To the Securities and Futures Commission of Hong Kong:
I just sent a couple of letters to OCI and HKFI complaining about the sales practices of Standard Life and Convoy Financial Services which I cc-ed to you. This complaint specifically addressed the sale of Standard Life’s ILAS Harvest 101 Investment Plan to my girlfriend, Leung Chung Yan. But it also addressed the method by which this product is sold to all other clients as well. I hope you will read it and take whatever actions you can to help prevent these abuses from happening again. But I am writing specifically to criticize your shockingly weak regulations applying to ILAS illustration documents. I would not be surprised if the regulations were written by players in the insurance industry themselves. The rules certainly aren’t designed to protect the public. Rather, they seem designed to protect the ability of the insurance companies to obfuscate the true cost of ILAS fees, which makes it easier to dupe financially unsophisticated investors.
I recommend that the SFC immediately fire and replace whoever approved these regulations.
As soon as possible, all ILAS illustration documents need to contain a chart comparing underlying mutual fund returns (over the course of 25 years) vs. underlying mutual fund returns after ILAS fees have been deducted (over the course of 25 years). This will help facilitate understanding of the true impact and cost of ILAS fees. A sample chart is attached to this email.
Also, there is a vague sentence currently required in the illustration document that says if you stop paying premiums early, “you may suffer a significant loss”. This uninformative sentence needs to be immediately removed and replaced with a chart showing the actual figures of the loss. It should show the projected account value in 25 years if the policy holder stops paying contributions after 2 years, 3 years, 4 years, 5 years, 10 years, 15 years, and 20 years. A sample chart is attached to this email.
If you cannot incorporate these simple suggestions, then you need to issue a public statement acknowledging that you are protecting the interests of the insurance companies instead of the public, preferably with an explanation of why. I’m cc-ing this message to OCI, HKFI, PIBA, the Consumer Council, and several news organizations.
Thanks for your attention.