Representatives from insurers dissociate themselves from being called insurance agents to becoming financial consultants and investment specialists.

ILPs were also seen to be hipper and trendier.

Its working mechanics do offer the potential (Not Guaranteed) for faster breakeven and capital appreciation.

ILP funds and unit trusts grew in popularity. When banks formed partnership distribution with insurers, packaging tactics and leveraging the banks’ brand name, it just becomes easy to forget the roots of ILPs to begin with.

Quite a number of ILPs began as feeder funds.

Which also meant another layer of fees, and over time, innovation of ILP products made them relics of the past.

Insurance companies do improve the ILP plans over the years.

There can be improved better mortality pricings in newer ILP policies than those of the past.

Competition between product manufacturers also led to one-up-manship type new launches of ILP products.

Be they front loaded, or backend loaded, just be familiar with the surrender charges, early termination charges, or allocation rates and a whole lot of terms and conditions, when taking up such plans.

My summary conclusion from all the social listening and debates, the person decided on the particular ILP because he/she can deal with the cons better. Yes you read me right, there are pros and cons to everything, the pros are not necessarily more pro than others; the decision is quite nuancedly based on the individual being able to deal with the con better niah. Aiyah, familiarity breeds discontent. More people have become familiar with the mechanics of ILPs.

In the days of old, fund switches were done in pen and paper.

If you know by now, outcomes depend heavily on the performance of the underlying funds.

Pre-signed forms were not unusual back then.

Good proper choice funds combined with good market sensing, can produce good returns to keep policyowners happy.

Some representatives then start bragging their investment judgement calls.

These attract attention from all over, including the authorities. It attracts followers who want to know how to replicate. It attracts some analysts too, who will examine the extent of bias and choice selection of accounts instead of aggregate composites. It attracts authorities who want to make sure the language and communication is not false and misleading to the public.

With technology now, pseudo fund management arrangements have also sprung up to replace pre-signed fund switch forms but authorities are insisting on certain measures and verifications to prevent them.

Long story short, understanding ILPs from the lens of a whole life policy with estate planning intents, cuts through marketing fluff and clears ambiguity.

At times you get compliance to the letter of the law but not to the spirit of the law.

Yes ethics can have different approaches. So the big elephant in the room that no one talks about all this whole time, is that there is nothing written explicitly in the contracts that the agent representative who sold the ILP is obligated to watch over the performance of the funds.

Back to the origins, the investment decision making burdens have been laid upon the policyowner for ILPs. Some representatives are very upfront about this, but majority will not because of the branding they have set upon themselves.
I will never forget Goldman putting together a product designed to fail and sold it and when grilled by congress, the stance taken is that the buyers (ok institutions fair enough) were sophisticated enough to discern for themselves. The same can be said for those deemed to have passed their CKA, deemed to have read all the terms and conditions of the product, and chose to proceed with the recommendations.

Willing buyer, willing seller. Caveat Emptor. Not every representative will take into consideration anticipated future buyer remorse in their recommendations.

Outcomes are not the fault of the product manufacturer.

Amidst all the financial scams in Singapore, I tell people that regulated investments can go awry, what more then, those that are not regulated. Whole life plans have been recommended and accepted for funding children’s tertiary education funding (Try not to be shocked but I have enough experience in the industry to have seen what reasonable basis can get you.) so understand that reasonable basis is a fair cry from diagnostic prescription level type of recommendation.

I did up the Facillitating Decision Making method and I had hopes for it to nudge the industry to go beyond reasonable basis. I credit this FDM inspiration from my faith in the Heavens.

I personally do not think ILPs are for everyone and offered for acceptance on reasonable basis. Adding more layers to the onerous tedious onboarding process will only invite stones thrown at me by those in the industry.

I know there are good advisor representatives out there who watch over the underlying funds for their clients. And it is high time for people to understand the scalability issues in proposal-acceptance model and outcomes.

I have to break it down further actually, because the issue also touches on ownership of decision. Ok let’s say the market changed, fund switches called for, and the client ignores. Who is responsible for the investment performance? If the client rightfully ignores, the rep cannot claim credit. If the client wrongfully ignores, the rep will say “told ya” but causes deviation from the rep’s model portfolio. Depending on the rep’s use of technology in reaching out to all client’s in alerting fund switch changes, different response timings from the clients will lead to administrative bombs not to mention different entry/exit timings for the various accounts.

Usually, I would think the reps will email blast and the clients are to initiate the fund switches on their own with their own login. By no means should this be misconstrued as proposal-acceptance models cause poor investment outcomes. But yea, poor outcomes tend to invite fees scrutiny over time. 

In the court of law, proposal acceptance stance taken ensures the client bears some responsibility for accepting the proposal.

Actuaries simply cannot bring distribution costs assumptions to ZERO.

And for as long as the distribution costs are there, the agency structure will want a stake, and each level of the structure gets a fraction of the gross distribution cost that is already factored in and permissible right from the product’s birth and onset.

The distribution costs also goes to paying salaries of the compliance department of the firm, on top of office rental and other administrative costs. Comparing across various types of wealth management products, insurance products still give the highest margins for distributing.

Simple truths.

So actuaries of ILPs have already worked out those distribution costs, just go find one actuary to ask.