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Fundsupermart sells insurance now! Rebates 50% of commission back to you

Online platform Fundsupermart starts selling NTUC Income, TM Life and Manulife and are making commission structure  transparent to you.

One of the recommendations in the Financial Advisory Industry Review  Panel Report was to increase the transparency of the industry and the aftermath word is that there will cheaper alternative choices for the consumers.

This week we got news that Fundsupermart, who are one of the earliest to bring cheaper unit trusts compare to the banks to the consumer, will start selling insurance from 3 insurance companies. They are also the earliest to make it easy for folks like you and me to purchase Singapore Government Bonds (SGS) for as little as $1000.

Business Model

Fundsupermart is an online portal distribution arm of iFast Financial whose 2 biggest shareholders are SPH AsiaOne and DMG securities.

As an online platform, they can bulk transact and sell their unit trust, SGS Bonds so as to cut away unnecessary channel expenses such as advisors, and negotiate better rates, take advantage of online marketing to reach a wider group of audience.

To the end customers like yourself you get a

  • one stop shop to browse unit trust from different asset managers
  • SGS Bonds
  • Lower sales charges and switching cost
  • Research articles and community support

The push into insurance is probably coming and I thought they would have taken this up long ago. The way I see it, perhaps before this the insurance companies were the ones resistant to the idea for fear of cannibalizing their existing agents thus alienating them.

All that change with the push towards fee based financial advisors. It sort of give them the impetus to at least try to earn a bit and be the ones to cannibalize rather than let others do it.

Take a look at the advertisement article from Fundsupermart here.

Transparent Commission Structure and Commission Rebate

The main selling point is that they will rebate you 50% of the commissions earned. I  suppose they can do that perhaps because they are able to cut their expenses by going with this model or they are willing to lower the margins due to higher volume.

The main benefit is that the consumer can now how much they are actually paying for the product that doesn’t accumulate cash values or go into protecting them.

Creating leads rather than selling online

From the looks of it,  Fundsupermart doesn’t intend to sell the insurance online. Traditionally, term insurance can be sold via internet portal overseas.

This model seems to make use of their transparency as a selling point and use the complementary nature to general sales leads.

In a sense, I wonder if this will just be an excuse for them to cross sell much more lucrative products.

Buy Term and Invest The Rest

I see them very easily offer the clients 2 options

  • Be Conservative and buy a Whole Life option! Its all in one
  • Buy Term and Invest The Rest. Notice now they can ask the clients to invest the rest because they sell unit trust. It is a win-win!

My take on this is that whole life insurance you have to to live with below average returns and that investing in unit trust means investing in actively manage unit trust which traditionally have under perform the benchmark. You are better off with passive investing in Exchange Traded Funds.

Unit Trust

  1. Actively Manage have a survivorship issue
  2. Past good returns do not equal future performance. I learn that the hard way which I will talk about in the future
  3. High expense is definite, high returns on the other  hands are improbable. Unit trust expense ratio > 1.5% per year versus < 0.5% for ETFs
  4. Cost compounds

Update {13 May ’13}: Fundsupermart pulls page and promotion

I am not sure if they have antagonized the wrong group of people but it seems the page and the promotion have been pulled from Fundsupermart.

I hope this is not due to them losing the support of distributors as this will cannibalise the insurance distributors existing channels.

Summary

Commissions average 6% of Premiums

My question is whether the premiums are more expensive than if you buy direct from NTUC Income (or is there a way for you to do something like that)

If the “transparent” premium is more expensive, then that will eat into the appeal of the 50% rebate.

Somehow that commission margin reminds me of the amount you pay for when purchasing or selling properties!

A 50% rebate will bring down the premiums paid substantially which is a good thing

Whole life is 10 times more expensive commission wise. No wonder agents sell more

If you need more justifications of the economic bias of agents, look no further then this.

They are not pay by per hour but they get rewards by the amount for the time spend on you.

So if they spend 8 hours of their time with you, would you think its better for them to earn by selling you term or whole life?

Its pretty clear cut. Most don’t even bring up that term option to you. If you don’t know you won’t buy.

Difficult to adequately cover with Whole Life

Looking at the premiums, it makes you understand why Singaporean’s are not adequately covered.

I look at my friends coverage needs and its nearly 1.8 mil. My friend would need to pay an annual premium near 50k.

A more feasible annual premium would have be 4.8k.

If the economic bias of the agents make most of them sell whole life and its hard to afford, that is the main reason for low coverage.

Overseas Property Leases and Rentals offers more predictable cash flow
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anonymous

Wednesday 3rd of June 2015

This may be an old article but recently the anti competition body is going to fine 10 FA companies who pressured fsm to pull the commission rebate: http://www.channelnewsasia.com/news/business/singapore/10-firms-issued-proposed/1877472.html

Kyith

Saturday 6th of June 2015

Hi anonymous, thanks for bringing this to my knowledge. i was surprised their all IFA firms.

Sophia

Wednesday 24th of July 2013

The economic bias of financial adviser doesn't justify anything at all for us, doesn't matter which method in which they are remunerated. The idea at the end of the day: You got to be serious enough to bother to know what you want and need, query the adviser on all that you have learnt, and make the decision at the ultimate end after hearing all the advice. Then only you make it worthwhile for yourself.

Ed

Wednesday 8th of May 2013

SGS Bond yield is so low, where else can we find better yields?

Noob

Friday 3rd of May 2013

Hi Drizzt,

FYI, the insurance tab in FS has been removed.

Kyith

Saturday 4th of May 2013

huh, why would they do that?

owl

Friday 3rd of May 2013

Hi Drizzt,

Just an update, Fundsupermart had changed the rebate to a promotion period till end of May. They had also removed the name of the Insurer that they will be providing.

Kyith

Friday 3rd of May 2013

Ah shucks, let me update the post when I get home.

Thanks so much owl. So it's not a permanent thing

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