When we engaged CF for fee-based advisory financial planning back in Jan 2014, he sensed that something was amiss.
Like they said, there is more than meets the eye. We realized we don’t know what we don’t know.
Background story
I know I had bought an 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 was just …well, what it is – insurance that we need to buy from the bank when taking 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 an RM 800k basic sum assured, it is also a policy with an RM 800k critical illness rider.
Knowing this and by having CF as our adviser, I realized that:
- Should we not have known this, we would have blown away a few thousand ringgit unnecessarily every year when we bought another property down the road.
- That my critical illness coverage needs are about RM 250k. RM 800k of critical illness coverage is an overkill, which means I am paying more for over-insuring myself.
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 to reduce the annual premiums, she suggested surrendering it instead and getting a new Allianz policy, costing only 4100 a year.
Immediately, I sensed something was amiss. My thought was, “Why doesn’t the banker recommend Allianz in the first place if she knows it is cheaper?”
So I consulted CF for insurance coverage review. He confirmed my suspicion.
A new insurance policy with a cheaper premium does sound like a good deal for a client on the surface.
But customers 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 a smartphone, it is generally not recommended to surrender & get a 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 goes towards paying commission.
Customers can upgrade. But to replace and get a new policy? No, UNLESS the insurance is really not suitable in the first place (i.e., a 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 Lieu for advisory.
What we liked about the financial advisory
Throughout our engagement, CF patiently answered even the most unintelligent questions from us without judgement. And a very refreshing non-product pushing consultative approach, to say the least!
For example, he respected our decision to 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.
Finally, 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.
My story above is a testament to that because he could have asked us to surrender our ING policy and bought another one from him, but he didn’t.
A licensed financial adviser we would highly recommend to people not from the finance sector but trying to set their finances straight.