• All blog entries
    • Calculators
    • Case studies
    • Cost of living
    • CPF Are You Ready?
    • CPF Matters
    • Credit Management
    • e-Learning
    • Estate Planning
    • Events
    • Financial advisers
    • High Networth
    • Insurance
    • Investments
    • Letters to the Press
    • Magazines
    • Others
    • Retirement Planning
    • Scams
    • Surveys
    • Tragic Stories
    • Unethical sales process
    • Videos
  • Legal
  • Testimonies
    • Individual testimonies
    • Gallery
  • My Account
Hi, looking for a fee-based financial planner in Singapore? Read this article now!
  • Home
  • About
    • About Wilfred Ling
    • Why do you run your own professional financial planning practice?
  • FAQs
    • FAQs on Wilfred Ling’s Financial Services
    • FAQs on Financial Planning
    • FAQs on Investments
    • FAQs on Insurance
    • FAQs on Estate Planning
  • Services
    • Overview
    • Create a financially secure plan for your young family (package details)
    • Retirement Planning
    • Investment Portfolio Management
    • Insurance Planning
  • Fees
  • Cool Tools
  • Contact
  • Subscribe
You are here: Home / Insurance / Why am I against long-term insurance contract?

Why am I against long-term insurance contract?

13, December 2009 by Wilfred Ling 1 Comment

“Dear Wilfred, should I cancel Product J so that I can buy Product X and Y? Regards - M”

Dear M,

The general rule is buy a product based on your needs. If Product J continues to serve your original needs, continue with it and do not switch it to another product as this will involve unnecessary cost. Do not worry that future products are better. It is just like buying a computer. The moment you buy a computer, it almost immediately becomes obsolete due to more powerful computers being introduced.

However, if the needs have change, you should do a financial review. My experience is that if you have bought a long-term contract style of product like Product J (which you are contractually required to be committed to it over XX years time horizon), there is nothing much you can do about it even if your needs change. Everyone’s needs change over time. Human beings are not robot and their personalities, goals and circumstances change over time. Thus, I am not in favor of long-term contract style products. Therefore, I will always to try my best to recommend investment products that do not have long-term contracts. These are what I call simple products. Unfortunately, such simple products pay little or no commissions. Thus, many financial advisers do not recommend them. Their firms would also prohibit them from recommending those.

Take for example, a simple product requiring $1000 per month of investment would pay a commission of 3% x 1000 x 12 = $360 assuming sales charge of 3%. If there is a wrap fee, the first year commission is around 360 + 12000*0.01/2 = $420. However, a long-term contract product like Product J will have a commission of 100% x 1000 x 12 = $12,000 for the first year. You can see that there is no incentive for the adviser to recommend a simple product.

Wilfred

Like this article? Subscribe to my newsletter below for more.

Get regular Tips on Financial Planning. Free subscription for 3 years. Covers all aspect of financial planning such as 'How much salary you should have?', 'How to avoid insurance that is not suitable?", 'What are the retirement planning methods?", etc

Share this:

  • Tweet
  • Print

Related

Filed Under: Insurance

Comments

  1. Fred says

    15, November 2017 at 10:18 pm

    You are right. One should not commit on a fixed long term plan. When I was acyoung man, my insurance friends sold me few life plans that require me to pay right to the eighties and nineties. Four decades later, in my sixties and retired with no income, these’friends’ are no more in the industry.

    Lessons learnt: don’t just ‘support’ friends. The moment they become insurance agents, keep far away from them, they have been brainwashed by their companies to betray friends. Sad but true. Those days without these media to get information, you thought your friends can be trusted.

    Reply

What do you think? Leave a comment. Cancel reply


WILFRED LING, CFA

WANT TO GET REGULAR TIPS ON FINANCIAL PLANNING?

JOIN with thousands of other subscribers in getting tips on all aspect of financial planning such as "What is the minimum salary required?", "How avoid insurance that is not suitable", etc.


WILFRED LING IN THE NEWS

Click HERE to find out more.


THE KIND OF CLIENTS I AM LOOKING FOR

NEW TO US?

Learn how you can fully benefit from this massive website: HERE

For Registered Users Only (free)

  • How and what to invest now? (Webinar) 28/7/2022
  • How to identify high performing unit trusts in 3 steps (Webinar) 3/9/2021
  • Financial Planning – Christian Perspective Part 2 (Webinar) 14/8/2021
  • How and what to invest now? (Webinar) 22/7/2021
  • Financial Planning – Christian Perspective Part 1 (Webinar) 10/7/2021

View All

For Clients Only

  • Video Message to Clients 30/12/2021
  • Exclusive client-only Investment Update Webinar by Wilfred 26/11/2021
  • JPMorgan Guide to Market Q2 2020 15/4/2020
  • JPMorgan Perspective Q2 2020 15/4/2020
  • JPMorgan Guide to Market Q1 2020 5/2/2020

View All

Top Posts

  • Access Information & Sign Up Page
  • Strange way of how CPF Interest is calculated & retirement planning CPF has a rather strange way of calculating interest. I...
  • CPF: How to Accumulate $1m in your CPF by 57? I read online that there are people who wants to achiev...
  • AIA Pro Achiever 2.0 and my recommendations AIA Pro Achiever 2.0 was a product which someone recent...
  • Vanguard funds in Singapore at just US$ 20,000! Vanguard is the world’s most famous index fund provider...

Recent comments

  • Sinkie on Why Vanguard Fund Investors Underperformed The Fund Significantly?
  • Sinkie on Why You Always BUY HIGH In Investments?
  • honest_me on Cancer patient ends up with $33,000 bill after insurer refuses to pay for drug & what you must do to avoid this situation
  • susan on Single Premium NTUC Income SAIL
  • susan on Single Premium NTUC Income SAIL
  • LittleTiger on Nomination in insurance policies

To be notified of new blog post, like this facebook page

To be notified of new blog post, like this facebook page

Read articles based on different categories

Investment Login

iFAST Central: Login

iFAST Prestige: Login

Navigator: Login

Chartered Financial Analyst

CFA

Chartered Financial Consultant

ChFC

Featured Blogger

IM$avvy

© Copyright 2006-2022 Wilfred Ling

This advertisement or publication has not been reviewed by the Monetary Authority of Singapore

hollow-nasty
hollow-nasty
hollow-nasty
hollow-nasty