Author Topic: Royal London 360 - I dun goofed  (Read 73223 times)

StockBeard

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Re: I dun goofed
« Reply #100 on: November 26, 2014, 09:49:57 PM »
I was sold the EXACT same product.
[...]
Take a look at this caluclations sheet that I made for the Royal London 360 product: https://docs.google.com/spreadsheet/ccc?key=0AlZ4DevKDH_AdDdLQlozM1JKa3V4Wl9Yei11VkxLTUE&usp=drive_web#gid=0

Danclarkie, your spreadsheet is extremely useful. I myself have been a client of RL360 for 28 months now, and just sent the paperwork to cancel the policy.
 
Some questions about your spreadsheet though:
- Your spreadsheet only goes up to 25 years. My RL360 plan was 30 years.
- Why do you care about Isle of Man's inflation? Shouldn't you be putting in there the inflation of the country you live in? At the end of the day, it's what will matter for your lifestyle, so not sure why you put the Isle Of Man there. For example, I live in Japan, and inflation is more or less 0 here, meaning any investment with some sort of interest can beat it. [Update: I figured it out. this is because the policy specifies that the fixed monthly fees for the contract will go up according to IoM inflation]
- In your example, your Financial advisor's commission fee is 4.92%. In my case, this was 0.5%. Did you get scammed even more than me, or am I not looking at the right numbers? [Update: I was not looking at the right numbers. It seems in some cases the financial advisor is getting a "lump sum". In my case, the 0.5% is an annual rate, that is added to the other fees. It's actually a worse scenario in the long term, it just literally adds 0.5% to the already terribly high average. I had to modify the spreadsheet accordingly]
- In your example, your actual growth rate was -2.9%. Wow, what happened here? If I play with my current values, I think so far my growth rate was about 10% over the past 2 years and a half. I'm not saying it would stay that high forever, but at that level my advisor is actually beating the market...

On a related note: many people who are in this scheme are asking themselves if it is worth cancelling everything and taking the loss now (the answer is yes in all scenarios I've tried), or keep investing in that plan. It is easy to extend Dan's spreadsheet to estimate this.
The idea is that you compare starting the "alternate" plan from scratch, while your RL360 policy is already fairly advanced.
Add a new column "V". It starts at "whatever money you got back (that's the surrender value, or column Q in Dan's spreadsheet)" on the month of your cancellation. In my case, I am cancelling on the 28th month of my policy, so I'll write
in V28:  =Q27
in V29: =((V28+$B$8)*$B$41)*$B$47
(that's (value so far [V28] + monthly premium [B8]) multiplied by growth rate, multiplied by calculated inverse fee)
Then drag V29 to the bottom so that the same logic applies to V30, etc...

You can be conservative and have your first value be "0", if you assume you won't see any money back (if you're in your first 2 years, or if you think RL360 will never send you the money back)
You can create a column W, that will contain V - Q, and then you'll easily see when it reaches a positive amount.

From there you can play with the Growth rate to see how it impacts the result. Basically a high growth rate of the market overall will relatively make the RL360 fees appear smaller, meaning it will take more time to catch up with the alternate plan in a "good" market. On the other hand, if the market tanks, the fees of RL360 will be relatively much bigger.

All of the above (and Dan's spreadsheet) assumes that your RL360 advisor cannot beat the market in the long run (a very safe assumption). Although in my case they have been significantly above the market for the past 2 years, as it's been stated several times, it is safe to assume that over the course of 15, 25 (or, in my case, 30) years, they will be very close to the market returns. As such, it is safe to assume you can find a better plan with lower fees, that will have the same growth rate.

In my example, I have found that it will take me from 2 to 6 years (depending on growth rate) to get back to a level where my alternate plan will beat "staying with RL360". Keep in mind that I am retiring from the plan on month 28, so I am losing everything from the first 24 months. Depending on how you look at it I am losing somewhere from 80% to 90% of my investment, yet it will take only a few years to beat RL360.

All of this depends on all the fees, what your "other plan" is (in my case, an ETF from Schwab with a fee lower than 0.1%), how long you were scheduled to be in the RL360 thing, etc... So, it's difficult for anyone to help you in your specific scenario, but I found that even tweaking all the variables (growth rate, fees for your other plan, etc...) to exaggerated values, it is still better to get out of the RL360 scheme and invest in another location.
On the same line of thoughts don't fall for their "tax" argument. I can't think of a world where my tax on investment benefits + my alternate plan would end up costing me more than the atrocious fees this plan ends up being. And that's assuming I end up paying 0 taxes on their stuff, which, I have already confirmed, is not going to happen.

Again: take the 30 minutes it takes to understand Dan's spreadsheet, and start playing with the numbers, your own plan, etc. It's enlightening.

After playing with it a bit, I concluded that it is safe to get out of RL360 as soon as you possibly can, independently of how much you've invested in it, and how long you've been with them. Independently of where you live, there *HAS* to be a better option out there.
« Last Edit: November 28, 2014, 12:09:12 PM by wololo »

timjp

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Re: Royal London 360 - I dun goofed
« Reply #101 on: November 26, 2014, 10:17:57 PM »
Spoke with the advisor over lunch, so here is where things stand.

- Question about the commission wasn't answered in a way that made sense. He mentioned "everyone gets commissions in this industry". Don't have the data to prove him wrong but I don't feel like he addressed my concerns.
- I felt a little pressured to do things. He asked whether I was ready to move forward straight away
- He mentioned this forum was just a place for cheapskates who would rather jump through a ring of fire than pay fees for something worth it. Probably the final icing on the cake.

Said goodbye then sent an email that I am not interested after we had parted ways.

I am still looking for other automated options in Japan if anyone has them.

MDM

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Re: Royal London 360 - I dun goofed
« Reply #102 on: November 26, 2014, 11:29:50 PM »
Said goodbye then sent an email that I am not interested after we had parted ways.
timjp, well done!  It's not easy to resist the high pressure sales tactics.  Best wishes for finding a good alternative.

dungoofed

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Re: Royal London 360 - I dun goofed
« Reply #103 on: November 26, 2014, 11:36:58 PM »
There is an interesting but little known version of the Turing test.  In this version, one tries to distinguish between
  > an unwary investor seeking support for his hope that something seeming too good to be true, really is true - despite repeated contrary cautions
  > an agent of a financial firm trying to lure unwary investors by pretending to ask questions, but in reality looking to advertise

Here, I find myself unable to distinguish.  Other opinions?

:-) I was thinking the same thing, but apart from the fact that it's hard to prove, does it actually matter? Our combined response remains the same.

Furthermore, if you go back to my posts on the first page you'll see I seem almost evangelistic in my writeup. So I daresay there is one more possibility:

  > an unwary investor seeking support for his hope that something seeming too good to be true, really is true as he has already taken the plunge and doesn't want to face the fact that he/she may have been extremely wrong.
« Last Edit: November 27, 2014, 12:20:10 AM by dungoofed »

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #104 on: November 26, 2014, 11:37:15 PM »
timjp, thanks for coming back to report :)
Care to name the company who tried to sell you this bad product?
In my case this was Select Asset Management in Tokyo (and some of their former employees have moved to a company named Tyton Capital, selling the same products)

This is very simple: either they truly believe the product is good, in which case they are bad at their jobs (because they should point you to low fee ETFs which are largely superior products), or they don't, in which case they are scamming you to get the commission. Again, as I posted above, if you run the numbers in Dan's spreadsheet, it becomes extremely clear. YES, in the long run, RL360 makes money. But NO, this is not a good product. The fees are extremely high, and although the end result is better than having the money sitting in a JP savings account, the lock and duration of the plan make it very bad: if anything changes in your life goals (which *will* happen in the course of 20 years) then you are screwed

I am in Japan but am lucky to have a brokerage account in the US thanks to my company (I'm a specific case and I don't think a "random" person in Japan can have such an account. They actually told me once that they would have closed it if I hadn't been one of their clients for so long). Wiring money to this account, however, is very tough... I have some income directly from the US so that hasn't been a problem so far, but now that I'll have my monthly premium on RL360 cancelled, I'm on the same boat as you, not sure where to put it. But even if it takes months, years to figure it out, the end result will still be better than what RL360 can yield. That's how bad this product is (again, don't take my word for it, do the math with the help of the spreadsheet shared by Dan)

Some people in this thread mentioned that Shinsei lets you invest on the stock market through some other company? Also my wife has an account on SBI, which supposedly lets her invest on the stock market, but she never made the move so I don't know how flexible this is and if it allows investing on non JP markets.
« Last Edit: November 29, 2014, 03:21:35 AM by wololo »

timjp

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Re: Royal London 360 - I dun goofed
« Reply #105 on: November 26, 2014, 11:43:20 PM »
Different company, but I'm not bold enough to mention names. Don't want to face any angry calls / legal problems as I didn't choose my username as anonymously as I should've.

JamesAt15

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Re: Royal London 360 - I dun goofed
« Reply #106 on: November 27, 2014, 12:52:27 AM »
Some people in this thread mentioned that Shinsei lets you invest on the stock market through some other company? Also my wife has an account on SBI, which supposedly lets her invest on the stock market, but she never made the move so I don't know how flexible this is and if it allows investing on non JP markets.

I had this set up some years ago. Shinsei allowed setting up a connection to a Rakuten Shouken account, and you could transfer funds there and back and place orders via their online banking interface. It worked, but was somewhat clunky. At the time I was looking at possibilities for trading individual Japanese stocks, but lost interest when I found that the high lot number and stock prices made it unworkable for most small investors. (I.e. most trades would have to be for a million yen or more, which was too rich for my blood.)

Rakuten may now include index funds, maybe even the ETF versions of the Vanguard funds. I haven't kept up on it because I believe they don't allow purchases of US-based products by US citizens, like many financial companies here do. But for a non-US citizen, it might be worth looking in to.

JamesAt15

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Re: Royal London 360 - I dun goofed
« Reply #107 on: November 27, 2014, 12:55:58 AM »
Said goodbye then sent an email that I am not interested after we had parted ways.
timjp, well done!  It's not easy to resist the high pressure sales tactics.  Best wishes for finding a good alternative.

Indeed, well done timjp! I think you'll find a much better way to invest, although there will be more hoops to jump through.

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #108 on: November 27, 2014, 07:53:17 PM »
For those living in Japan, this seems to be a good resource, since there were questions about "where to invest, if not in one of these offshore ILAs?":
http://www.bogleheads.org/wiki/Investing_in_Japan

It confirms that my brokerage account at Schwab is now not a possibility anymore (I hope I'll keep mine as long as possible), but gives a few possibilities. The real problem seems to be for US citizens living in Japan, as a lot of restrictions apparently apply to them.

It seems Japan/US are putting honest people in a situation like I ended up with, investing in shady things such as RL360, because all other legal options are either super convoluted, or not available to expats, or with very poor return on investment. Once again, an additional attempt at regulating things impacts the honest guy more than the bad people this is supposed to target...
Nevertheless that link above should be giving a few leads to people in a similar situation, in Japan.

JamesAt15

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Re: Royal London 360 - I dun goofed
« Reply #109 on: November 27, 2014, 10:08:33 PM »
wololo, that's a good starting point.

Maybe we should include any further talk about how and where we SHOULD invest while in Japan in the other thread, "Please help me invest my truckload of yen"?

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #110 on: November 28, 2014, 11:31:40 AM »
Wow, my numbers are actually even worse than I thought.
If you see above, I asked Dan why his "commission fee" for the advisor was "4.92%", while mine is 0.5%. I saw my commission fee is actually taken *monthly* throughout the entire period of the contract. In Dan's case, it is a "one off" payment, a huge lump sum. In my case, they charge through the entire life of the product. On one hand, it means they have more incentive to help you with your investment through the lifetime of the product. On the other hand, it ends up costing way much more, and it means they have even more incentive to keep you in the contract.

Specifically, the contract says:
I authorise RL360 to take a withdrawal from my policy in line with the following:
A Percentage, 0.5% per year, taken quarterly as a percentage of my policy value. (the withdrawal should not be more than 1% per year)

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #111 on: November 29, 2014, 02:44:41 AM »
So, I have sent my cancellation papers. RL360 contacted my advisor, and he instantly contacted me back to try and make me stay with the plan.
He mentioned the following things:
1) A big "loyalty" bonus at the end of the contract term (in my case, 7.5% of the fund total added after year 30)
2) Tax deferred benefits of RL360 (I understand it as: you can declare your premiums as a "life insurance" investment and deduct those from your taxable income. They will be taxed in the future as you withdraw from the policy That understanding was incorrect. What they mean is that RL360 has the same benefits as an ETF: you pay taxes only when selling/withdrawing. As such, there is no tax benefit from RL360 compared to an ETF portfolio)
3) what he calls opportunity benefits (the possibility that his company will beat the market)

I ran additional math to look at it
1) The loyalty bonus basically covers the fees of the last 4 to 5 years. It looks like a big difference but doesn't make too much impact in the big scheme

2) [Edit: I had a big explanation here based on an incorrect understanding. Bottom line, RL360 does not have any more tax benefits than an ETF portfolio does. They are both in situations where you are taxed when you sell/withdraw rather than on a yearly/witholding basis]

3) Pretending they can beat the market for 30 years is statistically unrealistic

conclusion: The loyalty bonus needs to be added to Dan's Spreadsheet, but does not make a significant difference
« Last Edit: November 29, 2014, 03:20:38 AM by wololo »

richo

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Re: Royal London 360 - I dun goofed
« Reply #112 on: November 30, 2014, 09:45:56 PM »
Wololo, have a look at the spreadsheet I linked to in my previous post in this thread. The main reason I initially made it was to take into consideration the impact of the 'loyalty' bonus as my adviser argued Dan's sheet didn't take this into account and the account was much than Dan's spreadsheet showed. Of course my adviser was wrong - it was still crap when I took this into account!

Congrats anyway I cutting your losses and running.  Once you turn off the cold shower and get out of the fetal position you realize the future is lot brighter being in charge of your own financial destiny.



 

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #113 on: November 30, 2014, 11:57:02 PM »
Thanks Richo, I looked at your spreadsheet too, but for some reason I was not able to have the numbers trigger any change. I did not look too deep into it though as I had already invested lots of time on Dan's spreadsheet.

Yoohoo, introducing yet a new tool to compute your RL360 fees!

Eventually I am not so good with excel and the like, so I ended up writing my own tool to do the math. I'll link it here, mods feel free to remove the link if that is against the rules:
http://howtoretireearly.net/ilas.php

Hopefully it is easy enough to understand. Fill in the numbers and look at the results.

That thing is based mostly on Dan's spreadsheet, with the following modifications:
- Dan's calculation of the initial unit charge is wrong, if I understand correctly. In his model, the number stays constant after the initial allocation period. Actually, given how the initial unit charge is taken (from the initial units themselves) and how the initial unit value keeps growing with time, this number varies with time.
- More generally, the fees are sometimes taken from all units, sometimes from accumulation units (e.g. adviser fee), sometimes from the initial units (e.g. unit charge). The difference ends up not being too significant, but we might as well get the math right if we are to make the decision.
- RL360 have a new fee structure compared to what people have discussed here. The adviser fee is a yearly fee (typically 0.5% to 1%) that the advisers start getting after the initial allocation period. In other words, in theory, this gives them an incentive to manage the fund correctly throughout its entire life. This is different from the "lump sum commission" that apparently some people have ended up paying to their adviser
- I take into account the final bonus

I also added a "how long have you been in the policy?" entry. This computes a "leave the ship now!" scenario, that tells people if they should leave the policy and take the surrender loss. I think this is very useful.

Please give the tool a try if you are in the same situation as I was a few days ago: stuck with RL360 and not knowing if it is worth leaving it now. Feedback welcome, I'm also willing to correct issues if some experts find any :)

One technical detail: the form uses "GET" parameters: this way you can share the resulting url to show your results to others.

(Note: I have found that my tool ends up with an RL360 surrender value that is 2.5% lower than my adviser's simulation for the same values in a 30 year term. This translates into a 0.1% cost difference yearly. You can offset that by reducing the adviser fee by 0.1% in the input. This gives RL360 a "best case scenario" kind of approach. I am confident that even by doing that, your alternate plan will look better)

Tax discussions
My adviser has insisted that I wasn't doing the math correctly, talking about some tax benefits of RL360 (what he calls gross rollup). After digging and asking for more explanation, I understand that what he means is that rebalancing an ETF portfolio (Bond/Stock for example) has a tax cost. He says the same cost does not apply when rebalancing the RL360 portfolio. The only conclusion I drew from this, is that you have to be careful to include these rebalancing costs in your alternate platform. In my case, I found that the fees I have to pay in my ETF are: management fees + bid-ask spread costs + rebalancing tax costs + dividend tax cost. Needless to say, this plan is still much cheaper than RL360, but it is important to give RL360 a fair comparison.
« Last Edit: December 01, 2014, 03:13:41 AM by wololo »

timjp

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Re: Royal London 360 - I dun goofed
« Reply #114 on: December 01, 2014, 01:21:20 AM »
Thanks for making that site! It was interesting to compare what I received.

The tax thing is something I never really understood either...what's gross roll-up?

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #115 on: December 01, 2014, 02:08:07 AM »
Thanks for making that site! It was interesting to compare what I received.
I would love if you can confirm that the values your advisers gave you roughly match what my tool gives you?

Quote
The tax thing is something I never really understood either...what's gross roll-up?
(Disclaimer! Not a professional finance guy here, if you haven't noticed yet)
My understanding, based on what the guy discussed with me:
when you rebalance a portfolio (something that happens roughly every year... but there are many strategies), you need to sell some of your investment to buy some other stuff. For example if you plan to have 50/50 Bond/Stock, but your stock outperforms the bond, and you end up with 40/60, then at the end of the year you need to sell some stock and buy some bonds, in order to get back to your ideal risk/return rate of 50% bond, 50% stock.
When you sell your stock, you make a profit. That profit is taxed, either with tax withholding, or at the end of the year. The tax is money you will not be able to invest. Over the period of 30 years, this can have significant consequences on the final value of your stash.
What the guy told me is that when they do this necessary rebalancing thing in RL360, there is no tax involved, meaning you don't "lose" anything by rebalancing. The tax is deferred to when you will actually withdraw money from the fund, 30 years later. In the meantime, the money has been used to grow your fund. That benefit is what they call "gross roll up".
Again, the benefits of that are dubious given the high fees of their plan anyway. The only thing is, you have to include the "cost of managing your stock" in your "alternate platform" fee. It's not only the fee charged by your brokerage account, but also the tax you pay when rebalancing, etc...
This here seems to confirm my understanding: http://tax-planner.blogspot.com/2012/02/gross-roll-up-to-defer-tax.html

dungoofed

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Re: Royal London 360 - I dun goofed
« Reply #116 on: December 01, 2014, 06:22:31 AM »
Wow that tool is amazing. Hopefully it helps a few people make the same (hard) decisions. I'll be linking to it any chance I get, all over the web.

Seriously, fuck Royal London and fuck anyone selling their products.

timjp

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Re: Royal London 360 - I dun goofed
« Reply #117 on: December 01, 2014, 08:03:13 PM »
Projections were about the same. Your one was a little higher by 20,000 or so. So there might be some errors in there.

Anyone has some experience on how much rebalancing and taxes affects an ETF portfolios returns. I.E. Bid offer spread, div taxes, rebalancing tax costs?

dungoofed

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Re: Royal London 360 - I dun goofed
« Reply #118 on: December 02, 2014, 03:57:36 PM »
timjp - There's a lot of info here: http://bit.ly/1CCWXne

Otherwise you might like to try searching these forums, or asking in the Investment section as this question isn't specific to Royal London 360 Quantum.

timjp

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Re: Royal London 360 - I dun goofed
« Reply #119 on: December 02, 2014, 05:40:46 PM »
Thanks for the link (ok I did google this before asking but everything I am finding is for locals and not expats), I thought that this discussion is where expats go someone might already have experience. Plus if we could destroy the gross rollup myth this would be the final nail on the coffin.

What I am finding is capital gains, depending on the country is between 20-30% and dividends tax goes from free to 20% or goes into income tax.

How many times do people rebalance their portfolio / change brokerages? If you have to move overseas or have an account that pays your taxes for you, this would cut into the compound interest right?

I feel like this isn't so much of an issue when we're talking about less than 50,000 in capital gains, but from what the spreadsheets are showing me for alternatives the return of an alternative platform should be a minus the tax percentage right?
Edit: RL360s final total should also be lower by that amount as well since tax affects the final total.
« Last Edit: December 02, 2014, 06:35:25 PM by timjp »

dungoofed

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Re: Royal London 360 - I dun goofed
« Reply #120 on: December 02, 2014, 06:55:20 PM »
Good point. First step is to check with your local Tax Office how the product would be taxed over its life and also on withdrawal. Second step is to take a gamble as to whether you think the tax law could change at all in the next 25 years of the plan.

To be honest, IRA/superannuation/etc has a similar gamble. But it's much more politically feasible for a government to "clamp down on tax cheats" than it is to squeeze the local saver. This was one of the concerns I had with the program.

Also detection methods as well as regulation are getting more strict, not less. Isle of Man has already signed on to FATCA this year. The cowboys selling Royal London's Quantum 360 etc make it clear that they don't get involved with tax issues, so do your homework.

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #121 on: December 03, 2014, 02:26:21 AM »
Plus if we could destroy the gross rollup myth this would be the final nail on the coffin.
It's not really a myth, it's just that rebalancing your portfolio shouldn't cost "that much" that it would offset the RL360 fees.

I did the math on my own for my specific case. Basically, if you assume a 50/50 Stock/Bond portfolio, with average historical growth of G1 and G2 respectively, it's reasonably easy to compute, on average, what percentage of your stock (assuming stock grew faster) you have to sell every year to rebalance. Based on that percentage and G1, it is easy to compute how much tax will be taken as a percentage of the total fund.
Benefit B gained from the stock is value of the stock at the end of the year S, multiplied by G1/(1+G1).
B = S * G1 / (1+G1)
G1 / (1+G1) is the growth from the perspective of the "end of the year". In other words, B is G1/(1+G1) as a percent of S

Amount of stock to sell (in percent of S) is (G1 - G2)/2 * 1/(1+G1) = (G1-G2)/(2(1+G1)) . I can't remember exactly how I found this value
So, what gets taxed when you rebalance, in percent, is total benefit B multiplied by percentage of stock you actually have to sell. This means G1(1+G1) multiplied by (G1-G2)((2(1+G1).

in one of my example, the stock fund would grow 16.84% yearly on average (G1), and the Bond would grow 3.22% on average(G2).
G1/(1+G1) = 14.41%
G1-G2/(2(1+G1) = 6.81/(1+G1) = 5.83%
14.41% * 5.83% = 0.84% of Stock gets taxed.
Since stock is more or less half of your total fund (the other half is bonds), about 0.42% (0.84/2) of the fund gets taxed when you rebalance. My tax rate is roughly 25%, so I end up with about 0.1% of the fund yearly used for taxes during rebalancing (assuming you rebalance once a year. Some people do it less often) . Only thing remaining for me is to add this 0.1% to the yearly fee of my "alternate platform" in my computation. For good measure, in my tests, I multiplied this by 2 just in case.
It's also a "worst case scenario" that assumes you are not investing anymore. If you are still investing in the fund, theoretically you are doing it "cleverly" by buying the portion that is "lagging" (either bonds, or stock in my example). This lets you rebalance naturaly (to some extent) without having to sell, reducing the amount of rebalancing at the end of the year (and therefore reducnig taxes)

That's math done on the coin of a table while doing other stuff, and I just learned about these things 3 days ago, I just quickly checked it seemed to add up for me with an imaginary scenario. So Don't quote me on this!



timjp

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Re: Royal London 360 - I dun goofed
« Reply #122 on: December 03, 2014, 04:28:12 AM »
Ok. From all the financial advisor talk I don't know what's legit and what's not.
That's more complicated then I expected, I probably should do the math to understand it.

Alright, so on top of that you're paying capital gains on your funds, in your American brokerage and then paying taxes again when you take the money when you want it, assuming another country.

I am drawing the negative conclusion it's either pay the government or companies like RL360...

What I was told about RL360 was withdrawals are income and shutting down the policy is capital gains.

PeanutUtd

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Re: Royal London 360 - I dun goofed
« Reply #123 on: December 03, 2014, 04:28:54 AM »

Spoke with the advisor over lunch, so here is where things stand.

- Question about the commission wasn't answered in a way that made sense. He mentioned "everyone gets commissions in this industry". Don't have the data to prove him wrong but I don't feel like he addressed my concerns.
- I felt a little pressured to do things. He asked whether I was ready to move forward straight away
- He mentioned this forum was just a place for cheapskates who would rather jump through a ring of fire than pay fees for something worth it. Probably the final icing on the cake.

Said goodbye then sent an email that I am not interested after we had parted ways.

I am still looking for other automated options in Japan if anyone has them.

Not automated but I have been using ozforex to transfer from Singapore as interesting investment options are pretty limited here - plus we don't plan to stay here long term.

They seem to transfer from Japan and I've have found it extremely user friendly. They do have a Singapore $ account though, so that makes it easier. Not sure how Japan works. I haven't checked how the conversion rates compare in a while.

http://www.ozforex.com.au/why-us/delivery-of-funds

If you plan to return to Australia in the future, could be worth investigating investment options there. Check out the Australian Investing thread. Some good ideas.

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #124 on: December 03, 2014, 05:29:28 AM »
Alright, so on top of that you're paying capital gains on your funds, in your American brokerage.
This is what my "advisor" (quotes because I don't trust a guy who sold me RL360 to be truly honest about it) told me as well.
But I don't see it anywhere in my ETF statements (except for dividends. I took that into account in my yearly fees), unless he is talking about rebalancing, but I already computed that and am not worried. My advisor told me: oh, so you expect your portfolio to never have to be rebalanced? And, bottom line is with a simple portfolio of 2 or 3 ETFS, rebalancing is not that expensive. In other words, he failed to explain to me how and when that tax was taken, he got frustrated and me too, we stopped it there.

Here are the costs I found for my ETF:
- fees when buying new shares (0 in my case)
- capital gain tax on dividends (easy to estimate as a yearly % of the fund)
- management fees (yearly % of fund by definition)
- rebalancing tax costs (I showed you my calculations above)
- ask-bid spread (not sure how to factor that in my expenses, help appreciated)
- tracking error (ditto)

Then of course, when I sell/take the money, capital gain taxes in Japan (same as when doing rebalancing). But it would be the same in my situation when withdrawing from rl360 so I don't take those into account.
If you find more details I am interested too.
 

timjp

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Re: Royal London 360 - I dun goofed
« Reply #125 on: December 03, 2014, 07:48:26 AM »
I took dungoofed's advice and googled it.

http://international.schwab.com/public/international/pricing_services/us_tax

http://perspective.schwab.com/mobile/article/7504/ETFs-and-Taxes-What-You-Need-to-Know

From what it says, is that they'll withhold the US income and paying it straight to the IRS, and judging by those tax rates, things are quite different it seems.

My guess is since you have a smaller amount (20,000-50,000) in there so there are less taxes paid?
Have you had the account for a few years?
Sounds like the guy at least knows his counter arguments...

About Aus options, not sure which is going to be long term, Japan could be an option, so could Aus and somewhere else. I just am not sure I'll decide that until kids happen.
« Last Edit: December 03, 2014, 07:53:25 AM by timjp »

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #126 on: December 03, 2014, 04:44:45 PM »
I've had the account for years. I don't see in there anything that indicates my findings are wrong. As I said, dividends are indeed "double dipped" in my case, but these taxes represent a small amount (in my case 0.2% yearly), that I integrated in my costs.

Let me quote what the links you sent says:

Schwab foreign clients typically pay no U.S. capital gains on U.S. securities trades. And their dividends from non-U.S. (offshore) sources.

Schwab foreign investors who are non-U.S residents and are a resident of a tax treaty country with a valid Form W-8BEN on file can receive tax rates on interest and dividend income from U.S. securities investments often at lower rates than U.S. residents. Other foreign investors generally pay a flat 30% withholding tax on interest and dividend income from U.S. securities investments.


Dividends and interest are taxed in the US (in my case at 10%).
Trades (selling) is not taxed by the US. The benefit is taxed, however, by the country you live in. Just like withdrawing money from RL360 would be taxed.

There's a possibility that I am being double-dipped on dividends: paying 10% to the US, then 25% again to Japan. I'd have to check if I can get a discount from Japan for those, it is a possibility. But again, dividends represent a small share of my ETF and the Schwab withholding is already taken into account in my math (and yet the ETF is still way better than RL360), so I am not concerned

I am not seeing anything in schwab's documentation that makes me believe I forgot a huge chunk. I have already sold some of my ETF and never got taxed (by the US) for it. However, of course, I had to declare the capital gain (and pay taxes) to Japan.

timjp

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Re: Royal London 360 - I dun goofed
« Reply #127 on: December 03, 2014, 07:34:12 PM »
Alright. Looks good then, the PDF says stock issued on US securities and registered mutual funds is a 30% tax withholding, so the percentage of the your returns that are dividends is reduced by 30%, so a 10% (not that this would happen with etfs right?)gain in dividends would really be 7% right?

The only other risk is if the tax rules for foreign investors change in US. I guess same risk for the Isle of Man r.e. foreign investors, but I feel like their economy is built around being offshore so there would be a big fight for changing internal tax laws in the isle.

Looks like, apart from if an ETF closes / is rebranded it could be a shock, but Schwab looks good if only they took JP investors.

Do any other cheap US brokerages take JP investors?
« Last Edit: December 03, 2014, 07:35:53 PM by timjp »

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #128 on: December 03, 2014, 09:10:35 PM »
Alright. Looks good then, the PDF says stock issued on US securities and registered mutual funds is a 30% tax withholding, so the percentage of the your returns that are dividends is reduced by 30%, so a 10% (not that this would happen with etfs right?)gain in dividends would really be 7% right?
In reality it's actually much smaller than that:
Japan has an agreement with the US, the US witholding on dividends for Japan residents is 10%, not 30%.
Additionally, my ETF's dividends represent less than 2% of the total fund yearly. Of course this can vary for each ETF, but in the "real life" example of my account, we are talking of 10% * 2% = 0.2% yearly. Someone not in Japan using the same ETF would be 30% * 2% = 0.6% yearly.

I think Schwab was the only US broker that accepted people in Japan, but they stopped doing so several years ago. go to bogleheads.org for some discussions on the subject. Other people have mentioned that you could try and convince Schwab to take you anyway, under some conditions they might accept (in particular if you have lots of money... duh...). If not, the other option is brokers that have been mentioned before: SBI, etc... I don't know precisely about the fees and tax implications of going through these guys

timjp

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Re: Royal London 360 - I dun goofed
« Reply #129 on: December 03, 2014, 09:49:20 PM »
From what it seems it's a similar tax situation from my experience with their application forms over the last week. They withhold capital cains, dividens etc or I have to file my taxes seperately. Gross rollup isn't an option like with an American account. I'll have to close the account if I leave Japan too, if I get a better offer overseas, otherwise I'll more than likely pay tax twice...

This thread has been a little eye opening, didn't realise options from Japan where as bleak as they are.
« Last Edit: December 03, 2014, 09:57:43 PM by timjp »

1984@au

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Re: Royal London 360 - I dun goofed
« Reply #130 on: January 10, 2015, 03:52:22 AM »
I can't believe I got sucked into this. I hope they cancel my account soon.

dungoofed

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Re: Royal London 360 - I dun goofed
« Reply #131 on: January 11, 2015, 11:57:05 PM »
I'm sorry to hear, and I hope the damage isn't too devastating.

People have been encouraging to me, in this thread, via PM and also in my own Journal thread here:

http://forum.mrmoneymustache.com/journals/rising-from-the-ashes-dungoofed%27s-journal-%28japanaustralia%29/

The best advice I can give is to keep your eye on the goal, and to use this as an opportunity to educate yourself, and remember that if you do these things then it'll have been a cheap lesson when the dust settles.

Captainblunder

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Re: Royal London 360 - I dun goofed
« Reply #132 on: February 09, 2015, 10:04:08 AM »
Hi Dun Goofed. I just signed up to this website with the express purpose of saying thank you for posting your experiences here! I have had a visit from an IFA (alleged!) who tried to sell me this product. I was concerned about the fees generally so did some Internet digging and came across this warning. Suffice to say I will not be investing and will be opening up a tracker fund to start my investing before moving into some shares (eventually...).

As to being behind don't sweat it. By thinking of this stuff and saving now you are actually ahead of the majority (including me!).

Happy investing and looking forward to what else I can lesrn from these boards!

dungoofed

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Re: Royal London 360 - I dun goofed
« Reply #133 on: February 09, 2015, 10:35:15 PM »
You're welcome, and I appreciate you registering. I really enjoy hearing that we're reaching people with this thread.

ResearchFTW

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Re: Royal London 360 - I dun goofed
« Reply #134 on: April 16, 2015, 01:25:26 AM »
Hi DunGoofed,

I'm another who has signed up solely to thank you for your posts and spreading awareness about these 'products'!

I recently moved to Dubai and only a few days ago had a meeting with an investment manager from PIC, part of DeVere group, who was about to sign me up on a Zurich International plan..

Suffice to say, having done some digging around I will be running a mile from any of these slimy f#&%s!

It seems my best option is to create my own brokerage account online and choose some low-risk ETF's. I'm from Ireland, so now I just need to figure out who to sign up with, what ETF's to invest in, and find out the tax implications are etc. If you have any thoughts on this feel free to share =)

Thanks again!

dungoofed

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Re: Royal London 360 - I dun goofed
« Reply #135 on: April 16, 2015, 06:55:27 AM »
Hi mate no worries & thanks. 

I'm hopeful that these scammy plans will die a swift death now that information is out there. My buddy can't give his wife another child because he has to keep up payments into one of these plans. It's absolutely tragic.

Edit: jump into the forums with your questions. The guys here are knowledgable, no scammers.
« Last Edit: April 16, 2015, 06:57:14 AM by dungoofed »

ResearchFTW

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Re: Royal London 360 - I dun goofed
« Reply #136 on: April 19, 2015, 05:16:23 AM »
Sorry, I'm only after seeing your reply now. I've since read Andrew Hallam's Expat Investing guide so I'm a bit more knowledgeable :-)

I totally agree, and the sooner the better! I know a couple of people through my wife who are actually signed up to one of these plans already. They seem content with the quarterly charts/graphs the FA presents to them, but little to they know they're probably being fleeced!

That is truly tragic, very sad...

Thanks man, I'll check out the forum.

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #137 on: May 11, 2015, 09:56:13 PM »
The article I wrote on my blog (http://howtoretireearly.net/2014/11/30/the-rl360-scam-my-15000-investment-lesson/ ) about this plan is getting some attention: it's pretty much the only post on my blog that is getting any comments. Given how some people reply in there, I suspect some of them are affiliated with RL360.

I have yet to meet a person in real life who, facing the costs involved with the plan, can look at me and tell me "I don't see a problem here", besides the people who have sold me the insurance.
So tired of this BS, seriously. I guess it doesn't help that my blog post is not professionally written and this it is obvious I am not very well versed in the world of finance, so these people are now using the comments section to pretend the plan is actually good.

I'm reading random bullshit such as:
- Why does it matter how much they take from you as long as you meet your return goals?
(answer: because it means a good ETF would net me roughly 2.5% more)

- You should take into account the bonuses, etc...
(answer: I did, that's what my tool does, interesting that you keep pretending it does not)

- you scammed yourself by leaving the plan early, you ended up paying the cancellation fee
(answer: staying longer in the plan *is* a worse thng to do, as you keep pouring money in a suboptimal investment for 25 years, resulting in an opportunity loss of hundreds of thousands of dollars, even with the lowest monthly RL360 charge)
 

dungoofed

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Re: Royal London 360 - I dun goofed
« Reply #138 on: May 11, 2015, 10:56:48 PM »
LOL wow looks like they found you! haha

Staying in the plan was proven to be worse, dollar for dollar, than leaving. Plug the numbers into the spreadsheet and see for yourself. Unless they are claiming the fund managers have "edge" lol

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #139 on: February 02, 2016, 10:57:55 AM »
For those interested in taking action, a petition exists against these ILAS schemes, it calls out Royal London 360 (RL360) in particular:

Quote
Beware

Generali, Friends Provident, Zurich International, Skandia, Royal London 360, Aviva - has a commission-hungry "financial adviser" ever tried to lure you into buying one of these insurance company's investment-linked plans? If you did, you are a victim of a legalized, corporate scam.

Stop offshore investment scams holding expatriates' money hostage: https://www.change.org/p/generali-royal-london-360-zurich-international-stop-offshore-investment-scams-holding-expatriates-money-hostage?recruiter=55431908&utm_campaign=signature_receipt&utm_medium=email&utm_source=share_petition




The Telegraph in the UK also recently calls out Royal London as one of the firms involved in a "multi-billion pound industry in which savers are regularly paying up to seven times more in investment charges and commissions than they would in Britain.":  Exposed: the rip-off investment 'advisersí who cost British expats billions

dungoofed

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Re: Royal London 360 - I dun goofed
« Reply #140 on: February 02, 2016, 02:17:17 PM »
Would be nice if the change.org petition can get some momentum.

I guess a lot of people in these forums are thinking "it doesn't affect me, I've already got this investing thing worked out" but imagine if your friend's son gets pressured into one of these things while doing a year teaching English overseas. Or if someone you know has their retirement savings set back by years due to a simple mistake or oversight.

That's the problem with these plans, the way they lock you in. It's sunk cost fallacy at its best, and so even though you now know that it's extremely overpriced you can't get out and the payments each month hang over your head for thirty. long. fucking. years.

30 years of explanations to your wife for one indiscretion with a high-pressure-fast-talking sales person is a tougher sentence than even Bill Clinton endured (gasp!)

The only way out early is to take a massive loss, or die. And people seriously consider suicide as a way out of these plans.

This is wealth destruction on a massive scale. And the victims are just normal people. Royal London and the rest of them see these people as milk cows, unless you decide you want off the farm in which case they send you to the slaughter.

I implore anyone who is committed to the financial education of others to sign the petition at change.org and share it on social media/etc. I created an account for the specific purpose, this is the first change.org petition I have signed. That is how strongly I feel about this.

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #141 on: February 02, 2016, 02:53:57 PM »
Yup. What I've found after writing the article on my blog is that people are really happy to find honest resources about this. I have also found that these companies go to significant length to make sure negative reviews about their product get removed from the tubes.

But overall, once people are out of this mess, very few of them have the will to fight back, and as such it's difficult to make things happen. A person in Switzerland found my blog and opened a case with the Swiss consumer protection entity. I've contacted a few people from Switzerland who jumped off these plans, but the answer I usually get is "well, I got off, I don't want any more trouble", or "well honestly it really was my fault for blindly trusting the adviser". For the few who try to fight back, they find out that the only entity they can go against are their financial advisers, who are just one of the many heads of the hydra. Not even worth the fight.

I do hope more people sign that petition, but I think things such as the Telegraph article, and more generally educating people about these scams (and possibly how to report them locally?) is the best way moving forward.

On that note, Andrew Hallam's blog (http://andrewhallam.com/ ) has been recommended to me as he's been calling out Royal London, Friends Provident, Zurich International Life, and Generalli regularly for their bad investment products on his blog.

Fuzz

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Re: I dun goofed
« Reply #142 on: March 07, 2016, 03:26:52 PM »
Hi - thanks for the replies so far. Whether you mean it or not it actually feels like you guys are willing to help me out here.

Ok so a couple of extra point to put things in perspective:

  • Working in the industry in which I work the number of investment options are limited.
So confused. What industry do you work in? Why can't you buy an ETF or Vanguard? I can't think of any industry where you can't buy stocks as a condition of being employed... Where are you working in Asia? If you work in financial services, there may be some limits, but that sounds well beyond anything I'm aware of. Just do whatever paperwork you need to do to open up a proper investment account.[/list]

Heckler

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Re: Royal London 360 - I dun goofed
« Reply #143 on: March 07, 2016, 10:17:44 PM »
This thread deserves some recognition for what it is.

http://www.mrmoneymustache.com/rl360-insurance/



Malum Prohibitum

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Re: Royal London 360 - I dun goofed
« Reply #144 on: March 08, 2016, 12:08:37 PM »
This thread deserves some recognition for what it is.

http://www.mrmoneymustache.com/rl360-insurance/

MMM,

If you are reading, I am not an AZ attorney (I'm licensed in GA), but there is no need to wait to get a copy of the complaint.  It is a public record, and therefore any member of the public is entitled to it.   Unfortunately, you cannot see it on the Maricopa County online docket, which just shows it exists and was filed Feb 12 https://www.superiorcourt.maricopa.gov/docket/CivilCourtCases/caseInfo.asp?caseNumber=CV2016-004485

But you can request a copy by mail.  Please see below.

To obtain copies of public records by mail, please address your request to:

Correspondence Section
Clerk of the Superior Court
201 West Jefferson Street
Phoenix, AZ 85003

Please include in your request:

The case number;
The names of the parties at the time the case was filed;
The specific documents you want to receive;
The filing date or year filed;
The number of pages of the document to be copied, if known;
Your day-time phone number and/or e-mail address so we may contact you if any questions.


I hope this helps, MMM.

Malum Prohibitum

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Re: Royal London 360 - I dun goofed
« Reply #145 on: March 08, 2016, 12:17:25 PM »
Also, just as an FYI, web site hosts of forums like this are legally protected from lawsuits based upon defamation by forum members pursuant to Section 230 of the Communications Decency Act.  Here is some info for you:

https://www.eff.org/issues/bloggers/legal/liability/230


MDM

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Re: Royal London 360 - I dun goofed
« Reply #146 on: March 08, 2016, 01:58:49 PM »

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #147 on: March 08, 2016, 02:02:42 PM »
Also, just as an FYI, web site hosts of forums like this are legally protected from lawsuits based upon defamation by forum members pursuant to Section 230 of the Communications Decency Act.  Here is some info for you:

https://www.eff.org/issues/bloggers/legal/liability/230
That's good to know, but I think MMM is not trying to protect himself, he's trying to protect his users (us). He's trying to prevent that company from getting access to our personal information. I am sure RL360's lawyers are well aware of Section 230, which is probably why they are asking for information about the people who posted on this thread. They might not intend to sue MMM himself, but those who have posted on this thread

 Those of us living outside of the US might be particularly at risk, given that RL360 could sue these people in the UK (where defamation law are strongly biased in favor of the plaintiff), and then have the judgement enforced on wherever the user lives (Europe in particular). US residents are protected by the SPEECH Act. Others are not.

Disclaimer if that wasn't obvious: I'm not a lawyer

What da

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Re: Royal London 360 - I dun goofed
« Reply #148 on: March 15, 2016, 12:38:36 PM »
Hi guys, first of all thank you for sharing all your info. As a worker in a market totally different from the financial one I find it very difficult to find "the right thing to do with my savings..". As a young expat trying to save for retirement I signed up with RL360 half a year ago.... When typing in RL360 to find the login page of my account I found this page and now I'm starting to worry... However I am also wondering if my scheme has slightly different conditions because my spreadsheet comes out a bit different (I think..). Here's an overview:

Policy Period: 20 years
Initial Allocation Period: 20 months
Initial Bonus: 4.5 x monthly premium

Monthly Premium Deposit Charge: -0.50%
Monthly Premium Deposit Bonus: +2.00%
(I guess this 0.50% charge is a 'motivator' to maintain the monthly investment above 650 or 1150 euro to maintain the premium bonus which offsets the deposit charge.)

Annual Policy Fee: 12 x 6 = 72 euros
Annual Contract Fee: -1.5% of policy value

End of Policy Bonus: +5% of policy value

NO Advisor fees/charges. Advisor mentioned RL360 pays him 0.5% of the annual contract fee. In other words its in his interest to keep the policy doing as good as possible.

When I put it all in my spreadsheet I got the following results after taking off all the costs/fees etc:
If over 20 years my policy averages 0% annual return I would loose 10% of my total deposits.
If over 20 years my policy averages 4% annual return I would gain 60% on my total deposits.
If over 20 years my policy averages 8% annual return I would gain 280% on my total deposits.

Now with my very limited knowledge of the financial markets this scheme seems like a better option than keeping my money in the bank. So when I did the math I thought this was quite a good plan instead of trying to purchase stocks etc myself online.

My questions to you guys are:
1. Are my policy conditions different from yours?
2. Am I interpreting the cost structures in an incorrect way (making me a wonderful target for these investment advisers...)
3. Are there other investment options with lower cost structures and a reasonable probability of 4-8% annual interest I perhaps should investigate?
 
Thank you all very much in advance for taking the time!

StockBeard

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Re: Royal London 360 - I dun goofed
« Reply #149 on: March 15, 2016, 12:46:44 PM »
1. Are my policy conditions different from yours?
Nope, similar to mine, different numbers but basically the same

Quote
2. Am I interpreting the cost structures in an incorrect way (making me a wonderful target for these investment advisers...)
Kind of. With the contract fee + advisor fee alone, you pay them 2% of your total money every year. That's not counting all other potential fees such as the policy fee, etc... Compare that to my schwab account which on average costs me 0.05% nowadays, you're paying 40 times more than me for something that I consider to be the same service (would you pay $25'000 for an iPhone 6?).
Plug your numbers into my tool and see if it matches your calculation: http://howtoretireearly.net/ilas.php
 
Quote

3. Are there other investment options with lower cost structures and a reasonable probability of 4-8% annual interest I perhaps should investigate?
It depends where you live and your plans for life*, but you can certainly find something that will cost you less than 1% a year, pretty much everywhere. I recommend Andrew Hallam's book "guide to expatriates investing" which gives a few leads. People in the US use things such as Vanguard and Schwab (I have Schwab myself). I've seen"Interactive Brokers" being recommended a lot (for expatriates) but haven't tried their services. There are tax implications depending on where you live so you'll have to do your research, but my personal opinion is that you should not stay with an investment platform that takes more than 1% of your money annually, it will dramatically reduce your chances at financial independence.

Edit:
*are you an expat?
Do you plan to stay long term in the same country?
--> consider investing in a brokerage account in that specific country.
OR: Do you plan to go back to your home country?
--> consider investing in a brokerage account in your home country
OR: Will you move a lot/ don't know?
--> Check Andrew Hallam's book which recommends some brokers that take international customers. Interactive Brokers is one he recommends, he also recommends some companies, I believe in Singapour, Canada, ... that accept customers from all around the world. It depends a lot on your nationality and where you live, there is not a single good answer, but the answer definitely is *not* an investment platform that takes 2% or more of your money every year.

Also check boglehead's 3 fund portfolio ( https://www.bogleheads.org/wiki/Three-fund_portfolio ). It's mind opening how simple it is to invest on your own. My opinion (and my personal experience) is that you should leverage this experience to realize that you don't really need a financial advisor.
« Last Edit: March 16, 2016, 11:39:46 AM by wololo »