Joe Duffy Show on Whole of Life/Investment policies

[ClubMan]

A mantra is developing on the thread that "simple is good" and "complex is bad (or even deliberate gouging)".

On Liveline or here?
Just to be clear - I don't agree with that.
There are markets for all sort of financial products - from "simple" to "complex".
What's suitable/appropriate will always depend on the specific circumstances of the individual/family involved.
But a key problem here is that (it seems to me) that many of these combined life insurance/assurance plus savings/investment products were not explained or sold properly.
As long as a punter is given clear, accurate and reasonable info so that they can make an informed decision then that's fine.
E.g. "it's perfectly feasible that you will pay premiums on this product for decades, obtain the benefit of life cover but not get anything back by way of a maturity lump sum".
I guess it remains that (a) punters generally can't depend on the seller/tied agent for independent advice and (b) some will simply not engage with the facts/terms & conditions in which case (as long as the info provided is clear and accurate) it's hard cheese if they claim to be unpleasantly surprised years later.

 

[Steven Barrett]

it is a transcript. You can read it in about two minutes. I have edited out all the sighing.

I saw an attachment and thought it was a clip.

My two favourites:

Peter Dunne

30 year odd ago. €25k with Irish Life. Paid every month

When I was 65 , I got a letter saying the policy was dead.

Joe: In surprise: “Gone?”

Peter: Gone, completely gone.

Joe: And you money gone down the Swannee ? How much did you pay in?

Joe: You were taking out a policy that one of you would be dead by 65? Were you healthy at the time?

Peter: No one said it would go dead at 65?

Joe: Who would bet in the 1980s that I wouldn’t live beyond 65?

Joe: People didn’t know what they were selling; there was three card trickery going on; and people were selling insurance to people who were already insured twice three times - it sounds like the collapse of Lehman Brothers – CDOs. People were betting on products which were bigger than – they were gammy any way.

Plenty of examples of the reviewable whole of life contracts too, which are rubbish.


Steven
www.bluewaterfp.ie

 

[Duke of Marmalade]

Clubman (welcome back) I agree with what you say. But on this Flexible Whole Life thing I was surprised that none of the leading life assurer websites mentioned such a product. If it has vanished from the scene, I think that is a step backwards for reasons stated earlier. If it is still available but not on a mass market basis but only following sound unbias advice then that is a step forward.

I repeat an earlier point that the complainants on Joe's show are a very tiny minority and we can see that we can get complainants for even the most transparent and simple of propositions. Maybe they are the tip of the iceberg but I sense that the great majority of people who purchased these policies broadly understood what they bought and few were thinking seriously about life cover in their 80s.

 

[PMU]

But a key problem here is that (it seems to me) that many of these combined life insurance/assurance plus savings/investment products were not explained or sold properly..

I disagree. They were clearly sold as investment products and not as insurance products.

I have a copy of the original promotional brochure for Irish Life LifeSaver. It was sold as an investment product and not as an insurance product. The brochure is entitled 'LifeSaver Investment Account'. It states: “The LifeSaver Investment Account is a long term savings account.". It then does on to say the LifeSaver account “gives you real growth potential by allowing you to participate in the profits earned by the highly successful Irish Life Managed Fund.” and “Your money is actively managed to maximise your return.” Note the phrase “your return”. Based on this, a person investing is such a product would have a reasonable expectancy that there would be a return on the product. The next page of the brochure shows the growth of a 50 IEP investment per month in the IL Managed Fund. The brochure shows someone investing 50 IEP a month at age 20 -30 getting an estimate encashment of IEP 27,650 after 20 years. So you would expect such a return, or even greater if you left your money in longer. Then there is a lot of bumph on what a great company IL is (or was).
But based on this brochure any person investing in such a product (and I was one) would reasonably assume they were investing in a product that invested in the IL managed fund. We now know that this was not the whole truth and in fact you were investing in a fund that fed into an insurance policy. Life assurance is mentioned in the brochure but as an “added bonus”.


.

 

[Duke of Marmalade]

I disagree. They were clearly sold as investment products and not as insurance products.

I have a copy of the original promotional brochure for Irish Life LifeSaver. It was sold as an investment product and not as an insurance product. The brochure is entitled 'LifeSaver Investment Account'. It states: “The LifeSaver Investment Account is a long term savings account.". It then does on to say the LifeSaver account “gives you real growth potential by allowing you to participate in the profits earned by the highly successful Irish Life Managed Fund.” and “Your money is actively managed to maximise your return.” Note the phrase “your return”. Based on this, a person investing is such a product would have a reasonable expectancy that there would be a return on the product. The next page of the brochure shows the growth of a 50 IEP investment per month in the IL Managed Fund. The brochure shows someone investing 50 IEP a month at age 20 -30 getting an estimate encashment of IEP 27,650 after 20 years. So you would expect such a return, or even greater if you left your money in longer. Then there is a lot of bumph on what a great company IL is (or was).
But based on this brochure any person investing in such a product (and I was one) would reasonably assume they were investing in a product that invested in the IL managed fund. We now know that this was not the whole truth and in fact you were investing in a fund that fed into an insurance policy. Life assurance is mentioned in the brochure but as an “added bonus”.


.

PMU this shows just how much there was a disconnect between the product designers and the customer. You seem to be financially savez and yet have completely misunderstood the proposition, that's the designers' fault, not yours.

A bit more background. In the 1980s the Holy Grail of life insurance was the Universal Life concept. It came from America and it was made possible by developments in technology. Historically life assurance products had been very simple and varied from simple term assurance to simple and non flexible endowment plans.

Universal Life was meant to be the single product for life to meet all needs across the spectrum from savings to protection. It was meant to be super flexible, adjusting to your needs as your life cycle evolved. It could therefore be marketed under any guise from savings to protection. You clearly read the marketing blurb for the savings package but were sold something different.

The whole thing was possibly ahead of its time for both seller and punter and from a cursory browse of current websites it seems the industry has reverted to simplicity. As I stated earlier I think something has been lost in the process.

 

[Dan Murray]

A lot of lifesavers were sold as primarily investment only products. Even in cases where a client wished to establish an investment savings plan, there was an element of life cover attaching. There was a fiscal reason for this as where the sum assured was something like 15 times the annual premium, there was some element of taxation relief on the contributions (c.20%?). Someone with better recall will confirm the precise details. So it is completely plausible that PMU was marketed and sold primarily investment contract - with the "added bonus" of some life cover being included for the reason I have just outlined.

I have a pal who worked as an actuary for Irish Life who, to this day, feels guilty about the manner in which Lifesaver and similar products were designed. It is true that there is a disconnect between the product designers and the customers - and it's primarily because the actuaries designed a product with intentionally complicated structures (using approaches like initial and premium units) which were purposely structured to confuse the consumer. When, for example, Lifetime launched itself, its charging structure was based on having a period where no units were purchased for a specified initial period rather than adopt the then established charade of initial units. Such a charging structure is known more broadly as a "nil allocation period" approach. Of course, Lifetime did not call it so - referring to it as "a unit attribution suspense interval". You could not make it up.

The perfect storm then continues when the actuary's dodgy handiwork is distributed pretty exclusively (getting back, for example, to the Lifesaver) by those who probably benefited most from the primary reason for the dodgy design structure in the first place, the jolly salesman. Broadly, circa the first year's premiums went on commission and the second year's premiums went to the insurance company.

The combined efforts of actuary and salesman meant that there is no wonder the customer was regularly duped in the past in many different ways. I can recall various close shaves that I've personally had down the years where, were it not for, my poacher come gamekeeper actuary pal and another honourable soul, I would have been similarly duped by people purporting to have my best interests at heart.

Getting back to the man from Clontarf, the bits I've heard from Liveline have been dreadful in terms of quality. But I mean that's hardly surprising - it's tabloid radio. I kind of admire Joe - he comes from very humble stock, seems to be of ordinary intelligence - yet has managed to earn an out of the ordinary income for what seems like a cushy enough number. In that sense, he is more successful than most on this site. He has worked out long ago that he gets paid for outrage, like our actuary for obfuscation, our salesman for bull....

 

[Bronte]

PMU this shows just how much there was a disconnect between the product designers and the customer. You seem to be financially savez and yet have completely misunderstood the proposition, that's the designers' fault, not yours.

.

I totally disagree with this. It was done deliberately is my belief. Total scam.

 

[Bronte]

. When, for example, Lifetime launched itself, its charging structure was based on having a period where no units were purchased for a specified initial period rather than adopt the then established charade of initial units. Such a charging structure is known more broadly as a "nil allocation period" approach. Of course, Lifetime did not call it so - referring to it as "a unit attribution suspense interval". You could not make it up.

.

Which to be fair to Joe Duffy he had an expert called Kieron on, and Kieron explained that to the listeners. He said basically the first couple of years premiums went into the pockets of the Life company/commission for the broker and not into savings. (in a nutshell) But nobody buying these products knew any of this and designedly so. (I posted the points Kieron made upthread)

Good description by you of Joe too. I imagine the salesment's commission's this week are way down.

 

[Dan Murray]

Which to be fair to Joe Duffy he had an expert called Kieron on, and Kieron explained that to the listeners. He said basically the first couple of years premiums went into the pockets of the Life company/commission for the broker and not into savings. (in a nutshell) But nobody buying these products knew any of this and designedly so. (I posted the points Kieron made upthread)

Apologies Bronte - my post repeated ground that you had already, and more succinctly, covered.....

 

[ClubMan]

I disagree. They were clearly sold as investment products and not as insurance products.

...

But based on this brochure any person investing in such a product (and I was one) would reasonably assume they were investing in a product that invested in the IL managed fund. We now know that this was not the whole truth and in fact you were investing in a fund that fed into an insurance policy.

You disagree with me but make practically the same point that I was making!?!

 

[Bronte]

I disagree. They were clearly sold as investment products and not as insurance products.

I have a copy of the original promotional brochure for Irish Life LifeSaver. It was sold as an investment product and not as an insurance product. whole truth and in fact you were investing in a fund that fed into an insurance policy. Life assurance is mentioned in the brochure but as an “added bonus”.


.

Any chance you could scan the brochure and post it up.

What's you've said about the brochure ties in exactly with what the callers to Joe were complaining about. They understood they were saving to have a little nest egg. They trusted the agent/broker/hardsell and kept paying away over decades and all the cases I heard got nothing.

 

[Dan Murray]

They died out in the early eighties.

Duke

This is simply not true - I just rang my pal to confirm.

 

[Duke of Marmalade]

Duke

This is simply not true - I just rang my pal to confirm.

Post corrected.

 

[Duke of Marmalade]

Dan, it has already been conceded that initial units had the potential to obfuscate. Initial units had deffo disappeared from all the mainstream products like Lifesaver by 1990. Possibly yet another spin off thread is needed on initial units but it seems a tad off topic to Mick, Christina et al's complaints on Joe Duffy.

 

[Brendan Burgess]

Guys

Stick to the facts and don't make personalised comments.
If someone makes a personal attack on you, ignore it or report it. Don't respond.

In particular, you are wasting a huge amount of time writing a long, well argued point and including a personal attack in it. The whole lot will be deleted.

I do not have the time to edit posts - so I have effectively reset the clock, and you can resume the debate from the earlier stage.

Brendan

 

[Dan Murray]

Hi Brendan

Of course, you are totally right - the hand-bagging went a little far yesterday. Mea culpa, mea maxima culpa.

In summary, I think it's fair to say that a lot of the complaints on Talk to Joey were unjustified and Joe played to the gallery because he is a master at understanding that there is no such thing as bad publicity - especially in his line of business - the ratings game. [Read: Operation Rules Liveline 1.01 - Be populist and otherwise cause as much controversy as possible without being sued!] However, there is also no doubt that consumers need to be wary, when purchasing financial products, that the providers and their agents can not always be trusted. The debate then is to what extent this last sentence applies.

So all I was really trying to say is that when the designers and distributors of products combine to mislead the consumer, very bad outcomes can arise. Just now, I did a search on this site on "initial units" - which threw up the following very informative link. Obviously, it refers to practices in a different jurisdiction, but I think there is no need for us to be overly parochial - the principle of uberrimae fidei ought to be universal. What is really quite disturbing is that the cynical, systemic and exploitative behaviour, as outlined in this thread, continues to occur to this day.

I genuinely recommend that if you are interested in this area that you take the time to read this thread as it exposes the murky side of the insurance/investment world. Of particular benefit is that the links to Quantum's brochure and contractual terms are still "live" for all to see. I will leave it to others to comment further - other than to say that I think it's noteworthy that Steven Barrett - one of, if not, the most regular and respected practitioner(s) within the AAM community, features prominently in the thread and agrees with its essence!
http://www.askaboutmoney.com/posts/1385897/

Bí cúramach a chairdre - bí an chúramach ar fád

 

[Duke of Marmalade]

The thread has gone quite off topic as exemplified by that last post. I suggest it should be closed. I certainly will not be making any further contributions to what promised to be a quite informative discussion.