facebookShould I buy an investment-linked plan given that I have plans to invest? - Seedly

Anonymous

05 Mar 2020

General Investing

Should I buy an investment-linked plan given that I have plans to invest?

I was recently approached by a financial advisor to buy an investment-linked plan (AXA Wealth Accelerate) and was wondering if I should as my intention is to invest.

I'm a fresh grad currently working and earning about $3.5k per month.

Discussion (11)

What are your thoughts?

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We should not buy structured products of this kind, when we do not

comprehend them to the fullest.

Instead think of passive indexing ETFs, try to reas a lot.

some of my thinking here:

https://seedly.sg/questions/what-is-your-genera...

Victor Lye

21 Sep 2019

Founder & CEO at SquirrelSave

You said yourself. Your intent is to invest. So an ILP is not suitable.

ILP is a bundled product comprising (i) protection (insurance) and (ii) investment components. In traditional insurance which also contain the protection and investment components, the insurance company will basically break the premium you pay into the two components. The protection component usually is small compared to the investment component. This is because insurance companies tend to ramp up the investment component. Why? One possible reason is the commission sales structure, salespeople will generally prefer higher premium products to sell - simply because of the higher commissions they will earn. In the case of traditional insurance, the insurer will have to invest the investment (or savings) component - to generate returns for the policyholder. But often the insurer can only invest mostly in conservative investments such as bonds because of the long term nature of insurance policies and capital-based regulations. This is not ideal typically for a young person who has a long-time runway.

In the case of the ILP, the insurer essentially "outsources" the investment burden to a third party manager(s). The sum assured will also depend on the performance of the investments.
The key question is whether the traditional insurance product or the ILP is suitable for a person. The clue is that most ILP holders treat it like an investment. But an ILP is an insurance product. So there is an element of mis-selling here if the client treats it as an investment. The key factor is that unlike normal investments, you cannot simply liquidate or exit the investments in an ILP - because you will also lapse the insurance component. Statistically, you are less insurable with time. This poses the dilemma of re-insurability. It is far better and more flexible to BUY TERM & INVEST THE REST. No need to bundle. You can enjoy your protection at lower charges and cost while having full flexibility to invest. ILPs came about more due to tax benefits where such premiums can be tax-deductible. In Singapore, there is no such benefit. In short, ILPs are not ideal.

Glad that you’re considering seriously and doing your own due diligence.

I wouldn’t just dismiss and say ILPs are bad. If one knows how to utilise them properly, it is a very good tool. If all ILPs are bad, why do companies keep coming up with them and still able to sustain?

However, looking at your profile, you probably don’t need an ILP. Can just get life insurance and investment separately.
The best way is to get someone whom you trust and analyse your financial situation thoroughly with you. There are many ways to accumulate wealth, find one that you‘re most comfortable with.

Lim Chun Long Jimmy

03 Sep 2019

Co-founder at PolicyWoke (Traded Endowment Policies)

If you're planning to start investing, there're many options and different asset classes to invest in. Investing via an investment-linked plan is not the only way. Some of the other options you might wanna look at are:

Together with an investment-linked plan, consider the pros and cons among the above-mentioned options and see which one or more of the following you would like to start investing with.

I hope this helps.

Elijah Lee

29 Aug 2019

Senior Financial Services Manager at Phillip Securities (Jurong East)

Hi there,

I would not mix investments with insurance. Strictly keep them seperate. Make sure you h...

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