When we engaged CF for fee-based advisory financial planning back in Jan 2014, he sensed that something was amiss. Like they said, there are more than meets the eyes. We realized we don't know what we don't know.
I know I had bought a RM 800k coverage policy from the banker who handled my first house loan application. It is costing me RM 6,500/year. But I didn’t have the policy itself in hand, so that’s about all I know.
Firstly, we thought we had a conventional non-transferable MLTA for our first KL property purchase but then we later discovered it is actually a personal investment-linked insurance banca-assurance policy (which is a good thing actually) from ING. But, who could have known better? We thought MLTA/MRTA is just ….well, what it is – insurance that we need to buy from bank when take a house loan. It is calling a toothpaste – Colgate when Colgate is just a brand synonymous with toothpaste.
The banker was supposed to send us the insurance policy, but didn’t – until we asked. Good thing that CF triggered me this when he started to do our financial plan, else we wouldn’t know how important this is.
Only after a few phone calls to and fro (bankers really know little about insurance policies, that I found out. Plus, bad servicing as well), I managed to get my policy book. On top of a RM 800k Basic Sum Assured, it is also a policy with RM 800k critical illness rider.
Knowing this and by having CF as our adviser, I realized that:
- Should we have not known this, we would have blown away a few thousands ringgit unnecessarily every year when we bought another property down the road.
- That my critical illness coverage needs is about RM 250k. RM 800k of critical illness coverage is an overkill, which means I am paying more for over-insuring myself.
Ignorance is not bliss, in this case!
Secondly, when I called the banker who processed my house loan and expressed my intention to reduce my critical illness rider of the ING policy in order to reduce the annual premiums, she suggested to surrender it instead and get a new Allianz policy, costing only 4100 a year.
Immediately, I sensed something was amiss. My thought was – “Why don’t the banker recommend Allianz in the first place if she knows it is cheaper?”
So I consulted CF. He confirmed my suspicion. Here are his documented reply which I still have in my inbox:
A new insurance policy with a cheaper premium does sound like a good deal for client on the surface.
But customer only see one side of the story.For any insurance policy, I learned that the commission is the highest on the first year, and it gets lesser until the 6th year.
Unlike smart phone, it is generally not recommended to surrender & get new policy once there is a cheaper + better option available 1 or 2 or 3 years down the road. Not to your best interest because the large portion of premiums paid go towards paying commission.
Customer can Upgrade. But to Replace and get a new policy? No, UNLESS the insurance is really not suitable in the first place (ie, savings plan) or not relevant anymore.
Anyway, long story, I proceeded to keep my ING policy but reduced the critical illness coverage as advised. My annual premium now is down to RM 4,000.
Quantifiable Hard Savings = RM 2,500 recurring annually
For my husband and I, this is priceless compared to the professional fees we paid CF for advisory.
What we liked
Throughout our engagement, CF patiently answered even the most unintelligent questions from us without contempt. And a very refreshing non-product pushing consultative approach, to say the least!
For example, he respected our decision focus on investing in property for now, although we are made aware by CF that our portfolio should consist of diversified liquid assets as well.
Last but not least, CF showed me that there are indeed adviser with high Integrity first out there, putting client interest first instead of padding his own pocket at the expense of client’s money.