Those who know me knows that I use to have negative things to say about this type of saving plan product. However, for this post, I will write conversely, to give a balanced view. For this post I will talk about why to buy these type of product and who benefit from it most:

I) Saving Plan / Annuity or whatever you call it is basically you pay a certain fixed amount for a fixed period of time and in exchange the product provider will promise to pay you regular cash flow for a specific time period or until you die, depending on the product feature.

II) The IRR is usually low compared to pure investment products such as UT / Bond or stock market. It is usually in the range of OPR + 1.5%. If you see this as a tool for wealth creation... look elsewhere.

III) IMO, such a product is a good tool for wealth preservation / distribution.

IV) Firstly I say wealth preservation, meaning this product is good for people who already made enough money elsewhere be it from business or high income salary where they do not want to take anymore excessive risk. Such a product with its fixed income feature will be attractive to these people. If you are a just a regular salary man and you need to create wealth for, say retirement, then this product is too conservative for that purpose.

V) As a wealth distributor: This tool is very good for distribution purpose to your next of kin because this tool comes under insurance product. This means that you can put your children or spouse as the nominee and should whatever sh1t happens to you, the creditors cannot touch this portion of money. It is a social safety net. As the income is periodic and fixed, it is a great tool to pass wealth in a responsible manner to the next generation who may be financially frivolous.

For the people who are interested in point IV) & V) , they usually do not mind the low IRR as they have already achieve the desired wealth. They are now looking for wealth preservation and distribution.

OK, now.. you HLA agents out there, go and sell this product using my points discussed and stop disturbing regular salary men and women who are yet to build their fortune. Go and disturb those rich uncle, makciks, aunties and tycoons.

Xuzen

This post has been edited by xuzen: Feb 24 2016, 02:54 PM

Yeah, noted. My earlier posting is more of a general post, not specifically targeted to HLA EverGain.

Now, wrt to ILI saving plan, my comments are as follows:

I) Since we are talking about Investment, I shall now compare to pure UT.

II) In ILI product, you need to pay multiple charges that pure UT do not need to. On top of paying for the fund management charges aka Management expenses (which both ILI & pure UT will be levied upon), ILI product also need to pay additionally:

a) Cost of Insurance because ILI is an insurance product.

b) Monthly admin charge of RM 6.00 or RM5.00 - WTF is this for?

c) Cost of Rider - if any.

More often than not, the Insurance company will outsource the management of the fund to 3rd party anyway.

III) If you are thinking of using ILI product for investment, all the expenses incurred from a) to c) will drag its performance down.

With the above points stated, now I will give a balanced view on why and who should buy ILI products:

IV) ILI biggest advantage to me is the low entry barrier. Meaning if you are young, you can actually buy a large coverage for a relatively low premium vis-à-vis traditional product. The rational is that the insurance company take a calculated risk that your future cash value can sustain paying the cost of insurance in the future provided you do not prematurely sell your units.

In simple English, by paying small amount of premium earlier on, where a portion of it is used to invest into your UT of choice, hopefully the UT can generate enough return to offset future more expensive Cost of Insurance without the Insurance Company asking you to pay more.

V) ILI insurance is suitable for young people who due to low income whom may wish to transfer their mortality and morbidity risk to a insurer for relatively lower cost.

Xuzen

This post has been edited by xuzen: Feb 25 2016, 12:24 PM