Imagine an electric toothbrush.
It is a stick-like object.
It contains a motor.
You stick into a sensitive part of your body.
What other device can you think of that has the same general features ?
A vibrator.
It is also a stick-like object with a motor like component. You also stick it into a sensitive part of your body.
From an engineering perspective, it is possible to invent a device that is both an electric toothbrush and a vibrator at the same time. Components and form factor are very similar.
But we don't think generally about an electric toothbrush being a vibrator at the same time.
In the finance industry, however, people sometimes do not make such distinctions.
ILPs perform the task of protection and investment at the same time.
It is a toothbrush.
It is also a vibrator.
The one of the group of anonymous insurance agents who tried to declare war on the financial blogosphere told a story where he met an MBA and CFA during reservist who was rendered speechless when confronted as to why he felt so strongly that insurance and investment should be treated separately.
What justification do we have to separate investment and protection so vociferously ?
This is a common defence against "buy term and invest the rest" philosophy that clearly makes a distinction between insurance and investing that we tend to support in the financial blogosphere.
The anonymous insurance is unfortunate because he did not meet me during his reservist training.
I will ask him whether he would like to back my project to kickstart an electric toothbrush that can also serve as a functional vibrator.
And then I will ask him to shove it up his arse.
[ This is my first attempt at financial comedy. Other bloggers have been asking me to consider financial stand-by comedy in future talks. ]
"ILPs perform the task of protection and investment at the same time.
ReplyDeleteIt is a toothbrush.
It is also a vibrator."
Haha ... it sucks at both jobs.
Main reason is becoz of COSTS (besides the fact that most ILPs sold here are using mediocre funds --- that's why the fund houses are so happy to throw their reputations into the mud by tying up with insurers for $$$$$$$).
Anyone with 6 months experience in financial industry will know that the more middlemen/actors, packaged & wrapped the financial product is, the more fees, charges, and kickbacks that will be skimmed off consumers.
It's the same with all other things like dining, reno, fashion, holidays, luxury items, lifestyle, legal, medical, etc etc....
You are right.
ReplyDeleteWhen something tries to do several things at once, it would generally not perform as well as one specialised tool,