I love to eat Taiwanese Sun Cake. It is irresistibly sweet and fragrant.
Just a few months ago, the tainted oil scandal was unravelled in Taiwan and causing widespread mistrust and anger among consumers. I think I could have been one of the victims who had consumed tainted Sun Cake in my Taiwan trip last year.
Consumers have always trusted business owners to be ethical and believed the latter would provide the best for them. The benefit of the doubt was betrayed and utter disappointment followed with this scandal. Many feared the consumption of recycled oil which is not meant for human consumption would harm their health. No one knows the true effect and only time will tell.
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Similarly, consumers have a lot of trust in the financial industry. We trust that they create useful products to meet our financial needs. We also trust that the financial advisors have our best interests at heart and recommend suitable products.
However, reality is far from the truth. There have been ample reports over the years about wrong advice and mis-selling from the black sheep of the industry. MAS did a ‘mystery shopping’ and discovered that one third of the recommended products were clearly unsuitable.
Brendan Yong is an independent financial advisor and he has courageously step out to disclose the ugly side of Investment Linked Policies (ILPs) with his latest ebook.
Very few people are willing to compromise their own rice bowl in exchange for their principles. I applaud Brendan for that.
In the ebook, he explained why ILPs are time bombs. It is because ILPs have insurance cost rising exponentially with age of the insured. And the increasing premiums have to be funded by the investment component of the policies. This means that less money will be invested and worse, investment units are converted at low prices if the financial market happened to be doing badly.
He shared two other reasons why ILPs are bad and I would not do a spoiler. You should read the ebook and comprehend the facts and figures presented by Brendan. It would be more convincing to you.
I agree totally with him when he said that Singaporeans are underinsured, and yet overpaying the premiums at the same time. This state of irony is due to the financial advisors peddling high-premium (also high commission) products to clients which are too expensive for most to afford sufficient coverage.
Even though ILPs are bad products, Brendan mentioned under two situations he would recommend them and they are:
1) For a baby starting at age 0
2) For young working adults with a lack of investment discipline and capital
You can probably think of the reasons, else read his explanations.
Last but not least, he shared 3 real stories of people being mis-sold of insurance products. It is saddening to see these stories surface repeatedly.
My wish is that we can increase our financial literacy and be wiser to make good money decisions.
You can get the ebook here.