Financial planning can be a scary thing, since is the process where you chart your financial resources for your current and future life stages. This also means you’re more or less committed to this plan for years to come, barring any major changes in your life.
Most of the time, the financial plan that you work out with your financial adviser works out. But when it doesn’t, it causes regret and feelings of being lost.
In this case study, we hear from fundMyLife user Elsie (name has been changed to protect her privacy) as she sought financial advice from fundMyLife Roshan Belani of AIA. In the previous fundMyLife case study, Roshan encountered another user who was in a similar quandary and helped resolve his troubles as well.
With their permission, fundMyLife presents to you a case study that highlights the importance of needs analysis.
To Hold Or Not To Hold?
Elsie is a young working woman who bought an Investment-Linked Policy (ILP) four years ago. However, a year after she bought the ILP, she had to go overseas to work. Despite that, she maintained the policy for the next three years.
At this point, she felt that she can longer continue with the plan. Elsie preferred not to return to her original adviser to discuss her plan, which led her to use fundMyLife.
Since she bought an AIA ILP, fundMyLife’s algorithm connected her to Roshan, an AIA adviser.
Roshan first started with a bit of fact-finding. More specifically, he asked about the kind of ILP she purchased. He explained to that there are several kinds of ILPs in the market, and ILPs can either have both protection and investment components, or be purely investment.
He also found out that she had access to the AIA eCare portal, so she was fortunately able to examine her policies – and cancel them if need be.
If there was a single learning point, Roshan summarised the case study into this: understand your needs for the near and long term. In the case that you are not sure where life will take you in the future, it is crucial not to commit to long-term plans that cannot evolve with your needs.
Roshan also stressed the importance of doing a proper needs analysis because it can help people avoid situations like what Elsie faced. If her financial adviser figured out that there was a possibility that she would go overseas for work, she might not have received the recommendation to purchase an ILP.
Roshan shared that if you’re unable to foresee what your life path is in the near future, he suggests to get a term plan instead. There are 5-year term plans in the market, better suited for those people in transition between locations or life stages.
He also shared that ILPs are more flexible other plans, with stop-gap measures like premium holidays. However, this sort of measure is at best temporary, and should not be used beyond 6 months as it will eat into the value of the policy. Before engaging such plans, it is important to build up enough money to avoid cash-flow problems when paying premiums.
Needs analysis is important, and it goes beyond just calculating the sum assured for the consumer. Currently, online needs analysis tools do not provide the human insights required anticipate the wide variety of possible future events. In needs analysis, uncertainty is as important a factor as certainty.
If you find yourself in the same situation as Elsie, or you’ve questions on financial planning, head on to our main site and ask our curated pool of financial advisers! Alternatively, you can also browse individual advisers’ pages – just click on their profiles and you can ask them questions directly from their profile pages.
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