Does International Financial Services (Singapore) Flog Friends Provident Products?

It’s tough for expatriates to differentiate between high cost and low cost financial advisors.                        

zurich warning

 

 

Some low cost ones exist, including Noto Financial Services and Thailand-based Creveling & Creveling

But they’re not as common as they should be.  Reports from investors in South East Asia are implying that International Financial Services (Singapore) is selling Friends Provident Offshore Pensions. 

The reports of them using such platforms are unconfirmed.  Friends Provident Pensions charge more than 4% per year, including platform charges and actively managed fund fees.

 If global markets average 7% per year and Friends Provident charges 4% per year (which they do, when coupling platform costs and mutual fund fees) investors would be giving away 57% of their profits.

In a year where markets earn 4%, Friends Provident investors may be shooting blanks.

Such products are popularly sold because they create commission windfalls.

Here’s how the commission train gains traction. A representative from a brokerage firm slithers into an expatriate filled workplace.

Some of the more common brokerages include:

  • the de Vere Group
  • Montpellier
  • Austen Morris
  • Globaleye
  • Henley
  • Gilt Edge International (Group) Ltd
  • Sovereign Offshore Ltd

The broker convinces management to tolerate their firm, resulting in a ready-made customer base.

The brokerage rarely creates such products directly; it usually acts as an intermediary for a pension provider, many of which are based in the British Channel Islands, Luxembourg or the Isle of Man. 

Some common pension providers include

When an advisor for the de Vere Group, for example, sells a Friends Provident pension, the rep receives an upfront commission from Friends Provident. 

How Big Is The Commission?

Benjamin Robertson revealed the commissions paid to brokers in his South China Morning Post’s September, 2013 article, Investment-linked insurance schemes a trap for unwary investors

On a 20-year policy, a broker convincing a client to add $1000 per month ($12,000 per year) would receive an upfront commission of $10,800, split between the broker and his employer.

 On a 25-year policy, the commission would be higher.  It’s based on a formula multiplying the number of years of the policy x 12 (months in the year)x monthly dollar contribution x 4.2 percent.  As such, a 25-year policy where the investor adds $1000 per month would earn a brokerage commission of $12,600.

Recognizing a winning lottery ticket when they see it, many expatriate advisors flog these products exclusively. 

To a hammer, everything looks like a nail. 

Consequently these expensive, inflexible platforms have spread like pandemics among global expats. 

To recoup that commission, firms like Friends Provident are motivated to keep the investor’s money as long as possible.

Doing so allows the company to reap more client fees over time. As an investor adds more money, fees earned by the financial company mount. 

But investors who awaken to the tyranny of costs find their private parts stuck in a zipper. 

Those closing their accounts to invest elsewhere get ripped with early redemption penalties, sometimes up to 80 percent of the client’s account proceeds. 

International Financial Services—Are You Really Playing This Game?

International Financial Service’s Steve Young claims to have bagged 198 clients in a single month.

I hope the reports of his firm selling Friends Provident Investment Linked Assurance Schemes are false.

But I bring this question to the public.  Is it true, or not? 







best-car-rentals_650x120

andrew hallam

andrew hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (Wiley 2011) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use.

You may also like...

14 Responses

  1. Sean says:

    That is exactly what they tried to sell me, not once but three times. Thank goodness I read your book before I finally signed on the dotted line, it was close, too close!

    • Thanks for letting us know Sean. Wow…it’s such a shame they’re hawking those products. But I’m really glad you were able to sidestep them. How did they reach you in the first place? Did they enter your workplace? Or was it a cold-call?

  2. Sean says:

    They approached us a school, (cold call to the administration) about 5 years ago, offering the usual (and quite relevant) banter about how are you preparing for your retirement. I remember in our first meeting, I was right upfront with them stating that I didn’t intend to pay any more than maybe 1 to 1.5% for financial services, they at that point in time were quite clear that that was unrealistic but that they could certainly find something in the region of 3%. Of course, by our second or third meeting the number of the absolute baseline had increased to 4 to 5%… they assured me that it was quite ridiculous for me to expect to pay any less than that in international market. The salesman in question (I have his name if you want it, a very nice man but aren’t they always?) continued to attempt to follow up with me over subsequent years, I think my last email from him was in 2008. I remember asking how he can afford to send his kids to TTS and the nice shiny Lexus in the car park, I can’t remember his response but I know it didn’t allay my concerns about their overheads. Yes, all of the products they were advising were Aviva etc, but mainly Zurich.

    Seán

    • Sean,

      Have they had less luck recruiting teachers during the past few years? Do you still see these guys in the halls at work? I sincerely hope they’re finding it much tougher to ensnare young teachers now. Too many of you know the deal.

  3. Sean says:

    That was my previous school, so …they are probably still there preying on the unwary.

  4. Barb says:

    Hi Andrew,

    I was approached by IFS as well and they recommended Zurich products and I think they mentioned Friends Provident as well. They contacted me via a cold-call on my office number and ultimately I agreed to meet with them because I actually need investment advise, being an expat working for an European MNC located in Singapore. So in your opinion would you generally advise me not to continue talking to IFS or just ensure that I do not use any of the mentioned pension providers located in British Channel Islands, Luxembourg or the Isle of Man? Can you maybe recommend some financial advisers for expats which are trustworthy? This would be highly appreciated!

    Thanks a lot,
    Barb

  5. Barb says:

    I am German and I have currently around 500k EUR to invest (currently on various saving accounts in AUD, SGD, CHF and EUR as I worked in different countries before). Out of my monthly income I could also invest around 10k SGD a month continuously. Thanks!

  6. Stew says:

    Hi Andrew

    There have been a few IFS doing the rounds at the school where I work in the ME all selling the products that you mentioned in the article. After a couple of meetings I signed on the dotted line. I did need advice and wanted to invest so thought why not? I’ve been paying about GBP1000 pm for approx 1 year. Should i cut my losses and pull out so i can invest in something more worthwhile or do i need to see it out?

    I’ve just ordered your book off Amazon. Maybe i should have read it before investing?!?

    Cheers
    Stew

    • Hi Stew,

      Do the math with a compound interest calculator and determine whether it makes sense. With these products, you will be paying roughly 3.5% to 4% more than I will, with my ETF account. If markets make 8% per year, you will make that percentage, minus 3.5% to 4%. Over the duration of your policy, do the math and figure out what makes sense.

      Cheers,
      Andrew

  7. mimi says:

    Just avoid any offshore company domiciled in the Isle of Man like the plague! They’re all casino-culture clones, ripping off expats and getting away with it by saying they’re FCA-registered, thus giving protection to investors. Wrong – as the FCA won’t act against them, however, appalling these product providers are to their clients.

    Friends Provident International are one of the worst and, even here in Thailand, the SEC has listed deVere on its investor warning list.!

  8. Kris says:

    Hi Andrew,

    Just a quick question, is Zurich International also operating like Friends Provident or are they a reliable investment fund?

    Thanks
    Kris

    • Hi Kris,

      Friends Provident and Zurich International are very much the same, in terms of their outrageous fees, incredible inflexibility, and ridiculous commissions that they pay their brokers.

      Cheers,
      Andrew

Leave a Reply