Zurich International and Friends Provident charge investment fees that would excite John D. Rockefeller. And the guy has been dead since 1937.
In the world of investment products, low fees are good for investors. High fees are good for commission hungry salespeople.
Too many people buying insurance-linked investment products through Friends Provident and Zurich International don’t fully understand them. And based on telephone conversations I have had with Zurich and Friends Provident representatives, not all of their salespeople have a firm grip on the products either. They do understand one thing, however: these products offer fat commissions.
If you’re speaking to an investment rep (any investment rep) bring along a 14 year old kid. Have the representative explain everything to the child. If the child doesn’t understand what the rep is saying, it highlights a couple of things.
1. You probably won’t understand it either (although few people would admit that)
And/Or
2. The salesperson might not understand it.
Don’t Fall For The “Investment Guarantee” Promise
I looked over three people’s investment portfolios during the week of November 2010; they purchased “Investments” from Zurich International (two of them) and Friends Provident. These companies often couple investments with insurance policies.
An investment product that’s combined with an insurance component is generally a bad deal. Buy insurance if you need insurance. Buy investments if you want to invest.
As an example, let’s examine the Friends Zenith: “A single premium life assurance policy specially designed to allow access to international investment opportunities.”
“Death Benefit Guarantees” That Don’t Make Financial Sense
If you die, your descendents receive the greater of two sums:
1. The actual value of your investments (known as the market value)
Or
2. One hundred and one percent of your “cash in value” if the investments are worth less (upon your death) than what you initially invested.
At first glance, this looks like a fair deal. But let’s have a look at the specific details.
Assume that you made 7 percent a year on your investments with Friends Provident.
If you invested $2000 per month over 20 years, the market value of the investments would be $1,052,764. When you die (you won’t be creeping around 200 years from now) your heirs would receive the full value of the account (assume it’s $1,052,764) after all fees.
In the event that your investments don’t make money, your heirs would get 101 percent of what you invested. That sounds like a great guarantee, but don’t be fooled by it. If you invested $2000 per month for 20 years, you would have invested a total of $480,000 ($2000 per month X 12 months x 20 years = $480,000).
If your investments had tanked (and were worth less than what you deposited) your heirs would receive 101 percent of your “cash in value”. In other words, they would receive roughly $480,000 upon your death (not including fees to withdraw).
Don’t let the “101 percent” fool you.
If I loaned you $5 and you paid me 100 percent of it back, I’d still just be getting $5 from you. Marketing with numbers is an art.
Here’s the death benefit right from the company website:
Death benefit
In the event of the death of the Life Assured (or the last surviving Life Assured if the policy is written on more than one life) while the policy is in force, 101% of the cash-in value of your plan will be payable. … read the product summary
Think about what a chocolate bar was selling for 20 years ago. Inflation takes a bite out of everything. But a guarantee to receive back what you had invested, without an adjustment for inflation, is an unfair deal for investors.
And as they mention on the website, the company can change its fees at any time. Don’t believe me? Check this out:
Friends Provident International Limited reserves the right to change its charges at any time at its discretion upon three months’ written notice to you.
Investment Charges That Kill Returns
How about the “investment” charges for a group like Friends Provident?
They’re the highest fees I have ever seen. They rationalize these high fees (in all likelihood) by pointing to the merits of the Death Benefit above.
Again, right from the company website:
Administration charge 1.2% each year, debited directly to your unit value on the valuation day Bid/Offer spread Nil
Let’s deal with this one first. It’s a killer. Each and every 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 more than 30 percent of your profits to Friends Provident because they would take 1.2 percent of your account’s value each and every year. This fee alone, has Rockefeller digging his way out.
But the bleeding doesn’t stop with the administration charge.
There’s also an establishment charge, as pasted from the website below.
Establishment charge 0.4% each quarter (1.6% each year) of the premium for the first five years
For the first five years you invest with this company, they will take an administration charge of 1.6 percent annually. There’s a further rumble in the old capitalist’s graveyard.
When you add 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.
These are heavy charges, but it doesn’t stop there. Salespeople for Zurich International and Friends Provident choose actively managed mutual funds for their clients.
Taken from the website again, these products have internal fees costing up to:
3.35% per year of the fund value, dependent upon the fund chosen
You feel that earthquake?
In other words (and this is where it gets very real) your investments could end up making 6.15 percent per year for the first five years, and you could end up making… nothing.
But there’s another reason these financial companies are so profitable…for themselves. If you start investing with a plan such as this, and if your sister’s house burns down, and she begs you for cash, the company will penalize you for trying to help her.
From the 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.
What’s that? You don’t understand the above language?
That’s the idea. Just hope that you never need emergency money during the first five years of your plan. If you do, you’re going to get fleeced.
The hapless 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. I’ll ignore withdrawal charges, establishment charges and cashing in charges, just to be sporting.
If the investments make 6 percent annually, before fees, then the investor will make 3 percent annually. What would that cost you (in lost opportunity) over 30 years?
- $200,000 invested at 3% for 30 years = $485,452
- $200,000 invested at 6% for 30 years = $1,148,698
That little 3 percent fee would add up to $663,246!
If you’re feeling philanthropic, pick your charity. But don’t gift your money to a company that prints money.
Loading tweets...
270 comments
Jesse says:
December 9, 2011 at 1:27 am (UTC 8 )
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
Andrew Hallam says:
December 14, 2011 at 7:00 am (UTC 8 )
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.
MATHEW WILLIAMS says:
December 28, 2011 at 6:21 am (UTC 8 )
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
Andrew Hallam says:
December 28, 2011 at 6:09 pm (UTC 8 )
I did the math on that question Matthew. And it wasn't pretty. At first glance (before the number-crunching) it looks like it's better to stay put, considering the heavy withdraw fees. But after crunching the numbers, weighing the ongoing fees and comparing with the cheap alternatives, you might be interested in just selling, and cutting your losses.
If you've read my book, Millionaire Teacher, you'll see that I profiled a Canadian in Singapore (Gordon Cyr) who did just that. He cut his losses with Zurich and set up an account of exchange traded funds with DBS Vickers.
MATHEW WILLIAMS says:
January 4, 2012 at 1:13 am (UTC 8 )
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
Andrew Hallam says:
January 4, 2012 at 5:06 am (UTC 8 )
Hey Matthew,
What do you think?
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.
Cheers,
Andrew
WTF?! says:
February 22, 2012 at 5:21 am (UTC 8 )
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
Mathew says:
March 7, 2012 at 1:20 am (UTC 8 )
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
Andrew Hallam says:
March 8, 2012 at 12:19 am (UTC 8 )
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.
Andrew Hallam says:
March 8, 2012 at 12:29 am (UTC 8 )
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.
Lisa says:
March 9, 2012 at 3:47 pm (UTC 8 )
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
Andrew Hallam says:
March 10, 2012 at 2:20 pm (UTC 8 )
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.
Neil says:
March 20, 2012 at 10:45 pm (UTC 8 )
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.
Andrew Hallam says:
March 21, 2012 at 12:58 am (UTC 8 )
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
Karenne G says:
April 16, 2012 at 5:12 am (UTC 8 )
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..
Andrew Hallam says:
April 17, 2012 at 3:55 pm (UTC 8 )
It's a very unfortunate racket Karenne. Did you know that an American salesperson was recently given a short prison sentence for selling one of these products? Here's the link to my article which references it: http://assetbuilder.com/blogs/andrew_hallam/archi…
M.G. says:
April 17, 2012 at 10:10 am (UTC 8 )
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!
James D says:
April 19, 2012 at 1:44 pm (UTC 8 )
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
Andrew Hallam says:
April 19, 2012 at 6:11 pm (UTC 8 )
Hi James,
Many thanks for the kind words about the book. I'm glad it was helpful. Please let me know if this link helps! http://andrewhallam.com/2012/04/great-option-for-…
And if you have a couple of minutes to write a short review on Amazon (even just a couple of sentences) I'd be thrilled.
Here's the link to Amazon UK: http://www.amazon.co.uk/Millionaire-Teacher-Wealt…
And the link to Amazon USA: http://www.amazon.com/Millionaire-Teacher-Wealth-…
Thanks James, and please let me know if the linked article is helpful.
Cheers,
Andrew
YK Sharma says:
May 30, 2012 at 11:19 am (UTC 8 )
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
Andrew Hallam says:
June 3, 2012 at 3:00 pm (UTC 8 )
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.
David John says:
June 5, 2012 at 10:53 pm (UTC 8 )
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……….
Andrew Hallam says:
June 6, 2012 at 3:50 am (UTC 8 )
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.
Rese says:
July 5, 2012 at 12:59 pm (UTC 8 )
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
Fahed says:
July 18, 2012 at 10:34 am (UTC 8 )
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.
Steve says:
July 19, 2012 at 3:59 pm (UTC 8 )
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.
Andrew Hallam says:
July 24, 2012 at 6:33 pm (UTC 8 )
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.
Farah says:
July 31, 2012 at 5:05 pm (UTC 8 )
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.
Andrew Hallam says:
July 31, 2012 at 8:20 pm (UTC 8 )
Hi Farah,
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.
Noor says:
August 4, 2012 at 6:24 am (UTC 8 )
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
Andrew Hallam says:
August 4, 2012 at 1:53 pm (UTC 8 )
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%.
It would hurt to take such a penalty, but at the end of the 15 years, you would likely have broken even in the horse race, or come out slightly ahead of Zurich if you take the penalty and redirect your assets. But having said that, you would be behind the eight ball for many years after taking such a penalty. The decision, of course, is yours. But do your best to tell all of your friends and co-workers about this. What Zurich does here, with its salesforce, isn't illegal because everything is in the fine print of their prospectuses (an example of which, I've detailed in my post above). But is such a sales practice morally ethical? That's the big question.
Noor says:
August 5, 2012 at 6:43 am (UTC 8 )
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.
Andrew Hallam says:
August 5, 2012 at 12:06 pm (UTC 8 )
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.
Steve says:
August 5, 2012 at 2:06 am (UTC 8 )
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
Andrew Hallam says:
August 5, 2012 at 12:04 pm (UTC 8 )
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.
Andrew Hallam says:
August 5, 2012 at 5:22 pm (UTC 8 )
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.
In your case, you may wish to cut your losses and re-start. Where you invest, however, is dependent (as mentioned) on your nationality and location.
M.G. says:
March 15, 2013 at 3:59 pm (UTC 8 )
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!
Andrew Hallam says:
August 5, 2012 at 5:45 pm (UTC 8 )
Hi Rese,
If you haven't deposited a lot of money, I suggest that you considering bailing on the plan, taking the slight loss in the stomach, and chalking it up to an educational experience.
Andrew Hallam says:
August 5, 2012 at 6:01 pm (UTC 8 )
Fahed,
My apologies for taking so long to get back to you. You have outlined the fee structure very clearly. This is great, because few people who get involved in these programs even undersand what the fees are.
Having such this, I certainly hope that you choose NONE of their investment options.
Do not invest with any kind of insurance plan coupling as an investment.
The 15% first year bonus is a mirage. Let me explain why. Yes, you will receive it, but at what cost?
To answer that question, we need to dissect all of the fees that you will be paying. Add them all up and you will be paying at least 3.5% per year in fees (including the expense ratio on your funds). You pay 4% just to get into the plan itself, so your 15% bonus becomes 11% before you're out of the gate.
Now consider the damage that 3.5% will cost you over, say, a 25 year period.
My ETF investments cost me roughly 0.1% per year. Yours cost 3.5% or more each year.
If the stock and bond markets make 8% per year over the next 25 years, I will make roughly 7.9% and you will make roughly 4.5%.
Imagine investing $500 per month for 25 years at 4.5% per year, versus 7.9% per year:
$500 per month for 25 years at 4.5% = $279,423
$500 per month for 25 years at 7.9% = $466,430
Here are the same comparative figures over 30 years:
$500 per month for 30 years at 4.5% = $382,514
$500 per month for 30 years at 7.9% = $720,077
And don't forget that your one year 11% bonus (15% minus the 4% starting fee) will only amount to a very very small sum of money.
Even if Zurich offered you a 70% bonus on your total portfolio value in your final year, you still wouldn't make up the difference.
As for predicted returns, nobody will be able to tell you what they will be because nobody knows what the world's stock and bond markets will deliver over the next year, or the next 20 years. Historically, a balanced account would have made anywhere between 8% and 10%. But nobody knows what the future holds.
Walk away from this "deal" Fahed. And if the advisor tries telling you what kind of return to expect, don't walk away….run away.
Fahed says:
August 13, 2012 at 2:05 am (UTC 8 )
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 .
Neil says:
August 6, 2012 at 7:50 am (UTC 8 )
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.
1 2 3 … 5 Next »