Is This The Beginning Of The End For Offshore Pension Commission Structures?
Offshore pensions provided by firms like Friends Provident, Zurich International, Generali and a slew of others are lopsided products geared to make money.
But to whom do the spoils flow? Most have hidden charges totaling 3.5 percent to 4 percent each year. So the investor can hardly gain traction against inflation over time.
Financial advisors love them because they’re paid ludicrous upfront commissions.
In many cases, advisors receive an upfront commission nearly equal to the total that the client commits to in the first year.
And if the client catches on to how the massive fees are bleeding their account’s potential?
Well…that’s usually the first time they find out that to sell their investments and move the money elsewhere may cost them up to 80 percent of what they invested.
The parent firm needs the investor to keep the money in the fund.
Otherwise, they can’t enjoy reaping high investment costs over time.
But when people sell before the contractual end-date (which may be 25 years in the future) the investment firm won’t be able to recoup the massive commission paid to the sales rep.
So it severely punishes anyone leaving its party early.
These products should be illegal.
They’re popularly sold because of high commissions paid to sales reps. And now, we may be one step closer to making their banning a reality.
According to International Adviser, starting next year, these products could be banned in Hong Kong.
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