There is this perennial perception in the consumer's mind that financial advisers are wont to recommend a whole life product because of the very high commissions payable to them.
And of course, this perception has been augmented rather frequently by well known personalities like Mr Tan Kin Lian and Dr Larry Haverkamp.
On this, and I quote firstly, Mr Tan Kin Lian who penned a most recent entry in his blog:
"Life insurance products can be designed to be good for consumers. They become bad products when they are designed to pay high commission to the agent and give poor value to the consumer. This high cost is not disclosed to the consumer."
and Dr Larry Haverkamp:
"Buying term insurance is more economical.
Investments for whole life and endowment policies go into a huge policyholders' fund managed by the life insurer.
The costs are high in the early years. You must pay an average of 16 months of premiums as commission to whoever sold you the policy."
To illustrate on the commissions' structure payable to financial advisers, I shall quote TM Asia life's flagship product, TM legacy (LP). This is a whole of life plan with limited premium paying terms of 5, 10, 15, 20 and 25 years.
