The deluge of schemes offered by mutual fund houses, insurance companies and other financial services providers have only served to confuse investors rather than easing their troubled minds. Various schemes with colourful names have been vying for investors’ attention, without actually offering a glimpse of respectable returns on investment. While returns have been scant at best, product offerings have adopted fancier propositions, with service providers desperate to sell at all costs. What is compromised is the investors’ real need.
The latest example is a brand new offering from MetLife India. Its product, MetLife Wealth Plus, is another unit-linked offering that claims to provide a cost-effective wealth-creation solution for customers. But MetLife, which positions itself as a one-stop-shop for all customer needs, has trouble distinguishing which products serve what particular needs of the customer and how its offering meets those needs. MetLife’s sales strategy is a testimony to this.
Moneylife Digital has seen an internal presentation that shows how agents and sales teams are indoctrinated in selling unit-linked insurance plans (ULIPs) by highlighting the positive aspects, running down a competing product and presenting some half-truths. The presentation is in the form of check boxes under which mutual funds are shown as products designed to meet the short-term savings needs of the customer. Even lay investors would be aware that mutual funds are meant to provide capital appreciation over the medium- to long-term. Also, while MetLife considers ULIPs not to be cost-effective, as per its internal presentation, it still argues that MetLife Wealth Plus is cost-effective, while the product is just another ULIP. The presentation does not explain how this is so.
The Met Wealth Plus plan claims to be cost-effective while providing good returns, liquidity and tax benefits to the customer. Add to this, it offers a guaranteed minimum return of 5%, five years from the end of the subscription period. This is only designed to meet the widespread customer worry about the safety of the principal amount. Of course, even when the product claims to provide a liquid and cost-effective avenue of investment, the costs associated with surrendering the policy are quite high, if one has not paid the requisite annualised premiums. This is not highlighted in the presentation, but the guarantee is.
The guaranteed return also tilts the field against a better investment product, mutual funds. The current perverse regulations allow insurance companies to provide a guarantee on ULIP products but mutual fund schemes have not yet been given such leeway. Customers easily fall for this ploy, without realising that this really means little to two products both of which would have the same stock market exposure. Despite repeated efforts, we could not get MetLife to respond to this story.