Investment Linked Products- High Returns of 6% to 9% per annum by Fund Managers So No Worries On Your Retirement

I had another strange encounter with an insurance agent at a roadshow held at a suburban shopping mall yesterday evening. While shopping around,  a persistent lady kept asking me whether I can help her do a survey and offered a packet of "Himalaya Salt" to me as souvenir. She also assured me that her colleagues and herself are not pushing any products and just wanted to do a quick financial survey. Knowing full well the pattern of the marketing tricks employed to make prospective preys less guarded by offering the free gift, I still decided to sit down with her to do the financial survey as I was curious to see what latest sales pitch and gimmicks they have up their sleeves these days. I also rejected the packet of "Himalaya Salt" being offered to me. 

Which financial products have you heard before? Investment Linked Products, Endowment, Insurance, Unit Trusts?

Wow, the insurance agent wasted no time to educate me. She told me I must already have insurance coverage such as critical illnesses and hospitalization plan. Then she started to ask the next question of which product do I think has the highest return and to guess the annual return rate before moving on to Investment Linked Product that she is marketing. So long for "this is not a sales talk" claim. She told me that investment linked products with her company offered 6% to 9% annual return based on historical performance of the different funds. In addition, her insurance company will give 65% return on the initial investment. 

Investment linked products are good- It actually invested 100% of your premiums directly into the funds contrary to popular belief that not 100% are invested.

I could not believe the insurance agent said that and so I asked her to repeat herself. I then asked her if 100% are invested, then how do you earn a commission and also cover for the insurance expense portion, no matter how little or immaterial that she is asserting. 

"Are you sure this is not the case of 100% conversion upfront of your investment and then selling off the units to pay for maintenance expenses of the policy?"

The agent just smile and repeat 100% are invested to side step around the point.

Actually in a way, 100% of your capital are indeed used to ïnvest" into the units in the fund but the fun fact that the insurance companies will deduct your units to pay for expenses are strangely left out at this point if one does not ask for clarification.

Annual return of 6% to 9% and additional 65% bonus return on initial capital offered by the insurance company

I went on to challenge her that 6% to 9% annual return and a 65% return on initial capital would most likely means that her insurance company is a charity organisation and making huge losses.

The annual return then suddenly went down to 3.5% to 6.5% as she has conveniently omitted the annual expenses of around 2.5% for the product. The agent went on to clarify that 6% to 9% are the "gross return".

Also the 65% bonus comes with some caveats and lock in and does not apply to the entire capital invested. 

Damn it, I was getting bored. The usual masquerading and dressing up of the returns by giving half truth is still part of the bag of tricks employed these days. Sell based on the half truths. Not wrong to tell prospective customers that the fund generated 6% to 9% per annum. The mindset is if I never tell you got expenses deduction, it does not mean that there is no expenses deduction. Just that I never tell you at this juncture. *Clap*Clap*.

Are investment of the asserted 6% to 9% guaranteed?

The agent replied that investments are never guaranteed. But not to worry, if the investment returns dropped below the 6%, she will help you switch to a better performing fund. The insurance company that she is working for has lots of good funds for your investments and offered free switching services.

After hearing the sales talk for 15 mins, I decided that I need to go back for dinner and said bye bye to the insurance agent. I was glad I did not take the "Himalaya Salt" from the agent. She can thus use the saved packet to get another prospective customer to do the survey.