Zurich Vista Policy Holder Asks If He Should Sell It All

 hit

 

One of my readers recently put a comment on my blog. 

He’s kicking himself. 

He bought a Zurich Vista investment policy.  He signed up for a 24-year duration. 

Based on information provided in Zurich Vista’s policy, it isn’t a cheap investment scheme. Total annual costs might run as high as 4.5 percent per year when averaged over a duration of a 25-year term.

 

The online prospectus states that there’s a 4 percent annual charge on the amount deposited during the first 18 months. The firm calls this their “Expense recoupment charge.” As the prospectus reads, it costs “4 percent per year of the value of the initial units.” When we add this fee to the fees that follow, the first 18 months of deposits (the initial units) are charged 7.75 percent per year (depending on the funds selected). This fee doesn’t include the “Monthly policy charges” of $8.25 USD that the prospectus says is “a fixed charge deducted each month.”

 

If the investment charges (management fees and Zurich Vista charges) average 7.75 percent per year over a 25-year period, and if inflation averages 3 percent per year, the investors’ initial units will lose 3.75 percent per year after inflation.

 

(7 percent gross return minus 3 percent inflation, minus 7.75 percent in fees equals – 3.75 percent per year).

 

The online prospectus says that money added after the initial units period will attract the following fees:

 

A yearly management charge of 1 percent per year:

 

“This charge is based on the policy value and will be deducted on a monthly basis at a rate of 1 percent per year.”

 

The actively managed funds selected can cost more than 2 percent per year. The prospectus explains this charge under their section, “Underlying fund charges” on page 14 of their online brochure.

 

The online Zurich Vista prospectus also states that it adds a mirror charge fee of 0.75 percent per year. This is also listed on page 14. “This charge covers our fund accounting procedures, administering and reporting and is 0.75 percent a year of the net asset value of the underlying fund.”

 

The prospectus states that it offers a loyalty bonus in the form of fee reductions. On page 8 of the prospectus it reads, “At year five, the loyalty bonus will be a refund of 10 percent of the total yearly management charge deducted in the first five years.” The “yearly management charge” is listed as “1 percent” so it would be dropped to 0.9 percent from 1 percent. But such a deduction might not include mirror charges. It doesn’t include fund management costs.

 

Page 8 lists other fee reduction bonuses at years 10 and 15.

 

But if an investor misses a monthly investment payment and doesn’t make it up, the Zurich Vista Policy punishes them by not providing any loyalty bonuses (as seen on page 8 of the prospectus).

 

If investors want to sell their policy before a pre-determined date, the online report says the Zurich Vista policy might take all of the investors’ money. According to the prospectus, if it’s a 25-year policy, and the investor wants to sell everything they have invested after one year, Zurich keeps it all.

 

If investors want to sell everything after 4 years, Zurich keeps 89.36 percent of the investment total. It’s hard to believe. But the table that outlines such penalties is found on page 13 of the Zurich Vista policy statement.

If you think you’ll get comprehensive financial planning for these high fees, you might have to pay even more.  The prospectus says such a service could cost an additional 1.5 percent per year.  That puts total fees in the nosebleed zone, even after any possible loyalty fee reductions and bonuses.  

This is a costly plan with more drawbacks than benefits.  

 

 

 

 

 

 

 

 

 

 

 





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.

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32 Responses

  1. toony says:

    Ah, Tony Noto, a very rare financial advisor in the expat field like yourself Andrew. He was one of the first to publicly document how evil these ILAS are while refusing to be seduced by the fast money at the expense of expats. Reading his work on this topic really helped me understanding the working of these scams!

    I must admit, the people that originally designed these Zurich/FPI/Old Mutual ILAS products are absolutely brilliant, bordering on genius! These products are incredibly efficient at stealing money under people’s noses, while appearing to be a genuine financial product but remaining very tough to exposed/debunked/explain, even by very experienced financial experts!

    To the original person that inspire this post – take consolidation that you found out about the scam now and NOT after 24 years and realise that they have stolen most of your entire life savings!!!

    Keen to add a few points to what Andrew has mentioned already.

    There are actually 2 parts to these financial scams:

    Part 1 – Initial scam
    Basically, EVERYTHING you “invest” in the first 18 months is the upfront/non-refundable fees that goes straight into their pockets (shared between Zurich (approx. 1/3), the insurance salesperson, masquerading as ‘Financial Advisor’ that conned you into signing (~1/3) and their company (~1/3)).

    This is disguised as ‘initial units’ and ‘bonus units’ (to mask the real value of them to your account – ie. $0), which is then falsely trotted out as the ‘surrender’ fee when you realise the scam and try to leave!

    Part 2 – Ongoing scam
    This is the more insidious part of the scam! All contributions beyond 18 months are subjected to a mountain of different fees, most of which are invisible to the average person as they are conveniently left out or lied about at signup. Some of these fees include: fund fees, mirror fees, front load fees, fund spread, monthly account fees, admin fees, sky is blue fees, etc

    Together, the fees add up to 4-6% of your account value per year! This is the real killer part of the scam that most people fail to understand/see. I (and many other people) consider anything over 2% pa is a scam! This Vanguard blog neatly explains the massive effects of fees:

    http://vanguardblog.com/2011/10/28/stopping-the-silent-killer-of-returns/

    Assuming ave 5% fees per year over 24 years, Zurich will steal 69% of your entire portfolio. To put this into perspective, imagine you invest $2000 pm for 24 years. At 5% growth, the total amount at the end will be ~$1.21M. However, Zurich effectively keep ~$835k and leave you ~$375k! Seems fair and reasonable right? 🙁

    In summary, these financial scam operate by stealing 100% of everything you put in the first 18 months AND then 4-6% of your account balance each and every year, completely destroying your entire savings!

    What to do if already caught in these traps
    From a mathematical point of view, there is a fixed cost (first 18 months) with an ongoing percentage (4-6%), which gives us a positive exponential curve. In english, this equation/graph has no turning point which means there is no action you can take along the way to minimise your losses! Everyday you remain in the trap, your losses grows not linearly but increases exponentially!

    The only way to minimise your losses is get out of the trap ASAP!

    Common questions I hear
    1. What about withdrawing the max amount and freezing contributions?
    No, this doesn’t work and will results in you losing more money needlessly! If you max withdrawal and freeze (instead of full surrender) they will keep an additional 2 years worth of upfront fees from your payout. You can only freeze 2 years and if don’t add more money, your account effectively reaches $0 and they automatically closes it down. Wouldn’t you prefer to give them 2 extra years of fees or keep that money yourself?

    2. What about contributing the minimum monthly?
    No, bad idea on 4 fronts!
    A. The more money you add to your account, the more they can take with fees.
    B. Fees are charged based on highest monthly contribution, not your minimum contribution
    C. All new contributions are better off invested in low-cost index funds to recover your losses, and
    D. You will get monthly reminders of this financial mistake which is not a good for your mental health!

    I have yet to see anyone in ANY situation, circumstances or strategy that is better than an immediate, full surrender! The designers of these policies are extremely clever, leaving no avenue of escape or ways to minimise your losses! You must take the financial hit and get out ASAP!!! As alluded by Andrew at the very end, the use of the fictitious ‘surrender’ fee is an incredibly powerful psychological technique to keep people in the trap for as long as possible!

    I really hope anyone reading this is able to make use of the information, take the financial hit and quickly move on to the recovery part! 🙂

    P.S. There are ample of evidence from many people (experienced this personally) that the insurance companies collude with local insurance brokers (AKA ‘Independent Financial Advisors’) to trap and keep expat trap in these schemes while providing each other plausible deniability.

    Even with solid proof of fraud or mis-selling, both parties will laugh in contempt of ALL refund requests (apart from a couple of extremely rare cases) while hiding behind a foreign country (Isle of Man) and knowing the local financial laws are too weak to prosecute them! Any attempt to chase after losses will result in much greater costs than what is lost to them initially! My personal advice – accept this costly, but valuable financial lesson, warn other people and move on to better things asap!

    Best wishes all 🙂

  2. scd says:

    Zurich Vista Policy is a horrible savings policy or anything. Worst part is their is no exit clause that allow to surrender the policy with out paying extortionate encashment charges. I would not recommend Zurich for any saving or investment types of plans as it is a scam. Maybe for straight insurance where you can drive down price based on market competition but stay away from any investment type of vehicles.

  3. Shah says:

    Does the same concept apply with Zurich Futura policies? I know they’ve taken ‘total fees’ for 18-24 months. Not sure of the costs per year after that. That’s an insurance policy though in the case of death and other riders, so is it worth keeping?

  4. Daniel Alberts says:

    I have found myself in a similar situation with a product that deVere sold in Mozambique. It appears that deVere were not registered to sell their products (espeically insurance products like the Generali Vision Plan) in Mozambique, either. http://www.dupedbydevere.com

  5. Greg says:

    Daniel, and others, please join the Facebook group, Action Against Zurich Vista.

    https://www.facebook.com/groups/997246113667517/

  6. Mark says:

    Hi Andrew

    I recently met you when you came to Dubai and had my photo taken with you!

    Respect your effort and time to educate people.

    I too had a Zurich Vista policy which I was mis sold by Global Eye (Tim Searle) & Dynamic Zone (Joe Capaldi). Joe sold me a policy for $2000.00 then persuaded me to increase to $4000.00 a month after seeing what my father left me as inheritance. My salary at the time was just over $4000.00! Got some interesting e mails from the 2 of them saying I signed the forms and I cannot change anything would you like me to forward you them just for your info and to help other people not to sign up. Eventually they agreed to reduce back down to $2000.00 but now thankfully out of it now and investing as per your books.

    Tim Searle & Joe Capaldi still here and promoting these products. Also meant to be respected financial advisors here!

    • Thank you Mark,

      Yes, please forward me the emails. andrewhallam1970ATgmail.com

      • Mark Rich says:

        Hi Andrew I am so sorry for the late reply I didn’t actually tick the box to notify of a follow up. Was just randomly looking through your website again and noticed you actually replied. Thank you and would be more than willing to send the e mails. Do you still want me to? Thanks Mark

    • toony says:

      Mark,
      If what you say about your salary and new monthly commitment is correct, you have an avenue for redress with Zurich. What happened to you should have been picked up by compliance and never approved of!
      .
      Basically, there was a rule brought in to stop intermediaries doing EXACTLY what you described! With these policies, there is a maximum amount permitted of your surplus (after expenses). Don’t have the Zurich numbers in front of me but it’s ~50% I think. Lets say your wages is 4k with 2k expenses, leaving you 2k spare. The maximum policy they could sign you up for is 1k (ie 50% of surplus unless they do some incredible creative accounting).
      .
      Normally with a lump sum, they try to trap you with the lump sum product. However, it only pays them 7% upfront commission. It appears they went for the ‘saving plan’ option which was illegal (with your numbers) but pays much bigger commission. They knew they were in the wrong thus agreed to reduce to original 2k, hoping you wont complain to the authority. There was a chance you could have pushed for full refund if knew about this rule and threaten to complain to Zurich and/or IA! – open and shut case if reviewer saw the original wage/surplus calculations when you first signed on.
      .
      FYI, Tim Searle has publicly brag about GlobalEye being sponsored (51% owned) by the Al Maktoum family (ruling royal family of Dubai) – take that info however you want it.

      • Hi Mark,

        I’m currently writing a second edition of my expat book. I’m examining sales techniques. I would love to tell your story in a paragraph or so, describing the promises they made and strategies they used to “make the sale.” Please email me at andrewhallam1970ATgmail.com if you’re interested.

        Toony,

        Would you mind if I told your story too? Please email me if I can describe what they did to you too.

        Thanks!
        Andrew

      • John says:

        Dear Toony and Andrew,

        I was very interested by your responses to Mark. Andrew, I met you during one of your talks in Abu Dhabi… won your Global Expat book… fantastic read!

        My spouse was sold a RL360 Quantum policy by PIC/DeVere/Acuma, at an initial installment of ~4k USD per month. This is 2/3 of the monthly 6k salary. Within the first several months they advised to increase it beyond the salary, which my spouse did.

        Moreover, the advisor did not collect the proper UAE Visa, instead obtaining a rental contract, so that he could sell the policy to a US citizen without RL360’s knowledge. The advisor lied about initial fees, tax liabilities, and also never gave us the original hard copy signed documents.

        I am unsure how to proceed with this case… is it possible to email you with more details? Do you know of anyone in the UAE who has experience with these redress situations?

        Many thanks

        • toony says:

          John,
          Don’t want to get your hopes up. You do have 2 possible areas of appeal.
          .
          1. These products can’t be sold to US expats (there has been a case where money was refunded after a drawn out fight). With regards to lying about the product/features, there’s not much you can do unfortunately with current laws.
          .
          2. With your wife’s policy, it does appear to be ‘predatory selling’ with the info you have provided – chance of redress on this matter. I don’t have the fine print for the RL360 or know their internal policy/compliance for the maximum monthly contributions allow.
          .
          The big problem is that regulations is so poor (but slowly getting better) that BOTH the insurance companies AND brokers know they can get away with things that would result in massive fines and/or jail if done in a regulated countries. There’s plenty of incentives for the insurance companies to work with brokers to extract as much money as fast as possible from expats! Even in cases of misselling/fraud, they simply deny everything and bounce you back and forth until you give up. Legal action is not really viable as international court (they hide in the Isle of Man) is too costly!
          .
          My advice to you if you want to attempt redress:
          1. Contact Quantum and query them about US expat status and their policy on maximum contributions allowed for a given income. From their answer, if feel you have a case
          2. Put in a formal complaint that you are seeking refund/redress due to x/y/z reasons.
          3. Also include any communication you have already undertaken with PIC/DeVere/Acuma to redress the problem.
          .
          From personal experience and stories by others, they have a very polished system down pat with DeVere (and other IFA companies) to play Ping-Pong with you.
          .
          “Sorry, we only provide the product, see financial advisor if you want a refund”
          “Sorry but we only sell what we are given. Quantum has your money so see them if you want a refund”
          .
          They have plausible deniability down pat! After 1 bounce, simply inform them that you will put in a formal complaint to the UAE IA (Insurance Authority) against both companies. They will call you on this so be prepared.
          .
          Now go here:
          https://eservices.ia.gov.ae/Wirestorm/Pages/Render.aspx?page=Complaints&layout=NewAnonymousComplaint&lang=en&th=default&fs=1
          Fill out the relevant details/submit information etc. They will get back to you with something along the line of:
          “Have you attempted to resolved the situation with the other parties involved?”
          You can simply say ‘yes’ and upload communication. This will escalate your complaint. Both DeVere and Quantum with be forced to supply an answer etc.
          .
          There’s a small chance that one or the other will offer you something – it costs them money and time to deal with the IA so they would rather settle if cost effective for them.
          .
          If you do go this way, let us know how it goes so we can all learn and help others…good luck!!! 🙂

      • Mark Rich says:

        Hi Tony sorry for the late reply as mentioned to Andrew I didn’t tick the notify by e mail to a response.

        Just for your information I tried Zurich in the UAE and the Isle of Mann. Financial Ombudsman plus here in the UAE but was told I did not have a case . It was so frustrating and time consuming trying to fight them on my own.

        This was back in 2009 and carried the plan on until last year 2016 until I had the courage to withdraw and invest as per Andrews book.

        I have noticed a Zurich Vista action group on Facebook but was wondering if I would just be wasting my time as back in 2009/10 it was so frustrating.

        Tim Searle can’t believe he’s still here and allowed to carry on selling these products.

        Joe Capaldi is still working in Dubai for Holborn Assets I just can’t believe how these guys are still here and probably still selling the same products.

  7. Cameron says:

    HI Andrew,

    Really enjoyed your book, I have encouraged as many of my friends around Dubai to read it. It amazing how many people have been ripped off in Dubai by these products, guess it is a hunting ground around here. I was misold 2 products and lost around USD$ 25,000 in the cancellation, let alone the wasted years with crappy returns and crappy advice about the underlying funds choice too!

    At least now following the strategy in your book, I made an average return of 17-20% in the past 18 months since I read it, which whilst it is only short terms, I am used to the complete opposite when I had both a Friend Provident Premier Plan and the Generali Vision plan… I am using Saxo Bank and a relatively simple mix of ETFs… Cant recommend your book to people starting out and wanting to do some investing of their own.

    I must say I am a bit disappointed to see AES International being promoted on this website, they are as bad as the rest of them and that was the exact company that ripped me off! So I hope you dont mind if I outline my experience. The companies who engage in the activity of selling products like this all need to be exposed. Hopefully then people can make informed decisions before proceeding with ANY apparent “IFA”. So apologies in advance for the long comment.

    I admit that I was naive and yes I should have done more homework before signing up, but when you go to a Doctor on advice on how to get better you expect to be advised on how to cure your sickness. Hence when I went to an “Independent Financial Advisor” I guess I expected to be advised on how to invest my money, not how to line their pockets with commissions. I was even advised by this particular advisor that AES was or was owned by a “UK Private Bank and therefore we follow the same regulatory standards as the UK, which compared to all of the other companies out which do not follow the same standards” yet ironically he sold me the same products… Interestingly from their email below the dislaimer states that “It is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”) in respect of its UK activities” Again ironically because they are promoting expat products? Yet arent most “expats” going to be outside of the UK

    I havent heard of many people being able to seek redress in the UAE on these products. It is sickening what these guys get away with. Especially with the Generali Plan I bought, I was specifically told that I could ” use it like a bank account, make withdrawals whenever I wanted, pay as little or as much each month, but when I put the amount up I just had to do it for a minimum of 3.6 months (5 year plan)” At one stage I was putting USD$5000 per month into this so imagine my fealing when I realised that in the 5 year plan that meant there was $18,000 in fees hence the 3.6 months…

    I thought I would share an email I sent to the apparent CEO of AES, in response to a marketing email where AES are now trying to promote business on the fact that ” other IFA’s” rip people off and contact them instead. Suprise, Suprise I did not get a response from him or anyone in AES, I think I have also been removed from their mailing list because I used to get advertising emails from them 🙂 I knew it wouldnt get me anywhere but it did feel good writing it! 🙂 By the way his apparent email address is samuel.instone@aesinternational.com if anyone else ripped off by AES wants to do the same…

    Thanks, hope to make it to your next Dubai seminar…

    Cameron

    ——
    Hi Samuel,

    I find it very hard to see publications like this from your company, when in fact I was completely mis-sold 2 of these products by one of your advisors in Dubai.

    I don’t even need to read your books, unfortunately I learned the hard way.

    Your (I believe he is now ex) employee (Mr. Zubair Abid) completely misrepresented himself, your company, and pretty much lied through his teeth to sell me these products. He even told me that AES “follows” the same regulations as the UK Financial Services Authority (as the parent company did) and I was in good hands with your company or some very careful play on words to the same effect.

    In any other jurisdiction he would have been lucky to escape prosecution and/or a lawsuit. When I confronted him about the fees in these products he could not even explain anything about how they work, or any solution, the only thing he knew was his pre-rehearsed sales techniques to pray on the financially naïve clients that he was supposed to be serving.

    I am down around USD$ 25,000 because of an IFA that was employed by your company’s lies!!! And I believe I got off relatively lightly compared to some of the people sold these products by companies in this profession – Including AES International!

    Is AES International going to do anything about its own customers that were mis-sold these products by IFA’s employed by AES International? Before preaching that it is exposing the other ‘dishonest’ IFA’s out there?

    If AES International actually acknowledge these truths, they should be looking back through their books and profits that have been made globally by selling these same products and lies that you are now apparently exposing and take some moral responsibility and compensate those affected by the same.

    Be very interested to even see a response to this mail…

    From a once very naive client who trusted your company to give me financial advice.
    Cameron

    Sent: Tuesday, 18 October 2016 1:51 AM
    Subject: Thanks for giving me 20% of your pension…

    You wouldn’t knowingly give away 20% of your pension, would you?
    ________________________________________

    You wouldn’t knowingly give away 20% of your pension, would you?
    So why do most expats hand over up to 20% of their pension to their IFA?
    The answer is simple: it’s because they don’t even know they have…
    Fortunately for anyone affected there are positive remedial steps that can be taken to prevent any damage from being compounded…unfortunately most people don’t even know they are affected.

    Fact #1: the international financial marketplace is under-regulated and provides rich pickings for financial salespeople; your pension is their biggest temptation
    Fact #2: IFAs can get payments of up to 20% of your investment when they sell you a pension – this money is taken directly from your money without you even realising it
    Fact #3: most expats aren’t even aware of these risks, let alone of the fact that the IFAs they trust to manage their money are the ones financially incentivised to mis-sell

    Even if you believe you’re not affected by the risk of financial mis-selling that’s rife abroad, unfortunately if you’ve made any form of financial commitment via a commission-based financial adviser* then you are affected.

    *(If you’re not sure whether your adviser was commission-based, the majority are…)
    As the biggest favour to your future self, download my five-minute industry exposé “How IFAs are paid to mis-sell pensions” and you will:
    • Understand how expat IFAs are financially incentivised to mis-sell
    • Discover if you’ve unknowingly been affected by mis-selling already
    • See the financial impact of mis-selling, and how it will affect your retirement unless you take specific action
    • Discover the 3 critical tactics that will protect you and your money
    • Learn everything you need to know to build and protect your pension
    Download now: How IFAs are paid to mis-sell pensions >>

    A word of warning

    I have written this exposé against legal advice; I know it will draw criticism from international financial consultancies and they may issue cease and desist threats via their lawyers as they have in the past. However, I’m used to that and I remain committed to stopping the damage being done to expats’ lives by pension mis-selling. I am also equally committed to stopping the damage being done to my profession by those determined to keep it an industry that sells high cost, low performing pensions for the financial salesperson’s own gain.

    Because those who consider themselves our competitors profit from the tactics I reveal, obviously they will not want you to read this exposé – so click here to download it before they try and force it offline.

    I believe our organisation’s approach to expatriate financial planning is unique, and together with the work being done by our team of Chartered Financial Planners, our approach is already delivering better returns to over 10,000 international investors. After you’ve read “How IFAs are paid to mis-sell pensions” I think you will understand how we can help you too.

    If you have any questions now or when you’ve read the exposé I invite you to get in touch with me personally. I also welcome you to challenge me on anything you read; I am willing and able to substantiate everything I have written.

    Your sincerely,

    Sam Instone
    CEO, AES International
    samuel.instone@aesinternational.com

    P.S. The risk of doing nothing is the biggest risk of all – don’t take that risk – download “How IFAs are paid to mis-sell pensions” and take the five minutes to read it – it will shock you, it may upset you, but it will also provide you with all the knowledge you need to protect your financial position now and into the future.
    ________________________________________

    AES Financial Services Ltd (“AESFSL”) is registered in England no. 06063185, its registered office being at 24 Elysium Gate, 126-128 New Kings Road, London SW6 4LZ. It is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”) in respect of its UK activities (which include all AES International’s financial promotions).

    • Cameron,

      Here’s what happened with AES International. They came into the Middle East with intentions to do business differently. They wanted to be the first company to offer reasonably priced products. They also wanted to be the first company to shun offshore pensions. But (as all people do, at some stage) they made a mistake. Here’s my best analogy of what happened. They attempted to build a brand new car. But instead of building the car with brand new parts, they took a few working parts from other cars (in the form of some small investment firms that they brought under the AES International hood). If Sam Instone could build a time machine, he would go back to this day and build his new car entirely from scratch. He said, “Nobody is going to sell crappy offshore pensions.” All of the employees that he freshly hired adhered to that principle. But some of the others (like old rusted parts) kept doing what they had been doing for years. When Sam found out, he fired them. He also told his staff that if anyone even dreams of selling an offshore pension, he wants them to leave.
      About 1 year later, about 75% of his advisors were gone: fired, or they left on their own accord because they wanted to sell lucrative offshore pensions. All of the staff that he hired from scratch (those new car parts) have remained to help build a business that they think is fair.
      Unfortunately, the person who sold you that offshore pension didn’t have a high degree of ethics. He would have sold that pension to you anyway, with his former company’s name on the statement, instead of the name of the new kid (at the time) on the block, AES International. There are two tragedies here. One, you were sold a piece of garbage by an unethical person and it cost you plenty. I wish I could personally string that person up on a tree, by his privates (I feel that way about anyone who sells this stuff). Second, a good firm got its name plastered over a bad firm’s logo, because that good firm (AES International) had an optimistic sense (perhaps a naive sense) of human nature. When they said, “Don’t sell these pensions,” they were trying to teach old dogs new tricks. It didn’t work.
      The crooks that were selling those pensions earned huge commissions from the insurance providers. Most of that commission goes directly to the salesperson. I don’t know how deep AES International’s pockets are. But I can guess that if they started to dig into their private coffers to pay hundreds of thousands of pounds that some dodgy salespeople earned (the broker gets a little, the salesperson gets a lot) then it might be the end of AES International. And that truly would be a tragedy, considering that they are the only firm in the Middle East that has taken a stand against offshore pensions. And their vehicle is now comprised on brand new parts, hired for the sole purpose of providing true financial planning and building portfolios of index funds.

      I do wish them well. But I am also gutted by what happened to your money. By educating others, I hope we can make those insurance products extinct.

      Thanks,
      Andrew

      • Cameron says:

        Thanks Andrew and all others for your comments on this.

        I have actually been contacted by AES International regarding this matter (maybe they do monitor this website and its comments 🙂 ), and who are investigating “my online complaint” currently and have issued what I would call some preliminary “findings”.

        I want to get my facts with them completely straight on this before I post further and will do so in due course.

        Again thanks everyone for your comments and support.

        Cameron

  8. Cameron says:

    Sorry I meant to say above… cant recommend your book “enough” to people starting out and wanting to do some investing of their own. (Global Expatriates Guide to Investing).. Its a great easy read.

    Thanks
    Cameron

    • Robert says:

      Sorry to hear this Cameron. I personally am still concerned about AES as a friend of mine had the same experience as yourself (and he has friends which followed his lead). He had been encouraged to open with Zurich and 40% of his money was invested in Thailand stocks (I verified this). Sam meet with my friend and apparently (I was not there) he was a little defensive of the plan.

      But clearly whatever Sam Instone’s intentions for his company are, he clearly can not keep on top of the policies that AES clients have been/are placed into by his employees (or chooses to ignore the fact that some AES customers are currently in septic seven plans). He also can not oversee the funds/trackers that they are placed into and as such in my humble opinion they should be used with caution. I mean even in this example my friend was placed into 40% Thai stocks, 20% gold, 40% Euro and American small cap, so even if we ignore the fact he was in the septic seven, it was still a poor portfolio allocation.

      I sincerely hope that AES can get on top of all of this but for the jury is still out.

      • Robert,

        I think you should look at the message I sent Cameron. AES International doesn’t sell offshore pensions. Advisors who were brought in (annexed) from previous firms used to sell them. But those advisors are now all gone. Rest assured, nobody using AES International today will be sold an offshore pension.

        Cheers,
        Andrew

        • Jen says:

          Yes-it is so terrible what those few people did. Although I manage my own portfolio through Saxo–I was going to try spread risk by opening with another like Td direct–but the thought I’d open the index Fund with AES and put money in and even though the fees are higher than doing it alone I’d have peace of mind knowing it was being balanced etc and I’d not worry abt it–then I read these comments on here and got nervous. And meanwhile AES is not like that. It’s a pity they did not answer on here themselves as well. Thanks Andrew for explaining things.

          • Hi Jen,

            The DIY method is the cheapest.

            I’m guessing AES has better things to do than scroll finance blogs for comments on posts 🙂 But who knows? Maybe a PR person does keep an eye out for that kind of thing. It would be a pretty boring job!

            Cheers,
            Andrew

  9. Stuart says:

    Andrew, I am one of many friends Cameron (above) recommended to read your book. It induced 1 litre of vomit and 1 litre of relief in equal parts; and by “vomit” I mean I can’t believe I was so stupid and duped so easily! “Relief” because you explain it very well and illustrate a path towards recovery.

    What inspired me to contribute to this thread is that I was listening to Tim Searle of GlobalEye on the radio a few mornings ago and I don’t think he was even convinced by the nonsense coming out of his mouth. The DJ’s rightly challenged him (but not enough) on the integrity of his team and ensuring they had customer’s interests at heart.

    The maths has clearly been dealt with by posters above by I’ll recount my experience of the sale and psychology. I think Cameron’s analogy was best. When you go to a doctor, you have to trust him to give you the right advice. I don’t want to have to second guess him. It would be like buying a plane ticket and then doing my due diligence on the competency of the pilot!

    The “financial advisor” I dealt with was Azmat Hussein from GlobalEye in Dubai. He appears to have since got out of GlobalEye and now does recruiting for the finance industry. “Az” was actually a really nice guy on a personal level – I suppose they all are – but he wasn’t aggressive in his approach. He wanted to be your friend first, “financial advisor” second.

    Where I was naive was that I trusted he had a good heart and that he’ll win by me winning. I didn’t ask the questions I needed to ask but, and it’s a big BUT, he revealed very little about the product itself. He drew a nice chart with pretty numbers and my wife and I thought, great! The fact that it was a massively inferior product definitely escaped his lips and I was subsequently sold, hook-line-sinker.

    When Cameron explained what happened to me, I obviously went postal over email to GlobalEye. Their legal officer got involved in the correspondence. In spite of hundreds, perhaps thousands of words, I can summarize their response into one sentence, “you signed up for it sir”. They had no response whatsoever when I called them on the fact that the full details and mechanics of the policy were not explained in any way whatsoever.

    My current policy is valued at $28k and I probably have 20 or 21 years left. My surrender penalty will be about $21k. I’ve reduced the monthly installment to $300. I believe the right thing to do is to surrender in full.

    GlobalEye, like others, are a cancer to Dubai Expats and anytime this subject comes up, I get so aggravated and advise anyone I come across to not make the same mistake I did.

    • Stuart says:

      P.S. Az also flat out lied about one thing. He said I would be able to make a full withdrawal of the full policy after 18 months, no penalty. I covered this ground more than once because we were looking to buy an apartment so I wanted to know I had access to funds. I addressed this on email too but “you signed up for it sir”.

    • Stuart says:

      P.S. Az also flat out lied about one thing. He said I would be able to make a full withdrawal of the full policy after 18 months, no penalty. I covered this ground more than once because we were looking to buy an apartment so I wanted to know I had access to funds. This was the wildly unethical part of the whole sale.

    • Stuart says:

      P.S. He also flat out lied about one thing. He said I would be able to make a full withdrawal of the full policy after 18 months, no penalty. I covered this ground more than once because we were looking to buy an apartment so I wanted to know I had access to funds. This was the wildly unethical part of the whole sale.

      • Jen says:

        U know I can almost forgive the guys who sold these years back-bcos I think the sales people themselves might very well have been quite ignorant about products–but in the last 5 yr’s–there is just no excuse! And even more so in the M.E. bcos they know things r not regulated like in home countries, expats r desperate to do something with their earnings, few options available etc…..and they deliberately and knowingly mislead and fleece this group of people!!! It is a plotted and carefully planned invasion of finance innocent people!!

  10. Gav says:

    Andrew, thanks for the post. I wanted to share my own situation and just ask for clarity of the best way forward. i signed up for a FPI Premier Advance plan on $3,400 per month. I’m now into my 4th year, I have invested $132,000 to date and the policy is valued at $161,000 but as we know this is a fictional value. When I look at the spread of my money across 7 funds then I’m actually fairly happy with the spread and risk is spread. However, what I’m slowing getting my head around is that the percentage running costs annually and along with the fact that the first 18 months payments which is $61k is effectively lost money no matter what I do. I just wanted to confirm that even with these type of numbers then the best option is to fully surrender, in my head this means I will receive a lump sum back from FPI that will be a significant amount down on the amount paid in. If I’m right them the amount that I receive back will be based on the multiplication between the unit price and the number of accumulation units, therefore, timing the exit at a time where the unit price is higher is in favour, some of the funds such as emerging equities have been trending well, month on month for the last year or so.

    If I do want to close the account and cut all loses if that is my best option then how do I go about it, is it a case of going back through the financial advisor? I’m still in regular contact and we have met recently to switch some funds around and re-allocate.

    Like many above all I thought I had to do was make sure I kept it going for at least 18 months and then after that I would have access to my money if I needed it for a house purchase or any large scale purchase, I can’t believe I was so stupid.

    Also in terms of your various books that I have seen mentioned, do you have one that is a good first read in terms of getting ready to set this up on my own and avoid another one of these horrible plans.

    • toony says:

      Gav, no doubt you have seen my first post in this thread so have some idea of the situation you are in.
      .
      It’s good to hear you understand about the hidden upfront costs (which are sunk) so we can head straight to the repair/damage minimisation part. My recommendation is to always ‘full surrender’ – the longer you stay, the more damage that occurs.
      .
      You didn’t mention the contract length so I’m guessing they stitched you up for 20 or 25 yr plan to maximise commission. My estimation: $110-120k is the ‘full surrender’ value. The lost is not too great given the great bull run of the current decade.
      .
      Saving $3.4k/month will grow to >$2M at a modest 5% growth, in 25 years. However, the running costs of these plans are 4-5%, meaning they will effectively ‘skim’ $1.3M from your account, leaving you 600-700k at the end! The fees are so devastating that I have only ever seen 1 plan break even after 10 years and NO ONE has EVER seen a 10 year plan keep up with inflation!
      .
      Don’t switch ANY funds (cancel the switch orders if you can). They will constantly prompt you to switch fund to bleed extra $ from you. The ‘no switching’ fees is purposely misleading. It’s all hidden in the massive spread! You immediately lose up to 5% of trade value for each and EVERY purchase/switch you make!
      .
      Yes, refund is roughly based on unit price x accumulation units ONLY. Timing exit has zero impact as should be investing again in your own portfolio.
      .
      To get out:
      1. Go to ‘IFA’ and inform them you would like to close account & request for ‘full surrender’ value.
      2. Resist their attempts to keep you in the trap and continue paying into the policy.
      3. They will delay closing account as long as possible to squeeze as much trialing commission from your account – go straight to FPI if they take more than 1 month
      4. Buy both Andrew’s book while waiting. Learn basic financial principles & how to build your own DIY portfolio so no ‘financial’ advisor can steal from you again (hint: if you are able to deposit/withdrawl money from your bank account without the manager holding your hands -> DIY will be a cinque!)
      .
      Get both of Andrew’s books.
      Teachers -> understanding basic financial/investment/economic principles
      Expat -> step by step guide for expats for DIY portfolio
      .
      Remember, when it comes to your money, channel Fox Mulder -> ‘Trust No One’!

      • Gav says:

        Toony,

        Thanks for the response, I have now read one of Andrews books “9 rules they should teach you in school” and have the other waiting. It now seems so clear and is well put across. Like everything though its just a little awkward to get started and as you can imagine I’m not wanting to make mistakes again. SAXO bank looks like a good option for me as a UK expat living in the UAE getting paid in AED. My challenge is finding index funds or more likely ETF’s on SAXO banks platform of available funds that would give me the balanced portfolio of exposure to a global stock, UK stock and then a UK government bond. Andrews book makes a lot of reference to Vanguard and fund codes for their various options, I’m struggling to find the equivalent funds available on SAXO Bank. Also I likely now have the dilemma of currency to deal in and for my account.

        Any thoughts or help greatly appreciated.

        Gav

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