it is more expensive than having an account with a broker and buying ETF's; from my calculations, I pay 1.2% per deposit to Generali. But it has other advantages that I need:

    – It falls outside of my estate; I can designated whom the beneficiaries are, in case I die of accident; the beneficiaries will receive the money without having to travel to Singapore.

    – There is no capital gains tax; there are no capital gains tax in Singapore but there's GST.

    – It's confidential, my government doesn't know I have this account.

    – I can make "deposits" with my Visa card, it's free of charge and I collect points

    For the above reasons, I use for myself Generali Vision to save and invest money. And also use it with some of my expat clients living in Asia. It's up to you to see if you need the advantages above or not.

    By the way, the reason I end up in this blog/website, was a link sent by a client of mine now living in Australia that got cheated a few years back in Vietnam by a broker/IFA selling him Friends Provident.

    Cheers

    • Neil says:

      I did have Generali Vision but I cashed out. I got it in January 2007 and since then, it had gone up about 1.5%. When I cashed out, it cost me about $5000 in fees. I am pretty sure that I could do better than that.

      There is a new teacher at our school that signed up for Generali. For him, I can almost justify it since without it, he would be still blowing every penny in Shanghai every weekend. He is now forced to save money.

  33. KF says:

    Hi Andrew,

    My husband and I have been investing in a Friends Provident product for 6 months with $800 per month. After reading your post, we have decided to terminate the plan, once and for all. (Even though it is doing well so far). We were not comfortable as we had to leave the first 18months of our investments till thhe maturity period of 25year – who knows what can happen in 25 years! It is a painful decision, as we had lost $4800, we could have gone on a holiday to Europe! But I told my husband that it is either now, or even more painful if we were to terminate it at later stages. From now on, we will not let anybody else take charge of our money, it will be us and ourselves- if we earn, good, if we make losses, it will be only ourselves to blame. No more so called Financial Advisers to split a share of our hard earned money!

  34. Siam says:

    Hi!

    I have just joined a insurance broking firm and was trained and kind of brainwashed to sell Futura.

    I was about to sell it to one of my known acquaintance who is going to pay about 33K USD per year. After reading this blog I will tell him to consider other options for investments even if its at the cost of my commission.

    I believe there are so many better products than these which charge you higher rates. I was looking for information on some products when I stumbled across this blog and must say I am glad I read about whats been happening.

    As a beginner in the industry, I promise to be as ethical as possible.

    • IFA Abroad says:

      I believe this is the case for most new financial advisors. People are welcomed into these companies, taught all the supposed benefits of these products, and then encouraged to go sell to all their friends and acquaintances.

      Congratulations to you for doing a little research before running a wrecking ball through your friends' finances! Years ago, I actually went through this same process. Fortunately I learned quickly enough to quit before chaining anyone to these fee machines.

      You should start looking for a new job now, because that insurance broking firm did not hire you to research their products – they hired you to sell them.

  35. Thomas Hughes says:

    Hi Andrew,

    So i took the jump and stopped my policy with Zurich, i will have to admit it hurt to know i was going to get back $0 from the $10,000 i have invested over the past 7 months.

    After picking myself up off the floor, i got in touch with Vanguard to talk Index Funds and get myself back on track. The bad news is that they don't offer any services to us nice residents of Qatar, the only people who could offer me an account that i have found so far is E-Trade. They also seem to have the highest charges.

    Is there anyone you know that i could get in touch with or is E-Trade an ok way to go? I have got in touch with several advisors here in Qatar who seem very quick to bring the famous Zurich and Friends Provident brochures with them and are very quick to dismiss the Index option as too risky.

    I feel at 27 with some good income i could establish a good portfolio, im just having a little trouble getting started and have spent the last 7 months walking around in the dark before coming across your book. It just seems a little harder to get started out here in the Middle East.

    I hope you can help, many thanks in advance.

    Stay safe,

    Thomas

    • Hi Thomas,

      If E-Trade is expensive over there, they must be doing something different to what they usually do.

      Normally, they're extraordinarily cheap: no annual fee, no setup fee, no charterly charge, and just $9.99 per purchase commission with account values over $50K and about $29 per purchase with account values below that amount. What are they charging over there?

      • Thomas Hughes says:

        Hi Andrew,

        I got back in touch with E-Trade and they clarified everything for me and you're very correct that their charges are very good. It seems the first person i spoke to over complicated things.

        I have filled out all of the forms and i hope to open an account soon. Would you recommend the UK Index Market or the US? or even a combination of both? With so many options it hard to know where to start.

        Thanks again.

        Tommy

  36. Hi Neil,

    Since 2007 "it had gone up about 1.5%" it is due to bad investment decisions, either from you or the investment manager, but nothing to do with Generali.

    Who is/was managing your account? Yourself? What is/was the strategy?

    • IFA Abroad says:

      Alfonso – Generali is in the same bag with FP and Zurich. They don't charge as high a fee on initial units, but Generali charges some of their fees based on 'assumed contributions' – another ridiculous approach few people understand, since advisors never explain that point, and instead stress flexibility to stop contributions.

      As for the benefits you mentioned –

      -life insurance benefits? get actual life insurance if you want life insurance benefits. these products are just an expensive life insurance wrapper, and worth no more than 1% above account value.

      -tax benefits of these plans over a brokerage account in a place like Singapore? you're REALLY stretching there.

      -it's 'confidential' – as stated by a CFP? so disappointing. by the way – Guernsey is signing FATCA. so is Isle of Man. not to mention we are in the digital age. you really tell people they are going to be able to keep these accounts 'confidential' for the next 10-20 years?

      -can pay with credit card – is that really worth 4-5% per year charged on your savings?

      Whatever the supposed benefits are – the fees blow them out. And bad performance can definitely be related to the fees.

      Neil – Take your money out of your underwear and go to China Post – where you can easily transfer it to an account in your name in Hong Kong or anywhere else in the world, and the cost is something like 90rmb to transfer up to $5k USD. You owe it to all those people you introduced to that advisor to check out Andrew's website – so that at a minimum – they stop recommending newcomers to China to that same guy to rip them off! It's not right!!

    • IFA Abroad says:

      Forcing him to save money huh? Did you or the advisor explain he's 'forced' to save money for the entire term he signed up for, or forced to save for just the initial period?

      I can say with pretty high certainty that your friend signed up with the idea he's only 'forced' to contribute for the initial period – to cover his advisor's commissions.

      If you really need forced savings, buy real estate.

  37. Sean says:

    Hello Andrew,

    I'm a British citizen with permanent residency in Japan and plan to stay in Japan for the rest of my life (my wife is Japanese).

    I signed up to the FP Premier Mutual Funds service back in September 2006 with an initial investment of around GBP 10,000. I have been regretting the decision for the last couple of years. With complete honesty I can say that I was sold the plan without first educating myself on what it really meant and I'm pretty sure the financial planner that both I and some of my friends used didn't understand it fully either.

    The value of the fund is now less than what it was back in 2009 since I stopped paying due to charges etc.

    It's been over 5 years since I took out the policy so am considering surrendering it and putting the money into a savings account or somewhere similar.

    Would you recommend this?

    • Sean says:

      According to my policy I'll lose 78% if I surrender now. Not good.

      • Hi Sean,

        I'm really sorry to hear about this. It kills me each time I hear a story like yours. The decision, of course, is up to you. To sell or not to sell? The question is whether you can stomach the hit. Again, I'm so sorry to hear about your misfortune. And good luck with your decision.

        All the best,

        Andrew

  38. Shiva says:

    Hi Grace,

    I live in Dubai. I currently have FT funds about 60K USD. Also Royal Skandia savings plan which is about to mature in 6 months time. The value of RS is currently at par (about 29K) with the money which I contributed to the monthly savings plan (250 USD).

    My financial advisor is suggesting to move my FT (Mf's) and the RS savings funds to one umbrealla called "Royal Skandia Executive Investment Bond". Using this platform I can invest in funds which can not be accessed generally by retail investors. He showed me funds which return 7% guaranteed everyyear for 5 years. After the 5 years, it the market stay above 50%, then they will returun the principal 100% else based on the market value. Also he says that we can move out of the fund after one year also after taking 7% profit, I am not sure this is true.

    This platform as you have mentioned attracts 1.1 % fees per annum, + quarterly charges of 100 GBP every month.

    Kindly suggest your views on whether I should go for this or not?

    thanks and regards

    Shiva

    • IFA Abroad says:

      Hi Shiva, Here is a shortcut to get a much clearer understanding – ask your adviser (in writing) how much he will get paid by Royal Skandia if you follow his advice on the portfolio bond.

      He will either refuse to tell you (as loud and clear a warning as you can get) or he will tell you. If he tells you and you think it's reasonable, post that amount here – as I would like to see it.

      If Royal Skandia paid their salespeople anything more than what they can take from you, they would go out of business.

    • Hi Grace,

      IFA Abroad has given you some good advice. Please keep us posted, OK?

  39. Steve says:

    the kick in the tail – I pulled the plug on Zurich based on the figures my financial advisor had given me over the last few weeks was reluctantly looking forward to the paltry redemption fee. I chased the monies yesterday and now find out the penalty is higher than the surrender value and I have been misadvised by the advisor or have been completely lied to. To cancel the policy I need to write in and agree that the penalty is higher than the surrender value.

    • IFA Abroad says:

      This sounds incredibly fishy. Start dealing directly with Zurich – cut out the IFA. He's paid to sell it, no one pays him to help you out of it. I wouldn't put it past an IFA to get someone to top out their commissions.

  40. Lawrence says:

    Wow, what an enlightening read this has been!

    I am an expat in southeast Asia and it seems that I am yet another one of the victims of the Friends Provident scheme. I was reeled in with the promise of very low-risk, flexibility to my personal finances (being able to change investment fees between months/years, both increase and decrease the monthly allocation at will) and that early bonus sure did look good on paper! There was also the promise that I would be able to withdraw my money at any time if I needed, as I was very up front that I might need to do so despite wanting to invest for the long term.

    I signed up for a FPI Premier contract, it is a 25 year long contract and an initial 18 month commitment period. I was led to believe by my advisor that I could withdraw all invested money at any time after these first 18 months had elapsed, I wouldn't have signed the contract otherwise.

    The first 18 months elapsed last month and I currently have over 20.000 USD in the account, none of which can apparently be withdrawn. I would not have discovered this con if it was not for some personal circumstances requiring me to withdraw a small portion of the money now to cover some unexpected expenses. I am met with the response that I cannot withdraw any of the money committed during the first 18 months and this leads to me doing more research and finding this excellent site, I just wish I had found it sooner!

    I am in my mid twenties and I feel absolutely devastated, the money I have invested so far accounts for a whole year's worth of salary for me. I know I can take solace in the fact that I've now caught on and I know it could have gone so much worse, but it truly shattered my world when I found out that I could in fact not withdraw my money. It was an expensive lesson, but at least a lesson learned before I got in deeper.

    I can of course not prove that my advisor gave misleading information making me believe that I could withdraw the money at any time after the first 18 months. My name is on the paper and I guess that's that. I will be bringing a tape recorder if I ever speak to one of these "advisors" again!

    A few things are still up in the air for me as to how to proceed now:

    1. I am left wondering what it is that I can really do regarding the money I have stuck in there, or if I have any other options than keeping this account open for the next 23 years and making the minimum amount of deposits every few years. Will the fees eat up literally all of the money in the account over time if I do this? I believe the minimum payment is 500$, and that it needs to be done once every 2 years to keep the account from closing.

    It might sound silly in the large scale of things as I am sure that 20.000$ or so in 23 years will not mean nearly as much to me then as it does now, but I still find myself wanting to minimize long term losses as much as I can.

    2. I am also wondering if my advisor has lied to me in saying that I cannot withdraw any of the money as I see comments from others stating that they could make withdrawals with high accompanying penalty fees. Are the penalties perhaps high enough to devour the whole first 18 months?

    I think I would prefer cutting my losses right now even if it meant losing half of the money just so I never have to deal with these companies again.

    Any advice from you gurus (Andrew Hallan, IFA Abroad, and others) would be highly appreciated. If my information is too vague to give any sort of real advice then I'd be happy to elaborate on my situation.

    I have just invested in your book on my kindle too Andrew, I will be giving it a good read-over and hopefully make wiser investment choices in the future.

    Thank you for reading, getting all of this down in words also helped heaps!

    • Lawrence,

      You will be penalized for taking money out right now, but I do believe that your advisor is wrong to suggest that it can't be done. IFA Abroad, what do you think?

      • IFA Abroad says:

        1- These plans collapse when the value of the account becomes less than fees that have been charged. You can see the curtain is pulled on their imaginary accounting in this situation – as you can see with your account balance that fees were charged but were not reflected in your balance.

        Look at it this way – how can they possibly justify taking your $20k USD if you do not send them another $500, unless you really have no money left in the account? Your balance really is close to zero when they threaten closing the account, they just don't reflect those fees into your balance until absolutely necessary for them.

        Do not throw good money after bad.

        2- Ask Friends Provident for your surrender value to find out exactly what you can get out of the plan. You may be able to get some of that money back. If just past your surrender period, you likely lost more than half – but not all.

        • Lawrence says:

          Thanks for your advice, "do not throw good money after bad" indeed.

          That's a really good explanation, it really doesn't make any sense that the 20K will just be magically lost if I don't continue sending money to them unless the money really is no longer there. Wow, can it really be legal to not display the fees on the account balance?

          That definitely sounds like legal grey ground but I supposed they have an army of well paid lawyers making it impossible for a small time guy to contest it.

          I ranted for a bit there but I am definitely going to follow your suggestion and contact Friends Provident directly. I'll be happy if I can cut my losses and recover some of my money.

    • Education is the way to enlightenment.

      Cheers,

      Andrew

      • Lawrence says:

        Thanks for the advice. I've already warned my close expat friends here and I will be warning all of my colleagues as well, I hope none of them have been caught in this web already.

        Like I said before, this hurts now but I am really glad that I caught on before I invested even more money into this scheme

  41. Steve says:

    thanks IFA abroad. I pushed it with the FA and started the dialogue with Zurich..clever language was being used. Sometimes words have two meanings!!!!!! Pushed for clarity and money now allegedly on its way to my bank.

  42. Curt says:

    You guys are out of your heads. First you have to understand that these investment plans are a type of savings discipline. Most of the people out there do not have discipline and control of their financials. See if you invest in a bank you would get a very low return compared to these organizations. Plus you know you can take out the money any time you want, so the objective of saving goes flushing down. Same if you try to keep your money in a safe. It would be just the money you save.

    Even though these places have charges, the return at the end of your policy will be big if you dont touch your cash. That is the objective of saving. You guys take your calculaters and compare this with a bank and any of these organisation interest rates.

    Just like 'Financial Advisor' has posted, nothing comes free. This is the way business goes. You can make coffee at home or go to starbucks and pay more.

    Also this guy couldn't even get his calculations correct on his illustration. So how can you get the big picture advise from him.. (No offense)

    Nothings comes free. Theres a risk in everything. The choice you make is up to you. Thats the magic of it. If you want something for free, i suggest you collect all your money and spend it on lottery tickets. Maybe you'd atleast win that..

    • Thank you for your comment Curt.

      Considering that this is an open forum, one thing stands out:

      No customer of an expensive variable annuity plan has posted on this site to suggest that they think these products are a good deal.

      You are the only one.

      And you are a salesperson, not a customer. Please correct the calculations above if you consider them incorrect.

      And if you are proud of what you are selling, please give us your name and the specific names of the products that you consider worthy.

      If you try to pretend that you are a customer (now) then you will be deceiving people on more levels than one.

    • IFA Abroad says:

      Discipline? Why is it that almost everyone signing up for one is reassured that they only really have to contribute for the initial period? How do these reassurances help with discipline? These assurances just help the chances of a sale, as a 2 year commitment is a much easier sell than a 25 year commitment, and it protects the commissions from claw-backs.

      You are right that nothing is free. But would you ever buy anything else without any idea of how much it costs you?

      • Curt says:

        Woo.. Calm down guys . No need to get all hyped up.

        To be honest I'm not a sales person. I'm an accountant. Just looking at 2 sides of every story. What u guys say is also correct, but there's a good side as well, if you open up your mind a bit.

        whoever says they only have to contribute for the initial period is not giving you the correct advise. It's still the customers choice. If you've got your facts right then you would complete the whole plan and benefit. No doubt. The cutomer should know to get a trustworthy, good adviser.

        Correct me if i'm wrong, but i dont think there are savings plans for 2 years. You can have a premium holiday or something after the 2 year period. But still you would start the policy with a 25 year commitment or so in mind. What ever happends or whatever you guys say, still millions of people save with these organisations and thats a fact. I'm sure there's some good out of it.. Go figure

        Oh and there's no calculations to correct since you already corrected them after I noted it down 2 months ago…

        Good luck everybody !

        • IFA Abroad says:

          Curt, you say we're out of our heads, compare these plans to just keeping your money in a bank account (why not compare to a brokerage account as Andrew recommends?), tout a few of the supposed benefits, and then try to justify the fees comparing it to buying Starbucks instead of making coffee at home.

          In the investment game, the lower your fees, the higher your returns, and paying 4-5% a year as a best-case scenario with these plans is nuts. Which is why they throw in bonuses and other nonsense to make it difficult for you to figure out.

          There are no 2 year terms, but I have met people that signed up for 25 years thinking it was just a 2-year commitment, because that was easier for the IFA to sell.

          If you have any points to refute, refute them. But if all you've got is 'I'm sure there is some good out of it' – yes, the commissions are fantastic.

  43. Curt says:

    As I have said, you guys are also correct. I don't know much about a brokerage account. Just did some research on some savings products. Would surely check them out though. Thank you for the mmm professional advise..!

    Yup charges are high, but u put it into a profitable fund and the return is good to go. ups and downs in life..

    What do u mean by 'thinking it was a 2 year commitment'? If they signed up for a 25 year plan, the commitment should be 25 years. They can get a premium reduction or a premium holiday if they wish.

    I dont know or care about commissions since I dont earn on them. Also I dont think this is a debate. Unless I offended u guys with these comments. so yup all i've got is "there's some good out of it"…. If u know your objective.

    • Financial Adviser says:

      Hi Curt, Andrew and IFA Abroad,

      I saw these recent posts and thought my 5 cents worth might helps clarify some misunderstandings and different views.

      I agree with Andrew & IFA Abroad that it is true the charges of the plan is relatively higher compared to ETFs, the commitment of making payment is restrictive and the surrender penalty is painful.

      With regards to ETF, I think it is a different breed of product and it should not be used to compared with mutual funds, cause the purpose of mutual funds is to beat the benchmark and ETF is to follow the benchmark. During times when fund managers cannot beat the benchmark, it definitely make sense to go into ETFs, but during Bull Run, most of the fund managers are able to beat the benchmark, so it might be a better bet to go into mutual funds.

      I also agree with Curt that nothing comes free and there must be a reason why such products are being allowed to be marketed and it must always be a WIN WIN situation for all parties involved.

      Let me help with the understanding of such products so that everyone in this forum can understand this type of product better. Yes, I am a salesperson but I believe strongly in matching the right instruments to the needs of the consumers.

      Here are some facts :

      1) The 18 months premiums is locked in till end of term. Let's call this Initial Contribution Period (ICP), and the units in this 18 months as "Initial Units".

      2) Policy Term is flexible and let's assume a 20 years term, for illustration purposes. Any units invested after the first 18 months is liquid and can be withdrawn with no penalty. Let's call this units as "Accumulation Units".

      3) The higher charges is only charged on the initial units but continuously for the full 20 years term.

      4) The accumulation units is charged at a lower charges usually.

      5) Bonus Units will be given in the first 18 months, as part of the agreement to lock in the ICP initial units till end of 20 years term.

      6) There will be no more surrender penalty if you complete the 20 years term.

      7) There is an option for premium holiday during the contribution into the accumulation units.

      8) Most are mirror funds and have mirror fund charges embedded in the plan.

      Here's the advantages :

      1) Have assess to different fund managers at a low entry level. If you were to buy into a fund from JP Morgan, the minimum entry is $100k per fund and they usually charges a upfront fee of around 5%. Using Zurich or Friends products, you can buy up to 10 to 25 fund managers at a low entry of even USD$1000 per month.

      2) Options for free switching, meaning you can sell your funds from JP Morgan and buy into a BlackRock Funds, with no charges. Usually when you sell your funds from JP Morgan and then buy into another fund house like BlackRock, there will be another charge of 5% upfront fee. The switching fees is very painful if you actively managed your portfolio and switch from one fund to another frequently.

      3) Low commitment period of 18 months, comparing to other savings insurance plans, which requires you to pay throughout the whole term of 20 years just to get the promised returns from the insurance companies. However, if you only commit to 18 months, and stop payment for the rest of the term, the overall charges is too high, so the flexibility of premiums holiday should not be abused, but only used when needed due to emergency.

      4) Bonus units in the Initial units gives you a booster in the units purchased in the first 18 months.

      5) Have a choice to withdraw from accumulation units to meet life goals if necessary.

      6) Charges start to drop if you continue your contributions beyond the 18 months and it will dropped to be even lower the longer you stretch, this is due to the lower charges on the accumulation units.

      Here's the disadvantages :

      1) Mirror Fund charges eats into the performance of the funds.

      2) High surrender penalty on the initial units if you surrender initial units before the completion of 20 years term.

      3) Commitment to complete the 20 years payment to enjoy the full benefits of the product, this becomes a discipline investments for long term, and it is hard to channel this budget into other types of investments even if better opportunities appears.

      If you are buying this type of products, here are the things you need to take note of :

      1) Only consider a term tenure of at least 15 years and above, so that the overall charges will be lower as it stretches beyond 18months as the accumulation units have lower charges. If it goes shorter than 15 years, the overall charges is still relatively high and less attractive.

      2) Look at this as a long term investment, and consider the money you stashed inside this plan to be money you don't even need in the next twenty years.

      3) As much as possible, continue to make the monthly contributions and don't abuse the premium holiday options. The more investments you put into the accumulation units, the lower the charges.

      4) Most importantly, DO NOT surrender the plan until the end of the tenure, 20 years cause the contract will have a surrender penalty imposed on your funds.

      5) Do not go into this product under the impression that you only needs to pay for 18 months, and then can choose not to contribute forever.

      6) The higher bonus units will help a lot in off setting the higher charges in the initial units, thus going for the maximum bonus units will be most beneficial.

      7) Make use of the free switching facility actively, as that is one of the advantage of using this account. If you don't use the free switching, then it could means it's cheaper going direct with the fund managers.

      Here's the deal, we are exchanging our liquidity for some benefits that the plan allows us to have, and in the initial units, Zurich and Friends will give us an upfront bonus units, it will be very unfair to them if any customers can come into the plan and exit with no surrender penalty, considering they already top up your account with the bonus units.

      Overall, the terms and conditions of this investment plan is complicated and many people do not understand the terms and conditions well. However, if you study it into details, and look at the benefits versus the charges, you will realize that it make a lot of sense if you complete the 20 years term payment in full, with no withdrawal in between. If you complete the payment term and did not do any withdrawal, and uses the switching facility actively, you will be paying a much lower fees compared to going to the fund manager direct. I did the comparison using an excel and realized that most investors will suffer through switching fees if they move the funds from one fund manager to another.

      The problem and misunderstanding normally arises when the financial adviser is not able to clearly explain the terms and conditions to the client. Conclusion is that if you want to buy this plan, just assume that you need to continue the contribution for the whole term of 20 years and do not activate premium holiday unless really necessary, and most importantly, DO NOT surrender after you start the plan. If you really need money, just withdraw from the accumulation units. Because when you surrender, the happiest party is the insurance company as they get to forfeit your investments using the surrender penalty. This is a contract, which is an exchange of promise. The promise from the insurance company is to give you bonus units, allows you to do free switching, allows you to diversify to different fund managers at low entry level, provide you with lower charges if you kept the contribution continuously for the whole term. The promise from the client is to ensure they don't surrender their first 18 months units.

      In my opinion, I think all products exists for a purpose and if you buy this product for a wrong purpose, then you are in deep trouble, but if you buy it for the right purpose, I think it will fulfill your financial needs perfectly. It's not so much of whether a product is good or bad, but rather whether the product matches the client's financial needs.

      Let me state the example for someone who should consider this range of product :

      1) Spare Cash Flow and wants to set the funds mainly for retirement needs only.

      2) Not financial savvy and do not want to trade stocks and shares on their own.

      3) Wants an investment with potential higher gains than the bank and don't want any savings plan because he wants flexibility of premium holiday, which is not available in a traditional savings plan.

      4) Wants diversification, and believes in long term investments and dollar cost averaging.

      5) Comfortable with market risks and can understand market fluctuations well.

      6) Wanted this to be a discipline way of investing his funds from now until retirement, so it also forms a forced savings for him.

      Everyone have different needs, different preference and different investment experiences, there is no right and wrong, but rather to match an instruments that match their individual characters.

      A stockbroker will probably not buy into a mutual fund, a property investor will feel that buying a property is a better investment, a wine lover will probably wants to invest into wine banking. Whichever the option is, it is just another solution to match your investment preferences, so if you have chosen an investment option already then my take is try not to back out of it.

      Let's try something else as an analogy, imagine you decide to buy a $1million property with another three friends, each 25% share, and you paid the downpayment and go for a bank loan. Suddenly, the property market crashes and your property is only worth $500,000. Can you try asking your three friends to buy over your shares at the initial price cause you regretted your decision to go into this contract.

      I am not taking sides in my writeup above, and I am trying as much as possible, to explain that the plan is meant for certain types of people and if bought on the right purpose, it is perfectly ok. But buying it on the wrong purpose will be a bad investment call. Having a good discussion about your life goals and your investment objectives with your financial adviser is extremely important, because there are so many more products that you can consider rather than just this instrument. But if you feel that your financial adviser is purely pushing you a product that does not match with your life goals and investment objectives, you probably want to seek for more opinions from other financial advisers.

      This is a very long writeup but I really hope it helps those who already started this plan to make a good decision on whether to surrender or to keep it. Everyone have different preferences on different products, so make your own judgement on your decisions rather than depending on another person preferences. See what works best for yourself.

      • IFA Abroad says:

        Talking in circles might work with most people you come across, but not this time.

        Rather than pull apart everything you wrote, I'll just call you out on the biggest lie:

        Fact 1) The 18 months premiums is locked in till end of term.

        Name one offshore pension that explicitly states in its terms and conditions that initial contributions are returned to your clients at the end of the term.

        Then we can talk about the other benefits.

        • Financial Adviser says:

          Hi IFA Abroad,

          My point is simple: this may not be the best product for everyone but there are people who suits this. And if they buy it because they have done the discussions and understood the terms and conditions clearly, the plan is definitely not a scam.

          However, if they have misunderstood the terms and conditions and bought it without full understanding, then it's going to be a disaster.

          I'm just sharing here and not here to debate which type of products is best for clients, cause the best product is not in terms of charges, features or returns, but rather most suited to the client's needs.

          A best product can be an ETF, a time deposit, an insurance plan, bonds, gold, land banking, properties or unit trusts, but it's just the purpose and the risk appetite that determines if it's suitable.

          Let's put it this way : If this is a scam product, the regulators will not allow for this range of product to be marketed and these companies will not be able to operate for so many years with many sastisfied clients as well.

          It's ok to dissuade people from buying, but I think encouraging people to break their contracts and suffer the penalties, might not be a good idea after all. A financial adviser is liable for the advice they give, and they can be sued by clients if they give the wrong advice or Mis-selling a product. But in a forum, anyone can write anything they want and not be liable. So I am just hoping to those who are reading this, gauge for yourself on your own decisions, and not just decide based on some bad experiences of other people.

          I hope my point is clear and I hope I am not offending anyone in this forum.

  44. steve says:

    I'd suggest the people these pooroducts suit are financial advisers because in the main they are likely to be the only ones skilled in understanding the language and misdirection. However, it has been suggested that financial advisors might not truly understand what they are punting out the door.

    Financial advisers are innocent until proven guilty like the rest of us and in most cases talked about here it isn't what has been said, it what hasn't been said that is most important. Prove that in court.

    If it is buyer beware all the time then why bother having a financial advisor at all?

  45. IFA Abroad says:

    Financial Adviser

    You tell people that the money they contribute during the first 18 months is returned to them at the end. It's your fact 1.

    It is also the reason you tell people to hold on until the end – to get that money returned.

    Where did 'fact 1' ever come from? I cannot find that kind of wording anywhere in the contract.

    Shouldn't you, of all people, be able to verify such a claim?

    • Financial Adviser says:

      Hi IFA Abroad,

      The initial units must be kept till end of term before there will not be any surrender penalty.

      There will not be any guaranteed returns for the units and it depends on the fund performances. If the client is not willing to accept non guaranteed returns, then he or she might want to consider traditional endowment plans or fixed deposits over such products.

      Important Note : If you only contribute 18 months, and then premium holiday from 19 months all the way till end of term, the charges that's eating into your initial units is very heavy. And this does not make sense, so continue contribution is the only way to reduce the overall charges.

      Poor advice given that causes confusion is when financial advisers says that the client only needs to contribute 18 months and can stop contribution forever. That's wrong. But if financial advisers says, you should continue contribution but have the option to stop due to any unforeseen financial situation, and resume once you tided over. That's true!

      Hope my above answer clarifies your question.

      • IFA Abroad says:

        Any claimed benefit needs to be verifiable with the contract. If the salesperson can't back it up with the contract, that's a bad sign.

        As far as initial units being returned at the end of the policy, let's look at fees. With Friends Provident, the quarterly administration charge on initial units (including bonuses) is 6.1% a year. On top of this are investment admin charges of 1.2% and external fund fees which are usually around 2% (total expense ratios, and we'll ignore mirror fund problems which you touched on). There is also 1% for funding with a credit card and usually 0.5-2% for foreign exchange fees (when applicable), but we'll ignore the last two since they only apply when contributing or trading.

        You say it does not make sense for someone a few years into a 25 year plan to quit and accept the surrender penalty (losing the bulk of their initial units), but how much can anyone reasonably expect to get back from their initial units after 10-20+ years with those fees??

        All in, initial units and bonuses are charged about 9% a year in fees. Long-term market returns are 7-10%, and I'm not familiar with any funds that have beaten their benchmark index over a 20-25 year period.

        Most likely, people holding on will just get a letter within a couple years similar to what Lawrence above explained ('add $500 or the plan will collapse and you lose $20k' – but the reality is that the $20k is already gone, which is why they sent a letter asking for more money). Contributing more money to a scheme like this does not help an investor.

        • Financial Adviser says:

          Hi IFA Abroad

          You have to look at the plan in totality and not just the 18 months.

          The charges for accumulation units is reasonable and is liquid. That's the portion where the investor can make back their high charges in the initial units.

          I understand your point and that's what I have been trying to say in my previous post, "this is not a plan to invest 18 months and stop contribution. Period."

          Anyone who went into the plan with the intention to pay 18 months and stop contribution will suffer high charges. It also depends on how much bonus units the client is given. The higher the bonus units, the bigger the chances of keeping the profits with the market movements.

        • IFA Abroad says:

          If you are telling someone to hold on to avoid the surrender charge on initial units, then you need to look at the fees affecting initial units – in isolation.

          Bonuses are practically irrelevant at 5% or 100%, when locked up and charged 9% a year along with initial units. 9% is an unsustainable withdrawal rate.

          New money sent in as accumulation units are hit with 1.2%, total expense ratios around 2% (and forced into mirror funds); and new money is hit with the 1% credit card fee for contributing, and foreign exchange fees for funds outside your base currency.

          How is someone making back high initial fees by contributing more money to be hit with 3-4% in annual fees on top?

          No matter what you do, anyone signing up is hit with high charges.

  46. Financial Adviser says:

    Hi Steve,

    Good point!! If everything is said and agreed, then I think there are no issues. But the problem arises when financial advisers withheld material facts that might misdirect clients to make the wrong decisions, then that's where the problem is.

    So choosing a good financial adviser is more important than finding the right product!!

    Any financial product can be mis-sold if the financial adviser have poor understanding or chooses to hide certain facts about the products.

    I once walk into a bank and I told the banker I want to save $500 a month for my wedding in three years time, he probably do not know that I am in the same industry. The banker took out an investment linked insurance policy to sell to me. So I asked him, can I take out money after three years? He said "Yes, you can!" And when I look down at the benefit illustration it shows I would have paid $18,000 over three years with a cash surrender value of around $4,000 if I surrender at 5% gain. So I asked him, how come only $4,000. His reply was : "Oh this is just projections and only if the funds you linked to perform at such a bad performance of 5%. Some funds might go as high as 20% here." (that was in 2007) I was disgusted and I walk out of the bank immediately.

    He is not wrong in telling me that I can take out money and he is not wrong in telling me that some funds might go as high as 20%. The problem is he did not really care if I needed the money for wedding in three years time or if the market could tanked by 40% despite making a gain of 20% before. It is because of salespeople like this gave the industry a bad name!! However, there are also very good financial adviser that truly offers solutions for the benefit of clients. So don't assume that all financial advisers are the same and run away from them.

    Take your time to choose a good financial adviser. Meet a few more advisers, ask them about the experience in the business, talk to them to find out more about their background and if possible, talk to their existing clients that he had already worked with to know more. See which of them is really planning your finances for your sake or planning for their own sake.

    I hope my sharing make sense to you.

  47. Tommy Hughes says:

    Hello from Qatar again,

    With my Zurich policy now closed (we won’t mention the $10,000 loss) I contacted E*Trade to open an account. They received all the documentation required and I even sent further documentation they asked for. However, the following week they called me to say that the London office of E*Trade is closing!!!

    This now leaves me back at the start with no real direction. Also I was told by E*Trade that only American citizens can invest in the S&P 500. They recommended the SPY ETF, I have been monitoring this and so far it doesn’t seem as good.

    I would be really appreciative of your thoughts on my situation.

    Thanks.

    • Hi Tommy,

      If you have been correctly monitoring the ETF, with the ticker symbol SPY, then you will notice that it is the S&P 500 index. Incuding dividends, it will match Vanguard's S&P 500 index, virtually to the decimal point, each and every day. It's is the S&P 500.

      Cheers,

      Andrew

      • Tommy Hughes says:

        Hi Andrew,

        Thanks for your info on that one. It seems that it was just Plus500 that has slightly different figure as the day went on.

        Which online broker would you recommend for a British citizen in Qatar? Like i mentioned before i had done all the ground work for an account with E*Trade but they have since closed their UK office. Any recommendations would be great.

        I have now finished your book, great stuff! I will be sure to recommend it and leave a review on Amazon!

        Cheers,

        Tommy

  48. Kesh says:

    Hi Andrew,

    I thought I was doing a fairly decent job in terms of managing my investments, however after reading your blog, I feel like a fool :). You have truly broadened my horizon and i am so glad that i came across your blog.

    It has been a few months since I moved to Singapore and was planning to setup a SRS account. Basis your recommendation on investing in Index ETFs, I went to DBS bank this morning to enquire if I could use the SRS funds to invest in ETF's and they mentioned that this is not offered. I subsequently spoek to DBS Vickers and they suggested that I cannot use SRS savings to invest in ETF's provided by them. Being a foreigner I get to invest close to 30,000 SGD every year (plus a tax break). My questions are:

    1) Does it make sense to setup a SRS account and contribute the 30,000 every year?

    2) If so, which bank should I consider, so that i can invest in ETF's?

    Thanks in advance

  49. Financial Adviser says:

    Hi IFA Abroad,

    I'm not asking the client to hold on to avoid the surrender penalty. I'm only asking them not break their side of the promise at a penalty.

    This is going to go forever and we will have no conclusion. I think we should stop here. Because today I know of happy clients with these products who see the value in it and are not bothered with the charges because they see the benefit in the long run and lower charges comparing to the multiple free switches. They make the decision knowing the consequences clearly if they do a pause and a surrender. I also have met people who went into these products and realized they did not understand it fully and regret their decisions.

    My point here is just to make informed decisions and not to make your decisions because of what another person experiences, which might be totally different from your own situation.

    • Curt says:

      Exactly…..

      • Curt says:

        Even I figured, there's no point explaining to these guys…

        They've had a bad experience and there promoting negativity to everyone else…

        It's upto to you guys !

        • IFA Abroad says:

          Curt – It's clear I think these investments are horrible, and you and financial adviser think they're great – but opinions by themselves are irrelevant.

          What matters is the logic behind opinions. I have explained facts that led me to my conclusion, for example by breaking down a fee structure that was designed to confuse people. If you disagree with any of the facts I presented as the basis for my argument – please point out the problem.

    • Your clients are not informed or aware of the tyranny of fees. And you likely aren't either. If you showed them what a 3-4% annual drag would do to their money (based on high expense ratios and plan fees) would they be happy? I don't think so. If inflation runs at 3.5% and if the stock and bond markets make 7% going forward, your investors won't make any money after inflation.

      The trouble is with the conflict between the client and the advisor, in a case like this. The advisor wants a great commission, and feels comfortable selling a product with an extra 3% charge above what the client could be paying elsewhere–not to mention the inflexibility of taking their money early to help a relative who may be strapped for cash after a hurricane, job loss etc.

      I have yet to see comments from an investor in these products who says:

      "I have done the math and I am happy with the product."

      Good luck trying to find one. I think it was Sinclair who said: "You cannot explain something to a man if his salary depends on him not knowing it."

      • Financial Adviser says:

        Hi Andrew,

        Yes you are right! As a financial adviser, our salary is dependent on the sale of a product. In any business or trade, there are definitely charges and every business will have to make profits in one way or another. A car salesman earns from selling a car, a restaurant owner earns from selling food and a writer earns from selling books.

        If I choose to walk into a high class restaurant and ate a ribeye steak for $120, which after two weeks later, I went into the supermarket and realize the same size of ribeye steak only costs $20, I will not accuse the restaurant to be a scam business.

        The charges that you are referring to is only on the first 18 months of the investments. I am only suggesting to look at the charges after the 18 months as well. Because if you dine at a restaurant, you are also paying for the waiter's salary, the chef's salary, the restaurant's decorations and the cost price of the piece of steak. So we can't ignore all the other costs and just hitting on the cost price of the piece of steak.

        In such a product, the client also get the professional advice of the financial adviser in managing their finances in totality, and they need to know that they need to pay the financial adviser as well for their advice. Because the financial adviser also have a family to feed, a mortgage to pay and also working for his own retirement.

        I am not saying that this product is the best in the market and nothing else beats this product. I am saying that let's be fair and look at things from a positive point of view. Cause it will be a perfect world if anyone can trade like Warren Buffet, then we will not need fund managers, financial advisers and fantastic book writer like Andrew anymore.

        • Financial Advisor,

          Thanks for the comment. Please show me a link to a variable annuity product that doesn't have any charges beyond the management expense ratios of the funds after an 18 month period. I've never seen one, but would like to. You are telling me that after 18 months, the products you are selling have no insurance or admin charges, and just the expense ratios of the funds themselves? This would be a remarkable variable annuity–one that I have not seen before, and one that isn't (from the prospectuses I have seen) available in the United States.

          • Financial Adviser says:

            Hi Andrew,

            I am licensed by the regulators and providing professional financial advice is my work. Giving my clients what's best for their interest is my belief. Providing my clients with the best service is my commitment to them.

            Saving money is an important habit that everyone must learn to pick up, investing is a necessary step to grow the money you save. And I believe this is as simple as it gets and it's as pure as it needs to be.

            In this part of the world in Asia, it's not just about who gives the lowest charges and who gives the best returns that matters. It's all about being fair to everyone and creating a WIN WIN for everyone. It's about giving and taking. What goes around comes around.

            All the best to your future endeavors, Andrew!!!

          • Financial Advisor,

            By the sounds of things, you probably have many clients who you opted not to put into variable annuities. Too many other investment reps are like hammers. To them, everything is a nail.

            Thank you so much for your contributions to the comments on this post and your gentleman-like conduct.

            Cheers,

            Andrew

  50. Urko says:

    Hi Lisa,

    I'm the SSIS teacher that Andrew was talking about. Hi Andrew!

    Let me know if you want to talk!

  51. Urko says:

    Hey all,

    I just wanted to share that I have been there, that I was around 3 years into a Friends Provident plan, together with my wife, and in the end, we might have ended up roughly the same (with lots of luck!) staying put until the penalties decreased, or getting out as soon as possible and taking the hit.

    We decided to get out as soon as possible, take the hit of major penalties, but sleep better knowing that we didn't have to think about those [lots of censored descriptive adjectives] guys ever again. Now, around a year and a half in, we are in control of our finances like never before. It's been a very rough year financially for the whole world, and still, we are doing just fine, with some profits already.

    Take the leap, it's worth it.

  52. Hi Urko,

    Thanks for sharing.

    By "… those [lots of censored descriptive adjectives] guys…" you are referring to Friends Provident or to the guys that sold you the product in the first place?

    To my knowledge Friends Provident don't sell directly, so it would be good to share with everybody the name of the guys that misrepresented a financial product as they will do it again and again and again. Second, you can file a complain via email to the Isle of Man insurance regulator –it's free– even do the advise was not given by Friends Provident, this is because the sales person that sold you the product is supposed to be supervised/guided by Friends. Third, you can also complain to the regulator of the country where you received the "advise".

    Isle of Man insurance regulator: http://www.gov.im/ipa/insurance/contactform.gov
    They have always helped in dialogues we have had with Friends Provident to close accounts of clients that were promised the moon (and little fees) by rogue salesman in nice suits and perfect English accent.

    • Urko says:

      Hi Afonso,

      I was referring mostly to the "advisor" that sold this product to us. Of course, when push comes to shove, there is no way to prove misconduct. The contract was clear, the fees were fully spelled out, and it's all perfectly legal.

      The issue that I have, like a lot of people here, is that there is no reasonable chance to get a better return on investment from plans like the Friends Provident offer when compared with indexed investing like Andrew proposes.

      Of course there are mathematical odds that you would score really big, if you got incredibly lucky, but those odds are so ridiculously low, that I don't think these products should ever be recommended by anyone to anyone.

      No matter if they are legal or not.

      But as we can see from the discussions above, there is no way that financial advisors that believe these products make sense will make anyone around here change their mind. And these financial advisors will not change their mind either. So…

      Peace :)

      And thanks for those links!

  53. Canadian Carioca says:

    Hey Andrew!

    I am very happy to have been introduced to your website! I am a Canadian expat living and working in Brazil. I was recently approached by a broker to invest my money in the Friends Provident plan. I have not agreed to anything at this time and don't plan to after reading all these messages.

    I just wanted to understand if you know of any plans where I could invest my money without suffering the high fees. I am no longer a resident of Canada and so I understand that I can't invest my money in accounts there. I do have a company plans which does provide a match of my contribution up to 9%, but I would like to have a personal option as well. I'm struggling to find other options for people in my situation.

    I'll be seeing how I can get a hold of your book through my Kobo! I think I will learn a lot from what you share.

    Regards!

  54. Curt says:

    Looks like there's alot of Andrews over here. Looks like his posting his comments as multiple users.. Good stratergy to sell your products. A bit desperate though..

  55. Dirty Dan says:

    Hi Andrew,

    I am a Canadian living in Qatar. I have just filed for non residency and after reading your page I have decided to dodge the bullet Friends Provident offered me today. Where can go from here? Do I need to live in a country to have an account there?

    • Hi Dan,

      A few expats (not living in Singapore) have opened brokerage accounts here, without traveling here to do so. They wire their money monthly or quarterly to invest in exchange traded funds (much as I do here in Singapore). I wrote a post alluding to it, likely five or six down from the top of my homepage. You may want to try that. If you get get a notary to sign the forms to prove your nationality and where you live, DBS Vickers brokerage in Singapore will accept it. Give them a call after checking out the post. And don't let a rep turn you off if they say it can't be done. It can be done and people do it. You might get an unknowledgable person picking up the phone so be persistent. Then let me know, OK? Thanks!

      Andrew

  56. Vietnam Expat says:

    Andrew, bought your book the other day and it definitely made me thinking. Gosh, reading these makes me feel like an idiot, but I guess I really deserve it. Thank you anyhow for writing such a good book to wake us up!

    I signed up to FPI Premier on February 2011, so I have been with them for 21 months right now. Initially I paid 700 USD a month and about a year ago I increased it to 1300USD a month. Total contribution is 21.300 USD as of today.

    Reflecting on your experiences and on your wisdom, I see that the only way out of this is to opt out and terminate the plan to minimise longer term losses.

    Based on these numbers, how much will I loose? I already booked a time with my "advisor" so I am assuming it to be a very lengthy and interesting conversation. Will keep you posted how all went.

    • Urko says:

      Hi there,

      You should get ready to lose around half or more. You are really early in the plan, and that's when they hit you hard, very hard.

      I'm in Vietnam too, and I went through getting out of FPI around 2 years ago, after being in the plan for about 4 years. And we got back around 95k out of 145k (according to their valuation), after putting in 125k. So either 50k lost, or 30k+interest lost. Ouch.

      Get in touch if you want. Good luck.

      • Vietnam Expat says:

        Just a brief update to my case.

        I requested the surrender value of my account an it wasn't nice reading.

        Current policy value: 26K USD

        Surrender penalty: 21K USD

        Net policy value after penalties: 5K USD

        So 15 to 20K lost, depending how the calculation is done.

        Happy to have your thoughts, since I'm personally quite devastated. Should I pay the 300USD (minimum) per month for the next 3 years and withdraw or just withdraw now?

        • Urko says:

          Wow, that's tough. I would suggest get out right away. Financially it will probably make very little difference (notice that we lost even more money by staying longer), but how are you going to feel knowing where those 300usd are going each month? I know how I would feel.

          Just my opinion, though. I was there, and I know it's tough.

          • Urko,

            Thanks so much for contributing to these comments. I really appreciate it!

            Vietnam Expat,

            Getting your money out is definitely going to hurt. But from a purely mathematical point of view, long term, Urko is right. Having said that, we can't ignore the emotional part of what you are going through, and if it's psychologically easier to keep the minimum invested and put the rest of your money elsewhere, few people could blame you. It's hard to take a short term hit, even when we know that it could be the best long term decision to make.

            Andrew

  57. Jason Turk says:

    Dear Andrew,

    Many thanks for your detailed article. I almost invested over 30K in funds but as I saw your article, I wrote an e-mail to my advisor and told that I would not transfer the money. The worst part is, I have asked couple times about the costs but only answer I got was only adminstration costs and the others are already guaranteed. Such dishonesty!

    Thanks a lot

    • Thanks for the feedback Jason. The problem with many of these salespeople, unfortunately, is that they don't usually understand the products themselves. They have bills to pay as well, and lives to live, but they don't realize the long term damage they often cause others.

  58. I only wish I had that much free time Curt.

    Cheers!

    Andrew

  59. Hey Urko,

    Thanks for your humor,

    Cheers,

    Andrew

  60. Rachael says:

    I had an IFA in Singapore trying to push one of the Friends Provident plans a couple of years ago. It smelt bad from the off and as I kept digging, it just got worse. The IFA sat there in stony silence while I calculated that over a 17 year plan my investment would be $500,000 down against an index fund. "Really?" was the IFA's response! Needless to say, I told him to take a hike. Interestingly, as he was leaving, the guy cracked and confessed that he hadn't managed to sell any of these plans. I wonder why?!

    I only wish I could remember this guy's name and firm. I'm pretty sure I've thrown out all of the documents by now, unfortunately :(

    Will definitely be on the look out for these folks in future! I did not really know what these schemes were until I read Andrew's book and blog.

    • Thanks for sharing this Rachael! Unfortunately, better salespeople than him have managed to sell plenty of those plans. I'm glad you were able to turn him away. Let's hope his sales techniques didn't get better over time, or that he decided to try selling something else for a living.

      • Hi Andrew,

        According to what I was told by two insurance companies in Singapore, Friends Provident International writes more business for Sing Permanent Residents than any other insurance company in the city… And one comment was something like "and the second place is not even close…". These figures are not public, but insurance companies have to share them with the MAS and among themselves.

        Because of the overcharged bonus at start, clients only find that something is not right after three to four years… You couple that with the sales rep/IFA zero knowledge on macro-economics, asset allocation, and investment management; and it's almost certain the account is well out of the money on the 3rd or 4th year. And by then many sales reps have left town…

        • Rachael says:

          Wow Alfonso, that is really scary!

          I can totally understand why people sign up though – the sales pitch was very convincing. They make you feel like you're really missing out on something….exclusive access to all these amazing funds with no switching costs, blah blah, blah. Only on close investigation does it become clear that most of the benefits are on par with being given a free pass to board the Titanic. I certainly feel lucky to have dodged a bullet on this one!

  61. Andrei says:

    Dear Andrew,

    Thank you very much for yor website and efforts. I live in Malaysia, in KL, and have been approached recently by Questor Capital offering me to invest long term via Friends Provident. Actually they are quite in time sine I'm approaching my 30 years and starting thinking of such kind of investment for the future. It all sounded very good when I met with the people, but when I started reading the Technical Guide of FPI at home it appeared completely different. And your posts are confirming that it is better to avoid these "Friends".

    I'm from Russia, I've come to Malaysia just a few months ago and I'm planning to stay here for 2-3 years, then maybe move to Singapore but eventually I'm going to return to Moscow. Your advices are more American/British/Canadian oriented, but what can you recomend for a Russian in SEA?

    Thank you in advave for your assistance.

    Andrei

    • Hi Andrei,

      You could open an account with DBS Vickers, even though you don't live in Singapore. Some of your papers will need to be notarized, but you can still do it. Give them a call, and don't take no for an answer. Not all of the people answering the telephones are going to know this is possible, so keep pressing if you find a roadblock. Then, you could build a portfolio with the following:

      ISHG (an international bond ETF)

      VT (a total world stock market ETF)

      And then a Russian stock market ETF. The ticker might be RUS, but look it up. I know that it's available on the New York Exchange, which is the market you would be buying from through DBS Vickers.

      Many fee-based advisors suggest that your bonds represent your age. For example, 30% of your total if you are 30 years old. If this suits you, you could split the remainder equally between the two other stock indexes.

      Hope this helps!

      Andrew

  62. Franz E. says:

    Hi Andrew,

    Thank you so much for this blog. I am an IT professional working in Singapore (my home country is PH). A financial specialist from Finexis has been referred to me by a friend since I wanted to start investing. I am an investment-newbie. Just trying to learn. He charges .5% commission which I think is fine but then I remember he recommended me Zurich International. And although I am a newbie, I am seeing a big chunk of charges on the first few years which my gut instinct tells me it is not good. I have read your blog and thank God, I have not yet made the investment. I have ordered your book from Popular. Still waiting for delivery :)

    A colleague has advised me that it is better to invest here while I am still working here since the taxes are low in Singapore. I would like to ask an advice from you on what type of investments do you recommend for someone like me. I am a permanent employee but under Employment Pass. I want to invest but I am not sure if I will be in a another country in the next 5 yrs. I am also thinking of investing in PH since it is my home country but to some percentage only.

    Hoping to hear from your soon :)

    • Hi Franz,

      If you will be investing small, regular amounts, you could use the Standard Chartered brokerage. They have low fees.

      You could follow the recommendations I gave above for Andrei. But for you, find a PH exchange traded fund. As I mentioned to Andrei, if you google this, you will likely find the ticker you need off the New York Exchange. If not, just go with the world stock index and the international bond index.

      I'm thrilled that you didn't get involved with Zurich!

      Cheers,

      Andrew

  63. TJ says:

    Andrew

    Do you have any insights on the generali vision plan?

    I invested 4 months ago and have now started seeing all this negative feedback on it on several blogsa and I am going out of my mind about what to do next.

    I googled zurich international out of curiosity to see if there was negative feedback on it too since both are similar products and voila I came to ur blog.

    Somehow I am getting the reinforcement to pull out of generali now rather than later. I'll lose 6000 euros right now but it's a small price to get my peace of mind back.

    Any thoughts would be much appreciated.

    • Hi TJ,

      Unfortunately, Generali is much the same thing.

      • Honest Adviser says:

        Hi TJ,

        What term did you sign up for and for how much a month (your post suggests 1500 euros a month) ?

        The Generali Vision plan can be an excellent option if sold with the client in mind and not the advisors commission.

        The longer the term, the higher the costs and the higher the commission.

        Happy to answer any questions you have and explain this plan to you properly, that goes for the FP plans aswell (hard to get any real value out of the monthly premier plan but the Reserve account is very reasonable).

        Remember, every person is different so there is no one right answer for all.

        Cheers,

        HA

  64. Sigh... says:

    My Facebook has been updated with link to this blog. I am certain most every expat in Singapore receive numerous calls per week from Financial Advisers wanting to sell them their best investment vehicle.

    Once again I have paid for my education!

    Andrew

  65. Honest adviser says:

    Dear Canadian Carioca,

    I will be in Rio next week and can help you here.

    These plans can be very expensive if not used correctly as has been clearly stated. Depending on the type of investment that you are looking at making (lump sum or regular amount) the fees can actually be incredibly good value provided the adviser is not just out to make as much commission from you as possible.

    I would welcome the chance to have a quick chat with you by phone/email or in person to tell you more.

    Infact, if anyone wants to speak to me direct about options that don´t cost the earth while getting some of the unquestionable benefits if the products of international life companies then please do get in touch.

    Broker accounts are right for people who know what they want to invest in and why but people that require actual advice can get great value from life company products if they are ethically delivered.

    I happen to be a highly qualified financial planner (having worked in regulated environments for the majority of my career) who believes in offering the right solution to the right client at the right price. If I haven´t got that then I will soon say so.

    Apologies for staying anonymous here but could do without the wrath of the greedy advisers of this world!

    Best,

    HA

  66. Styx says:

    Hi Andrew,

    I've been recently approached by an IPP advisor, he urged me to go for Zurich since there was even a better offer if you apply before the 14/12. But when we talk about money I'm never on hurry and of course find you blog and directly cancel the appointment I had on Tuesday. Vey happy to find your blog in time and I bought your book yesterday (Saturday 1/12) at MPH city hall, only 1 remains now :-) but their computer inventory is not up to date.

    Now, I'm french living in Singapore, not as an expatriate but under local contract. My wife and me have some saving in France but we are thinking about doing something with the money earning in Singapore rather than sending it to France, because yes the exchange rate make me reacher everyday but I'm no so confident to the Euro anymore.

    I know a little bit of the financial world but reading clause and regulation while subscribing to SC or DBS vickers are always troublesome for me. I aslo don't want to spend to much time managing it and I'm not looking for 20% growth at all.

    Any advise ? Knowing that in France are crazy high !

    Thanks a lot, I would probably know more after finishing your book -:)

    • Honest Adviser says:

      Hi Styx,

      You will find most companies have special incentives to sign before a certain date. Many of these incentives are renewed on a regular basis so you should not rush a decision based on this.

      The key here is knowing what you are saving for, over what sort of time frame and what sort of risk you are comfortable with. I am happy to go through this with you if you wish?

      Best

      HA

  67. Scott MacKinnon says:

    Hi

    Please can you help me.

    We are very close to signing up for the Zurich Vista Plan but are put off by the threads concerning surrender charges and actual gain.

    We were looking at investment for 5-10 years.

    I am guessing that this is not the plan for us?

    If so can you recommend a start off point?

    We are teachers working in Dubai

    • Hi Scott,

      I'm really glad you found this thread.

      I may be able to recommend a starting point, but first, could you let me know your nationality? Some brokerages don't allow certain citizens to open accounts.

      Cheers,

      Andrew

  68. Marc says:

    Dear Andrew,

    I have been looking for a site like yours for a while. Pity I didn't find it 4 years ago.

    As an expat in Singapore, my company would not contribute to my super fund in Australia, (perhaps I should have just kept putting money in there myself ? ) so I was looking for something to make sure I saved money for the future.

    Think i got fooled by the silver tongue – normally I'm far to skeptical ;-(

    Started in 2008, paying in 1200 SGD per month. Currently 53000 SGD contributed and Value of 46863.70. Its been running at a 10-15% loss for 2 years now.

    All my other funds are doing much better – so either these guys are completely rubbish at what they are doing or ripping me off or both … should have looked and seen was registered to the Isle Of Man

    All the other people i know that also have a vista are also running at a loss.

    What should I do ? I really don't trust any of these financial advisors … first thing will be to go buy your book. If I stop what penalties will I really be looking at – can't even get a straight answer from them on that either

    Thanks in advance – Marc

  69. GAurav says:

    Hi Andrew,

    I am a 35 yr old expat living in Singapore and have been recommended Friends Provident Global Term Assurance with Total & Permanent Disability Rider and Aviva Term Assurance with Total & Permanent Disability Rider for my wife.

    On top of these my broker has recommended a regular premium ILP – VISTA from Zurich to fund children education.

    Any thoughts on these product?

    Cheers,

    • GAurav, Your broker would love you to buy the Vista platform for your children's education. And by doing so, you would most certainly be putting plenty of kids through school—perhaps your kids, most definitely your broker's kids. If this is what your broker wants you to buy, then he or she is dealing with a very serious conflict of interest. Examine those other insurance products very carefully. You found a broker who does more than lick off your ice cream. He or she wants the whole thing!

  70. Matt says:

    Dear Andrew,

    Last night I was wondering what to do with some extra cash sitting in my back account doing nothing… I thought maybe I should top up my Zurich Vista account. And lo and behold I somehow managed to stumble across your site (much to my disappointment, thanks for ruining my rose coloured glasses!).

    Anyway, some quick background info.

    1. Aussie expat living in Singapore since 2008.

    2. 25 year Vista fund started 1Q 2009 @ SGD 3200 a month.

    3. Now 4 years in, current value is $183K with a surrender value of $113K. Contributions 147K to date.

    I am about to order your book, but just wanted some quick thoughts on what you may think my options are here. Currently at least I guess I am ahead of the 8-ball in terms of the current value vs my contribution, but in the long run I do foresee those management fees really eating into my potential earnings.

    I see that so called 'effect of deductions' on this fund are $1.17M after 25 years (assuming 9% return p.a.). Even at 5% the surrender value @ 25 years is 1.3M after fees, which would mean I'm giving them 400K that could have been mine if I somehow managed to average 5% without fees.

    a) With that in mind, is it better to take that 34K bath right now? (147K-113K). If I did this how long would you expect it to take me to break even again if contributing the same monthly value to a more efficient "vehicle"?

    b) or is it better (doubtful) to take the maximum partial surrendar (~80K) and just maintain the minimum contributions from now on in? I don't think so as those fees will still continue to add up. I am having trouble working this part out though, if I were to maintain the minimum contributions only to avoid any penalties, I am not sure how to calculate what it is actually costing me in fees.

    If I look at the Fees & Charges it doesn't seem that bad for the 25 year policy. Expense recoupment charge (18/300)*4% = 0.24% + Policy Mgmt Charge 0.75%) + Policy Fee S$144 = Total Reducation in Yeild (RIY) per annum = 0.99% p.a + $S144.

    The hidden costs that it's missing are the actual managed fund fees, the ones I'm on look to be at 1.5%. So all in all I look to be paying 0.99% + 1.5% over the 300 months = ~2.5%. So if we come back to the difference of let's say 5% over 30 years compared to 7.5%, it really adds up!! I am on the right track here?

    Anyway appreciate your guidance on what you might do in my particular situation. Please break it to me gently though!

    I am still not completely against the Zurich policy and so far on paper, it's doing better than all the other rubbish funds I've bought in the past. At the time and place of my life it made sense when I committed to it as I didn't know any better and other options presented to me seemed to be just as bad (granted I didn't sniff around that much).

    Other than that, you're doing a real service to the people by opening up our eyes as to what we may be missing out on. The truth is that without the large fees that help to pay for a large workforce and marketing $$$'s, it's difficult to get this message out there!

    Thanks for your time,

    Matt

  71. Ali says:

    Hi Andrew,

    Like everyone else it seems, I stumbled across your article whilst researching Zurich vista funds on google. Very interesting yet worrying reading! I took one of these out about 3 years when I was working as an expat in Singapore and thought it would be wise to put some money away.. I'm now back in the UK and have started paying the minimum allowed into the fund

    1. Assuming we don't have another market crash, etc, am I likely to lose any of the money I invest if I carry on paying in the minimum until the end of term, i.e. will I get out at the end of the term less than I have put in? Or is it just a case that because of all of the hidden fees, etc, the fund maturity value won't be as much as if I'd chosen a better investment option?

    2. I'm not sure you'll be able to answer this yourself but maybe another one if you contributors could-as I'm now back in the UK do you know whether I will have any issues with having to pay tax on the fund when in matures?

    Many thanks in advance

    • Hi Ali,

      Because you have a long commitment to this company (the terms are usually long) you won't likely lose money, but you won't make as much as you deserve because of the high fees. Some of what you deposited may be redeemable without paying a penalty. If you choose to move this money, you may want to consider a collection of UK-based HSBC tracker (index) funds. They are excellent products, costing a fraction of the fees you are paying annually.

      Cheers,

      Andrew

  72. Hi Marc,

    I'm sorry for my slow response on this one. Emotionally, selling and taking the hit would be hard. But in the long run, you'll make more money elsewhere. I'm sorry to hear that this happened to you. Keep spreading the word among your friends so it doesn't happen to any of them.

    Andrew

  73. Will says:

    Hey Andrew:

    Glad to come across your site. I am living in Qatar and have been "courted" over the past few months by wealth managers selling the Friends and Zurich kind of packages. As a result of reading the various postings, I have wisely decided to stay away from this type of investment. However, I was wondering if you (or any other posters) have had experience purchasing monthly life insurance with either of these companies (Friends Provident in particular). I have been quoted a premium of about $50.00/month (which I felt wasn't bad). As a non-resident ex-pat, I don't see many alternatives. Does anyone have some quick and helpful advice?

    • This may be reasonable Will. But I don't honestly have the answer.

      Can anyone out there offer Will a suggestion?

      • Will says:

        Thanks for your quick reply. I did notice that there are a number of people on this blog here in Qatar. We get cold called all the time about investing with Friends, Zurich and Generali. I'll be getting your book asap. and owe you a cold one the next time I'm in your area for steering me away from a potential disaster.

  74. Dare says:

    Hey Andrew,

    just bought your book few days ago. Very interesting and eyes opening read i admit.

    A problem is, as a Serbian living in UAE, do I have any other option than to go with mutual funds?

    Really appreciate your help and time you give to all those people here for basically no fee.

    Best

  75. Phil says:

    Hi Andrew,

    Thank you for writing this blog. I already had an inkling that I had made a bad choice buying a Friends Provident plan and your writing helped show me just how disastrous it was.

    I am accepting the 4 years of lost growth and exit fees as a costly life lesson – don't buy anything you don't understand – and am moving on with indexed ETFs via DBS Vickers.

    I have just bought your book and factored it in as a 0.000001% expense fee :)

    Many thanks,

    Phil

  76. Dare says:

    Hi All,

    I think I've found very good and cheap option for opening offshore trading account.

    It's very easy and for all the expats out there not able to access the DBS Vickers.

    It is Swissquote bank from very obvious location.

    Very easy to trade and fees are within 1-2% pa.

    best of luck

    • Hi Dare,

      Are you sure the fees are 1%-2% per year? Those are very high fees, much higher than a DIY investor should be paying. Do it yourself investors should be able to pay less than 0.25% annually on their expenses. Sometimes less.

  77. Chris says:

    I have just read through some of these threads and have to say, most of the people on here are insane.

    Quality products and advice cost money. If you don´t want them, don´t by them…. grow up and take some responsibility for the financial decisions you make. "I didn´t understand what I bought" is frankly a pathetic excuse. Read the information before committing to a financial contract!

    Anybody that just has a bash at their own account with one of these low cost online brokers and does not fully understand what they are doing is a cretin. Anyone that does know what they are doing would not use one of these unknown houses anyway.

    Swissquote? Who? DBS Vickers… Who?

    Friends Provident, Zurich, Generali and Skandia are HUGE and highly respected GLOBAL companies. They create products specifically for the sort of people that are on here complaining!

    Some bloke with no pedigree writes a book that tells you what you want to hear and you take his word for it? Natural selection at its best. Its a wonder he hasn´t been prosecuted…. oh, no its not, sensible people don´t listen to him.

    Ridiculous.

    • Hi Chris,

      I wasn't telling them what they wanted to hear: quite the opposite. I also realize that these common stories and explanations may cut into your annual income.

      Andrew

  78. Chris says:

    Hi Will,

    Could I ask you what you were looking for as an investment? It would be interesting to see if somebody was just trying to flog you a product to earn commission or trying to answer your stated needs with the correct product.

    On the life insurance, how much cover was this for and over what term? Also how old are you and do you smoke?

    I should add that I am on the otherside of the world and am not remotely interested in doing business in Qatar. I am just keen to hear what advisers out their are coming out with.

    Best,

    Chris

  79. jason t says:

    Hello Chris,

    Thank You for humiliating all the people without enough financial knowledge. This helps as well how financial consultants see their customer.

    But still, what's wrong by Andrew? He doesn't do an anti-capitalist propaganda. He proves his objection with number and facts. It would be nice to hear when you have something against it.

    Thank you for you advice

    Regards,

    Jason

  80. Dare says:

    Yes Andrew, I made mistake – it's 0.1% account fee, plus 0.85% for each transaction.

    It's all in here: http://www.swissquote.ch/sqw-static/trading/fees/

    Kindly check if you've got time.

    Best regards.

  81. Chris says:

    Andrew,

    Your simplistic and frankly appaling take on financial advice has no impact whatsoever on my annual income. Actually, that may be a lie. I think I may point potential clients towards your misguided ravings in future before they sign a contract.

    This way I will not waste my time and only end up dealing with grown ups. Those that take the word of an Internet blog nerd over a qualified financial planner will get all that they deserve.

    Cheers,

    Chris

    • Thank you Chris,

      If you do point future clients to this post, you would be helping tremendously. Rather than taking one person's word over another, it will encourage a starting point for the person to begin reading about the benefits of low cost indexing, and perhaps lead him or her towards some certified financial advisors (CFPs) such as this gentleman: http://andrewhallam.com/2012/11/tony-noto-shangha

      His pedigree, when looking at his credentials are truly impressive.

      Cheers,

      Andrew

    • The Truth says:

      Chris the funny thing is you think of yourself as a financial advisor. You are nothing more than an insurance salesman trying to get the largest premium for the longest term out of the client whether the client needs or not and then you try to justify the high fees as the price of your superior advice. The biggest problem with this industry how misaligned the interests of the advisors (salesmen) is with that of the clients.

      • Chris says:

        Mr Truth,

        You have no idea who I am, what I reccomend or to whom. Your comments are typical of this site however.

        I am a pretty well qualified financial planner who worked as a fee based adviser in London for a number of years before moving overseas approximately 5 years ago.

        While the products being trashed here can clearly be mis sold or indeed mis bought they are absolutely right for many people. I use them for many of my clients (and indeed myself)

        Best,

        Chris

        • Thank you, Chris, for improving your tone. As we both know, to influence other people, we don't want to refer to them as stupid or be personally derogatory towards individuals. You have shifted to a more professional tone. Thank you.

          These arguments (on the side of the insurance-linked salespeople) tend to be fought very emotionally, without reason or substance. In case you're curious, here's a comment I received on another post on the same subject, from a sales rep who is also named Chris. Readers on this thread might find what he said to be interesting. And you can read my response below his rant:

          http://andrewhallam.com/2011/04/weve-just-been-sc

          Dear Andrew,

          I must say that having read the rubbish that you have written here about the one of the world’s largest and most successful investment companies, Friends Provident International, my own opinion is that if there is any “con” going on it’s what you have written.

          It is obvious to me that you have a personal issue with Friends Provident and that you are using the fact that you wrote a little book once in your mundane little life to sully the reputation of an institution that has been around and served millions of people and corporations for over 180 years.

          What you are doing is highly destructive and extremely malicious. You are advising people to early surrender their investments with Friends Provident and you have actually gone as far as having provided a competitor to Friends Provident, Vanguard, as an alternative. This smells of a personal fiduciary interest Mr. Hallam. Are you attempting to hoodwink people into believing that Vanguard or any other investment provider does “not” charge Establishment Charges or Annual Management Fees? Is there any company or bank in this world so absolutely charitable that they are prepared to operate their businesses without paying themselves?

          The now retired CEO and shareholder of Vanguard is worth net, 80 Million Dollars. Are you attempting Andrew Hallam, to have innocent investors believe that John C. Bogle and the other Shareholders of Vanguard survive on pure Goodwill? What you are doing, to the financial detriment of any investor that takes your very foolish advice Sir, is hoodwinking people away from Friends Provident over to Vanguard.

          Are you being paid by Vanguard for this service Mr. Hallam?

          There is not one investment provider operating a business on this Planet Mr. Hallam, that does not charges fees for almost every transaction that they do on a client’s behalf. Starting at your local Bank Mr. Hallam, when you wire money from your personal Bank Account to someone else, does your Bank charge you, or are in some “special” Bank that does not charge for services rendered? Are you aware Mr. Hallam, of the old adage that ” there is no such thing as a free lunch.?”

          Everyone charges Mr. Hallam, including Vanguard. John Bogle did not make his 80 Million because he charged nothing. So what you are doing here, Mr. Hallam, apart from being in very poor taste, is actually quite disgusting. My advice to you Sir, is to leave financial advice, to the professionals.

          In other words Andrew, according to you, every investor ought to cancel all their investments with Friends Provident, Generali, Aixa, Zenith Life, Hansard, Zurich Life, Allianz, HSBC, BNP Paibas and buy the Vanguard Asset Builder?

          Can you tell me Mr. Hallam, but more so the investors that you are advising to cancel their investments with Friends Provident, what special qualifications and experience you have Sir, apart from having written a novel, that allows you to provide such destructive financial advice to these people.

          Can you also let me know Mr. Hallam, why it is that you have herein singled out an organization that has an outstanding worldwide reputation for what they do, and do, well?

          My advice to all of the people that have unfortunately come across this blog and Mr. Adnrew Hallam’s views is to ignore this poor attempt by a man obviously carrying his own cross for Friends Provident and seek advice from professionals, not writers of fiction that bear personal vendettas.

          Hi Chris,

          If you sell high-commission paying financial products through a company like Friends Provident then I can understand how upset you would be to see the products fully explained. The book I wrote (which you described as “puny” “fiction” and a “novel” simply references the shared philosophy of some of the world’s greatest investment minds: Warren Buffett, Princeton Economics professor Burton Malkiel, Yale’s endowment fund manager David Swensen, Harvard’s chief investment officer Jack Meyer and a slew of Nobel Prize winners in Economics.

          As a commission-based salesperson, you are indirectly referring to those men as “puny” creators of “fiction” when deprecating a book that simply compiles their consistent philosophy: that high-cost commission paying investment products (such as those you sell) are unfair options for investors.

          Neither I nor Warren Buffett nor any Nobel Prize winner in Economics is on Vanguard’s payroll. But we all admire a financial service company that (unlike the products you sell) puts investors first. Vanguard is run much like a non-profit organization. Nobody owns Vanguard shares. There are no public shareholders. Like a co-op, the owners are the (big and small) investors who buy the funds. This is why John Bogle, the founder, is referred by the American press as Saint Jack.

          Because of this corporate structure, you can own a Vanguard portfolio for less than 15 basis points each year, compared to 350 basis points for a Friends Provident variable annuity.

          What “IFA Abroad” suggested about Bogle’s personal net worth is true. If Vanguard were a regular “for profit” public, traded company or a private one like Fidelity, then Bogle’s net worth would be in the billions (as is Fidelity’s Johnson family’s wealth).

          As it stands, his $80 million net worth is easily explained by a strong (though unexceptional) salary and a frugal lifestyle. Bogle has been working and writing for 60 years. If you invested $28,000 per year for 60 years at 9.8% per year (roughly the 60 year market average) you would have more money than Bogle: $85 million.

          However, if someone had sold you the products you are selling others, you would pay at least 3% more in annual fees (including Friends Provident costs and actively managed fund expense ratios) and would wind up with $22 million. The long term cost of that extra 3% annual fee, in this case, would be $63 million.

          Granted, most of us invest much less than $28,000 each year, and we won’t likely be investing as long, but the tyranny of extra fees becomes very clear with this example.

          It may be time for you to stop challenging me and continue learning instead. Instead of continuing to sell high-commission products, you could opt for products that will better serve your clients. I have written profiles on this blog about such advisors/firms (guys like Tony Noto, Robert Wasilewski, and the firm, Assetbuilder).

          Vanguard is not the only option. There are “for profit” investment service providers that charge more than Vanguard (because yes, they exist to make a profit) but they charge far less than the variable annuity Friends Provident scheme that I will continue to work very hard to criticize.

          As a personal finance columnist with The Globe and Mail, Canadian Business magazine and Assetbuilder (a competitor of Vanguard’s) I have never, in my life, seen anything as expensive and unfair as the variable annuity investments sold by Friends Provident.

          Just because a business grows large (Zurich International, for example) doesn’t mean that all of its products admirably serve people in a healthy way. Just look at McDonalds, Coca-Cola and the variable annuities sold by Zurich and FP.

          I believe, by your impassioned response, that your heart is in the right place. But you need to keep learning. I have faith that you could make the right professional decision, going forward, to model the integrity of some great advisors. But you would have to be prepared to make less off the backs of others.

          Cheers,

          Andrew

  82. Dare says:

    Hi Andrew,

    any reason for deleting my previous comment?

    • Sorry Dare,

      I don't delete comments, and may not even know how to! I have a webmaster who runs the blog because I'm a tech Luddite. He doesn't delete comments either, as far as I know, so perhaps there was some kind of glitch. Could you re-post?

      Thanks,

      Andrew

      • Dare says:

        Yes sure, it's from previous page:

        Andrew says:

        Hi Dare,

        Are you sure the fees are 1%-2% per year? Those are very high fees, much higher than a DIY investor should be paying. Do it yourself investors should be able to pay less than 0.25% annually on their expenses. Sometimes less.

        Dare says:

        January 26, 2013 at 5:13 pm (UTC 8 )

        Reply

        Yes Andrew, I made mistake – it’s 0.1% account fee, plus 0.85% for each transaction.

        It’s all in here: http://www.swissquote.ch/sqw-static/trading/fees/

        Kindly check if you've got time.

        Best regards.

  83. Rachael says:

    Hi Chris

    I'm sure we all welcome a balanced debate on these products and I'm glad that someone has finally filled the deafening silence in their defence. Perhaps, in the interests of furthering this debate, you could provide details of your pedigree and your experience of how these products perform?

    I assume, given your passionate defence, that you invest in one of more of these products yourself? After all, there is no better endorsement than a salesman who eats his own dog food. If you're happy to share details of which of these products you personally invest in and their performance to date, I'm sure it would be most informative for the layperson who is considering or already invested in one of these plans.

    • Rachael,

      It's a good idea for Chris to rebut. But of course, you don't want him data-mining through funds that have done well in the past and saying, "see, this strategy works."

      Cheers,

      Andrew

      • Rachael says:

        Andrew

        Completely agree. I was rather naively hoping Chris could give us an example of an actual Zurich/Friends Provident etc. plan that he has personally purchased, which, given his superior knowledge and fund picking skills, has shown consistently market-beating returns over the long term. (And to be totally clear, I mean “net returns”, less those all-important costs, and “consistent” meaning out-performance over say 15 years, not 1-2 years, as the very nature of these products is that they lock people in for the long term). If Chris is able to demonstrate such an impressive track record, I’m sure people will be queuing up to buy a policy from him. I certainly would.

        Of course, I accept that it would be possible for him to form a mythical high-performing “plan” by picking out selected funds retrospectively that have outperformed in given years. Well, we can all read back-issues of Money Week! To avoid any confusion, perhaps Chris’s clients would like to comment on how well their plans are going?

          • joji says:

            Hi Andrew,

            I have been approached for Zurich Futura plan where the salesman has confirmed that if i pay 185 dollars per month for 15 years, I am covered for life cover of 200000 dollars and 50000 dollars critical illness cover upto age of 95 years.

            The above plan also has an investment thing built into it. The thing that interests me is that its covered upto age of 95 by paying for only 15 years. The way i see it is 185 dollars x 12 months x 15 years = 33000 dollars for guaranteed life cover of 200000 dollars and 50000 critical illness cover.

            The other term insurances cover me till maximum age of 70.

            Please advice.

            Rgrds / Joji

  84. Chris says:

    Dear all,

    Yes, I do personally have accounts with both Friends Provident and Generali (Nothing with Zurich).

    My Friends Provident reserve account holds mainly index tracking ETFs with the odd managed fund as well as a couple of individual shares. I have held the account for 15 months and am currently up just shy of 30%. 2012 was a good year and fortunately the timing worked out well.

    I also hold a 20 year Vision account with Generali (to run to my 50th birthday so still approx 15 years to go) which I am happy with. The performance is much harder to measure as I invest monthly via my credit card so I dollar cost average with 12 price dates each year. There are no transaction fees on that and I get to buy $100 dollars of major mutual funds at a go for institutional rates. This is largely allocated to Emerging market equity funds through some of the worlds largest fund managers. The dollar cost averaging allows me to adopt an aggressive growth strategy with which I make very few changes.

    I highly value this low cost monthly purchase option and the discipline it gives me. I can access the majority of the cash without cost for any reason should I wish and am currently looking at transferring $25,000 over to the reserve account to increase exposure to a couple of ETFs and individual stocks I like.

    The thing that annoys me about these threads is that everybody is different and needs to be treated as such. Suggesting there is only one correct answer and the rest is a rip of is naive and reckless. Indeed if the person saying it was putting it in writing to clients in a regulated environment he would likely lose his license

    The products being trashed here are designed specifically for globally mobile people who want consistancy in their financial planning over a number of years and that is exactly what they provide.

    Best,

    Chris

  85. simon says:

    I have been with Zurich for several years and just cashed out. They ripped me off, they were slow with the execution, and their sales staff are rubbish. Worst experience of my life.

    • Hi Simon,

      I'm sorry to hear that they roped you into their scheme. When you cashed out, how much money did they take from you? What convinced you to cash out?

      Thanks for sharing your experience on this thread. It should help many others avoid the same fate. I know that it doesn't compensate for what happened to your money, but it's a silver lining around something dark.

      So thank you,

      Andrew

  86. Alistair says:

    Hi Andrew,

    After doing a quick google search on the FP Premier Advance plan the weekend before last, I found your comments here, and ended up buying the kindle version of your book from Amazon. It's the first book I've ever read about investing and I found it really interesting. You certainly convinced me to take more control of my finances.

    I decided to close my FP account. I've only been with them for three months, but paid £1500 in premiums, and have been told that there is no surrender value. FP will keep 100% of that. Still, it's a learning experience, and in future it means that I'll never sign my name to something I don't fully understand. So, thanks for the good advice. Apart from that, I thought your book was a good read. It got me interested in reading up on investing, so I immediately got stuck into a biography of Warren Buffett!

    I'm writing because I wondered if you had any advice on pension schemes? I'm a British citizen, working in Asia. My employer will pay £150 monthly towards a pension scheme. They specify that the pension scheme must have the option of an annuity. I don't want to lose this money, so am looking round for pension schemes with less fees than FP Premier Advance life assurance plan, which I've just surrendered.

    What I'd like to do is make the minimum payment into the pension scheme, so that I can take advantage of my employer's contributions, and then look into investing the rest of my money into a portfolio of share and bond indexes, as you suggest in your book.

    With regards,

    Alistair

    P.S. You got any plans to write a sequel? Although I enjoyed your book, I thought it could have been improved — I admit there were some good villains, but where was the love interest? 😉

  87. Adam says:

    Andrew

    Firstly congrats on an excellent website (I will definitely buy the book as well!).

    I stumbled across your site when doing some research into why my Friends Provident 'Growth' Plan had done so poorly over the last decade or so. Unfortunately all my worst nightmares about the high fees eating into gains were confirmed by your comments and links to various articles.

    I'm seriously considering taking out the maximum amount that won't induce penalties (accumulation units as they call them) and spreading the funds into ETFs via my Saxo account in Singapore.

    The remaining (initial units) will be left in place until the plan expires (to avoid taking the immediate hit on the surrender charges). I will however switch the management of this money from the current (high cost) fund of funds to the cheapest available mirror fund (vanguard s&p 500). In that way, over time, the fund should grow enough to cover the fees (4% p.a. + 1.2% mirror charges), and I'll at least get my initial investment back (losing out for inflation big time!).

    For the ETFs i was thinking of the following allocation:

    US equities 20% (eg VOO, VTI, IVV)

    Australian Equities 20% (VAS)

    Int'l Equities 20% (VT, IVE)

    Emg Markets 10% (VMO,IEM)

    Int'l bond 30% (ISHG)

    As a 40yr old Brit with Aussie PR I want the portfolio geared to AUD exposure, hence the bias there. Also slightly more equity exposure than the standard (60:40) allocation.

    I noticed the Vanguard expense ratios tend to beat the iShares for these index funds. Is it a no brainer then to use Vanguard or are there other things to consider (hidden charges, liquidity etc)?

    Any other comments in regards to portfolio mix, Saxo execution fees (& fx fees), tax implications, dividend reinvestment, which exchange to buy the ETFs on, etc would be most appreciated.

    Adam

    • Hi Adam,

      This looks like a solid plan. This does concern me, however:

      "In that way, over time, the fund should grow enough to cover the fees (4% p.a. + 1.2% mirror charges),"

      Have you done the math on what costs of 4% p.a. would do to your money? Look into what you would receive if you cashed out everything. Then make two calculations:

      1. Assuming a 8% return before fees (and a 4% return after fees) what would your money grow to over the duration of your signed term with the company? You can do the math by going to the compound interest calculator at http://www.moneychimp.com

      2. Then compare that growth, assuming you pulled it all out, took a penalty, and compounded money for the length of the term without that crazy fee. In other words, if you have $200,000 in there, and they will penalize you $50,000 for pulling it out, you would be left with $150,000. Compound that $150,000 at a hypothetical market return that doesn't include their atrocious fees and see which comes out ahead over the duration of your "term" with them.

      You might find it prudent to pull the whole lot and take the hit.

      As for your proposed allocation of ETFs, I think it's excellent. Vanguard will nearly always have lower expense ratios because it's a non-profit firm.

      Let me know what numbers you end up crunching.

  88. Duncan Page says:

    Hi Andrew,

    I have read your comments about Zurich and FP several times, both to get over my embarrassment at having been duped by both of them and to start to make a plan.

    I am a Brit living in Tanzania, and called HSBC to make sure I could invest the money I am taking out of Vista and FP in their tracker funds. They told me no, and were very cagey why not. I assumed it was because of my living in TZ. Have you any advice as to what I should do next?

    Regards,

    Duncan

    • Hi Duncan,

      You should be able to open an account with DBS Vickers in Singapore. Give them a call and ask them about it. The person on the phone may tell you that you can't do it. That's incorrect. Ensure that you speak to someone knowledgable. Ask to speak to a different phone rep if you get shut down by the first. Many of my readers have done this from other countries; it's doable. Then wire your money to DBS Vickers. Here's some info you might find useful. The first part is something you will be familiar with, but please keep reading: http://andrewhallam.com/2010/11/how-british-expat

      Cheers,

      Andrew

  89. Madhu Jaya Moolya says:

    Dear Andrew,

    I have just purchased a Term Insurance Policy for my both daughters aged 26 and 24 respectively.

    And I am currently looking for Critical Illness Cover, for which I approached some Insurance agents in Dubai and was offered Zrich Futura, Alico Investment plan and Friends Povident find, etc.

    Need your guidance if I can avail this Friends Provident Fund International Protector Middle East cover for Life or Earlier Critical Illness Cover?

    Await your advice Andrew.

    • Hello Madhu,

      I don't really know much about their term insurance coverage, so I'm sorry that I can't help on that front. The fact that you have bought term insurance, however, is probably smart. Are you purchasing the insurance to protect your grandchildren, so they are looked after, financially, in case anything happens to your children and you?

      Andrew

  90. Adam says:

    Hi Andrew,

    Running the numbers (assuming 20yrs to maturity, 100k notional, and a 60% surrender charge):

    40k @ 8% = 186k

    100k @ 4% = 219k

    However if you include the mirror fund 'admin' fee 1.2% and external fund charges ~1.8% net growth is a measly 1% p.a.

    100k @ 1% =122k

    So as you say it makes total sense to cancel everything. Fortunately we are only talking about the first 2 years contributions (not total plan value) so in actual $$ terms the hit is much less than the above example.

    • Adam,

      You have proven how nasty these products are. And your calculated examples will serve as informative inspiration for others. This post gets a crazy number of hits each day. Thanks for contributing to the education. I really appreciate it.

      Andrew

      • Adam says:

        No probs Andrew.

        Would love to hear from an advisor who sells (or has sold) these plans in the past to come out and say the 3%++ running costs p.a. are worth it for the following reasons…..

        Areas of discussion could be:

        1. Active fund management vs passive investment

        2. Benefits of free switches

        3. Estate and tax planning

        I doubt we will. And if so please give some evidence.

        Cheers

        • IFA Abroad says:

          1- active vs. passive – addressed very well in Andrew's book – good luck to anyone still debating this one.

          2 – free switches – this is a nice benefit for active traders that switch funds around a lot or try to market time. See point 1 above. Cost per trade for ETFs is tiny.

          3 – locking yourself into a decades long product not specifically designed for the tax system of the country you live in (or are considered domiciled) does not make sense from an estate or tax planning perspective. considering expats change countries more than most – this type of inflexibility is even likelier to cause problems.

  91. Chris says:

    Andrew,

    This post highlights something important, you are not a financial adviser. How can you possibly tell this person that term insurance was smart? I am very keen to see how you cover his need for critical illness insurance.

    Best,

    Chris

    • Chris,

      Neither of us know why Madhu has purchased this insurance or what kind of coverage his is looking for. You likley consider term insurance a dirty term, regardless, because it pays lower commissions. You would prefer whole life insurance under every circumstance (so it seems by your comment). Conveniently, it pays brokers the most money.

      Commission-hungry salespeople see no place for term insurance. When somebody's adviser chooses term (as this gentleman's advisor did) then I congratulate them on finding an advisor with a conscience. The advisor has obviously assessed his client's needs and made a decision based on his client's circumstances, rather than on his need for a big commission.

      In most cases, term is better than whole life. SmartMoney: Term Versus Whole Life, Which is Better? http://www.smartmoney.com/plan/insurance/term-or-

      And it's cool when an advisor assesses a client's specific needs and makes a fiduciary decision based on that assessment.

      • Chris says:

        Ha ha ha, what nonsense!

        I use term assurance 80% of the time as a lot of needs are solved by it (mortgage and kids being the main drivers) at its a lot cheaper. I use term assurance myself as in 22 years my mortgage will be paid off, my kids will be their own problem and my Friends Provident account will be more than enough to support the wife for the rest of her life.

        Term vs whole of life is about more than price.

        My point is how can you know it's the correct solution?

        How are you getting on with the critical illness?

        Best,

        Chris

        • new guy says:

          Just a share of comment,

          1. usually term insurance pay advisers the best as insurance companies earn every cents you pay thus their agents can get bigger share of the cakes. But it’s a good plan for those who don’t mind lose all the premiums but get coverage for unknowns and unplanned.

          2. Ask yourself this question, why do you invest? You want your money to work harder for you right? There’s only 2 way to do it. Invest yourself if you have the know how or hire people to do the investment for you. If you hire people to do for you, do you think it’ll be free?

          3. If you think this is expensive, look at charges from endownnent plan or par plan, I myself hold an endowment plan which I’m regretting owning it.l. If you don’t understand the charges, get your adviser or banker to explain to you. If he / she can’t, time to change another adviser. Or else, work out the charges and returns in yearly terms in excel and ask your advisers whether your understanding is correct. Sign the papers only when you are comfortable. Make sure you yourself understand it.

          4. From all the comments I read so far, everyone is complaining their investment is not making a profit in the earliest years. Everyone are just at most into your third years of investment. I own investment plan as well but from other insurance companies, I’m very unhappy about the investment in the first 3 years because it’s losing money but now into my fifth year, it’s actually into the positive region now. Luckily I didn’t pull the plug early. All I learn is that if you are into long term investment, never pull short. Dollar cost averaging always give you the best balance investment. If you don’t know what I’m talking about, go buy Warren Buffet book and read. Never cancel your investment on your impulse. That’s a disastrous move. If your investment is losing money, go find out from your adviser why. Pester him and not cancel after reading people comment. You never know whether there’s anyone out there trying to earn from your lost or to make publicity (hi Andrew, i’m not talking about you. I’m talking in general terms. I know you are jusy trying to bring awareness to everone). Go find out from your adviser is there anything that can be done. If he can’t explain, time to change adviser.

          5. I myself is a Forex day trader which earn an average 30% returns annually and Inever put all my investment in single nest. I choose to diversify them. Average out my risk to make sure even during bad times, I can ride it out smoothly.

  92. Chris says:

    You are a plonker.

    This guy has explained the issue perfectly and I am guessing in a second language. He makes a lot of sense and is not trying to hide anything.

    What sort of monthly savings vehicle do you use and how do you get paid?

  93. Your comments are welcome on this site Chris. And I will continue to be polite when conversing with you.

    It would be best, however, if you are respectful towards IFA Abroad. It isn't fair to attack him personally for not agreeing to strap clients with high-cost products. He once sold what you currently sell, and deemed that it wasn't fair to the client. That is his choice, and he doesn't deserve to be disrespected for making that decision and professionally defending it.

    You called him a derogatory name, and I can't allow that kind of thing on the blog. I won't approve your post for visibility. You might be a great guy, but your emotional responses aren't winning you friends.

    Please feel free to comment respectfully.

    Thank you,

    Andrew

  94. Madhu says:

    Hi Andrew,

    Thanks for your clarification and I am very happy to hear that I have taken the right decision for my children. The TI was taken keeping in mind my children's future after marriage, our future, etc.

    However, I am still waiting for your reponse on Critical Illness cover from Friend's Provident Fund. Shall I go for it?? Or I can just opt for Health Insurance or just go ahead with CI cover.

    Await your advice.

  95. IdiotAbroad says:

    Hi Andrew,

    I opened my long-term Vista 4yrs ago falling for the sales pitch, I have recently returned to the UK and stumbled across this site. My contributions now come out of my UK account but after reading this I am beginning to wonder if I should cut my losses and find something else in which to invest but as I am no longer an expat my options may be limited?

    Advice welcome!

    • Your options in the UK are substantial. Don't let anyone convince you otherwise. I can't advise you on what to do, but I can tell you what I would do, personally: I would cut my losses with Vista and start investing in some efficient products. HSBC's low cost tracker funds (they're indexes) are excellent options.

      Cheers,

      Andrew

  96. joji,

    The rule of thumb is this: buy insurance if you need insurance. But never buy a product that blends insurance with an investment. The ONLY people who will disagree with that are the greedy folks selling such high-commission products. Insurance wrapped investment products are the highest commission earners there are in the investment world. Avoid them, no matter what.

  97. padma venkataraman says:

    Hey Andrew

    Tragic that I am about to thank you for making it clear that I am about to lose shitloads of money on the Zurich Vista policy. My paid up is USD 23,000, the fund value is USD 22,000 (so much for performance!) and my surrender value will be 6k!

    Is there really nothing that one can do? Is it worth keeping this policy alive just by paying in once in 3 years so that I can get some kind of a lump sum at the end of a few years? or just take the massive hit in my stride and leave cussing and cursing???

    Solutions please. And yeah, next stop headed to check out your book!

    Cheers

    Padma

    • Hi Padma,

      Try contacting Zurich directly. Let them know that the plan wasn't properly explained to you and see if you can get more of your money back.

      Considering that the markets have gained more than 30% since September, 2011, it's very disappointing (also) that your funds have not performed well. Since 2009, the markets have soared tremendously.

      I know that some of my readers have directly contacted Zurich. And they have had luck reclaiming much more of their money.

      Good luck, and please keep me posted.

      Andrew

  98. James H says:

    Hi Andrew,

    Congratulations on the website, all very interesting information. I'm a Brit, 30s, just under 2 years in Singapore and finally getting round to sorting out some investments and retirement planning.

    On the latter, I've been recommended the Zurich Vista product and looking through the comments here I can see and understand why a lot of people are unhappy when they've invested in the same.

    I would be investing in a retirement plan with my eyes open and that whatever term I choose (20 years/25 years) I'd intend sticking to rather than try to cash out early as I'm aware that this brings high penalties.

    My questions then: Is Vista a reasonable investment plan as long as you plan to go the distance?

    Or is it just a high fee, low return product and there are better investment options elsewhere?

    I know the old adage is that if you don't understand something don't buy it…

    Thanks in advance,

  99. Rachael says:

    Forget the fees for a moment; just think about some of the key “features” of this policy. You have to invest a FIXED amount EVERY month for 25 years. Sure, they say you can take a payment holiday, reduce your payments and take money out but read the small print, IT WILL COST YOU DEARLY! Now ask yourself:

    – Can you predict your financial circumstances accurately for the next 20 years?

    – Do you think there might be times where your finances are squeezed (e.g. illness, redundancy, kids)?

    – Do you think it’s possible the UK government might change the tax laws in the next 20 years as they come up with new and inventive ways to bleed their citizens dry and crack down on offshore accounts?

    – Wouldn’t you rather have your money in a place where you can call the shots, rather than an inflexible product that handcuffs you for a third of your life?

    Now to the fees. A quick read of the Vista brochure shows:

    4% of everything you put in for the first 18 months gets deducted in “expense recoupment fees”. That’s 4% of your money that never makes it into the pot in the first place. It will never have a chance to compound or grow. And that 4% deduction isn’t just for the first 18 months, it’s for the whole 25 years. Over 25 years that’s going to be a scary loss!

    Next, policy charge: $12 per month. Ah, cunning. Switching from %s to $s muddies the waters, but let’s say you save $1000 a month, $12 equates to a 1.2% charge.

    Next, policy management charge. 0.75% per year. That’s just the charge for managing your vista policy, not the funds you invest in, because next is…

    Fund Charges. Gotta love the policy here. Whenever you buy a fund, with or without Zurich, said fund will charge you a % fee annually. Fees vary but for actively managed funds are normally quite high. Yet on top of this Zurich collects a fee “on the specific funds held within the investment policy”. So in plain English, you’re paying Zurich AGAIN. I can’t see the list of funds and charges but let’s assume you’re going to pay another 1.8% in fund fees and 0.5% to Zurich.

    Maths has never been my strong point, but I make that a grand total of 8.3% in fees per annum.

    On average the stock market returns 9% per year, so after fees that’s 0.7% gains. After inflation you’re into negative territory.

    Given the above, I find it incredibly misleading that Zurich include in their literature an example of projected returns based on a 7% NET annual return. Of course, these smooth-talking salesmen will try and tell you they are going to get market-beating returns. Well they’d need to achieve about 16% returns to make these numbers work. Now, how many actively managed funds beat the market? Answer: very few. The majority lag behind, in fact. So what are your chances of making 16% returns every year for the next 20 years. Unless Warren Buffet is your cousin, slim to none, I suspect.

    So what’s the alternative? You could put your money into a low cost tracker fund or ETF, where the annual management charges are 0.5% or less (plus any trading fees). This way you have complete flexibility to buy when you want, sell when you want and stop or reduce your investment if your circumstances change.

    So back to your original question, is Vista just a high fee, low return product and there are better investment options elsewhere? What do you think?

    I strongly suggest you read Andrew’s book and website – all the info is clearly set out there.

    • Incredibly well stated Rachael!!

    • Anonymous says:

      Does Vista have bonuses? If so, you can't add it up as simply as you have done. Also, the initial unit charge only applies to initial units. So fees are 8%+ per year only on initial units (and bonuses if applicable). You are right in pointing out that the fees are a mess, but you should be careful with the information you present.

    • Urko M. says:

      Brilliantly said! I should frame your comment and put it up somewhere!

  100. Rachael says:

    Dear Anonymous,

    More than likely Vista does have bonus units. That seems to be how these plans reel people in, by making the fee structure really complicated and unclear. The plan I was shown (Friends Provident not Vista) had free bonus units in the early years. In my view this was just a ploy to offset the high initial fees and make the returns look better during the early phase until people are “beyond the point of no return” and have sunk pot loads of money in. Investment psychology 101….nobody likes to pull the plug on a failed investment.

    I agree my calculation is highly simplistic and no doubt not accurate, as I’m only really looking at year 1, not the whole term. But to be honest the fees are so complex that even despite pressuring my IFA I cannot get clear answers on how they are all calculated or deducted!

    I’m merely trying to point out that these products seem very inflexible and expensive and stack the odds of making a decent return totally against you, It seems that you are paying through the nose for a bunch of pen pushers and bean counters at an insurance company to take your hard-earned money from you, pass it to a fund manager to invest it and churn out a couple of statements. Does this seem fair? Why should you pay someone over the odds to do that when you could just invest directly?

    The way I see it, these plans stink more than French cheese.

    • Julia Correa says:

      Dear Rachael

      So do you think its better to invest yourself directly? In my opinion, these plans would be better (for exemple the Friends Provident International) because you can change where you are investing in and you dont pay anything for that, while when you invest in stock market for yourself, whenever you change where you´re investing you need to pay commition.

      What do you think? What would you do for a long term investment?

      Cheers

      • Rachael says:

        Hi Julia

        It's true that these plans offer "free switching" to a different fund with no charges. But given the overall level of charges with these plans, the benefit of this is negligible. Self investing would still work out cheaper, even with trading fees to pay. Personally for long term investments I am investing in a mixture of low cost funds (HSBC FTSE tracker at 0.25% annual fees) and index ETFs. I also have some individual shares which are mainly in solid companies offering good dividends.

        Having looked at Friends Provident, they try to tempt you with free bonus units and free switching. However if you look at the overall costs, any benefits are wiped out. As a self investor you can also decide to change where you invest, without any of the nasty penalties that come with being tied into a 25 year plan. If you are following Andrew's advice and using index trackers, there is no need to worry about the price direction of specific stocks. From personal investing experience of 15 years I can tell you that you think you will buy low and sell high, but rarely does it work out like this. You can only see the bottom and the top of the market with hindsight, hence an index tracker takes away the worry of having to stay on top of prices and read loads of research on individual stocks.

        Personally I would not touch Friends Provident, or similar, with a bargepole. If you have read everything here and still think it's a good investment, I don't know what to say. Also note that you can't reduce your contributions as you have suggested without incurring penalty fees. Again, I can highly recommend reading Andrew's book, which sets out a very simple approach for DIY investing without paying over the odds for one of these plans.

        • Anonymous says:

          Rachael,

          What penalty fees are you talking about – that apply if you reduce contributions with Friends Provident? Overall the message is clear that there are serious problems with these products, and the main problem is the size of the fees, but this is the second time you posted incorrect information. There are more than enough problems with these products that there is no need to make any up. Start citing terms and conditions if you want to introduce problems that have not already been addressed.

          • Rachael says:

            Dear Anonymous,

            I must say I find it rather odd dealing with a faceless commentator. I guess, given your comments and your need for anonymity, that you sell these products? ?

            The IFA who showed me the Friends Provident plan basically explained this as a plan where you commit to a fixed amount per month over however many years you sign up for. My understanding, from this conversation, was that you can change your monthly contributions (either increase or decrease) but that extra charges will apply in either case.

            I did question the guy at length, so if my understanding is wrong I can only apologise. Perhaps I should re-phrase my comment. Anyone considering taking up one of these plans should check carefully the terms and conditions (and any fees which may apply) if wishing to alter their regular contributions.

            I have presented my view based on discussion with my IFA and analysis of the information provided. However I accept that others may take a different view and have different needs or circumstances. Ultimately, everyone is entitled to their own opinion and we must all take personal responsibility for the investments we chose. Good luck to everyone with their choices!

  101. Julia Correa says:

    Hello, Andrew

    First of all, I would like to thank you for this article, it opened my eyes to something I hadn´t realized.

    I am from Brazil and recently I have been thinking about making a plan in the Friends Provident International Limited, starting in about 3 months from now. I read everything about it and was quite sure it is a really good plan for a long term investment. It would work like a Private Pension Plan and, comparing to what I know form the others private pension plans in Brazil, the FPIL sounds better. Better for giving you the option to change your investment whenever you want and all the bonuses seem to be very good, plus the security in Isle of Man is a good deal.

    Everything was already set, but now that you have attempted to this big charges, i am thinking if this is the best option for a long term investment. I am planning to make a 25 years investment, putting 1500 dollars in the first two years so that i can take advantage of the big bonus they offer. After, during the Additional Unit, I was thinking about lowering this quantity to 500, or maybe even 1000. They offer also a bonus of 0.2% to 0.4% per year from the third year.

    You are probably already aware of the charges, they are 1.5% in every three months on the Initial Units, 1.2% per year from the Additional Units and 6$ per month.

    What made me very tempted to this plan is the fact you can always change where you will invest, making your profit depending of where you choose to invest and making it also more secure if a company breaks. The other point that made me interested is that, since it´s not in Brazil, i won´t need to spend more money paying income taxes .

    Therefore, right now I am very unsure of what I should do. Would FPIL still be good for me according to my interests? Can I find another long term plan where i will make more profit in the end of 25 years, thinking in a retirement plan?

    I would appreciate a lot if you could help me with this issue.

    Thank you very much again for the great article!

  102. Chlorate says:

    Hi Andrew,

    I have a Generali Vision which I got 2.5 years ago. I agreed for 500$ on a 10-year plan. Current value is 16.9k USD. I'm french and I live in Dubai, not planning to leave soon.

    I'm invested on high risk funds, mostly on Asian/Emerging market. What should I consider to decide whether I should cut my loss right now and learn this expensive lesson ? I don't need the cash and I'm not sure where else I would invest it – it's not really a big amount any way. But is it worth waiting till the 10 years limit ? I feel like my chances of really making a gain are very limited.

    PS: French cheese does smell bad. But they taste really good and go well with wine :)

    • Hi Chlorate,

      The CHARGES of Generali Vision are:

      – Administration Fee: 2% pa (0.3% after year 10), this is deducted regardless if you make deposits or not. This is taken from the “initial period” investments, using the average offer price at which these investments were purchased. Ideally you want the initial period to coincide with a downturn in the market. Your own "initial period" were the first 13.2 months, but if varies according with the "term" (how long is the account for).

      – Investment Administration Charge: 1.5% pa, this is taken from the total investments, the account value, so Generali has a vested interest that you make money.

      – Policy Fee: 45 USD per year (54, if you make monthly contributions).

      – Bid/Discounted Offer Spread on the Funds: 0.5%* one time only. Ideally you want to use the fund(s) you invest for one year and longer, as it’s not charged on a pro-rata basis.

      – Annual Management Charge: 1.5% pa** charged on a pro-rata basis, built-in on the price of the fund.

      * It varies from 0% to 2% but the large majority of the fund houses charge 0.5% or 0%. There are no entry or exit fees, and no fees for switching money from fund to fund inside Vision. My own Vision average (like you, I use Vision) is 0.5%.

      ** It varies from 0% to 3%. The average over the life of the plan is 1.5%. For reference our own firm medium-risk portfolio today is 1.3%.

      The BONUS of Generali Vision are:

      – Allocation Rate: 105% when you save 1.250 USD per month or more *

      – Loyalty Bonus: 5% on all contributions made at the end of year 10 **

      * 105% means 5% in “normal” language. For instance, when you contribute 1.250 USD per month, Generali will give you (no strings attached) 62.5 USD monthly. If you contribute 1.000 USD monthly, Generali will give you 40 USD because the Allocation Rate is 4%, etc.

      ** At the end of year 10 Generali will give you 5% on all contributions made. Example: at the end of year 10 you have made 9 years of contributions at 500 USD per month, and 1 year without any contributions because you were on a sabbatical. Total: 54.000 USD contributions made. Generali will give you (no strings attached) 5%, or 2.700 USD at the end of year 10. The same happens at the end of year 15 (5% on the previous 5 years contributions), year 20…

      In conclusion, Generali Vision it's a good account if:

      1) You deposit 600 USD per month or more, because you will receive 3% bonus;

      2) If you don't stop deposits for 10 years, because you will collect 5% bonus on all deposits made at the end of the year 10;

      3) If you don't reallocate your portfolio more than once a year, to avoid paying the bid/offer spread;

      4) If you use your Visa or Mastercard to make the deposits, because it's free of charge and you collect points, depending on the card;

      5) If you want to have your money out of sight of your government or your family, as this account is confidential.

      6) And if you want to have the ability to nominate whomever you want as a beneficiary in case of death.

      Bonne chance!

      Afonso Vieira (and that's my real name)
      http://www.linkedin.com/in/afonsovieira

      • Thank you Alfonso and Rachael,

        An account so layered in fees, however, wouldn't suit a diversified, low cost investor hoping to maximize profits.

        Rachael's account won't offer bonuses, but based on the lower costs of her diversified tracker funds, and the tyranny of compounding fees on the Generali plan, her account won't have to. She would most certainly be miles ahead of such an expensive platform. But then again, no financial academic has ever recommended an insurance linked plan for the performance. In a low return climate (if the markets made just 5% going forward) such a portfolio would be giving away more than 60% of its profits in fees each year. The little bonuses pale in that light.

        In the U.S., products like Generali's are called variable annuities They cost a lot less than Generali's products, but they still catch the ire of financial academics: http://assetbuilder.com/scott_burns/variable_annu

        Thanks for the breakdown of costs Alfonso. When selling such a product, what does the typical salesperson earn?

        • Jeff Kowalsky says:

          Wow, what an interesting read. I read Alfonso's post of fees and rules. In my humble opinion, how could the average investor possibly understand all that. You would need to be an accountant to figure it all out.

          Jeff

        • Hi Andrew and Jeff,

          Just to clarify, I am not advocating using Generali Vision. The cheapest way to save/invest is by using ETF's on a low cost platform, which as been mentioned several times in this blog, including by myself.

          The costs/bonuses above along with other considerations are a help for Chlorate and others to make a decision regarding this product, as I can't find any breakdown on this blog. As Jeff rightly said, the average investor cannot understand the charge structure, but above all, neither an ex-car salesman turned asset manager/financial planner. I believe the cost structure was created like that so neither the average investor and the salesman can understand it… it's on purpose.

          Andrew,

          The commission is two fold: initial and trailer. And it's very high, ridiculously high. Since I have identified myself I cannot disclose it, at least on written form. In my firm, we pass-on a large part of it to our clients as commission rebate, which makes the account usable. Note that I am talking about Generali Vision, not the other accounts that are discussed here often.

          Dear Anonymous,

          I am happy to share information and explain in a detail as I did several times in this blog. That's what blogs and forums are for. I like blogs and forums because most users share and explain. Most users.

          Since you have now a complete breakdown of costs and bonus, could you please calculate and, for everybody's benefit, tells us the answer to your own question (net cost). And since you are on a sharing mood, please also explain –in detail– what are these agreements you mentioned, when will they be put in place, who are the people affected by them. This will help all users to make better decisions. Thank you. As for the commission(s), since you are not identified –I assume Anonymous is not your real name– you can tell us all how much is it. Don't forget that, like I said above, there are two: initial and trailer. Numbers please. Thank you again.

          Looking forward to read you.

      • Anonymous says:

        Alfonso, you broke down the fees and you broke down the bonuses, but everyone just wants to know the net cost. What do you tell your clients? For example, what is the cost for someone in a $1000 per month, 25 year plan.

        Then please share the commission information as Andrew has requested. For that same policy ($1000 per month for 25 years), what is your firm paid?

        And with your list of advantages, did you know Guernsey signed information sharing agreements with the US and the UK?

      • Chlorate says:

        Dear Afonso,

        Can you explain why 600$ would give me a 3% bonus ? I didn't find any note on that in the terms and conditions.

        Thank you for the very clear explanation.

  103. Anonymous says:

    Alfonso, I don't know how much the commissions are, which is why I asked. A list of all the costs and bonuses does nothing but confuse people, as others have mentioned. How much of the commissions do you rebate, and then what do you tell clients the total net cost is? And you should not be quoting the annual management charge, you should be quoting the total expense ratio. An annual management charge of 1.3-1.5% is likely a 1.6-2% total expense ratio.

  104. Chlorate says:

    For anyone interested, I did some analysis on my Vision plan after getting the statement summary from Generali (who sent it do me in less than 3 hours – respect).

    I have a 10 year, 500 USD monthly account, opened in August 2010.

    I sent 16000 USD so far (actually 16480 as I'm losing 15 USD monthly from the transaction, given that my account is not in USD).

    I was given 500 USD as a bonus gift when joining.

    So far:

    320 USD were charged as annual administration fees.

    265 USD were charged as investment charges.

    18 USD were taken during three plans switch.

    => Total charges: 600 USD, plus 480 from my bank.

    On top of which, 6600 USD will be taken (the 13.2 month charges, since I have a 10 year plan), and I will be given 3000 USD as loyalty bonus, or 5% of my total premium.

    The charges being a percentage of the investment, they will keep increasing. I think there should be a way to calculate the value and get the total cost of the plan.

    • Chlorate,

      Be sure to also calculate the management expense ratios of the funds themselves: roughly 1.75 percent per year.

      In one sense, the activity you're undergoing is a bit like trying to determine the exact weight of an Orca whale. While it can be done, it may be much easier to pass on the activity with the shrug of the shoulders and a "that's too big for my boat" dismissal.

      The program you're invested in may not be worth the cost.

      • Chlorate says:

        Dear Andrew,

        I understand you have your own reason to see me leaving my Vision plan. However, even though its cost is high (or even very high), I'm ready to take the risk to continue until the end. Maybe leaving now and investing somewhere else would be a win on the long term, but the loss would be too high compared to the size of my current investment.

        I requested Generali to send me the surrender value as of today, which would be of 9800 USD. That would be a loss of 40%. Leaving and going for another plan, even though cheaper, will not cover that loss.

        I'm glad I found out about your website, I now understand what I got myself into.

        • Chlorate,

          Fortunately, you only have 7.5 years left in your 10 year plan.

          Thanks for sharing your story, questions and thoughts here. They will be helpful to many.

          Cheers,

          Andrew

          • Neil says:

            I pulled out of my Generali Vision plan. I had a 10 year contract and luckily decided to pull out after five years. If you can hold off until then, the fees are less. There is an extra fee that is substantial if you cancel before half the term is over. Minimize your monthly payments and cancel after five years are up. This will reduce the pain.

          • Anonymous says:

            Neil, I never heard of the fees being lower if you hold for half the term. did you find that in the contract, or is that what your advisor told you? If it's in the contract, where is it?

          • Neil says:

            I really don't remember. It was buried in there somewhere. If I recall, I was paying $500 USD a month for 10 years. I pulled out just after five years and when I was trying to do the calculations to figure out how much I would lose, I found that one fee went to zero if the account was canceled after half its term was up. Sorry, but I don't remember what fee it was. It was buried in the fine-print. It was a percentage that went down every year to zero after half the entire term.

          • Anonymous says:

            Hi Neil, I never saw anything like you are describing with fees going down after half the term. Unless you can back it up with a specific reference, I believe you are mistaken.

          • Chlorate says:

            Hi Neil,

            If I may ask, how much did you get back after 5 years, and where did you invest it ?

          • Mathew says:

            Chlorate,

            See my post below for my story and what I got out after 3 years. Sad news…

          • Neil says:

            I looked up the Generali brochure and the fee is called the Establishment Charge. After five years, it is no longer applied. The earlier you pull out of Generali, the more this fee is since it it 1.5% p.a. If you pull out after four years, you pay that for one year. If you pull out in tree years, you pay that for two years, etc.

            I don't have the exact numbers handy but I think I got back about $23,000 after I put in about $29,000. The investment had made virtually nothing, which pissed me off as well. The money is sitting in a bank in HK, just waiting for me to figure out exactly what to do with it.

          • Anonymous says:

            Neil – I would guess you must have contributed a lump sum at the beginning of your plan? The establishment charge on lump sums is typically 5 years – it had nothing to do with your plan being 10 years.

          • Mathew says:

            There is across the board support that these funds are not an effective vehicle when compared against much better (and lower cost) ETF's. Read through any of the 5 pages of replies to this thread alone and you will see people across the globe coming to this realisation. Chlorate – I know it's a tough one to swallow now – but you're in quicksand right now. The sooner you get out, the better it will be for you in the long run (short term pain/long term gain).

        • Chris says:

          Dear Chlorate,

          I´m afraid that nobody here really seems to have got to grips with the flexibility of this plan.

          The Establishment charge is a fixed and known cost. For Chlorate it will be $6,600. The bonuses are also fixed and for you will be $4,200 (This would have been more if you were contributing more as you would receive a higher allocation rate than the 102% you get now).

          The establishment charge is largely in place to ensure that the adviser is paid and that if you change your mind that Generali do not lose money from underwriting and processing your application. Essentially, you are paying $240 a year for financial advice and unless your adviser is a bozo, or disappears on you that is a steal.

          The policy fee is $4.50 a month and a rather stupid fee. It is more relevant to a contribution of $500 than $5000 but is a fixed and known amount.

          As for paying the 1.5% annual fee or any underlying fees, you can easily withdraw your accumulation units and invest these into ETF´s in a "low cost" brokerage account any time you wish. This will not have any adverse effect on your plan or charges as loyalty bonuses are based on premiums paid, not fund value. In the meantime you can continue to dollar cost average $500 a month into the market at very low cost.

          You can pay your premium with a credit card and Generali will not charge anything to receive this, nor are there transaction charges to worry about. That means that you can get into the funds of some of the worlds leading fund managers for as little as $50 a month with no cost. You could then transfer these to a broker account and into ETF´s each year once accumulated. The alternative is to send your $500 to a brokerage account each month. Your bank will likely charge you around $50 a go for a wire transfer and lets say you invest in 4 ETFs for balance at $10 a transaction, that is a very expensive route to market. You also need to be very conscious of the financial strength of the broker and its jurisdictional security. Many accounts will not take your money from Dubai.

          So your best option is to maintain your Vision plan and receive the bonuses you are due so that you lower your costs overall. If you want to control costs on an ongoing basis and are comfortable with a brokerage account option, make withdrawals from your accumulation units on an annual/adhoc basis. The absolute worst thing you can do is surrender and not far behind is stop paying. Either option ensures that you lose money.

          Interestingly, the $2,000 a month 15 year Vision plan I have just set up for a client is cost positive on the vehicle charges (by around $6,000) and we will likely be running the accumulation units into a lower cost open architecture portfolio in future. We are also getting tax relief on the premiums so it irks me somewhat to hear people that are not qualified advisers bashing a vehicle that has a very useful place in controlled financial planning.

          It would be interesting to know what the reason was for taking out the plan over 10 years and at $500 a month?

          Best,

          Chris

          • Anonymous says:

            Chris,
            You can’t take away someone’s money in the first year, and then give back nominal cash bonuses in 10 or 25 years – and just net that together to assume cost. $4200 in 10 years with 3% annual inflation makes that about $3100 in today’s value, while the investor gave up their first year(s) of savings to fees.

            The first year of savings is potentially the most valuable contributions of the entire plan, in that it should have had the longest time to compound and grow. With these plans, the most valuable contributions go to pay fees.

            Getting into the world’s ‘leading’ fund managers that typically charge 1.5-2% total expense ratios does not carry cache on a website that talks about how passive strategies trounce active strategies.

            Funding a brokerage, someone saving $500 a month could fund their account from their bank account once every 6 months, or once a year, to minimize fees.

  105. Anonymous says:

    Chlorate, Did you find the parts in your contract that explain the surrender charge is taken from initial units, and that 100% of initial units are used to cover fees – no matter what you do? Those contributions are what economists call a 'sunk cost'.

    Bonuses seem to help lessen the sting, but the deal is not so great when you realize you gave up the rights on growth from your most valuable year (the beginning, which should have had the longest to grow and compound), which all went toward fees – in exchange for potential nominal cash bonuses provided at the end if you can jump through their hoops of not missing payments over long periods of time (as an inordinate amount of people in these plans do).

    And then to get that nominal cash bonus, you must accept investment admin fees of 1.5%, plus total fund fees around 1.5-2% per year, and figure 0.5% spread charge on everything you send them for the next 7.5 years. Alfonso, even if you rebate the entire commission, you are still putting them into something that carries these high fees on everything they contribute. Can't you recommend a brokerage account?

    Chlorate – $15 foreign exchange fee on $500 is another 3% charge. Overall that's quite a hurdle you are accepting for your savings for the next 7.5 years – and no, sending them more money for higher bonuses does not improve your situation.

    • Mathew says:

      I'd like to add in my experience with Zurich to further articulate how terrible the Vista plans are. Together with my wife, we wanted to aggressively save while we were young without children. Also, the more you save at a younger age – the more time it has to grow (basic investing principle). That is how our advisor managed to convince us to invest 4k per month into a Vista plan. We were also told that the fees would amount to less than 1% annually, and that we could postpone at any time without cost. That is where the ability of unscrupulous financial advisors comes in to get you. As these posts have proven, the fees are absolutely not 1% (in hindsight, our advisor never managed to explain it well enough for us). And indeed you can stop at any time, but the fees keep coming out and thus you can do nothing but watch as your investment dwindles with no new funds going in and huge fees coming out.

      To reinforce the point – keep in mind that if you buy a plan via an advisor – he/she gets a significant commission based on how much you agree to put in. The higher amount, the higher his commission, and the higher the basis for calculating your fees (fess are 4% of contributions in the first 18 months). Our advisor, by pushing us to 4k, pocketed 48k for his work. His interest is in getting money into his pocket – not your best interest.

      We made the painful decision earlier this year to get out while we could. Our plan had a value of 110k, and upon surrender, we got 40k. Now, that 110 represented ~30k in bonus money, so in effect we put in 80k, and got out 40k. We saved hard with long term goals in mind – and as a result have been burned. Upon writing to our advisor for some explanations, we were first ignored and then told that since he no longer works for the original company that he wrote the policy under, he is not responsible and if we have a complaint we have to go to them. The pain of being scammed like this hurts – it's a painful lesson. But to anyone thinking about Zurich plans, I plead with you to look elsewhere. If you need advice, go for a paid for service advisor and not an advisor who gets paid based on what you buy.

      If anyone wants to know more, feel free to respond to this posting. Again, it's a painful lesson to learn, but the sooner you take the hit, the sooner you can move on to successful investing through sustainable means.

  106. Chris says:

    Testing

  107. Alvin says:

    Wow! This is an eye-opener. I’m from Singapore and I have a Friends Provident account that’s been running for 19 months. I’ve only started Googling about it now as I want to start controlling my own investment, will definitely hunt for your book tomorrow. I feel like I’ll just cut my losses and pull out now. This is my new favorite site, wishing to learn more from you.

  108. Ben says:

    Hi Andrew,

    Thanks for the great information. I was about to join into a Vista plan with an investment firm in Singapore. It sounded attractive but now that I have read this, I did a calculation worksheet and worked out the fees and charges I would be paying over the 25 year term.

    @ $5000 a month for 25 years with 5% return pa (not really realistic but simple for this example), I worked out I would be paying approx $357k in charges over the whole term, which works out nearly $1200 per month averaged over the term.

    The interesting thing I noticed is that of the $5000 pm contributions that Zurich matches over the first 12 months, I would have paid all of my contributions plus the bonus amount in fees with the 4% over the term.

    I have just bought your book which I am about to start reading, but have a few questions for you:-

    1. Tax-free: One of the advantages of this ILP fund which the adviser keeps highlighting is when I finally withdraw my amount (at end of term or early), it is tax free when I return to my home country and would not be included as part of my income tax. Is this true? And are there any other non-ILP funds that have similar attributes?

    2. Moving between funds: Another advantage highlighted is that I can change between funds and fund-types without any extra charge. I was advised with mutual funds I will be charged approx. 5% of my investment amount performing this move. Is this true and is there a similar product that manages a number of funds where you don’t incur this charge?

    3. Other options: You have mentioned Vanguard and Assetbuilder. Unfortunately Vanguard Singapore only do Institutional investments at the moment, Vanguard Australia doesn’t setup accounts for Australian’s residing overseas and Assetbuilder requires a $50k starting amount, which I haven’t accumulated yet. Do you have any other recomendations for mutual funds or companies similar to Vanguard or Assetbuilder ? Or alternatively, have you come across or can recommend any “good” financial advisors that give you a number of options rather than push one product?

    Thanks so much in advance,

    Regards,
    Ben

  109. Pradeep says:

    Hi Andrew,

    Looks like I need some advice as well. I fell into the trap of Zurich Vista plan around 7 years back, and have now put in around 35K USD the value of which is about the same now :) I have relocated recently to the US and was wondering what I should be doing about this policy. If I surrender this now, I will only be getting around 22K USD I believe. Should I cut my losses, and take the money out? I am thinking if I stay for one more year with that, the value might increase and my losses might be much less, but I cant say for sure. Does it make sense to cut the losses, and invest in a better option such as Vanguard?

    Thanks,
    Pradeep

  110. Leonard says:

    Hi Andrew,

    This is a great website!
    I am a Singaporean, in my 20s and i just started learning about investing.
    I would like seek advice from you regarding the vista plan.
    I’ve purchased the vista plan base on trust back in Dec 2011, putting in a sum of SGD800/month. 3 more months of payment before i fulfill the minimum term.
    I am unclear about the penalty charges that would be incur if i surrender my vista plan. Is it the earlier we cash out, the lesser the charges?
    as i am trying to figure out how does the formula for the surrender value works.

    http://zdownload.zurich.co.uk/International/pdfs/MSP2533.pdf

    Thank you!

  111. eileen edwards says:

    I arrived in Chiang Mai, Thailand in June 2006, planning to invest £100,000 in an offshore bank at 5.5%. Whilst attending the local Expats' Club I was 'befriended' by a British FA on the board of the club who persuaded me to invest in an FPI fund, assuring me the I would get no less than 5.5 per cent per annum. He also told me that he was a partner in a UK FA firm licensed by the FSA. It transpired that his 'FA firm' was a small insurance and mortgage brokerage not FSA licemsed to sell investment products. Yes, I was stupid, BUT…I agreed to a five-year MitonOptimal fund administered through a Bangkok company, MBMG International, and handed over the cheque. No details were provided as to the nature of the fund or its combined charges and i was too confused to ask.

    Several months later I received the prospectus from FPI, plus the details of what I'd purchased. I was appalled to find that the duration was now 8 years, that the fund was insurance linked, (totally unnecessary as I have no dependents or family), and that the fund was intended not for investment virgins but for persons who wanted some input as to its management. In addition no details were given as to who would be managing the fund. The entire procedure was one of blatant misselling. Of course, I had no redress from the Chiang mai FA as the fund was already established and the FA had claimed his £5,000 commission.

    Between 2006 and 2007, it had already lost money, although to get a report of its status from the FA took several requests. In 2008, I attempted to complain about its misselling, poor performance and lack of suitalbility to FPI Hong Kong and to MBMG – neither of whom replied. A subsequent letter and several emails to MBMG also met with no response.

    In 2011, having never received the promised three-monthly investment reports nor any contact at all from MBMG, I was finally contacted by a newly appointed member of MBMG, with the good news that the fund was in profit. I withdrew an amount, taking the sum back to just below my original investement, and was promised regular contact. However, the person concerned was transferred to the Pattaya branch and I heard nothing more for a further two years as my details were still in the Bangkok office. I was also promised a refund of advisor charges, the which I never received.

    Several weeks ago, I was contacted again by MBMG, and found that my fund was now approximately £14,000 down, as the product to which it had been transferred in 2011 had failed. I was also informed that, as it is an eight year bond, should I now decide to cash it in there would be a large charge. This is in opposition to what I have been told as regards no cash-in charges after 5 years – this is also on your website outlined in red.

    For several months I have been planning to leave Thailand to take up residence in Greece – it seems I have no option but to leave the fund as it is until maturity in October 2014 to escape futher cancellation charges. As there seems to be little chance of its significant recovery, as a result I am unable to undertake the move.
    Given that I initially agreed to a five-year investment and was unknowingly given eight years, that charges, I now discover, are far higher for insurance linked-funds – again which I had not requested and that my investment and myself have been almost toally ignored since November 2006, – I am about to start WWIII with all concerned!

    I can accept losses due to worldwide economic conditions, but the 'take the money and run' attitude of FPI, MBMG (with one notable exception) and the original salesman are not acceptable – and I know I'm one of many in Thailand and in other expat destinations.

    • Eileen,

      Thanks so much for taking the time to share your story in such detail. And please keep me posted on the continuing story, as it unfolds. I sure hope that you can recoup some of the money that's lost.

      Your story makes me think of something as well. When, in schools, to we tell children that the world is full of opportunists who will try to make money at our expense? When do we tell them about those Nigerian princes, promising us a fortune if we can send them our bank account statements to wire money into? When do we tell them about crooked securities salesmen who are (like the person you dealt with) looking for a quick, slick buck off somebody else's blood, sweat and tears? These things need to be taught in schools so our kids can have their eyes wide open. There are many great, trustworthy people in the world, but an upsetting number of con artists exist as well.

      Thanks again for sharing your story, and I look forward to hearing a story of restitution, even if it's just partial.

      Good luck, and thank you Eileen.

      Andrew

    • bongers says:

      Eileen,

      It seems from your post that you may be in an FPI Reserve account. With an 8 year charging structure, basically a 10% charge spread out over 8 years. It is not nearly as bad of an account than the regular investments discussed on this board. If you started it in 2006 you should be able to surrender is with a minimal charge. Unless you need the money soon I would recommend that you leave it in the account….as once the eight years is up it become quite an inexpensive account. Via this account you do have access to the ETFs and other low cost options that are mentioned in this blog…so you need to find an IFA that you can trust to make sure you are in the best funds that fit your risk profile….Bongers

  112. F.L. says:

    Hey Andrew,

    I live in Singapore as well being an european Expat.

    I am literaly seconds infront of signing papers for a Zurich Vista plan and kind of shocked right now.

    I would like to purchase your book and might seek you advise (if not answered through the bokk), how to behave in my current situation. I definitely do not want to waste three or more percentage of my investment.

    So two questions:

    1. Can I get a copy of your book here in Singapore, maybe from you directly ?

    2. Is there any investment strategy zuo could just recommend at the moment (not in detail just some key words) and would you be availabe for a coffee for a freindly meeting (i do know finacial advise can only be given by examined financial advisors)

    Happy to hear from you.

    Cheers

    • Hi FL,

      At the top of my website, I have some ideas for expat investors. I think you'll find it helpful. My book is also at most Singaporean bookstores.

      Cheers,

      Andrew

  113. Bongers says:

    I think you may be referring to the bonus that you received at the start of the plan = 1 month of contributions. If you keep contributions going for 5 years you get to keep the bonus, if you reduce or stop prior to then you lose 100% of it.

  114. bongers says:

    Hi Ben,

    I'm a reformed IFA…used to sell these life products such as the Vista but have seen the light and have gone fee-based and much happier I have done so. When I see what your advisor has said it brings back bad memories of selling these products. In regard to your points. 1. tax free only helps when you have profits, he didn't mention that the plans are also profit free. Also, depending on your nationality they are not always tax free. There are a lot of factors to take into consideration. 2. ETF's and other index funds have no initial charge 3. There are a number of companies that offer ETFs, Ishares, SPDR, Powershares etf…you do not have a stick with Vanguard. I recommend using an online broker. We use Interactive Brokers to manage clients account, which I don't see mentioned on this thread. It is as cheap as they come, usually around $1 per trade and provides global access….Bongers

  115. Nick says:

    I started a Vista product in September 2010. I signed a 25 year contract committing to pay £800 a month. I live in SG but am British.

    Initially I got concerned that I can't maintain afford to maintain my payments if I change jobs and I want to find out how badly my portfolio projections will be hit if I do reduce my payments later.

    When I signed up I did not understand the fees at all though I thought I did. I actually thought the 4% few was only based on the total I was paying in each month, ie £32, and I remember writing this down and the advisor saying something like "er yeah".

    So he was unable to properly explain the fees to me himself. But I signed up because he explained that if I wanted to invest then all the plans have fees but this was the best one. Maybe Vista is the best one but the best of a bad bunch. My advisor showed me he had a Vista policy himself, so at least putting his money where his mouth is.

    I've paid in around £25,000 so far and my portfolio is worth about £28,000 (so actually minus £3,000 as I was given £6,000 in bonus units).

    The surrender value is considerably less of course.

    In my heart I do believe that if I can keep up with the payments the plan can make a lot of money ultimately. However I am pretty scared about all these extra fees and inflation and it seems it needs to make a very high amount each year just to break even.

    I don't know what to do and I'm deeply upset and worried.

    • Hi Nick,

      Since September, including dividends, global stock markets have risen (as an average) by 12 percent. If you had invested 25,000 pounds in September, it would be worth 28,000 pounds today, without any bonus payments (if it earned the return of the global market minus an exchange traded fund expense ratio fee) If this link works, you should be able to see the total world stock market index (VT) and a chart since September: http://finance.yahoo.com/echarts?s=VT+Interactive

      Your advisor isn't exactly eating his own cooking, as he won't have to pay the same establishment costs that you will pay. The plan is destined NOT to make a lot of money because of the high fee structure associated with it. I'm sorry to hear that the advisor sold you on this product, and I only wish there were some legal steps people could take when a product is mis-sold.

      Andrew

  116. Sasha says:

    Hi Tommy,

    Who did you sign up with in the end?

  117. Sasha says:

    Where are you located, bongers?

  118. Sasha says:

    Seems Generali Vision is pretty bad too.

    http://boards.fool.co.uk/im-another-one-who-has-f

  119. Mark says:

    I use Saxo and haven't had any problems. They are pretty helpful and fast at getting back to you. Their fees are pretty high compared to discount brokerages ($15 USD on NYSE and $25 on TSE) but since you won't be doing much trading, this won't amount to that much more. Watch out for the currency spreads though.

  120. Mark says:

    I had the same plan with Generali and lost half my money in penalties. Luckily, it wasn't too much but left me with a bitter taste for investment companies.

  121. Mark says:

    I'm still anxiously awaiting Chris' response with actual data backing up his claims. I guess that's what trolls do though. Throw out some emotionally charged messages and then run and hide under the bridge that they live under.

  122. Rachel Gawith says:

    There are a lot of comments here and I will wade through them but basically I was duped into investing with Friends Provident back in 2009. It was a large sum, although a quarter of it was just meant to go into a bank account on a fixed deposit for a few months as I would need instant access.

    I was not properly informed of all the charges. I used a dubious outfit (as I now consider them) – Holborn Assets based in Dubai.

    I needed to encash much of the money fairly early on. I thought I had a lump sum available – apparently I did not. This cost me thousands back then in various charges and rate exchanges.

    Then all went quiet, I never received any valuations or anything. All of a sudden in April this year I get an email saying the remaining fund I have is in administration. It is looking unlikely I will get anything from this. But Friends Provident are claiming over £40,000 from me in charges. This is about half of what I invested. Apparently I am now being told I had two premiums with them (news to me) and each was charged 9.5% (yes that is correct!!!!) a year establishment charges for first 5 years.

    If the fund in administration does not pay out I am left owing them (although will fight it) over £40,000!!!

    PLEASE PLEASE PLEASE PEOPLE DO NOT GO ANYWHERE NEAR FRIENDS PROVIDENT OR HOLBORN ASSETS IN DUBAI!

  123. Chris says:

    Is that post from Mark aimed at me, the Chris who posted a clear explanation on March the 15th of this year?

    I have ignored the whole thread after attempting to post a response 10+ times and being told I was a spammer.

    I also have dealings with Saxo by the way although they do not accept individual accounts from where I and my clients are based.

    You only lost half your money in fees if you cancelled the plan very early which is the worst possible move you can make.

  124. Toby says:

    Zurich International’s reps have complained to the Monetary Authority in Singapore? I cancelled my Zurich policy because I did not wish to pay the high fees they charge. I am doing much better now as I have a passively indexed balanced portfolio. I own the following ETFs:

    Vanguard Total Stock Market ETF VTI 30%
    Vanguard International First World Index VEA 30%
    Vanguard Shirt Term Bond Index BSV 30%
    iShares Short Term International Bond ISHG 10%

    The portfolio is easy to manage and my wife and I add to it regularly. The fees are extremely low compared to the fees I paid in my Zurich product. My wife and I lost ten thousand dollars by cashing in the Zurich product early. We are thrilled and overjoyed that we did cash it in early. The fees on the Zurich product were killing us.

    Thank you Andrew. The article above is excellent. Great work! The best I could find on the Internet.

  125. Sasha says:

    Hi,

    Having read Andrew’s book, I was very excited and wanted to tell others. I quickly learnt that some people don’t appreciate it at all. I have a friend who got very defensive when I suggested that maybe some financial institutions charge fees that are too high. She wouldn’t believe that companies like Vanguard, which she had never heard of, could be any good and felt that if their fees were low it was because they weren’t investing your money properly.

    She has an account through PIC. After speaking with her, I had posted a question on this site about the group but no one at the time had heard of them. I looked up the company and I found some negative things about the DeVere group but I didn’t pass it on as realized that she probably wouldn’t listen to what I had to say. I gave her the link to this website though and hopefully she will see for herself.

    Having read the posts above I really was tempted to speak to her again but I decided not to in the end.

    I am very grateful that someone had posted a link to this site on the TES (Times Educational Supplement) forum or I probably still wouldn’t know about it.

    Sasha

  126. Toby says:

    I have found the same response from some people. I think money is such a personal issue that some people are in disbelief and cannot accept that all their time, energy and life is being siphoned. That suspense of disbelief is a hard barrier to get around.

    Ultimately I is a personal decision that cannot be made by you. It must’ be made by them. I made the decision along with my wife. It was not nase by another person. The exit fee for us was ten thousand dollars. The way I looked at it at the time was this: I wanted to live the rest of my life knowing that I had control over my money rather than resenting paying into a scheme where I knew that so much of the money that should be credited to my account was removed as fees. I didn’t want to have to think about that for the rest of my life. Now I enjoy adding to our account and making decisions about which ETF to add to. It’s fun. My wife and control our money.

    There is a sell off going on right now since the Japanese market dropped recently. This has had a flow on effect to the US markets. Previously I would be getting annoyed with this. Now I am looking forward to it.Iif the markets continue to sell off I am very comfortable sitting here as I type this out because our bond allocation sits at 40% and I will be looking to rebalance if this number too far from 40%.

    You cannot change your friend’s mind and I believe that your friend must make the decision by themselves. What you hav edone is excellent. You have made them aware of alternatives. I like to point out that having ownership over my money is the best part.

  127. Mathew says:

    Hi Andrew and all posters/readers/commentators,

    Not that added ammunition is needed – but in the spirit of sharing experiences I thought I could add to this posting. My wife and I were ‘duped’ into investing in Friends Provident and Zurich in 2010. We were shamefully convinced to put in as much as we could to take advantage of the bonus allocation that comes with it. Suffice to say, once we started looking at the fees and lack of overall growth of the portfolio, we started asking questions. That’s when the cracks started to appear, and things went downhill from there. At the moment of decision – we had a Vista account worth 110,000. We took the plunge and walked away beaten and bruised – we walked away with a 40,000 remainder. It was painful at the time, and I still feel very disappointed in what happened. I did follow up with the advisor – who told me in short words that since he was now with a new firm, my complaint should go to his old firm (who wanted nothing to do with me). I contacted Zurich and they advised that my complaint is not with them but with my advisor. And the circle was complete.

    Since then, I have created my own ETF portfolio and manage it myself. I have seen it grow with the current market improvements, and feel that while it hurt to take a heavy loss, in the long term it will be more than worth it.

    To anyone thinking of investing with Zurich – please carefully challenge the numbers and assumptions and look at what you can easily manage yourself (a diversified ETF portfolio takes no more than a few hours a month (or more if you are keen)). Beware of anyone who offers you ‘advice’ – when that advice is funded by a heavy commission from Zurich themselves (I read that commissions for any rep that sells a Zurich plan is equal to the first 12 months of your contributions…). Also beware of ‘free money’ (the bonus). Financial institutions give nothing away for free. Lastly, beware of any place that won’t let you have your money back for 20+ years…

    Anyone who is thinking of getting out – it hurts – but getting out early and learning a lesson in finance is 100% the way to go.

    Good luck – thank you Andrew for great advice and a great book.

    • Chlorate says:

      Hi Mathew,
      I understand your decision, but I like numbers and I wonder if financially, it really makes sense to close the account and take such a hit. To regrow to 110k from 70k, you need an increase of 57% of your investment. That’s 5.2% per year, every year for 10 years. In the meantime, your 110k with Zurich would have appreciated too, even though slower due to the cost.
      The biggest mistake is to open such account, we all agree on that. I did the same mistake and I’ll regret it for a while. However, I’m still not convinced that closing it is the right solution. I still find it better, mathematically, to let the money sleep and get back most of it at the term.

      • Mathew says:

        Hi Chlorate,

        To be clear – I also like numbers. And what you also have to consider is what happens if you take $5,000 from your gains each year in fees (Expense Recoupment Fee, Monthly Fee and .75% Annual management fee for me summed to $4,970 annually). Consider over time a line representing 110k growing at 1.07% annually but subtracting 5k in gains annually in expenses. Take the second line of the 70k growing at 1.07 uninterrupted. Before you reach the end of the term, the line that started below (your reduced investment) will surpass the Zurich funds.

        Having said that, Alfonso also hits it correctly – I wanted out, I wanted full control of my own money, and I didn’t want anything else to do with them. Don’t forget that if you maintain a Zurich fund, you will have to make contributions periodically – you cannot stop for good with still e.g. 10 years to go.

        It’s a painful lesson to learn, but one best learned early and not repeated.

        • victim of Zoo says:

          I also have Vista from ‘Zoo’ around 10 years. I went to their office to clarify what the IFA told me. Zoo’s staff told me the product fits me. If I surrender, I could only get back at most one-third of my money paid.

          I once have more than 100% book gain, I can’t even have my capital back if I surrender then. You could think of the cost of this rubbish.

          I haven’t paid since then, give up the ‘bonus’, now the SV is around 80% of my capital.

          This is a very bad experience.

  128. Hi Chlorate,
    You are right on the calculations and I think most of us agree with you. But that is the rational side of us. Around half of my clients that come to see me with a Zurich Vista or Friends Provident Premier decide to close the account and take the hit because morally they can’t stand having their money for years with Zurich/Friends. And that is the emotional side of us.

    Hi Mathew,
    The modus-operandi is indeed the way you described: talk to Zurich/Friends and they tell you to talk to the broker; talk to the broker and they tell you to talk to Zurich/Friends. Solution? Send detailed written complains (copy Zurich/Friends and the broker) to the regulators of:

    – Isle of Man, that checks on Zurich/Friends;
    – the country where your Zurich/Friends account was sold.

    We have helped many of our clients recuperating some of the money (never 100%) from Friends Provident Premier accounts using the above method. And it’s free, it costs energy and time only. I have left the contacts to the Isle of Man regulator in a previous post.

    Hi Sasha,
    Your “defensive” friend is in the denial stage, it may last several months or years. By experience I know that there is nothing you can do about it, especially if her account is still in the first 2 to 4 years, as the “bonus” Friends and Zurich give is deposited in full during the first 18 months and inflate the account tremendously, making the broker look like Warren Buffett on steroids.

    • Rachel says:

      I would appreciate advice on trying to re-coop losses or at least minimise them with Friends Provident.

      I invested with them in a whole life policy back in 2009 through Holborn Assets (dubai based and of course not regulated) – I put in a large sum in August 2009 and this was put into various funds. A second sum went a couple of weeks later as coming from a different place and went on a deposit account as I knew I would need this in a few months time.

      Fast forward to January 2010 and I needed access to funds as buy a car and put a deposit on a property. Lot of hassle later as records had not been properly updated, mistakes were made and I managed to get out most of my funds. I had one policy left that I was originally wrongly told I could encash in a year, actually turns out due to high exit fees would be 2014 before I could encash it.

      March this year the fund that money was in went under. Chances of getting anything from it practically nil.

      Friends Provident claiming over £40,000 in establishment charges. There were apparently 2 premiums (not that I was aware of this) -> one for first lot of money and one for the money that went on deposit for a few months. Both being charged at 1.9% a year for 5 years. They say legally I have to pay this – even if no funds left with them as it has gone bust.

      I have complained. The FA in Dubai washed his hands of me back in March 2010 after I complained about them then.

      I will write to FPI in Isle of Man and also the UK ombudsman and another regulatory board. However would appreciate thoughts on whether FPI are likely/able to take me to court or anything for the unpaid establishment charges and interest and admin fees etc etc….

      • Anonymous says:

        I wouldn’t pay FPI anything more. If they keep bothering you or get aggressive, talk to a lawyer before doing anything they say (the parent companies for these insurers are ok, but the divisions that handle these types of products are really dirty).

        also consider talking to the media – Friends Provident chose to provide access to that fund that eventually went belly up. There are thousands of funds out there that FPI can provide access to, but FPI chose to offer that one. It’s known industry practice that fund companies kick back part of their annual management fees to the insurance companies in exchange for getting listed on these platforms (or the insurer just adds to the fund annual management charge to take their cut).

        The media/regulators could take a look at how much the now defunct fund paid to Friends Provident and/or your IFA to get listed on their platform and sold to you, before going belly up. These are factors that should be taken into consideration – and maybe you could counter-sue for your money back from a fund and product they should have never sold you, in response to them asking for you to pay even more fees. It’s unbelievable that it’s possible to lose more than 100% of your money with this type of product.

        Isle of Man regulator will do nothing for you. They know how these businesses run, and they do not care. The regulator in the place you were sold has more power and motivation to do something.

        Good luck and warn your friends.

    • Russel says:

      Dear Andrew and Afonso,
      I am a teacher in Canadian teaching in Nanjing, China and in October 2008 I signed up for 25 years with Friends Provident. I have so far invested $94,000 and have told my financial advisor that I don’t plan on meeting my next payment in June. I gave the excuse summer expenses as I am in the middle of reading to Andrew’s book and deciding what to do. He replied this was okay and my next payment is in October.

      Are there any strategies I can do to maximize my return:
      • wait a few years for less penalties. Is there some “special” year in which penalties become less? I re-read through my policy conditions tonight and could not find anything like the guy a few pages back that waited 5 years and had less penalties for his fund, but his was a 10 year fund.
      • report to regulator if I let broker and FP send me back and forth as Afonso suggested

      or just suck it up, ask for surrender value and be done with it? I have not asked for the value yet as I want to have a plan before continuing. Knowing how much money I will lose will help make decisions though?

      Will there be any extra penalties if I wait until after the next schedule payment to ask for surrender value?

      I am quickly becoming educated in reading Andrew’s book and the post on this blog. I am sorry it took 5 years too realize that I was throwing money away and that I could manage the money myself. Better now than later.

      In peoples experience were their financial advisors helpful in helping you cash out or was it more of a battle? Just to let you know my background, I was fresh meat that offered myself up for the slaughter and told the advisor I knew little and trusted him and his recommendations. He did sell FP over Generali which one other company’s advisor was pushing as he explained tax and other benefits for Canadians of FP over Generali.

      Any advice, feedback welcome.

      Thanks

      Russel

      • Hi Russel,
        A few comments and answers to your questions:

        1) You say “have told my financial advisor that I don’t plan on meeting my next payment in June. I gave the excuse summer expenses”

        You don’t need to give any excuses. It’s your account, it’s your money. Would you give an excuse to your local bank if this month you decided not to deposit your salary and instead do something else? Right.
        Your account with Friends Provident can be managed by you or another firm. You just need to send a fax to Friends informing that from this day on you want your account to be managed by such and such or by yourself.

        2) “Are there any strategies I can do to maximize my return”

        They are discussed in this forum/blog. Read a few pages and you will find enough information. In essence, you have three:
        – Close (surrender) the account today and take the hit;
        – Keep the account but stop making deposits;
        – Continue making deposits and manage the money properly either by yourself or by appointing a money manager.

        3) “Will there be any extra penalties if I wait until after the next schedule payment to ask for surrender value?”

        No. You can indeed stop depositing after the first 18 months. What your adviser may have “forgot” to tell you was that fees are for 25 years and charged no matter if you make more deposits or not.

        4) “In peoples experience were their financial advisors helpful in helping you cash out or was it more of a battle?”

        If the advisor “forgot” to tell you that there are fees all the way for the twenty five year period, then don’t count on him/her to help you.

        Good luck.

        • Russel says:

          Dear Alfonso,
          Thank you for your clear answers. If there are not extra penalties and I don’t need to keep contributing I may let the money sit there instead of taking a surrender hit but invest all future money in indexes myself. If I already paid the 25 years of fees then how much more is there to loose.

          I am on vacation with only ipad and I will probably wait until I am back in front of my computer to make some spreadsheets and do further research.

          Take care and have a great day.

          • Anonymous says:

            Russel, You paid 25 years of your advisor’s commissions upfront, and 25 years of the insurer’s administration fees upfront.

            There are still other fees that are only charged if you hold onto it – that are still much higher than what you could do with index funds on your own.

          • Bongers says:

            Russell..The amount you paid upfront are sunk costs so you cannot look at these costs as a reason to stay in the plan. You need to consider the running costs to determine if it makes sense to move your money out. These costs include the 1.2% mirror fund charge the 1.5% underlying fund management fee and hidden costs of the bid-offer spread that the mirror fund pays to get into the underlying fund which is as high as 6%. This cost is then mostly rebated to the life company and most likely shared with the advisor…which pays for their trail fees. So on average, you are paying 3.7-4.7% annual fees..most of which you can avoid if you moved your money out.

  129. Antonio says:

    Thanks for all the valuable info, I have read the book in 2 days and gone through a lot of the comments in this blog.

    I also got “scammed” with one of the Friends Provident Premier Plan. I am definitely going to do the surrender, but I have a question.

    Does the “financial advisor” keeps getting paid comission throughout the duration of the policy (25 years in my case) or they only get paid upfront? I have read they get paid 12 months of the money in advance.

    Thanks,
    Antonio

    • Joshua says:

      ¿Anyone on the info if the “Financial Advisor” keeps getting paid comission on the duration of the policy (Friends Provident) or they only get paid upfront?

      • It may depend on the policy Joshua. Can anyone out there share specific first hand knowledge and examples?

        • Hi Antonio, Joshua, Andrew,
          If the product is Premier from Friends Provident International (Isle of Man), the adviser gets paid a very large commission up-front that is linked with the client’s 18 months deposits –and hence the reason why your adviser may have insisted on you making at least the 18 months deposits.

          From the 19th month onwards the adviser gets a very small commission only if the client makes deposits, nothing at all if there aren’t deposits. Hence why product misrepresentation is done by so many “financial advisers”, as they don’t care what the client does after 18 months.

          Dear Antonio,
          You didn’t get scammed by “with one of the Friends Provident Premier Plan.” Friends Provident didn’t sell you anything. You got scammed by an individual, a company, in a city where he will continue to scam others over and over again until you (and other that get scammed) share their identity and actions. If you can do your bit for a better world. Thanks.

          • Bongers says:

            to be exact, the advisor receives 2.5% trail commission for every payment into the premier plan after the 18 month. So if you look at it in total, the adviser makes at least 4% UPFRONT on all premiums due for the lifetime of the plan. i.e. $12,000 per year * 25 years * 4% = $12,000 whether you invest for 25 years or not…and then another 2.5% trail commission. So if look at it on a per annum basis, assuming the client keeps up their payments, the client averages 6.5% in fees per year and this does not include the fees that FPI receives which has to be another 4-5%. On top of this, there is the underlying fund managers fee of at least 1.5%. With the average long term S&P return of say 9% the only people that make any money are the advisors and FPI.

          • Joshua says:

            Thanks for the info. I canceled the premier already.

            Does anyone know how long before they deposit the surrender value?

            Thanks,

  130. francisco says:

    ello Andrew,

    I am from Mexico and I wanted to have a mutual fund for long term. A friend of mine is selling mutual funds through friends provident. I was confused that the document says “insurance” and I do not understand why it said insurance.

    I had to pay 150 dls per 18 months and because I was paying a low invesment 5% will be deducted (which I do not understand as well)

    Finally, it was my decision to investment in risky funds and I lost over 1,000 dls but what really made me angry is the lack of attention by not advising me after and change it to invest in moderate funds.

    There is the average cost per dollar and my friends says that even if I lose money now, the value in the future can be worth more because of the average cost per dollar.

    Now, I stopped paying and I do not what to do.

    I didnt know about the hidden fees or if I ever going to get what is left.

    I appreciate your comments.

    Regards,

  131. Chen says:

    I had an extremely disappointing experience with Friends Provident and one of their agents in Shanghai, Austen Morris Associates. Back in 2008 I inherited around $100,000….and it happened around the same time I was cold called by Austen Morris Associates, one of the more active finance firms in Shanghai…I met the advisor, seemed like a nice guy. Anyway, he recommended that I take advantage a great bonus that was offered by Friends Provident. It was something like a bonus of 50% of everything I invested in the first year and a half of the investment, after that point I had liquidity to withdraw my investment. Not knowing much about investing at the time, I thought it sounded good…So I ended up investing $5,000 per month for 18 months and then at that point I would decide if I wanted to continue. This ended up being the worst decision of my life. After the 18 month period I stopped contributing as most of my inheritance had been invested and after watching the account slowly erode over the last couple of years I decided to take my money out. When I contacted Austen Morris the story totally changed and I could not get a straight answer out of them. I then contact Friends Provident and after talking to them I realized, to my massive disappointment, that my money was tied into a 25 year savings plan…meaning they locked up my 100K inheritance for 25 years and on top of this the annual fees on this money was something like 8% per year. Needless to say, I’m pissed and feel totally cheated. I have looked at ways to get my money back, i.e. approaching the advisor, Friends etc, to no avail…I have looked into suing them but they did not seem to care. After doing more research I realized there is actually no regulatory body in China that oversees these type of offshore investments,…so there seems to be little legal recourse on my part. If anyone has any suggestion as to what to do I would really appreciate it.

    By the way, I tried to post this in a Shanghai sight but was unsuccessful for some reason.

    • Anonymous says:

      Sorry Chen – This is a lot worse than what happens to most people. In your situation they could have sold you a portfolio bond – which is what they typically use for lump sum investments.

      Why would they sell you a 25-year plan instead? They are paid commissions based on the total sum assumed to be invested. With the portfolio bond, they would have only gotten commissions on the $90k-$100k they could talk you into (I think commissions on that would have been something like $7500). But with the 25 year pension, they get paid based on $5k X 12 months X 25 years = $1.5 million assumed contributions. The commissions on the 25-year pension they sold you were $63,000 – and this was paid to them upfront once you finished the first 18 months of savings.

      The first 18 months go into initial units = $90,000 of your $100,000 inheritance. All initial units (the $90,000) and all those bonuses are going to get charged 8-9% per year. In other words, don’t expect much of that back after 25 years with fees at that level.

      I’m so sorry to hear this happened to you. The advisory firm deserves fines and the advisor should be barred from the industry. And Friends Provident knows they encourage this type of behavior.

      I’d talk to a local lawyer about suing the advisory firm.

    • Hi Chen,
      Sorry to hear your story… I have heard many like that before.

      As Anonymous suggests, contact a local lawyer and sue Austen Morris asking full reimbursement of the $90.000.

      To my knowledge Austen Morris is incorporated in China as a WOFE –as opposed to rep. office– and therefore it’s just a matter of time to get the money back. Chinese courts don’t play around. Hopefully you have all documentation with you, particularly important is written evidence of “investing $5,000 per month for 18 months and then at that point I would decide if I wanted to continue.”

      Good luck.

    • Hi Chen,

      Do you have any update on your story? With global markets now higher than they were in 2008, your investments should now be in profitable territory: http://sg.finance.yahoo.com/q/bc?s=VT&t=my

      Are they back to the $100,000 you deposited, or have fees eroded much of the capital?

      Andrew

  132. Your Money Back says:

    Chen
    That’s awful. I got my money back from a broker in Guangzhou re Generali Vision. I think it will help you, so listen uip.
    Forget suing. Can’t. No proof on relationship between your borker and the insurance company and you in one doc. They are too smart for that. My lawyer told me.

    The plan is this.
    You need to threaten with something they care about. The broker. Not the insurance co. All insurance must be sold through a licensed broker and the insurance itslef must be licenced via the Chinese gov. CIRC to be exact. Friends prov and the rest aren’t licenced and your borker isn’t either. That’s breaking the law right there.

    You need a connected lawyer in Beijing to the finance regulation bodies like CIRC like Yun He who could, if you asked nicely, contact the authorites and get your advisor investigated and shut down. you dont want them shut down. Just to think that you can and crazy enough to try.

    Forget fault or blame. It is a simple question. Can you pay me my money back or should I shut your business down and put your chief rep in jail for up to 20 years. What do you want? Channel your inner Tony Soprano.

    Pay your lawyer a few thousand USD and ask for your money back in person by next week – plus the amount you paid your lawyer. Easy peasy. Took me years to find the secret words, but once a health insurance guy showed me the way, was no problem. I finally got my money back.

    Good luck!

    • Another victim says:

      Hi Your money back,
      We are also another victim of these insurance companies in China. We invested with Royal London 360 through a brokerage firm in Beijing three years ago. Do you think you can share a name and the contact of your lawyer that got your money back with us? We would also like to get our 100k+ back. Our IFA never gave us the details for all the fees until we found that out from this blog.
      Thank you

  133. Anonymous says:

    the problem comes down to investing in an unregulated market..there is no court of law that investors can go to if they are cheated. The advisors know this and they use is to their advantage. Unfortunately Chen paid the price.

    • Anonymous says:

      there are few, if any unregulated markets. sometimes regulators turn a blind eye as long as locals are not getting screwed. but when these operations break the law and the expat clients complain to local regulators through well connected law firms – there is recourse like the last guy pointed out. chen – you can get your money back. they stole from you. go get your money back. spend some money on a lawyer – $90k is DEFINITELY worth fighting for, and you can definitely get it back. all of it.

  134. New Guy says:

    I wonder how long before my post get posted. Posted some comments but seem like it’s either didn’t go through or didn’t get approval for posting

  135. Mike Smith says:

    Hi Andrew

    I have just bought your book and look forward to reading it.

    I have a Friends Provident plan that I opened 6-7 years ago and am contributing to monthly. I am eager to begin investing in index shares as you recommend. Do you think it is a good idea to surrender my Friends Provident plan now and invest that money, or do you think it is better to bite the bullet and see out the plan?

    Appreciate your advice

    Thanks

    Mike

    • Hi Mike,

      The decision is yours. Find out what your surrender penalty would be. Then take the remaining sum and figure out what it would grow to at, say, 8% per year over 20 years. To do this, go to http://www.moneychimp.com and use their compound interest calculator

      Then compare the end result with the result of this calculation: the current market value of your investments (no deduction for redemption fees) but compound that over 4.5% per year over 20 years. This rate of return would reflect the costs with the ILAS plan. In other words, if global markets made 8.3%, you would make 8% with a low cost platform, but roughly 4.5% with a high cost platform, such as the one you own (based on probability and fees).

      Would you likely “catch up” after taking the hit? You may want to do the math to find out.

      In most cases, you would.

  136. Hello there! Do you use Twitter? I’d like to follow you if that would
    be ok. I’m definitely enjoying your blog and look
    forward to new posts.

  137. Steven says:

    Hi Andrew,
    I’m a Canadian living in Korea, as a non-resident of Canada, and have invested in FPI via a broker who works out of Osaka, Japan, as part of the Pinnacle firm of independent investment advisors.
    I was initially investing 1000 USD per month, and then dropped it down after the 18 month minimum (based on the lure of the bonus paid out) to my current 500 USD per month.
    I’m reading the above horror stories, (mostly about Zurich, but some FPI) and the sad thing is I understand little of it. Apparently, my funds are doing well (roughly 10% now, after a rather healthy 20+% in the first year or so. I started a 20 year plan (I just turned 54) back in Dec 2010.
    But details about surrender value, and penalties are murky, and I’m not quite sure what to do.
    Stay in for another 16-17 years (based on what I’m reading, it doesn’t sound like a good idea), or cut my losses (whatever they may be) now, and try to find a way to invest more soundly?

    • Hi Steven,

      This might be hard to believe, but your investments have actually done quite poorly. Imagine the ocean tide rising 20 feet. You have a boat floating in the bay that rose 12 feet. Because of the holes in it, you have not risen with the tide.

      Such is the case with your Friends Provident account versus the overall global market. Since you have opened your account, the average global stock has gained roughly 45% including dividends. The U.S. market has gained much more. You can see the 2 year price level charts from this link (not including dividend growth). These charts don’t depict the results of some hot stock or hot fund. They represent a global average of all stocks. http://sg.finance.yahoo.com/q/bc?t=2y&s=VT&l=on&z=l&q=l&c=vti&ql=1
      The fees you are paying and the inflexibility of this account are far worse than any of your friends are paying in Canada. Let’s assume you catch on to the high fee structure and want to sell everything. You can’t. THe firm will likely keep nearly 40% of your total proceeds. When your advisor signed you up for a 20 year plan, he received a commission from Friends Provident that was equal in value to every dollar you invest in your first year of the plan. In other words, if you invested $20,000 in your first year, that’s what he was paid up front. Friends Provident recoups the money it paid him in commissions by keeping you with the firm for as long as possible, while you pay layer upon layer of fees. It won’t be long before you have paid more in fees than the rep was paid in commissions. At this point, Friends Provident will break even on the commission it paid, while hoping to keep you with them as long as possible. As mentioned, if you do bail on them, they will recoup the money they paid your advisor by hammering YOU with a penalty that will likely amount to 40% of everything you have invested thus far. It’s hard to believe this is legal, but unfortunately, it is. I can’t advise you on what you should do. But if you read the comments on this post’s thread, you will see a variety of things different people have tried.

      Cheers,
      Andrew

    • Goodfellow says:

      The first year or two always looks good in these plans due to the bonus, but if you take the bonus out, you are probably just treading water. The first couple of years you are fighting 7.2% fees plus hidden fees in the mirror funds. Investing a larger amount in the first 18 months just for the bonus is a terrible idea. The bonus is all smoke and mirrors as it will get charged out of your plan over the next 20 years. This is exactly what the advisor wants you to do as he makes 2X the amount of commission if you invest 1000 in the first 18 months and reduced to 500 thereafter, rather than just starting out with 500. its a difference of making $12000 rather than $6000.

  138. Imagine a “financial advisor” selling investment linked assurance schemes to 185 people in a single month. Well, here’s a guy who did just that…and he appears to be proud of it: http://andrewhallam.com/2010/11/beware-of-zurich-international/

  139. Sabrina says:

    Hi Andrew

    I first got to know your website when a rep of DeVere Group was trying to sell me zurich and others. Luckily your advice saved me and my friends a lot of hassle. After reading your book I’d like to take hold of my future and build up my portfolio. I’m 26 now, so I am not as young as you started but I am hoping to catch up. I’m interested in doing the coach potato strategy and invest in low cost index funds. Now my challenge is to find the right way to do it. A lot of your examples talk about Canadians, Brits & Americans. However, I am a Belgian living in Dubai. I won’t be staying here forever and most likely will move back to Europe or the States in a couple of years. So who do I go to? Brokerage in Singapore? I also saw Vanguard has an office in the Netherlands and in one of the comments you named TD direct investing in Luxumbourg. Which one would you recommend? Or if you know anything in Dubai? As all I find our these sales people who want to sell me the wrong things.

    Good luck with the new book, I look forward to reading it!

    Sabrina

    • Hi Sabrina,

      It should be easy to set up an account with TD International or Saxo Bank online. With Saxo, you will likely need a notary to verify your identity. Then you can transfer cash to the brokerage and purchase a combination of exchange traded funds. I don’t believe there’s anything in Dubai.

      Out of curiosity, how did the rep from DeVere find you? Cold call? Or were they invited into your workplace?

  140. Sabrina says:

    Hi Andrew

    Thanks for the tip on TD International and Saxo Bank. I’ll have a look at both.

    Actually most financial reps go to all the expat networking events here. They snatch up business cards and then afterwards they call people up even though at the time you might never have had any conversation about finance. The guy I was speaking to is from PIC (part of DeVere group). They also rely on their customers/ potential customers to give them names of friends – which I didn’t do-.

    A friend of mine was approached by NIB Wealth through a colleague, luckily the day before she signed I was able to convince her not to do it after all this information I found on here and other financial forums.

    Thank so much for your advice!

    Sabrina

    • Thanks for sharing Sabrina,

      It makes the effort worthwhile.

      Cheers,
      Andrew

      • Kelly says:

        Yes, that’s right, if you have a consultation with someone from one of these companies in the UAE they ask you for the names and phone numbers of 2 friends. I have had a few calls from various investment companies because of this – annoying!

        I know someone who works for one of these companies and she got a 7500AED bonus for signing up 16 new clients in her first month! And I don’t even think she understands the horrible thing she signing them up to – all she can see is the dollar (dirham) signs…

        • How did your friends get involved in the firm in the first place Kelly? Did she/he have a background in personal finance, or sales? I suppose you have to walk around eggshells a bit, when you discuss money with your friend.

          • Kelly says:

            Her uncle runs one of these companies. Her original job was teaching English, but she decided that wasn;t for her and her uncle gave her a position. So she had no background in finance or formal qualifications. I believe on of the other employees at that company has a BA in finance and economics and she was acting more or less as his PA. She has now moved to a different company, which is where she got the big bonus for signing up all those people. And she is now going to do a course in finance.
            It’s funny isn’t it? DBS Vickers won’t let someone with no background in finance/previous trading experience do any trading without doing that online course (which I am in the process of doing!), but these financial advisory companies allow people with no finance background sell these actively managed products to innocent people! And many of them don’t even know what a disservice they are doing to their clients.

  141. Rao says:

    Hi Andrew, I am an indian working in UAE. 1968 born.

    On 1st August 2009 I have taken Zurich Vista policy with a 15 year duration. Current quarterly premium is USD 2,000. (for certain durations I even paid USD 3,000 also).

    As of 22/12/13 I paid USD 48,498 and the policy is valued at USD 45,719 (about 94.2%).The surrender value is USD 33,899 (about 70%).

    Appreciate your thoughts on the following:

    1) How can Zurich bind a customer for the entire duration. In India, you pay a 1.5 to 2% of the fund value as pre-closure charge, but Zurich is sucking 30%. This was not explained by the sales guy.
    2) When will my policy come to break even stage.
    3) I have started with a good intention of 15 years at least a moderate return. Seeing the current value / performance, is it worth to continue this policy further
    4) I am even ready to close this policy (at a loss of USD 15,000) , put the proceeds and further premiums in India where I can easily earn 8% per annum.

    Thanks in advance

    • Hi Rao,

      These policies are very frustrating. Since January, 2009, the global stock market average has exceeded 80% and the U.S. market has exceeded 120%. The fact that your money hasn’t increase exponentially is extraordinary. That said, with the firm you are dealing with, it’s sadly typical. The portfolio carries very high fees and it obviously wasn’t diversified properly. If it were, you still would have made more than 60% (considering that global markets have risen so much since 2009).

      Be careful about expecting easy returns of 9% per year. Some years you will make more, some less. I don’t know whether you are suggesting such a percentage in a fixed deposit account, or in the stock market, but if it’s stock market related, the only certainty is volatility. Some years, you will make much more than 9%, other years, your money will drop in value.

      Use a compound interest calculator at http://www.moneychimp.com to help you decide what to do. Plug in the amount of money you would have if you surrendered the policy, and see how it would grow at, say, 9% per year. Then do the same thing with the money you have in Zurich, but use about 5% for the compounding interest rate….because fees for the account are so high. You are roughly 45 years old, so in each case, use a 15 or 20 year time horizon. The comparative growth will help you make the decision. Feel free to report the calculations back to me.

      Cheers,
      Andrew

  142. ritesh says:

    Dear Friends,

    I would like to take Life insurance+Critical illness policy. Is any good policy available in the market on which I can trust. I am presently staying in Dubai (UAE). Currently i have 2 options Freinds Provident Internationa and Zurich….which policy should i adopt from the above 2.

  143. Ian says:

    Hi Andrew,

    I am in the UAE and I wanted to finally take control of our finances and start socking away significant dollars to my retirement so I asked around. Someone gave my number to a guy and we were approached by a representative of Professional Investment Consultants (www.pic-uae.com) which is a subsidiary of the deVere financial consultancy company. He met us and gave us the slick talk. Right away he hit us with the Friends Provident and Zurich International. He kept saying over and over that the advantage is that you can contact us anywhere in the world because we have offices in most countries (So we can send a salesperson to sell you more stuff, perhaps? ;). He handed us a pamphlet that pointed out how people were regretting not getting in on the China and India bandwagon 20 years ago and know Africa was “ripe for investing” complete with colorful photos of giraffes. I found the term Unbeknownst to our FA wannabe, my wife and I traveled extensively through 13 countries in Africa and saw with our own eyes the beauty and yet the plight of Africans and their respective countries (not to mention reading up on the two subjects) and the dangers of certain kinds of foreign investments, local investments and corruption at every level that is the vice of too many of the major players of the continent. My wife asked him about ethical investments and his eyes sort of glazed over and I felt he just got an idea about what kind of investors we might be. I don’t think he held out much hope for getting us after that but he did say that, “we can find some for you, we can do that” (Interestingly, Friends Provident has one and I have since found out ethical funds may not be “ethical” after all depending on how far you are willing to be “ethical” not to mention lower returns which, yes, I now know, is not a predictor of future returns). Luckily, my wife and I rarely jump to commit to anything so huge without doing a little research first and we found this blog. Also, we didn’t cave into the pressure to get in on a “special offer” that was set to expire by the end of the month. We could feel the sales pitch oozing out of him. Besides, I figured there would always be another product with a “special” on with these guys. So a big thank you to you Andrew.

  144. Matt says:

    Dear Andrew,

    Like many other ex-pats in Singapore, when I first arrived I was cold called by one of the advisors that like to sell the Zurich Vista product, anyway as a younger me I didn’t know about any other options for the naïve investor and knew I needed to do something so just went for it – 25 year plan.

    Eventually I stumbled across your site, was suitably outraged when I found out about the high fees, etc. So for a long time I was ready to pull the pin on the Zurich product and follow your method instead. But… Zurich doesn’t make it that easy to get out of it (need Lawyer’s or consulate people to sign off on it), and so basically for the last year I have done nothing.

    This is the interesting part. 5 years into the plan, the on-paper gains have done quite well. If I do an equivalent calculation with investing in VTI only over the last 5 years, my Zurich (USD Performance and USD Adventurous) has matched what I would have if I had invested purely in VTI instead.

    As it stands right now I have a large exposure to those two underlying funds and nothing in bonds. If I sell the Zurich now, I would at least break even from what I’ve put in, but I’d be walking away from the decent gains it has made. The upside is that I would gain the flexibility to sell when I like without penalty, and to balance the index funds and my future bonds.

    I’m currently 35 years old and have another 20 years of potential Zurich heart-ache. But right now my heart just isn’t aching as much given the performance that I’ve seen.

    I was wondering, what if I was to keep the Zurich with its VTI equivalent performance, but start buying my own bonds separately to keep to your ratios, e.g, 35% bonds, 65% Zurich.

    I know the Zurich products are high fees but when they seem to be keeping pace with VTI, I don’t really mind. If I had followed your strategy for the last 5 years on paper my position would not be as strong (due to the mixture of lower performing bonds), but it would be safer due to the bonds, and more flexible due to myself being in total control with no exit / surrender penalties.

    My question is, do you think I have just been lucky with those underlying funds making up my Zurich portfolio? Do you expect those funds in the long run will fail to keep pace with the indexes? Do you think it was the initial bonus units that has helped it over these last 5 years? I am suspecting this is the case. It’s hard to get the historical pricing data on the Zurich products in a table form. I have a feeling that those bonus units have helped quite a lot and has allowed this Zurich option to match VTI to this point in time, however I do expect VTI to pull away from here on in.

    Another possibility, are my calculations way off doing the VTI simulation? If I was investing SGD $3200 a month since March 2009 in VTI, what would it be worth today? (I don’t know how you calculate these things but I tracked the SGD/USD rate and VTI prices across that period of time – I got the rates from investing.com).

    Appreciate your thoughts on this situation, and am looking forward to your next book!

    Matt

    • Hi Matt,

      You started your investments at a lucky moment, in March 2009. Do remember that investment returns aren’t just determined by price, but also by reinvested dividends. If you had invested $3,200 per month in VTI for 59 months (March 1 2009 to February 4th 2014) you would have $327,240 today, including dividends.

      If you have more than this, it may be based on early bonuses pushed into your account. What did your $3,200 per month over 59 months grow to?

      Cheers,
      Andrew

      • Matt says:

        Hi Andrew,

        Thanks for your reply. Actually from March 2009 to today Feb 2014 it’s 59 months right? 45 months would only be to Dec 2012 (not 2013).

        My calculation for the VTI performance over 59 months excluding dividends was $264,800, anyway, the Zurich performance has been more or less around there (assuming that you also calculated VTI with 57 months to Dec 2013).

        So the challenge is should I keep tracking both Zurich and VTI for now but hold on to those Zurich paper gains for now, or should I really get out of Zurich and take the surrender value loss to re-invest into VTI or some other indexes? If I do that, it’s really going to be a few years at least to in theory start surpassing those Zurich gains (and now might not be a great time either). Or should I surrender now, put it into cash/bonds, and wait for large decline in the market to buy back into VTI? (I’m not expecting you to answer this as we really have no idea if this is going to happen or not).

        I may yet just start buying VTI separately, and have 35% in new bonds, and then keep a mixture of VTI + Zurich for the balance.

        As always, greatly appreciate any thoughts you may have.

        Kind regards,

        Matt

        • Hi Matt,

          When I messed up the number of months, I skewed the calculations. Now I’ll get it right! According to Morningstar.com, Vanguard’s total stock market index, including dividends, increased by 171% between March 1, 2009 and February 3, 2014. That’s 59 months. Compounding 1.71% monthly for 59 months (using a compound interest calculator at http://www.moneychimp.com) provides an overall return of 171% (ironically). In other words, if you earned 1.71% on $10,000 for 59 months, you would have $27,192, for a total return–just shy of 171% overall. As such, your $3,200 per month, earning 1.71% per month, would have grown to $327,240 (including dividends). I would have eaten my bath towel if your returns had matched the index. It wouldn’t be impossible, but it wouldn’t be very likely either.

          As for your decision, I can’t actually provide you with advice on that matter. I’m not being awkward. Regulatory authorities in Singapore have warned me against giving opinions on this blog. Sorry I couldn’t be more helpful, but I have a green card to keep for a few more months.

          Cheers,
          Andrew

          • Matt says:

            Hi Andrew,

            I’ve been making my Excel work overtime the last couple of days trying to match your results, but I now understand how you got to that value. To me it looks as though you didn’t take into account the SGD/USD currency fluctuations (and I don’t blame you as that part is fairly time consuming). For example, my $3200 SGD was around $2200 USD in March 2009, and now it’s more like $2500 USD. This means I am buying significantly less units and therefore getting less dividends back. (I know you already know this but for anyone else reading this).

            I even went as far as painstakingly entering every single mock historical transaction into Google finance (the stupid import CSV doesn’t work), and managed to come up with a return of $212,731.85 USD, $9000 of this which was the dividends (not reinvested). Even if I reinvested that manually and giving it a huge benefit of the doubt (e.g, buying $9000 worth of units (227 of them) at the cheapest price right at the start of the period). It increases the value to $226,060 USD which is worth SGD $286,757 today. Well short of your $327,240 estimation.

            I then found a much more convenient website to calculate these historical returns and reinvesting the dividends automatically back in. The only problem is that it also uses a fixed currency, so what I did is just average out the SGD/USD over the last 5 years.

            http://www.buyupside.com/backtest/divrebackinput.php

            Using this tool with the average SGD/USD price of $2464 USD I get a final value of USD $219,690.84 ($278,676 SGD).

            Long story short, if I use the Google / Buyupside results it’s not that far off what my Zurich has done, probably thanks to a lot of those bonus units received up front. I mainly want to point out here that it would be unfair to compare the $327,240 value against the actual $264,800. While I’m a firm believer in passive investing I do want to give credit where credit is due if the Zurich has done better than the odds would suggest, and to not over exaggerate the gains of going 100% passive.

            Now that I’m fairly certain of the VTI performance, I can definitely move forward on to my next stage of decision making (to pull the Zurich pin or not). Just a few more calculations to go…

            Best regards,

            Matt

          • Hi Matt,

            I didn’t know where you were from, so left the currency in USD. However, looking at a short historical time period (especially if you received bonus money) means little. The question you have to ask yourself is this: how much of that money is truly yours, if you want it today? And what will extra fees eat up in the future? That’s truly what you need to put the excel sheet to work on.

            Cheers,
            Andrew

  145. Goodfellow says:

    Matt,

    It seems you are looking at the policy valuation which is very different than the liquidation value. The value of any investment is what you are able to sell it for…which I suspect is far less than what it shows on paper. You did get a nice bonus in the beginning but this will eventually get charged out of your plan over a 25 year period and none of the bonus is actually liquid until then. For the most part the bonus is nothing more than smoke and mirrors, designed as a sales tool. The difference between your valuation and the surrender value represents the outstanding plan fees you will pay over the next 20 years. Besides this you are also charged mirror fund charges many of which are hidden. The valuation really gives the investor a false reading on how well they are doing. You are really comparing apples with oranges.

    Goodfellow

  146. Mari says:

    HI Andrew,

    Ughhh. I just stumbled upon your website today and realized I’m one of the stupid ones.
    The kind that was so eager to start saving up after paying students loans and living a good life as an expat teacher. I’m with Generali but only for a year. I have the Vision Fund and under a 25 year Term. I’ve been paying $835 premium per month. I’m trying to make an appointment with my agent, but I gather he won’t be upfront with me about everything. Is it best to drop everything now before I lose anymore? I’m in a bit of a shock right now.

  147. Steve says:

    Hi Andrew,

    Unfortunately I read your post too late. I was previously based in Singapore and at the time was referred by a friend to an IFA who sold me a Zurich Vista policy. A great salesman and showed me both his and his sons policies, so was sucked in by that as well as the promo period.

    My investment is low in comparison to other bloggers I have seen (as below) though still frustrating to be losing out for something that I believe was mis sold to me.

    Current total monetary value of policy – SGD 28’932.59
    Current surrender penalty deduction – SGD 24’837.21
    Current surrender value of policy – SGD 4095.38

    Before taking the policy out I repeatedly asked the IFA for an indication of the cancellation penalty or surrender fees on this policy, it was never given. IFAs excuse being that it was never the intention to cancel, but a long term investment!

    I do believe that I wasn’t best advised when i took out this policy, so do you know if there is a similar government body in Singapore similar to the Ombusman in UK that I can register a complaint with?

    Would like to see if there is any other way of getting more of my money back by cutting my losses now.

    Thanks
    S

    • Hi Steve,

      You can issue a complaint with the Monetary Authority of Singapore http://www.mas.gov.sg/
      Here are the things you will need to make clear:

      1. You were not told what the surrender costs would be, despite asking.
      2. You feel the product is unsuitable for you and the advisor didn’t represent it clearly enough.

      Good luck, and please keep me posted.

      Andrew

  148. Steve says:

    Hi Andrew,

    Thank you for the advice and this blog. I will contact MAS about my policy and keep you updated.

    Best regards
    Steve

  149. Alex says:

    Hi Andrew,

    I’m an Australian living in Singapore and have had 2 IFAs try to sell me the Vista plan. From reading your post + comments, it seems like an easy decision to say no. The only thing that is keeping me (slightly) interested is that apparently the Australian government won’t claim any tax on the gains made in an insurance-linked investment such as Zurich, as long as you keep it for at least 10 years (e.g. see http://www.expatwealthadviser.com/invest/australian-expats-tax-effective-investment-opportunity/)

    That is the sales pitch – invest in this and when you move back to Australia you can keeping paying into the investment, and then at the end of the term you won’t owe the govt. any tax, which sounds appealing.

    Question is whether the tax benefits would outweigh the high fees? Or are the fees just so much higher that it still wouldn’t be worth considering. I assume I’d need to run numbers to get an idea (e.g. compare to low cost index funds assuming same rate of return but lower fees).

    Note I am likely to move back to Sydney in around 3 years time – so if I invest in a standard (in tax terms) investment now, I think I wouldn’t owe any tax on the first 3 years of gains (as earned when not an Australian resident), but would for the remainder of the investment when back in Australian. So in short I won’t enjoy much of Singapore’s no tax on capital gains policy.

    Thanks

    • Hi Alex,

      If the markets make 7% per year, you will pay more than a 50% “tax” every year in fees. Charges on such an account exceed 3.5% each year. Will seeing it, from this perspective, help you make a decision?

      Cheers,
      Andrew

  150. Finding a solution says:

    So High money back and Another victim

    Did you get your money back eventually?
    What are the contact details of the laywer?

  151. Rene says:

    Agree Steve.

    I tried contacting Zurich about partial withdrawal and nobody has got back to me yet. I also mailed several times and they claimed that they have not received any letter! Zurich International is a scam to me.

    • Vig says:

      Hello Rene,

      We are also in the process of removing our cash from Zurich policies. Has been nothing but a nightmare. We started the ball rolling back in Dec 2013. It is now July 2014 — eight months later.
      There has been an issue with my wife’s old employer (an international school in Asia) not doing “due diligence” and thus, Zurich says, Zurich cannot release our money to us.
      We are caught in some kind of pass-the-buck nonsense that is obfuscated with legalese and terminology designed to deliberately confuse the layman. I am absolutely disgusted with the lack of accountability on both Zurich and the school’s ends. Neither seem to have any regard for us — the client — whatsoever. It is pathetic. It is amateur hour and a gong show combined. The inaction of both the school and Zurich is completely unprofessional, but it’s doubtful at this point if they even care anymore. Really, I don’t enjoy being cynical, and I assume the best of people and companies, but this experience has permanently changed my opinion of how the investment industry works.
      I am so angry that I will stop writing now.
      Good luck to you ; )

  152. Finding a solution says:

    Is the life insurance and critical illness insurance from friends provident reliable?

  153. Finding a solution says:

    What about the life insurance and critical illness cover from friends provident?

    • Sean says:

      Hi there,

      The TERM life insurance cover + disability policy from FP is not bad considering what’s on the expat market. From where I live in Dubai, it was the best I could get. If I had been able to take out a life insurance policy in my own country, I would have got a bunch of consumer-friendly add-ons (second death, inflation-indexed, possibility to renew at end-of-policy without having to do a medical) for the same price. Alas, I was not able to do so as you have to be a resident, so I went with an FP term policy (international protector middle east) instead.

      The cost for me and my wife for the next 30 years is 60 euro per month for a 200k euro policy. If we stay in Dubai, we will probably keep it. But if we unexpectedly move back to the west, I’ll probably ditch the policy for something more competitive and consumer-friendly back home.

  154. Jack says:

    When I first moved to Asia just over three years ago, I was determined to start saving after paying off my student loan. I was gullible enough to be talked into buying an FP Premier, investing $1,000 a month for 25 years. This was more than I could really afford, but I was talked into it due to the ‘bonuses’ of having a high premium.

    After just over three years, my portfolio is worth $58,000, with a return of only just over 7.2% over the whole of that time. I am very disappointed by this.

    However, I work for a company that matches pension contributions up to $3000 a year. In order to qualify for this, one has to have a ‘whole of life’ plan. This was the main reason I got an FP product.

    I am therefore wondering which of the following options I should take. Should I:

    a. Surrender the plan and take the financial hit and start again
    b. Reduce my contributions to $3000 a year (knowing that at least I will be getting that doubled by my company) and keep the FPI as a vehicle to qualify for the matching contributiuons

    If I take option a., I will have to find another ‘life product’ to qualify for the matching contributions, and I don’t know if I will find any which isn’t an overpriced disappointment.

    Any advice would be much appreciated.

    • Jack,

      In the past 3 years, the global stock market index has risen 26% and the U.S. stock index has risen 49%. http://quotes.morningstar.com/chart/etf/chart.action?t=VT&region=usa&culture=en-US&productcode=COM

      Here’s what you might consider:

      1. Keep the plan but don’t invest more than what your company will match ($3000 per year)
      2. Consider the allocation of the portfolio and see if you can educate the sales rep a bit…or a lot. If your portfolio has truly only earned 7.5% during the past 3 years (when global markets earned 26% and U.S. markets 49%) then your advisor has speculated by creating a lopsided portfolio. I see many of these sales reps (they are great at sales, not so great with investment allocation) chasing yesterday’s performance instead of building a diversified portfolio. In your case, you may be heavy in emerging markets. If somebody was silly enough, three years ago, to build a portfolio weighted heavily in the markets that had been doing well in the recent past, this is what they would have done. As is nearly always the case, investing through the rear-view mirror is silly. So…you’ll need to find a way to educate your advisor so he or she invests responsibly. Otherwise, even that matching contribution will mean little.
      3. Convince your employer (gently) of what they have done by selecting this firm. It’s great that they match a portion of your savings, but ask them if they will do so regardless of the vehicle you may want to use. If they insist on something similar to what they are using, but they’re looking for something cheaper and more responsible (in terms of how they allocate/diversify money) they may want to check out this firm. http://veracitycorporatepensions.com/

  155. Jack says:

    Hi Andrew,

    Thank you very much for replying to me so quickly. I have been having some sleepless nights and feeling quite down since a friend first opened my eyes about this ‘scam’. Re. the 7.5% growth, I’m assuming this is after charges. With charges being so high, it’s hardly surprising that growth has been about 2.5% a year.

    You’ll be pleased to know that since posting earlier today, I have bought your (e-)book from Amazon, and I’m working my way through it.

    You were spot on about the uneven weighting of my portfolio – it’s quite heavy in emerging markets. In your experience, do these companies offer fund which track the entire market, which I could switch my funds to?

    Assuming that I keep the FPI account active purely for the matching contributions, and I can afford to invest $1000, this would be a plan of action:

    – continue paying $250 a month into FPI to qualify for 100% matching contributions (this absorbing the blow of high fees)
    – invest $750 in low cost funds, as outlined in your book

    As a Brit, which platform could I use for the latter? I assume their would be tax liabilities, but in which territory?

    Also, would it be worth trying to get as much out of FPI (prob 50%) as possible without incurring penalties, or just start from scratch?

    I will definitely have a word with my employer about the ‘advisers’ they associate themselves with.

    Thanks again.

  156. Martin says:

    My apologies if this has already been asked & answered above, but I am (yet-another) who’s been suckered into FP. Premiums thus far are S$84K and valuation is S$112K at 31 months in. I’m on a premium holiday now and considering cashing out (would get S$57K of $84K back, i.e. $27K loss) OR going paid up participating and taking S$33K of accumulation units (i.e. max penalty-free) now and leaving the rest until maturity (18 years). With so many fees it’s unlikely to grow but may (?!) remain flat (or near-to).

    I can imagine you prefer not to give advice on individual personal circumstances but as a matter of general principal do you think it makes more sense for people to cut losses and re-group (with a painful lesson learned) OR try riding it out as paid-up participating? Many many thanks.

  157. Adam says:

    Hi Martin,

    This sounds almost exactly the same situation that my wife and I were in, except our total valuation was less. We cashed out and took the $55K rather than leave any in and have it wither away.

    One idea to help make it easier to stomach is to forecast the amount you’ll possibly have in 20 years with FP after subtracting all the fees from say 7% (or how many ever years your policy with FP has remaining). Then do the same with the 7% you’d likely make in low fee ETFs using the surrendered value. After we took into account all the fees, we were more ahead taking the big hit than flirting with FP and keeping the minimum amount invested. Emotionally it was painful and a life lesson but we did like putting the whole crummy investment and the FPI sales people in the rearview.

    Anyway, just saying that looking at it long term helped with our decision. Andrew recommended this in a previous post, but I’m not sure exactly where.

    All the best,
    Adam

    • Thanks Adam,

      Yes, it’s best to do the math for your own personal policy and length of time. Use a compound interest calculator (the one at moneychimp.com works well) and count on paying an extra 3.5% to 4% in annual fees for the FP product. After penalties, would you catch up with a lower cost approach? You should do the math to find out. Most people find their answer to this question is, yes.

      Cheers,
      Andrew

  158. Martin says:

    Thank you both. Yes, I did ask FP to do a projection based on 5.2% and 9.2% – what they say is that leaving initial units with them and going paid up would (assuming those projects remained in effect for 18 years) result in returns of either $52K (at 5.2% p/a) or $102K (at 9.2% p/a). Total value of the initial units presently is $79K (at current valuation) so neither of the scenarios is as attractive as taking a near-term hit and parking the surrender value in an ETF (or even money-market). At just 2.5% returns would still exceed FP’s projection.

    There’s also the intangible benefit of not needing to be reminded for the next 18 years of one’s own foolishness in believing snake-oil salespeople.

  159. Expat in DXB says:

    Hi Andrew,

    Well I just spent a good amount of time reading all the posts on this website:-)

    My husband and I are both American Citizens living in Dubai. We were offered by a financial adviser when looking into options here, General i Vision which I am glad I started researching and came across your website (among many others). I knew from the start the “scheme” sounded fishy, the only reason I did not immediately dismiss is due to the “trust” pension option that could or could not come out soon (Malta etc) that would allow an American citizen to wrap up their investment in a trust to avoid gains tax. (but again this seems unlikely).

    My question what do you recommend for an American Expat at this time? There are not many options as far as I can tell, although I have just begun my search? Going through the US is my next search option so starting that now:-)

    We want to invest monthly and use the account as a sort of “retirement fund”.

    I’ll make sure to get your book shortly and have a read.

    • Hi Expat,

      There are many options for Americans. I’m sorry that I cannot list them all right now. I’m on holiday (a cycling trip) with a tight schedule. But I can suggest Assetbuilder.com. I have a published article coming out soon which lists more options. My book does this as well. Sorry I was so rushed.

      Cheers,
      Andrew

  160. Jean-Charles says:

    Hi Andrew,

    I bought a Vista policy (ZIL) in March 2005 and I received US$ 9,000 bonus. I was satisfied at first with the results and I bought a second Vista policy (the same) in December 2006.
    Then I realized that it was a bad investment to stop payments (after the initial period) respectively on September 2007 and December 2007. Therefore my both policies became suspended.

    Later on, I received notification from Zurich that my policies will became dormant if I don’t do the necessary. Following the advice from my ‘financial adviser’, I made minimum payment in 2011 on each policy. Still Zurich declared that one of my policies became dormant… but after complain from my ‘financial adviser’ Zurich rectified the situation.

    Beginning of 2014 I received new notification from Zurich that my policies will become dormant and I have meet few days after my ‘financial adviser’ to complete the necessary documents but he came without the documents. Also, I never receive the document/form to complete, neither from my ‘financial adviser’ and neither from Zurich until after one of my policy become dormant.

    My first policy became effectively dormant on June 1st despite the fact that I have sent them the completed form (# document form from 2011) 10 days earlier and made payment on June 13th (the same day that I finally received the original document -from my financial adviser- with the confirmation of the bank account). On 13th, I also sent a new set of document directly to Zurich, Douglas.

    I understand now the meaning of ‘being dormant’… Zurich took (steal?) 15,440 USD from my policy… and the fact that I never received the documents doesn’t seems to be an accident.
    Also to complete the picture, my both plans already reduced by over 7,000 USD even before Zurich make my policy dormant.

    Zurich offered to reverse the dormancy charges of my policy BUT at the (‘pathetic’) obligation that I restart the quarterly payment. Financially that doesn’t seem a bad operation… if Zurich was little honest. Also, I could anyway withdraw each time the amount right after deposit, the initial period being already passed. But by principle I refuse. I complain to the Ombudsman Scheme… but they consider that Zurich didn’t do anything incorrect. Do you think that Ombudsman Scheme are objective?

    Legally, I won’t probably get those 15,440 USD back and I won’t be surprise to lose more. Do you think that I still have chance to get back this money?
    You seem confident to say that investing in Zurich (and similar institution) is bad… So why not organize official manifestation / petition against them to inform a large public about it?
    I am living in Asia and I am willing to give my full support on this project and travel back and forth to Europe if needed.

    regards,
    JC

  161. Deborah says:

    Hi JC,

    I have had a lot of issues with Zurich too. My advisor also sold me two products, one from FP and one from Zurich, and I also lost a lot of money. Now I know that the reason I was sold two products was so that the “advisor” could earn commission on both products. Same situation as you describe, I was very pleased with the first year or so, and so was enticed to buy another “investment.” The first year, while they are giving the “bonus” units looks good on paper, but the bonus is really totally bogus, as they are actually eroded by fees. They make it look good so that you’ll refer your friends and family, or maybe even buy another one yourself, and it’s only much later, that you realise how bad these products are.

    Here’s a really good article that talks about how Zurich Vista and others work. It’s a bit long, but definitely worth reading.

    http://therapeofhongkong.com/2014/08/09/investment-linked-assurance-scams-explained-a-look-at-how-insurance-companies-swindle-investors-out-of-years-of-savings-and-why-they-could-and-should-be-prosecuted/

    Neither Zurich nor FP will acknowledge any wrong doing in my case, and won’t discuss any further. Would you consider starting a petition or manifestation? What about setting up a Facebook group to get the ball rolling? I’ll support it, as I imagine, so would many readers of this blog.

    Regards,

    Deborah

  162. Deborah says:

    HI Andrew & JC,

    There are personal reasons, why I won’t initiate anything. BUT, I will support anything that is initiated by someone else. I’ve lost a great deal of money from these scams, and have been trying, without success, to recoup anything at all. So JC, or anyone else please start a movement.

    Who has jurisdiction over these products anyway? Is it the individual country regulators? Would Interpol be able to play a role? I seem to think that they are all hiding under the blanket of the Isle of Man, which they sell as being regulated by the UK, but in actual fact seems to have it’s own set of rather questionable regulations. To me, it is disgusting how pensioners and ordinary people can be so tricked into parting with their hard earned money, and the regulatory bodies just close a blind eye to it.

    Regards,

    Deborah

  163. Alessandra says:

    Hi Andrew
    I am an Italian teacher working in London.I just bough your book and found it really interesting. How can I procdee coninsidering my nationality? Thank you very much for the excellent book and website! I am a roperty person buI am thinking of invrsting as you advise
    Thank you!

  164. Dave says:

    Hi Andrew,

    I must say that I have been searching for a site like this for a long time! I have had great difficulty finding information regarding investments for Canadians that are considered non-residents. I have your book (my mom has bought a copy for everyone in my family!) I too, like many of the stories here, am feeling frustrated. I am not an investment guy – just work hard and try my best.

    I entered into a 10 yr pension savings scheme with Generali International, managed by SCI. I am a Canadian citizen living and teaching in Thailand and am a non-resident of Canada for tax purposes. I guess I have a couple of questions:

    1. Have you heard about the practises of Generali and SCI? Do they have a reasonable track record?
    2. I have been with them for 5 years (started my investment after the last crash) and despite the growth of the market, my portfolio is worth less then I have contributed and that is before the penalty in calculated in. There seems to be a large penalty for cashing in after 5 years but it has been difficult getting information from them. I am looking for ways to invest in some of the ideas you have mentioned but I have constantly hit roadblocks due to being a Canadian non-resident, not having $500,000 to invest, etc….

    Any help with investments that are available to Canadians in my situation would be soooooo helpful.

    Thanks every so much for your time,

    David

  165. Jennifer says:

    Hi Andrew

    What about the new 5 yr Visions plan from Generali–they seem much less restrictive and upfront–or am I being naive?

  166. JHC says:

    Hello,

    I’ve learned a lot by reading through these comments and I look forward to reading your book as well for some more insight. I too was sold a FPI Premium 25-year savings plan and have been contributing only 200USD a month since it started in 2007. I have always felt that it was a bit of a scam mostly because the advisor and company completely disappeared after about 2 years. (I’m an American expat living and working in Istanbul). But through FP directly, I’ve been able to manage my own account and felt a little more assured that my money was still going somewhere. Of course I now realise that the advisors are probably getting some pretty heavy commissions up front (or during that initial 18 months) and then just move on and scam elsewhere. (They sold these products to a number of my expat friends and acquaintances here in Istanbul who were all completely dissatisfied.) Anyway, I stuck with it understanding that indeed it was a long-term investment and that initially I wouldn’t see big gains but that in later years I’d see better gains. Now I’m starting to think that I’d be better off in a product that you suggest. (Or just put it into a time-deposit!) I’ve contacted FP to learn the surrender amounts. Here it is:

    Surrender / Withdrawal Quotation
    Currency and Amount
    Policy Value USD 19145.71
    Surrender Adjustment (Fee) USD 1590.45
    Surrender Value USD 17555.26
    Maximum (penalty free) USD 16735.93
    Withdrawals from this product can be made on an ad hoc or regular basis. Regular withdrawals may be taken monthly, quarterly, half yearly or annually. Withdrawals can only be taken from the Accumulation Units and no charge is imposed. The minimum withdrawal (per withdrawal) is USD 750.00 (or currency equivalent).

    I paid into this a total of about 18k. Based on this info, it looks like I would suffer a slight loss, but having the peace of mind to get out of this and manage my investment more thoughtfully appeals to me.
    A few questions:
    1. Would it be better to just close it all out, suffer the loss and move on? Or, since there is no regular withdrawal penalty, take a premium holiday, take the withdrawal option for now, get some money back monthly and start investing in something else? (Since it looks like I’d lose the initial 18-month amount anyway, why not let it just sit in there until the end of the contract?)
    2. How might you suggest I receive the money (either full surrender value or withdrawals)? Should they wire it to my Turkish bank account or my US bank account? Will there be any consequences to having it wired directly to my US account? This is what I’d prefer in order to work with a company like Vanguard based in the US. Otherwise I’d still have to pay to wire transfer money from my Turkish account anyway.
    3. I already have an account with TIAA-CREF from an older job I had. It is just sitting there doing nothing. Do you have any experience with them or know if they are similar to Vanguard? I wonder since it’s already set up, I should just transfer the FP money to them if they offer similar services with similar fees.
    Thanks a million for your thoughts (or anyone else!) I appreciate it very much. I wish everyone good luck in their investment choices.
    Kind Regards,
    Jake

    • Hi Jake,

      My biggest concern is that an advisor sold you this product, as an American. You aren’t legally able to own it and could get into some pretty hot water for doing so. To confirm, please speak to a U.S. tax accountant, telling them where this money is domiciled (likely the Isle of Man). He or she would likely suggest you bail immediately, regardless of account fee charges. If you were in contact with the advisor, it would be wise for you to also go after this person, if possible. They put their greed for commissions ahead of U.S. tax laws. If you know of other Americans this happened to, please pass this along to them. It’s important.

      Andrew

  167. Simon says:

    Hi Andrew,

    My wife started a vista policy back in 2010 which she was sold by an IFA in Singapore, we are now able to take a lump sum without penalty and have reduce down our monthly contribution to the minimum after realising how heavily front loaded this product is. We are still debating whether to fully withdraw from the policy and re invest the funds elsewhere, but in the meantime we are due to relocate back to the UK from Singapore where we presently reside. Question we have, is what tax would be liable to pay on any redemption, would it be income tax on any gain? We seem to be finding it hard to get a clear direction on this from anyone in Singapore, so any help would be appreciated?

    Thanks for running such an informative site, this has been very helpful!

    Simon

  168. Nicholas says:

    I’m another victim of a Zurich Vista policy. I’m posting this to add to the chorus of warnings to deter any more people from getting locked into this costly and non-performing product.

    After exactly 4 years, I’ve put in a total of £38,000 plus an additional £6,000 in bonus units, thus making £44,000. Its worth today? £35,000. Surrender value is £24,000. So I lost a third of what I put in. Absolutely gut-wrenching and heart-breaking.

    The other reason I am writing is because I’d like to hear from anyone who managed to get any additional money back from Zurich. I have several complaints about my advisor.

    1. He himself failed to successfully explain the fee structure of the ICP to me. I thought the 4% charge only applied to the monthly premium (mine was £800) so that it would be just £32 a month. I even wrote this down on the document he was going through with me and he didn’t correct me.
    2. He didn’t tell me about the additional hidden charges of the mirror funds.
    3. He put me in 4 funds, three of which have not grown at all over 4 years, and the other has declined by 60%…

    I truly paid dearly for this “advice”. The ironic thing is he really sold it to me on the basis that if I kept my money in cash I’d be throwing it away due to low interest rates and inflation. If only I had! I’d have been close to £20,000 better off!

    I’d be grateful, very grateful for any advice about whether I can take this further and if so, what would the best way to do it be.

  169. Ryan says:

    Hi Andrew,

    I have been reading everything above and of course i am starting to get nervous.
    I came across this page trying to find anything good on Friends Provident or success stories but all i found were sites directed to there own page and negative feedback.

    I started investing 1 year ago on a 20 years plan from recommendations from my friends and colleges. I will have invested around about 22,000 US in the first 12 months.

    The more i read though the more nervous i get, if i surrender the plan now i loose nearly everything to get around 50% of my money back i would need to surrender the plan in 10 years.

    The other option is too stop investing all together after the 18 month initial period and let the money i saved in the first 18 months sit there and pay the 3-4% fees for the next 18.5 years.

    Your advise would be greatly appreciated as i am confused and not sure what to do from here, i wish i had just saved money with my bank instead of listening to others.

    Can you tell me anything good about Friends Provident Premium Advance, or is the cold hard fact that i will be paying more in fees then what i actually earn on my investment.

    Also if not friends provident, what company to you recommend that offers a similar plan but without the 3-4% annual fees. I really no nothing about investments and was more interested in just saving my money and getting a bit of growth on the saving.

    Please let me know your thoughts

    Thanks

    Ryan

  170. Mark Gamble says:

    Hi Andrew,

    We have just been reading your latest book and took great interest in the section regarding Zurich and similar policies. My wife is a colleague of Sean McHugh’s at UWCSEA and thanks to him communicating your advice we have already taken action regarding both of our Zurich policies.

    About a year ago we contacted Zurich to request a cancellation of our Vista policy which is due to run until 2026. We were informed that we could withdraw a maximum partial value of approx 22% but the remainder must stay in the account until maturity with us paying ongoing fees. If we wished to take the full amount we would incur a huge surrender penalty. We withdrew the max partial value but kept the remaining sum in the policy.

    After having been inspired to further fight this ‘daylight robbery’ by reading your latest book, we would like to push Zurich to see if we can shame them into returning our money without deduction. We read in your book that some people have been successful with this and we would welcome any advice you might be able to give us as to how best to proceed.

  171. Nicholas Stone says:

    Hello Mark,

    I’m in a very similar position to you and I’m also based in Singapore. I’d be happy to ‘team up’ as it were, with you, in your pursuit of Zurich if you were agreeable to the idea. I don’t know what Andrew’s policy would be on this, but maybe he could pass on my email address and we could get in touch. Just a thought.

    Nicholas

  172. Bhama says:

    Hi Andrew
    I have a friends provident international 20 year plan. It has been under performing for 4 years and the current value is less than the premium paid. I am into the 6 the year of the policy right now. Is there a way I can negotiate the surrender fee ( if I go by the published table I stand to lose about 30,000 USD). Appreciate your feedback. Bhama

  173. Midton says:

    I’ve just read through this, apparently belatedly.

    I have a Royal Skandia managed savings play. It has a 15 year term with just over 4 years left. At present it has increased by about 25%. My advisor has twice rearranged the funds after talking to me. As a novice I’ve been quite happy so far. I now know, after reading, I could have done better, cheaper but how badly do you feel I’ve done. Obviously I should continue it?

    Midton

  174. Midton says:

    Yeah, I would lose half of my profits. With only a few years left I will continue though.

    Recently I’ve been thinking of starting a FTSE 100 tracker. I’m in Japan. Could you tell me where on earth to start as I don’t even know where to buy one?

  175. T.A says:

    Hi Andrew,
    I live in Dubai and I was approached by a financial advisor 2weeks ago who based on my spendings and earnings recommended the premium FP plan. Its a 25 years plan with an 18months initial commitment period. (It is the same plan as a lot of people who commented on this thread)

    Reading this made me question my decision.

    I signed all the document two days ago and FP(friends provident) wil start taking money from my account starting the 1st of march.

    Is it possible at this stage to step back and to cancel everything? I really need to do more researches on this matter and i am afraid it is too late.

    I am looking forward for your reply,
    T.A

    Sent from my iPhone

    • Do your best to get out, T.A., before they fully snatch you in.

      Cheers,

      Andrew

    • BVK says:

      hello T.A. I got in to a similar plan with FP 5 years ago ( in dubai). I am seriously thinking of coming out of that plan with a USD 30,000 penalty by March . Over 5 years my fund is 10 % negative . I stopped monthly contributions 2 years back and asked the brokers to grow the fund without my contributions. Brokers nor FP manage the fund , fund is att eh mercy of the circumstances. We take the full market risk and no one takes any responsibility to make the fund grow. Their standard advise is that because it is a 25 year plan , let the funds remain invested till it naturally grows. FP’s 18 month unit contribution makes it look as if the fund is growing. That’s just an eye wash. Longer the duration better for the brokers – they get paid commission based on monthly contributions. Like Andrew said , it might be a good idea to get out of it. Currently I am in New Zealand – will be back in Dubai end of the month. Cheers

  176. Lee says:

    T.A. – run for your life!!!!!!!

    I also live in Dubai and got into one 5 years ago with PIC, it was the worst investment decision of my life!! I am now taking a 45k hit to pull out (so losing roughly half what I put in), but I just can’t bear the thought of continuing to give them my money given the high fees and how badly my portoflio has been managed (they don’t care once they get your money) and perfomrned over the last few years (during a period of time when every stock market has pretty much doubled!!) The high fees make it almost impossible that you will actually make money. I heard that somewhere close to 90% of people pull out of the plan before maturity, for one reason or another, meaning that almost every person who buys these plans ends up losing money. I don’t know anyone who has entered into one who hasn’t regreted it.

    I posted on another comment about how I am now looking at investing following Andrew’s advice in his book – take a look at that (or even better, buy Andrews book – they sell it in the bookstore in Dubai Mall). I would certainly inform them that you want to cancel and cancel your direct debit until you have had a chance to read the book (then pretty sure you won’t let them take your money).

    FYI – As I understand it, if you sign up and then stop paying during the initial periond of 18 months, they are entitled to take the whole amount so best not to even start.

    Honestly, these guys hould be banned. I have already made a compliant to the UAE Central Bank re how my plan was sold and managed and want to take it further – BVK, maybe we can discuss.

    Lee

  177. Chalie says:

    Hi Lee, BVK

    Anyone keen to push this thing with Devere Dubai further? I am.

    Charlie

  178. Lee says:

    Thanks Robert, incredibly helpful, will see where I get too!

    Lee

  179. risc_sg says:

    Andrew

    I see the Henley Group has been acquired by St James Place and are keen on cashing in the expat market, salesmen out in force (certainly for the Brits anyway). The SJP offering doesn’t seem to have the same upfront expenses as those of FP, Generali etc stating a 1.5% annual management charge, no exit charges after 6 yrs. Question is what are the funds within the wrapper taking off the top, doesn’t seem to be all that transparent to me? Have you come across their offerings at all? I think if I hadn’t have read your expats book I would have jumped right in – so thank you 😉

    -risc-

    • Nicholas says:

      Risc,

      I’m with the Henley Group. Biggest (financial!) mistake of my life. Bought a Zurich policy from them 4 years ago. £38,000 in, plus £6,000 in bonus units. Currently worth just £36,000, with a withdrawal value of £25,000.

      They haven’t contacted me about any other policies, particularly any which have no exit charges after 6 years. Don’t suppose I could switch… what’s the name of the policy you came across?

      In November last year I put the remainder of my money into Index funds VMID, VRWL and IGLS as per Andrew’s recommendations. VMID is currently up 9%. During the same period of time, my Zurich policy has declined a further 1%. It’s hopeless.

  180. Peter Williamson says:

    Andrew

    Do you have the full formula for maximum partial surrender/withdrawal from a Zurich Vista.. I can see the early surrender penalty/full encashment formula but I cant see anything in terms of withdrawal without penalty..

    Kind regards Peter W

    • Nicholas says:

      Peter, if you call up Zurich they should be able to tell you. Mine was my palty surrender value minus about £3,000. That is to say, they will either penalise me £11,000 if I withdraw everything now, or £14,000 to keep the policy alive. Essentially that £3,000 difference must be what they calculate the fees will be over the remainder of the policy. Well, that’s my guess.

  181. Nick1411 says:

    Hi Andrew,

    Once again another post from yet another (naive, miss-informed, angry), expat in Asia, (Hong Kong), so the story goes…
    ‘Purchased’ or sold a premier FP 25 year policy in HK in Aug 2008, via De-vere contributing initially 550GBP/month and then ‘advised’ to increase to 1100GBP in the 18 months period.
    Currently ‘investing’ 550GBP/month, policy value is approx. 51,650GBP, (total contributions 53,850), I did take a 3000GBP withdrawal in 2010 just to see if it was possible, (even with this a paltry 1.5% increase!)
    Currently on my 3rd ‘wealth manager’ which I notice now that the intermediary is now Acuma HK Ltd, (whilst under the precision group on managers correspondence, believe this change happened last year).
    Anyway, don’t have too many review meetings nowadays apart from when being advised to switch some funds allocation. Currently hold 7 funds (with majority in 2 GAM funds which coincidentally was ‘advised’ to switch into 1 year ago), other funds shown below, (I notice that this fund carries heavy initial charge and I assume that the manager would benefit from this (and probably only chance they have with ‘somebody else’s original client).

    GAM GROWTH – Initial charge 5.00% Annual charge 0.70%
    GAM STAR BALANCED Initial charge 5.00% Annual charge 0.85%
    Parvest Equity Brazil Initial charge n/a Annual charge 1.20%
    Baring Eastern Europe Initial charge 5.00% Annual charge 1.50%
    First State China Growth Initial charge 5.00% Annual charge 1.50%
    Pictet CH Precious Metal Initial charge n/a Annual charge 0.30%
    JPMorgan India Initial charge n/a Annual charge 1.20%

    Having just read through these ‘familiar’ cases, I asked FP for a surrender value (see below!), with their additional comments:-

    “Policy value Gross = 51653.36
    Net = 36172.35
    SV Ded’n = 15481.01

    Policy value Gross = Fund Value
    Net = Surrender Value
    SV Ded’n = Surrender Penalty

    The estimated surrender value is based upon current unit prices and is not guaranteed.

    The actual surrender value that would apply in the future may be higher or lower than the amount shown above.
    Premier/Premier Ultra: Please note that the surrender value does not incorporate the plan fee [debt] from inception if your client had contributed 18-months initial allocation period only or where the policy holds no accumulatiion unit value, a plan fee [debt] may incur, once surrendered. The plan fee [debt] will be deducted from the surrender value, as an additional charge”.

    Not sure how the above paragraph further affects the policy, but needless to say, at this moment not at all impressed.
    As with others, what options to I have, run down the policy to maturity and reduce monthly premiums, take a ‘big hit for me’ by surrendering.
    I can swap and change through the website and some of the funds have performed well (but not so much exposure now), whereas others are poor, but it appears this incidental if there are so many charges and hidden charges with the policy.
    I appreciate that I have also the complexity of currency ex-change rates to consider as well.

    Has anyone had success with these policies at all considering that they are huge in South East Asia, is there any portal/blog where policies can be discussed/reviewed and offered.

    I have just found out how much I can ‘deduct’ from the policy penalty free and the figure is 21,555 GBP and I could look to invest this is various options suggested on your blog and via your book, (which I’m currently reading). Again, would this make sense, as the remaining 30,000 GBP appears to be ‘locked’.

    Cheers, (fed-up British ex-pat 40 year old)

    Nick1411

  182. Nicholas says:

    From one angry Nick to another:

    From what I understand, it is probably better to take the hit and move the money out because the reduced sum you withdraw will grow at a much faster rate since it won’t be laden down with fees. Eventually that growth will cause it to overtake what it would have achieved if you left it in the policy. You’ve still got 18 years to go on your policy rather than say 8, so that also strengthens the argument to pull out now.

    Having said all that, it’s a very painful decision to make. It’s not only the loss you make because of the unfair penalty (essentially they’re charging upfront for 25 years of “advice”) but also the knowledge of what you could have made if you had been in index funds from the outset. But the quicker you get out, the quicker you can put your money to better use again.

    Oh, and by the way, I was also in that Brazil fund but Zurich closed it and I got moved to an HSBC equivalent. Which has since dropped in value by 50%. Fantastic.

  183. Nick1411 says:

    Thanks for the objective advice Nicholas!, I was ‘half-expecting’ this to be the general view, still debating about what to do, finding out now minimum monthly premium and thinking to switch all funds to 2/3, (p.s also was in that HSBC fund (through HSBC) as well, (double whammy), before exiting!

  184. lucky mike says:

    am being pushed by HSBC wealth relationship advisor (??) to use a Zurich International Wealth Account as a platform for investing in underlying bond and equity funds. this would be on the basis of one or more lump-sum investments into the Zurich platform, not an ongoing contribution plan.

    the Zurich PDS states the IWA fees as follows:-
    – 3% establishment charge deducted at 1% over 3 years
    – annual management charge of 0.35% (based on a $250k investment)
    – early encashment charge between 4.25% (yr1) to 2% (yr 3) if account closed with 3 years

    ie much lower than seem to apply for the 25 year monthly investments plans referred to above.

    the IWA is structured as an insurance product but with the minimal 101% of investment or fund value payout – but the idea is to use it to invest in underlying mutual funds – HSBC recommendation on these seems reasonable ie established providers such as Templeton, Blackrock.

    the advantage is that if i buy the underlying sunds directly they all quote larger entry (5% ~ 6%) and in some cases exit fees, whereas if i purchase though the Zurich platform i am told by HSBC that the entry/exit fees don’t apply.

    so at face value it looks like a good deal. what am i missing?

  185. IM says:

    I understand that there are industry statistics showing that very few of these policies make it to maturity (especially on the longer terms) and that many are sold at a loss early on. Does anybody know what the actual stats are or have a link to them?

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