So when I'm doing the math between my policy and for example yours where you only pay 0.5% annually ($3.000 monthly premiums, 4% annual return) the difference after 20 years is $55.000,- / 4.5% of the fund value. Sure its not nothing but I wonder if thats worth canceling a policy over.
Bottom line: you need to redo your math more carefully, as I believe you are misunderstanding lots of the fees. I calculate a difference of hundreds of thousands of dollars under acceptable market conditions (either 4% or 8% return), up to 50% of the fund value. At 4% return you might not even beat inflation. Details below.
Also I forgot to mention the 0.50% deposit charge is only applicable to the Initial Allocation Period.
I think you're misunderstanding the contract here. Can you confirm this for sure? In my case, the 0.5% deposit charge was applicable to the initial allocation *units*, not *period*. These units live through the entire life of your contract, meaning you still pay a fee on the money you invested in the first x months of the contract, for 20 years. This would be a huge difference with my contract (or my understanding of it) if you actually only pay for the first 20 months.
[Edit: the RL 360 website confirms what I thought: http://www.rl360.com/row/knowledge/quantum/quantuminitialunits.htm
It says (emphasis mine):
"There is a specific initial unit charge which applies throughout the premium payment term
, but ONLY on initial units. The charge is 0.5% per month of the value of the initial units held
My tool is correct. In your case you will end up paying a total of approximately $90'000 with that fee alone, for your first 20 months of investments. So, to be clear: you're paying $90'000 in fees for your $60'000 invested.
I am unaware of the Deposit Bonus, and my tool does not take that into account. This could offset some of the fees but to me this only helps to complexify the contract more, which is not a good thing.
[Edit: I can't find any mention of a "deposit bonus" in the rl360 Quantum documentation. Could you scan the part of your contracts that mentions it and how it works?]
With a 4% return yearly before fees, you are overly conservative. I think the market on average returns 7%. Just food for thoughts
you only pay 0.5% annually
Just to be clear, I personally pay 0.05% annually, not 0.5%.
At 1.5% you still pay 30 times what I do. The 0.5% for "alternate plan fee" I put in my php file is kind of a "worst case scenario" thing that takes dividend taxes into account (when I was in Japan I calculated that my actual cost on my taxable brokerage account was 0.25%: 0.2% in taxes and 0.05% in fund management fees).
The advisor today confirmed there are no other charges. No fund manager fee's etc.
This directly contradicts the RL360 Quantum documentation, as it is on their site today (http://www.rl360.com/generic/downloads/rl360-quantum-terms-and-conditions.pdf
). Either your advisor chose specifically funds that charge no fee (hint: these don't exist, minimum fee is 0.04% and it goes up to 2.25%, see below), or he doesn't actually understand the fees (happens a lot more than you might think), or he is lying to you. I quote from the terms and conditions:
d) External fund management charge
The manager of each external Fund will deduct an annual management charge. This will be allowed for within the pricing of the individual Funds, at a rate determined by the manager of each Fund. The charge will vary according to the Fund chosen and further details can be obtained from the Policyholder’s Investment Adviser or the Investment Guide, as is updated from time to time.
Of course your contract might be different, but this would be highly surprising.
Note that my tool also assumes no fund fees anyway (I should update it), so there's not much to be discussed here :)
Edit 2: From the official documentation (http://www.rl360.com/generic/downloads/rl360-quantum-investment-guide.pdf
), the fund annual charges vary from 0.04% to 2.25%.
So, to summarize, you're paying:
- 1% to RL360
- 0.5% to your adviser
- 1% or more to the fund managers (there are only 20 funds out of hundreds that charge less than 1%, so I'm using 1% as a reasonable average here)
- The initial unit charge (close to $100'000 over 20 years)
- the policy fee (close to $2500 over 20 years).
You're at least paying 2.5% in fees annually.
The benefits you get:
- The premium incentive: $13'500 (the premium incentive is in initial units, meaning you pay the 0.5% fee on that). Note how this is dwarfed by the initial unit charge.
- The Deposit bonus (I haven't heard of that, you need to explain)
- The loyalty bonus: 5% of the policy value (basically offsets less than the last 2 years of fees)
However it looks like with that broker you have to pay overnight charges when you enter long or short positions for an ETF. Appear to be between 2-3% which isn't cheap either...
Make sure you are not confusing a "one time" fee with a yearly fee. If the broker is charging you 3% every time you buy some shares, it sucks, but in the long run it will be much, much less than a system that charges you 2.5% of your total wealth every single year.
One more data point:
From the official Documentation here: http://www.rl360adviser.com/generic/downloads/qu016.pdf
You would need a 1.38% growth rate annually to break even with a 20 years plan at $3000 premiums. That's without taking external fees into account (the fund fees). In other words, this means RL360 charge you approximately 1.38% annually once everything is said and done, bonuses etc... taken into account. (unclear if they count the advisor fee in here, they say 1.5% contract charge, you say you have 1% contract charge + 0.5% advisor fee. I recommend you double check your numbers. In my case I was paying 1.5% contract charge + 0.5% advisor fee. But let's assume their number includes the advisor fee)
add about 1% in fund fees (you can compute how much you actually pay by looking at the doc I linked to above, and weight each fee by the percentage of each fund in your portfolio) and you're at 2.38% in fees annually. 47 times what I pay. And that's from the official documentation, that's not me playing with the numbers here