(I really do not mean to eavesdrop, but they were sitting just beside me and talking about my favourite subject.)
Let me give them fictional names of Jenny and Jeremy for illustration purposes.
Apparently the Jenny and Jeremy barely knew each other but Jenny was trying to convince him to take up an investment link policy (ILP) with low coverage, high premium and non-guaranteed return.
Another sucker, I thought, as Jenny started her sales pitch.
I was wrong.
Jeremy is actually a very savvy investor. Although he tried to conceal his knowledge on insurance and investments, the “blur” questions he posed was definitely not easy to answer!
Comments inside the ( ) denote my opinions.
Jeremy: How come ILP? The coverage is so little and yet the premium is so high. Why must we combine investment and insurance and not do it separately?
Jenny: Erm, like this saves time. (The commission is higher)
Jeremy: If I die, my investment might be liquidated at a bad time also right? (Aware of Murphy’s law)
Jeremy: Can I buy term and invest separately?
Jenny: For what? (Like this I have very little commission and cannot hit my June target!!)
Jeremy: How much is the management fees?
Jenny: 1.5% P.A
Jeremy: That’s very high!
Jenny: Quite ok what! No redemption charge leh! (It’s charged on you anyway)
Jeremy: The stock markets are quite attractive now. I want to invest. STI is still falling before I left home.
Jenny: Oh is it? (I don’t invest in stocks and unit trusts actually)
Jeremy: Can you tell me why I should invest in UTs through your bank and not just buy single stock equities?
Jenny: Because… (I am pretty and I am spending time to talk to you) it’s safer.
Jeremy: I know! Diversification right?
Jenny: Something like that.
I can go on and on, but although Jeremy appeared stupid and blur, in actual fact he is aware of “buy term invest the rest” concept, pitfalls of ILP, has been actively monitoring the stock markets and quite familiar with investment and insurance.
It is Jenny who with poor financial knowledge and only concern about sales target has been taken a ride for.
I smiled as I left for two reasons. One, Singaporeans are getting financially more savvy; two, people like Jenny who focuses only on products and sales targets will have to find another job, sooner or later.