By Term, here we are talking about Term insurance. Looking back. I've 2 life policies(one I bought to support my childhood friend Joe, I'm glad I did that cos he's now one of the top HSBC consultants) a term policy and a another 10k(CPF) in mutual funds. Question is after reading A Random Walk Down Wall Street by Burton Malkiel, why in the world did I still decide to invest/secure my life in such an expensive way? I mean both my FA and my friend drive cars while I still use public transport. The critical issue here is time and the lack of resource to execute the much better strategy. Everyone in the Financial Advisory industry advocates a Life Insurance plan and mutual funds strategy. I can totally understand why. With 40% commissions on your life insurance premiums on the first year and recurring percentages thereafter, and 2-5% on your mutual funds investments and 1% annual fees (aka wrap fees or fees for asset under management) it's definitely a lucrative passive income for them.
A view from a non commission based Independent Financial Advisory firm advocates my right belief, life + funds investment only benefits the Financial Advisors. Term + well rounded self investment is the way to go. It takes discipline I admit and the industry isn't making it easier by shooting you down everytime you suggest it to your Financial Advisors. Here's a quick analysis, but with no resource on how to go about it except a rather expensive fee based Financial Advisory service that Providend provides. I do hope to find something to share but until...
Highlights:
1) Costs Difference between Life and Term Insurance: about $1.3k per annum on $100k sum insured.
2) No flexibility in payments for Life plans, Term plans almost always allow adequate coverage cos IT'S CHEAP!!!
3) With Term, you can limit the age until which you want to be covered until. Most people really only need to be covered till 60 contrary to what your FA tells you. Most of us have much reduced protection needs by age 60 as our mortgage will be fully paid up and our dependants no longer need our financial support.
4) You can terminate term plans at any time when there is no longer a need for certain protection, without worrying about the potential loss of savings.
5) The investment part of your Life plan a part of it goes to the company shareholders. If the policy investment makes a loss, your bonus is definitely cut. DOES THAT MAKE SENSE??!?! I'll rather invest my own and keep all of it.
6) Generally you can make better investments suited for your different life stage. Recent events have shown even experts are not better at managing your money.
The Buy Term and Invest the Rest strategy definitely works. If you have the platform to help me execute this, please be in touch. Not only will I "buy" from you. I'll get all my friends and relatives to adopt this strategy. Please don't say you'll charge me $300/hour etc cos I already know someone who can do that. They're called Providend.
What I am looking for?
A platform for Term Insurance, General Insurance and Stock investments/Property/other alternative investments etc...
