[ajmat]

Originally Posted by am1m

I'm wondering what the use is of these relationship managers. I've never gotten anything useful out of any of my initial conversations with these RMs. So I've just blocked their numbers.

They come and beg you for FD's and to put max cash at the end of every quarter.
Waste of time

[FiatDiesel]

Originally Posted by JMaruru

My sister had invested in some ULIP based pension schemes of ICICIPru. Now that has completed its tenure, the rep from ICICIPru is asking her to re-invest in some other ULIP schemes. She wanted to withdraw the entire corpus BUT he quotes some rules and says it NOT possible. According to him only way she can get part of the corpus is by re-investing some of the corpus into schemes advised by him.

Is there a way to come out of this imbroglio? Please advise!

ULIPs are day light robberies committed by insurance companies and by agents / banks selling those policies. You will always find agents / banks pushing for it rather than basic term plan.

The percentage of commission is huge in ULIPs spanning over the years hence it ensures regular income for agent / good revenue for bank. No one would like to sell you basic term plan of insurance which is the actual need to cover the risk on life to ensure financial help to dependents.

Never mix investment with insurance. For investment today there are multiple avenues including direct mutual funds, NPS which have minimal costs and invest maximum money of investor.

To get out of this situation, shut that agent out first. Read the complete policy document especially the surrender clauses. Typically there is some lock in period, post that policy could be concluded however returns could be muted if not in loss. In any case getting out of the agent and ULIP trap is any day better.

[Tanmay_868]

Thank you to all the members for providing true facts related to ULIP and cunning practices of RMs.

So a bit of background first:-
I am a MBBS student currently 20 years old. I was looking at various options to invest monthly and had finalised some direct MFs. I am looking at minimum 10-15 years investment period. Told my father about them and he agreed. But he told that RMs from various banks HDFC,SBI were calling him repeatedly for ‘meeting’. We agreed and soon HDFC one’s came. They told about policy/ ULIP combing Life insurance plus mutual funds. It is detailed below.

Members please enlighten me that whether the terms and conditions related to ULIP have changed in recent 2-4 years.
This is because recently RMs from HDFC and SBI visited and showed the policy combining Mutual Funds+Insurance with a minimum 5 year of lock in period. This similar policy is being provided by many banks.
The policy name of HDFC is Sampoorn Nivesh under this plan Discovery fund. We have option to invest in mid cap company fund, Discovery, Balanced advantage Fund etc. But >10% are found in mid cap only.
They are charging 5% brokerage charges and in return giving 12-14% as very least. We can invest maximum of 2.5 lakhs per annum so as to apply income tax section 10,10 D.
Also we are provided life insurance to amount of 50 lakhs(if I remember correctly).

But main benefit is that NO LTCG TAX is charged. So in end of policy even after 15 years no tax has to be paid at maturity.
If we go for MFs then after 15-20 years substantial tax has to be paid when we withdraw

Members please suggest whether anyone has first hand experience or have any knowledge regarding this policy.
It seems to good to be true.

This is the link of brochure https://https://www.hdfclife.com/uli...06&language=en

[DroopyGarfield]

Originally Posted by Tanmay_868

Thank you to all the members for providing true facts related to ULIP and cunning practices of RMs.



They are charging 5% brokerage charges and in return giving 12-14% as very least. We can invest maximum of 2.5 lakhs per annum so as to apply income tax section 10,10 D.
Also we are provided life insurance to amount of 50 lakhs(if I remember correctly).

But main benefit is that NO LTCG TAX is charged. So in end of policy even after 15 years no tax has to be paid at maturity.
If we go for MFs then after 15-20 years substantial tax has to be paid when we withdraw


It seems to good to be true.

I typically believe that your financial advisors should not be banks or institutions who have a vested interest in selling their own products. As such, a quick digging on ValueResearchOnline suggests that ELSS are outperforming ULIP, in nearly all aspects.

https://www.valueresearchonline.com/...ich-is-better/

Also, LTCG tax are applicable for ULIPs starting Feb 2021. This should tell you something about the talent of your financial advisors. They are dying to get your money, by hook or crook. I cannot stress enough that you need a sound validation mechanism to verify their claims and most of the knowledge is free.

[anilp]

Originally Posted by SixPistons

Today my HDFC Bank RM tried to up sell me another lopsided scheme, which I didn't even ask about in the first place.

This is common with HDFC Bank RMs. Some time back, I had gone to enquire about Infrastructure Bonds which they handle. Instead of helping me with that tax saving investment, the RM was more busy trying to make me put that money in FDs instead. When I finally put my foot down, he refused to help me further with the bonds and turned hostile.

It got done only after I contacted the branch manager and escalated matters.

[dearchichi]

Originally Posted by hothatchaway

It can be argued that 7.1% does not beat inflation yadda yadda yadda, but for millions of indians who have modest incomes, PPF EPF etc are their best investment buddies.

Not only is the rate of return modest, it is further diminished if you consider the time value of money, ie I would rather have 96 rupees now than 100 a year down the line.

These quotes appear contradictory to me. The first one seems to disregard inflation when net returns are judged, while the second doesn't.

[hothatchaway]

Originally Posted by dearchichi

These quotes appear contradictory to me. The first one seems to disregard inflation when net returns are judged, while the second doesn't.

Inflation is what it is. Most people, especially retirees, don't have any exposure to equities and have their money parked in FDs PPF KVF etc. Their way of beating inflation may be to move to a less expensive location, supplement with rental income and perhaps also compromise with their lifestyle to the extent possible. Education and healthcare are the two areas the most susceptible to inflation, the latter will remain a concern throughout and no amount of smart imvesting can help if something lethal strikes.

The second example is based on the time value of money. I took a loose monetary figure to illustrate it. More specifically, the annuity payouts are usually abysmal and can't even beat FD returns, let alone inflation. You are much better off investing the money on your own, even in conservative instruments, instead of paying a handsome amount each year for a decade or so and then have your own money returned to you.

Do the math for yourself, it will be evident

[vijaykr]

Originally Posted by Tanmay_868

in return giving 12-14% as very least. We can invest maximum of 2.5 lakhs per annum so as to apply income tax section 10,10 D.
Also we are provided life insurance to amount of 50 lakhs(if I remember correctly).

But main benefit is that NO LTCG TAX is charged. So in end of policy even after 15 years no tax has to be paid at maturity.
If we go for MFs then after 15-20 years substantial tax has to be paid when we withdraw.

It seems to good to be true.

Is the RM or HDFC willing to give you in writing this projected return % for the entire duration of the policy? Unlikely. It not only doesn't seem to be good to be true, it actually is.

My suggestion, stay as far away from these kinds of ULIP/money back policies as you can. Keep investments and insurance separate.

You have done the hard work of identifying direct plans of MFs you are interested to invest in regularly. Go ahead with that investing philosophy. You are young and will be able to get large Term insurance covers for small premiums. That's the most economical way to get insured. The savings from the insurance premiums can also be directed towards MF investments for the long term.

Regarding tax, don't start an investment activity just to reduce/avoid tax. Inflation is a bigger issue to tackle in the long term and you've to find investment avenues that help you beat it over time. MFs can be used in a tax efficient manner to reduce or better manage the outgo over time along with accumulating significant corpus.

You'll need to work with a qualified professional financial advisor to ensure your financial goals align with your investment plan. And this advisor is unlikely to be your bank RM due to conflict of interest. The RMs work for the bank, and you need a person to work in your long-term interest.

Cheers!

[am1m]

Originally Posted by vijaykr

My suggestion, stay as far away from these kinds of ULIP/money back policies as you can. Keep investments and insurance separate.

I'm surprised that ULIPs are still offered as an option. As far as 10-15 years ago itself, people used to warn against opting for these. I remember one 'financial advice' seminar that the HR department of a company I used to work at had organized, and the presenter went on to talk about ULIPs. Very soon, he began to get uncomfortable questions from the audience and he actually lost his cool when doubts were cast about this as an investment option! That itself did more to convince the crowd that he was trying to pull a fast one!

[Samarth 619]

My personal experience with ULIP funds had been negative. And from whatever little information I got, I concluded that ULIP as an investment tool is overrated for what it is.
LTCG Tax savings is one factor, but let's put it aside for once (in direct comparison to MF's, obviously, this is the first point that crops up now).
Commission is not a big deal, as there's no one to stop you from being an insurance advisor yourself, or let a family member be one. At that time, it only took an 18 day training and 50% marks in a multiple choice exam. So, the commission stays in the family.
In fact, I was an advisor myself about 15 years ago for similar reasons, but the agency is defunct now.


The bigger thing is: Quality of the Fund managers. In older days, the situation was heavily in favour of mutual funds.
Mutual fund managers were like the wolfs/ the sharks of the industry, those who'd digest the market at the breakfast, street smart individuals, earning lakhs and crores of rupees in net earnings easily with a host of other benefits, while insurance fund managers were like rabbits in comparison. Lower earnings, lower everything. Insurance considered ULIP's just a "Part of our wide product portfolio".
I know IRDA requires separate fund managers for Equity and debt in insurance companies, but is it even helping the cause?

Today, I'm not aware. I do know some insurance companies have appointed mutual fund ex-staffers, but are most of them any good against present MF top guns? I can't say due to lack of updated information, left this industry years ago.
But there's one thing certain- a person on a meagre (Rs. X Lakh) monthly salary can't be expected to do a great job in managing funds in crores and billions. And a capable person won't settle for so less, when he knows he's worth way more.

[hemant.kamat]

Let me add my 2¢: My colleagues wife, who's a bank sales executive used to frequently camp in our office canteen to emotionally entice (mostly) mid-level employees into investing in money back schemes. Until she cornered me one day with her sales pitch:

"If you invest only ₹10K/month in this scheme you will retire with ₹80L, and god forbid, if you're not around tomorrow, your family will at least receive ₹1Cr"

My reply was that her ₹80L retiral corpus was taxable, subject to market volatility and the sum assured was only ₹34L, less than the total premium paid. And that I'd rather invest ₹1.1L annually in PPF and buy a ₹1Cr term insurance cover with the remaining ₹10K. This would let me retire with a guaranteed tax-free ₹1.35Cr (after 30 years) or pay my family ₹1Cr in the event of my untimely demise.

Unfortunately for her, my reply was heard (and spread) by everyone in the canteen. She hasn't spoken to me since.

[sukhbirST]

Agree with the above calls and schemes RMs force/suggest. In my last few years experience, they are yet to act upon basic requests. However branch visits do help bcos it is face to face. Thanks for sharing. HDFC is now going the ICICI way , sadly.

[NetfreakBombay]

Originally Posted by am1m

I'm surprised that ULIPs are still offered as an option.....

Originally Posted by hothatchaway

Small savings schemes like the PPF is supported by the state and a chunk of the interest is subsidized to ensure the published rate of return.
These ULIP schemes can never hope to compete because they collect money and invest them in the market. They keep part of the return before returning your own money back to you in installments over many years. Not only is the rate of return modest

ULIP do have "some" value to investors. But only for those :

1. Who can save 30% in tax saving every year (if PF and other things do not already cover it)
2. For some reason wont invest in MF or are not financially aware

For such investors, ULIPs are much better than FD / PPF etc. I was helping a friend analyse a ULIP he purchased in 2004 (20k yearly premium).

He saved 6k every year till 2013 in taxes and fund value is now 9.2 Lakhs . Similar 20 year investment in PPF would have resulted in fund value of 8.8 lakh rupees https://groww.in/calculators/ppf-calculator .

Had he invested same amount in easy passive fund like NIFTY , Fund value would have been 17.9 lakh https://www.valueresearchonline.com/...s/#performance .

Returns (XIRR) :

[Fx14]

Originally Posted by SixPistons

Here goes: I came across Sweep-In Facility, which seems like a good convenience on the surface. Now, I thought it to be a good idea to speak with my RM to better understand the product.

In case you are interested in knowing how it works (across various banks with minor variations), listed below are the answers to your queries.

Though my 2p is that this product was suited more during the earlier regulatory environment wherein interest in the Savings bank account was calculated only on the lowest balance maintained in the account between the 10th of the month and the end of the month.

Currently, interest in Savings bank account is calculated on the daily EOD balance for which the offerings of some banks with slab-wise interest rates are more attractive and remunerative, if you maintain higher balances.

Any amount over a pre-designated base limit gets converted into a Fixed Deposit, gives higher returns than saving accounts and is withdrawable seamlessly.

This refers to Sweep-Out (not Sweep-In). You specify a threshold balance above which the excess balance is swept out from the Savings Bank (SB) account and into a Fixed Deposit (FD) booked for the specified tenure (let's say 1 year). This FD is then linked to the SB account for the reverse Sweep-In which is triggered in case of shortfall of balance in the SB account.

The Sweep-In amount varies across banks (basis their T&C's) and could be rounded off to the nearest rupee / hundred rupees / thousand rupees etc. of the shortfall encountered.

Product variants exist of :
1. Only Sweep-In - where you manually book an FD for the tenure of your choice and request the Bank to link the FD to your SB account for Sweep-In when there is a shortfall of balance.
2. A 2-way sweep - wherein both the legs are automated basis pre-determined thresholds.

I asked a few more questions on how the interests work, especially since this is not a classic FD and I may withdraw from it during the tenure how would return be computed and if there is anything else I must know about the scheme that is not mentioned.

Interest is paid only for the actual tenure the FD has run, at the corresponding interest rate applicable, irrespective of the initial tenure and interest rate selected.

To illustrate, suppose that you have placed a FD of Rs. 1 Lakh for 1 year @ 7% p.a. and linked it to your SB account for Sweep-In.

Let's assume that on the 46th day there is a shortfall in the SB account due to withdrawal necessitating a Sweep-In of Rs. 60,000/- from the FD to the SB account. The balance amount of Rs. 40,000/- is allowed to remain in the FD till maturity (the end of 1 year).

If the FD interest rate applicable for the period of 46 days is say 4% p.a., then the interest would be calculated as follows :

1. For the amount of Rs. 60,000/-, it would be
= 60000 * (46/365) * (4/100)

2. For the amount of Rs. 40,000/-, it would be
= 40000 * (7/100)


Hope this helps you.

[Fx14]

Short practical answer, since you seem to know about investments - Do not combine your Insurance and Investment needs.

Originally Posted by Tanmay_868

They are charging 5% brokerage charges and in return giving 12-14% as very least.

So straightaway your invested amount gets reduced to 95% of your actual contribution.

Next, you need to further deduct the MORTALITY CHARGES - the amount of premium paid towards the insurance coverage.

The balance can then be invested towards earning returns (assuming there are no more deductions towards fund management / allocation charges etc.).

Compare this to the fact that in Direct MF schemes, almost 99% of your actual contribution earns returns.

Also, check which is the underlying scheme that gives you the return of 12-14% as stated. Is it Large / Mid / Small Cap? Now compare against similar category OF DIRECT MF schemes to see the truth for yourself.

We can invest maximum of 2.5 lakhs per annum so as to apply income tax section 10,10 D.

Do note that this cap on ULIP of maximum of 2.5 lakhs per annum was introduced few years ago itself. Another few years and the LTCG treatment could very well be the same for ULIP as MF.

But main benefit is that NO LTCG TAX is charged. So in end of policy even after 15 years no tax has to be paid at maturity.
If we go for MFs then after 15-20 years substantial tax has to be paid when we withdraw

This is the most hilarious part. We do not know who will be the Finance Minister and his / her TAX plans after 15-20 years, yet they are predicting your tax out go?

Basis current tax regulations too, you can stagger your MF withdrawals if you wish to ensure that your LTCG will be within the non taxable limit of Rs. 1 Lakh.

So, don't fall for such sales pitches.