AXA Life Insurance
Investment Linked Policies (ILP)
Asked on 30 Sep 2019
For the FAM Global Opportunities Plus Fund and paying $600 per month?
I don't advocate mixing investments with insurance.
Investments should always give you the flexibility to liquidate whenever, without any penalty whatsoever (other than being able to accept the market price of your investments when you liquidate, as well as transactional costs when you buy/sell).
In a regular premium ILP, you are probably going to be hit by many different charges. A very quick look at the WA product summary lists the following fees:
Account maintenance fee
Investment management fee
Early encashment charge
Partial withdrawal charge
Bonus recovery charge
Redemption and Switching fee (currently 0, but they have the right to change it)
That's not counting the fund charges which are priced in at the fund level. I would not think that I would want to pay so many fees, and find myself locked in without the ability to withdrawal penalty-free should I need my funds.
You would have more options in terms of asset classes, availability of funds, etc and greater control if you directly invest, whether on your own or with the assistance of an independent advisor like myself. The options are very wide when it comes to the investment universe. Speak to someone to get an understanding of your risk appetite, motives, objectives, etc before you start investing. The worst thing you could do is rush into the flavour of the month without doing your research. Global markets (especially the US) may look good at this point, but when you invest, it is for the long run and you need to have a strategy to address this.
02 Aug 2020
05 Aug 2020
Investment link policies are in the market for a reason. Generally, there are better ILP out there. Of course, most people will take about the fees, I do agree fee are slightly higher as compared to other investment platforms. But you must understand that the open another brand new doors for mass-market investors like you.
Wonder how the rich get richer while the poor get poorer? One of the reason, rich people get to invest in things that poor people cannot. The financial industry deems these rich people as accredited investors. Through "Good" ILP, they open these AI Funds to the mass market and allow them to hop on the ride.
Can you buy these AI funds via normal platform?
The answer is yes, proof of $300K income /year or net assets of $2million, you will be deemed as Accredited Investors.
If the return of the funds has been fantastic, then what is that additional 1-2% of charges you paying for the ILP, in my opinion, is worth it.
Not forgetting the idea of Trust vs Insurance.
ILP is due deem as life insurance, and you are still under SDIC protection. Lastly, ILP may charge more, but they do provide you with an attractive welcome bonus package.
The bonus incentive will assist you to earn more when the times are good, they will be able to cushion your loss when the time is bad such that you do lose your capital.
Having said that, ILP also provides flexibility withdrawal. Of course ultimately whenever you choose to buy must align with your financial goals.
1 more comments
If you lived in the 1990s and 2000s, I would say ILP is in a way to access some funds that are previously not available in the market. There was not much broker house that offers low transactions fees and not only that, estate duty tax exist way back in 2008, which hedges against this when you need to distribute your estate.
Now in 2019,
(1) There are robo-advisor offering low cost alternatives,
(2) Investment through IB and AMTD brokers,
(3) DBS Vickers with low cash upfront
(4) DollarDex, Poems, FSMone, offering lower fees alternative and unit trust
I'm really trying to argue for a case for ILP now, sadly there is none.
You pay Fees for a value premium. What is the value created by the person that wants you to pay him? That is your answer.
I prefer not to mix investment with insurance.
A lot of investment-linked insurance plan has many hidden costs:-
monthly admin or policy fees
premium gets into a bid-ask spread of 5%, means you get charged 5% for every dollar that goes in
the funds' expense ratio is usually higher than stand-alone unit-trust or funds that are similar or EXACTLY the same. Insurance company feeds into them, hence extra layer of charges
assurance charges may be levied by insurance firms.
all the policy fees, assurance fees etc may not be deducted directly from your premium. Your premium goes into bid-ask of 5%, then the policy deducts the units to pay for the fees. Meaning this roundabout way gets extra 5% out of you. I hate this a lot, it's a dishonest way to squeeze money out. Why can't they just charge the fees outright?
For these various reasons, I think its more worthwhile to separate insurance and investment.