The Truth about HKFI’s ILAS Propaganda Campaign

The Hong Kong Federation of Insurers (HKFI), the industry’s so-called self-regulatory body, launched a media campaign last year to misinform the public about ILAS. This was mentioned in HFKI’s latest annual report:

HKFI's ILAS Propaganda

Excerpt from HKFI’s 2013-2014 annual report

HKFI outrageously and falsely claimed that ILAS “is a simple and effective vehicle for regular saving”. The truth is that ILAS is one of the most complex and deceptive investment products ever invented. Most ILAS savings plans are scams, which defraud investors out of their first years of savings. The products are only “effective” as a means of destroying savings, not accumulating it.

HKFI also touted the “death benefit” as one of the attractive features of ILAS. This so-called death benefit is usually no more than an extra 1% of the account value, which is a mere fraction of the annual fees. (Fees can exceed 13% in a single year.) This meager death benefit is a complete ripoff for consumers seeking life protection.

HKFI also mentioned that ILAS offers “enhanced consumer protection”. This is certainly the worst of all the lies. Real consumer protection would mean outlawing these products, imprisoning the executives who are responsible for creating and distributing them, and then refunding all the victims who have been scammed.

Coverage in International Adviser

Last year, when HKFI’s propaganda campaign was launched, International Adviser (the industry’s mouthpiece) wrote a story entitled, “HKFI campaign counter attacks on ILAS“. It said:

The Hong Kong Federation of Insurers has launched a media campaign to counter recent “unbalanced and negative” attacks on Investment Linked Assurance Schemes by regulators and the media.

The article quoted Rosetta Fong, CEO of Convoy Financial Services, a large predatory advisory firm which earns 90% of its revenue from ripping off consumers (by flogging ILAS products for obscene commissions). Rosetta Fong is on the intermediary panel of International Adviser, which allows her to “provide guidance in the editorial direction of the magazine.” She said:

“The HKFI campaign is needed to educate the public about the whole picture of ILAS by including its benefits rather than just focusing on the negative or risk side of the product.

“In the first place, the nature of ILAS itself is actually neutral and it is only one of the investment tools that could be considered for managing one’s investment portfolio.”

Both of her sentences were false.

Most ILAS products are scams and therefore not “neutral”. They are criminal.

HKFI’s misinformation campaign was definitely not needed. Consumers are already bombarded with a never-ending stream of lies from the marketing departments of the evil companies that sell ILAS (e.g., Convoy). The regulators and media were doing the right thing by warning consumers about the overwhelming “negative or risk side of the product”, since the crooks who sell it definitely are not.

7 thoughts on “The Truth about HKFI’s ILAS Propaganda Campaign

  1. James

    Whilst I agree with your points on ILAS, I would be careful about accusing companies such as Convoy (as much as I hate them) as being criminal; unless you actually have proof you are open to charges of libel and I am sure they would be happy to set their lawyers on to you. Reading your assessment of the Prevention of Bribery Ordinance also shows that you are not really very knowledgeable regarding the law, best to stick to the facts and not speculate on matters of law.
    I would not say ILAS products are complicated, certainly not if sold to informed and educated investors which should be their target. Companies selling to lower educated and inexperienced clients will of course result in miss-selling.

    Reply
    1. Lindell Lucy Post author

      Have you read the Prevention of Bribery Ordinance?

      If a broker wants to take a commission, he needs to get permission from the client, AND the client must, “before giving such permission, have regard to the circumstances in which it is sought.”

      No client would grant permission for an adviser to take 25 years of commissions upfront if they knew that the commission was linked to the duration of the contract AND the commission was paid for by swindling them out of their first years of savings.

      ILAS is extremely complex. Have you ever tried to calculate the fees for Generali Vision or Zurich Vista?

      Convoy mainly sells to inexperienced investors, and many of its 2,000 advisers have little to no knowledge about investing. I know this because I have met several Convoy victims and advisers.

      Reply
  2. James

    Actually every client should sign a client agreement or terms of business that states that payment to the broker/agent is via commissions. Also the application forms clearly state this now. You would have to be be pretty naive to think this was all done free. Everything costs, salesmen in Fortress get more commission for selling you the TV that is displayed at the front of the store than the older models.
    You mention iFast a lot but these can only be recommended and sold by SFC licensed companies and have nothing to do with PIBA or CIB.
    The fees for the Zurich and Generali are pretty well summarized in the new docs I have seen. Never sign anything you do not understand, if you do not understand the fee then do not sign or ask for them to be clarified.
    re Convoy, agree a bad company with inexperianced slaepersons that maybe miss sells but just say, be careful. Calling someone criminal could get you into expensive trouble.
    The issue of your beef with Convoy and the whole ILAs thing are very separate, do not mix them up as it dilutes your arguments.

    Reply
    1. Lindell Lucy Post author

      You are missing the point about the bribery issue.

      There is a disclosure that a commission is being paid, but that is not enough. The law says that, before giving permission, the client must “have regard to the circumstances in which it is sought.”

      These advisers who sell 25-year savings scams, as opposed to 5-year plans or non-contractual plans, are certainly not disclosing all the relevant “circumstances” about the commission. They should be disclosing that their pay is directly linked to the amount of money that is being swindled out of their clients upfront. They are not doing this, which means the commissions still violate the Prevention of Bribery Ordinance.

      Regarding your point about SFC licensing: Even if advisers aren’t licensed to sell through iFAST’s platform, they still have no justification whatsoever for recommending 25-year scams, as opposed to 5-year or non-contractual plans.

      Convoy and the companies who create these ILAS products are criminal, and if they want to sue me for speaking the truth, they are welcome to do it. They won’t get much money, but they will make me a lot angrier, which probably won’t work in their favour.

      Convoy is the biggest broker and most aggressive seller of ILAS, so the two issues (“Convoy” and “ILAS”) are closely related. I don’t see how commenting on both of them at the same time dilutes any arguments. It’s frequently necessary to talk about both of them at the same time.

      Reply
    2. Lindell Lucy Post author

      One more point about the licensing issue:

      According to PIBA and CIB’s code of conduct, an insurance broker must always act in the client’s best interest. This means, if all ILAS products are shitty investments, the adviser should tell his client to not buy such products. He should tell his clients to buy funds directly.

      If the adviser is not licensed to sell funds directly, that is his own fault. It is no excuse for ripping off clients. If the adviser wants to sell funds directly, he should go pass the SFC exams. It doesn’t take very long.

      James, please let readers know who you are. You claim to have knowledge about Zurich Vista and Generali Vision, so presumably you work in this industry. Please explain.

      Reply
  3. James

    Acting in the client’s best interest sounds very subjective and obviously open to interpretation. It seems to mean not favoring one company’s product over another if that (similar) product is worse for the client.

    It does not mean they can then go outside their licence and break the law by recommending direct investments and who is to say that making the client forcibly save is not in his best long term interests? I would not say all ILAS plans are wrong for the client just because they were miss-sold to many uneducated, very young, very old people or those that should not be investing in the first place.

    There will always be the argument against contractual plan but at the end of the day there is a reason we have the MPF and other countries have similar pensions: they force people to save and NOT spend their retirement. It is very easy to dip into the pension and then reach 60 and realize there is not enough to retire on.
    For the charges, all the details are on their websites http://www.generali-intl.com/media/47679/gi_vis_hk_el_kfs_final_07_01_14.pdf (Zurich I can’t remember the link now) I just did a google search a while back. Fee’s are all mentioned up front and should be explained. All the literature is SFC authorized and so should show the true fees.

    Again, PIBA/CIB licenced company cannot advise on direct funds. Getting an SFC licence is another issue entirely

    Reply
    1. Lindell Lucy Post author

      “Best interest” is not subjective.

      It does not mean second-best interest or third-best interest. It means BEST interest.

      It also does not mean breaking the law and going outside one’s license.

      According to PIBA’s Code of Conduct, brokers are supposed to “know the product”. They should therefore know that these products are ripoffs, which means they should not be recommending them. If they are not licensed to sell non-insurance products, then they should simply tell their clients, “Sorry, I can’t help you.” If they want to sell funds, then they should go get an SFC license and find a decent employer who supports selling funds direct.

      James, you seem not to understand these products or their fee structure. I think you have also been deceived. The fees are more complex than you realize or have acknowledged.

      You claim that contractual plans could arguably be good because they force people to save, like MPF.

      I agree that forced savings could arguably good, but these plans aren’t forcing people to save. They are defrauding people. For a 25-year plan, almost everything paid in the initial period is down the toilet. It is guaranteed to be eaten by fees. Do the math. For a Harvest 101 plan, if you buy 100 units, at the end of 25 years, there will only be slightly more than 20 units left. And if you try to exit early, you also won’t be left with more than 20 units.

      This is not forced savings. It is theft.

      Also, the money in the accumulation account is not “locked-up”, so this isn’t forced savings either. The only money “locked-up” is in the initial account, but it’s not really “locked-up”. It is stolen.

      There is nothing good about contractual plans. They’re just tools for robbing people.

      Reply

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