Should I burn this or let it run

[Jakarta]

A couple of years ago I started a saving 'thing' through an expat friend of mine. I now get the feeling he was hard up for cash and was willing to sell any old tosh to get him some immediate commission.
I've recently queried this with my IFA as 2 payments failed due to me changing the associated debit card and forgetting to update the details.

SPX15-N - S&P 500 Index 15 Year through Investors Trust
$500 per month ($6,000 PA), 15 year term
Account value is $13,520
Surrender charge is $12,760
27 monthly payments so far, so a net payment of 13,500
Looks like it's performed remarkably well with a $20 profit from $13.5k over two years...

If I bin this now I'll get $760. At present I can comfortably afford the payments, but this may change in the future, I've lucky so far in not getting culled during the Oil & Gas industry decline.

Looking at the performance so far, is this going to be worth the same as I'll have put in, i.e. a net decrease in value, or do these things typically start performing much better in the later years?
$90k over the term of the policy, I definitely know of better ways to spend my money over the next 13 years instead of effectively putting it under the pillow to devalue.

Any thoughts would be much appreciated, particularly if anyone has specific advice on this product.

Typically, the guy who sold it me has left the country, leaving his former business partner as my IFA. Frankly, I don't think 'Independant' part of the acronym runs true, I get the impression this is solely to make themselves money. I may just be bitter and not seeing the full picture.

Finally, I haven't missed the outgoings over the past few years, so if I surrender this now, I'm not fussed regarding the net loss. However, if it will suddenly mature into $250k then I'll leave it running.

If all this is doing is stopping me spending $500 per month on beer/coke/hookers/petrol, I'd rather spend it enjoying myself.

[megaphone]

Impossible to give any advice, you'll need to send a link to the 'product' information. Is there a term interest payment? If so what is it based on? Can you make the investment 'paid up'? Stop making payments but leave the existing in place?

Edited by megaphone on Tuesday 1st November 05:52

[sidicks]

Jakarta said:

A couple of years ago I started a saving 'thing' through an expat friend of mine. I now get the feeling he was hard up for cash and was willing to sell any old tosh to get him some immediate commission.
I've recently queried this with my IFA as 2 payments failed due to me changing the associated debit card and forgetting to update the details.

SPX15-N - S&P 500 Index 15 Year through Investors Trust
$500 per month ($6,000 PA), 15 year term
Account value is $13,520
Surrender charge is $12,760
27 monthly payments so far, so a net payment of 13,500
Looks like it's performed remarkably well with a $20 profit from $13.5k over two years...

If I bin this now I'll get $760. At present I can comfortably afford the payments, but this may change in the future, I've lucky so far in not getting culled during the Oil & Gas industry decline.

Looking at the performance so far, is this going to be worth the same as I'll have put in, i.e. a net decrease in value, or do these things typically start performing much better in the later years?
$90k over the term of the policy, I definitely know of better ways to spend my money over the next 13 years instead of effectively putting it under the pillow to devalue.

Any thoughts would be much appreciated, particularly if anyone has specific advice on this product.

Typically, the guy who sold it me has left the country, leaving his former business partner as my IFA. Frankly, I don't think 'Independant' part of the acronym runs true, I get the impression this is solely to make themselves money. I may just be bitter and not seeing the full picture.

Finally, I haven't missed the outgoings over the past few years, so if I surrender this now, I'm not fussed regarding the net loss. However, if it will suddenly mature into $250k then I'll leave it running.

If all this is doing is stopping me spending $500 per month on beer/coke/hookers/petrol, I'd rather spend it enjoying myself.

I'm guessing that you have the figures wrong. I suspect that the account value is $13,520 and the amount that you would receive if you were to take the money now would be $12,760 i.e. there is a surrender charge of $760.

[Ginge R]

Jakarta said:

A couple of years ago I started a saving 'thing' through an expat friend of mine. I now get the feeling he was hard up for cash and was willing to sell any old tosh to get him some immediate commission.
I've recently queried this with my IFA as 2 payments failed due to me changing the associated debit card and forgetting to update the details.

SPX15-N - S&P 500 Index 15 Year through Investors Trust
$500 per month ($6,000 PA), 15 year term
Account value is $13,520
Surrender charge is $12,760
27 monthly payments so far, so a net payment of 13,500
Looks like it's performed remarkably well with a $20 profit from $13.5k over two years...

If I bin this now I'll get $760. At present I can comfortably afford the payments, but this may change in the future, I've lucky so far in not getting culled during the Oil & Gas industry decline.

Looking at the performance so far, is this going to be worth the same as I'll have put in, i.e. a net decrease in value, or do these things typically start performing much better in the later years?
$90k over the term of the policy, I definitely know of better ways to spend my money over the next 13 years instead of effectively putting it under the pillow to devalue.

Any thoughts would be much appreciated, particularly if anyone has specific advice on this product.

Typically, the guy who sold it me has left the country, leaving his former business partner as my IFA. Frankly, I don't think 'Independant' part of the acronym runs true, I get the impression this is solely to make themselves money. I may just be bitter and not seeing the full picture.

Finally, I haven't missed the outgoings over the past few years, so if I surrender this now, I'm not fussed regarding the net loss. However, if it will suddenly mature into $250k then I'll leave it running.

If all this is doing is stopping me spending $500 per month on beer/coke/hookers/petrol, I'd rather spend it enjoying myself.

This one, run out of the Cayman Islands?

https://www.investors-trust.com/eng/sp500.html

Intrinsically, it's a boggo standard structured product, which means you also pay an insurance premium to counteract any fall in the value of the S&P benchmark. In itself, that's not always *automatically* a bad thing, but why invest 100% into equities if you aren't prepared to accept volatility and the potential for loss? The fear of loss, and the subsequent paying of insurance to diminish it, means the fear becomes a self fulfilling prophecy. A bit like burying your money in the garden, in a high inflation environment.

Scrambling around a little for some good news, I'd look at that 'loyalty bonus'. But, the website suggests that all premium payments must have been received 'within the grace period', for it to take effect. The website also refers to looking at 'plan documentation', but I could see none. By comparison to what you're faced with, with dividends reinvested, your benchmark could have made you in excess of 12.2% by comparison. I'd confirm that surrender value first though.

If you think you were badly advised, contact the remaining partner and tell him so.

[Stylus]

sidicks said:

Jakarta said:

A couple of years ago I started a saving 'thing' through an expat friend of mine. I now get the feeling he was hard up for cash and was willing to sell any old tosh to get him some immediate commission.
I've recently queried this with my IFA as 2 payments failed due to me changing the associated debit card and forgetting to update the details.

SPX15-N - S&P 500 Index 15 Year through Investors Trust
$500 per month ($6,000 PA), 15 year term
Account value is $13,520
Surrender charge is $12,760
27 monthly payments so far, so a net payment of 13,500
Looks like it's performed remarkably well with a $20 profit from $13.5k over two years...

If I bin this now I'll get $760. At present I can comfortably afford the payments, but this may change in the future, I've lucky so far in not getting culled during the Oil & Gas industry decline.

Looking at the performance so far, is this going to be worth the same as I'll have put in, i.e. a net decrease in value, or do these things typically start performing much better in the later years?
$90k over the term of the policy, I definitely know of better ways to spend my money over the next 13 years instead of effectively putting it under the pillow to devalue.

Any thoughts would be much appreciated, particularly if anyone has specific advice on this product.

Typically, the guy who sold it me has left the country, leaving his former business partner as my IFA. Frankly, I don't think 'Independant' part of the acronym runs true, I get the impression this is solely to make themselves money. I may just be bitter and not seeing the full picture.

Finally, I haven't missed the outgoings over the past few years, so if I surrender this now, I'm not fussed regarding the net loss. However, if it will suddenly mature into $250k then I'll leave it running.

If all this is doing is stopping me spending $500 per month on beer/coke/hookers/petrol, I'd rather spend it enjoying myself.

I'm guessing that you have the figures wrong. I suspect that the account value is $13,520 and the amount that you would receive if you were to take the money now would be $12,760 i.e. there is a surrender charge of $760.

If it's anything like the products I've seen passed around the expat community then sadly those figures are likely the correct way round. Massive "fees" all structured into the early part of the products duration.

I've seen people sign up for these things, circumstances change which means they want/need to cash it in and the losses are essentially absolute unless you're well into the duration.

[Ginge R]

sidicks said:

I'm guessing that you have the figures wrong. I suspect that the account value is $13,520 and the amount that you would receive if you were to take the money now would be $12,760 i.e. there is a surrender charge of $760.

My initial thoughts too. But if I'm looking at the right 'plan', the surrender charge is promulgated thus - "equal to the sum of the annual administration charges due for the remaining contract years at the time of surrender". It's 1.7% per annum, so, if it's compounded (even annually) and if there's thirteen years to run, based on a paid up value, the figure is a third one again.

[sidicks]

Ginge R said:

My initial thoughts too. But if I'm looking at the right 'plan', the surrender charge is promulgated thus - "equal to the sum of the annual administration charges due for the remaining contract years at the time of surrender". It's 1.7% per annum, so, if it's compounded (even annually) and if there's thirteen years to run, based on a paid up value, the figure is a third one again.

Ok - I didn't do any digging into the actual product.

Out of interest, was the 12% return number you quoted based on the index change over the previous 27 months, or the average return based on monthly contributions?

[Ginge R]

Fag packet calc of two years index return but with dividends reinvested. Fair to suggest we should allow for a few degrees of arc at this time of the day..

[Jakarta]

Thanks for the quick responses.
To answer a few queries, here is a screen shot of the surrender quote, pretty hard to misinterpret I think.




And the product is as detailed here the 15 year regular contribution plan.

Whilst I'd hate to lose $12k, I would rather do that than commit another 13 years towards a weak investment. I would rather put the same money into paying off current / future mortgages quicker.
It turns out that 6 payments have been missed (as of this week). I can catch these back up in the next few days without penalty if I choose to, but I'm reluctant to throw another $3k at it if I'm eventually going to finish entirely.

Thanks for all your comments.

[Ginge R]

Have them explain the calcs behind the surrender value, it doesn't tally with the product info. It might be that they are adding an adviser clawback to the sum. In which case, not only may it be argued that the advice was unsuitable in the first instance, but that you're paying for it, having realised that.

[bluenosewrx]

i know sweet FA about financial stuff, however could you not sell it on for say half the investment and even if it makes little profit in the future, someone will likely be 6-7 k up at the end of the term.

I may be talking ste though.

[Jakarta]

There is a %140 Guaranteed at maturity regarding the Principal sum, if you maintain all payments, withdraw nothing and achieve all loyalty payments.
So for a total of $90k deposited over 15 years, a Guaranteed return of $126k for a net increase of $36k.
Is this any good?

[Ginge R]

It's there or thereabouts, not the returns you'd expect if you had a cheap S&P tracker, and none of the flexibility, either. But you do have a guarantee of returns, of sorts. Which begs the question; if you want a guarantee of returns, why invest 100% in equities?

In respect of that guarantee, bear in mind that you're exposed to counter party risk; the risk that those guaranteeing the insurance that provides the uplift, remain solvent. Five years in global financial planning is a long time, 15 years even more so. Are you certain those organisations will remain able to discharge the commitment? If the counterparty goes bankrupt or suffers financial troubles, the investor, you, bears the risk. I imagine the past couple of months will have seen some worried traders scanning their Deutsche Bank counterparty contracts.

Complexity can work for you, or against you. Usually, the more working parts you have, the more likely it is you'll suffer some form of malfunction.

Counterparty exposure in structured products (similar to yours) can work for you, or against you, too. I picked up a risk averse client, a few years back, who had unwittingly been invested in a Bricks and Mortar structured product that was pegged to the UK house price index. Purely by chance, he had 'struck' a price the very week before the market plunged. So, when the plan paid out, five years later, he realised something like 60% profit. Was it right for him though? No way. I like structured products, but for the vast majority of clients, they're unsuitable.

I just noticed, you're not paying more than $6k per annum, or less. Are you on the hook for that 2% dilution on all of your premiums too?

[Jakarta]

Ginge R said:

Are you on the hook for that 2% dilution on all of your premiums too?

Apologies Ginge R, I have no idea what this means?

I've had a bit more of a think about it, and it isn't a large sum per year, so I'm leaning towards keeping it full term.
So far, nobody has said it's a terrible product that should never be offered to anybody ever and the IFA should be nailed to a cross.

An equivalent to $90k now when I'm 53 will be a nice little sum to play with, or to throw into the pension pot.

Not a definite decision just yet, I'm not home to speak to the advisor till the middle of the month so can hold off any decision till then if I choose.

As Ginge mentioned though, I need to be mindful of a complete crash in the fund, and I am interested as to how it can be guaranteed.

Cheers

[NickCQ]

bluenosewrx said:

i know sweet FA about financial stuff, however could you not sell it on for say half the investment and even if it makes little profit in the future, someone will likely be 6-7 k up at the end of the term.

I may be talking ste though.

This is worth investigating - although there might be transferability restrictions which mean that you can't get out of the surrender cost.
Do you think it's worth investigating a mis-selling or consumer protection claim? Sounds like a pretty crap product that you have been signed up for to be honest, a very expensive way to get S&P exposure, which should not cost a lot.

[Ginge R]

Jakarta said:

Ginge R said:

Are you on the hook for that 2% dilution on all of your premiums too?

Apologies Ginge R, I have no idea what this means?

I've had a bit more of a think about it, and it isn't a large sum per year, so I'm leaning towards keeping it full term.
So far, nobody has said it's a terrible product that should never be offered to anybody ever and the IFA should be nailed to a cross.

An equivalent to $90k now when I'm 53 will be a nice little sum to play with, or to throw into the pension pot.

Not a definite decision just yet, I'm not home to speak to the advisor till the middle of the month so can hold off any decision till then if I choose.

As Ginge mentioned though, I need to be mindful of a complete crash in the fund, and I am interested as to how it can be guaranteed.

Cheers

Here you go, the 2% bid offer spread (fot).

http://www.morningstar.com/InvGlossary/bid-ask-spr...

[eyebeebe]

Make sure you read the small print before you cancel - I've heard of these expat 'savings' products where if you terminate it before the end of the period i.e. The 15 years, you still have to make good on the agent commission for the full term! This may be why the surrender value is effectively nothing.