15.10.13

Guest Post 17: Anonymous - A cautionary tale for expats: How Zurich Insurance is gouging me for $663,000

This guest post is close to my heart as it affects a good friend of mine who kindly took the time to share her story below. I like many other expats around the world took out a similar policy but thankfully managed to get out in time to avoid any serious costs. This is a good warning for all expats to take note of! A simple set of ETF investments will get you good gains without any high costs.
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The sales pitch from the financial advisors hit all the right notes.

As an expat in Singapore, I had started to turn my attention from planning holidays throughout this beautiful region to thinking seriously about my long-term financial security. Like so many working abroad these days, I hadn’t the faintest idea where I would be living by the time I reached retirement 30 years from now. All I knew was that I needed a retirement plan that would provide returns on par with the market and follow me throughout my career whether I was overseas or back home.

So when the financial advisor I met with in Singapore pitched the “Zurich Vista” pension plan from Zurich Insurance, it seemed a good choice.

“The plan has a global presence,” the advisor said. “It is flexible to the changing needs of your working life. It will provide long-term security wherever you are.”

Drawn by the promise of flexibility and matching contributions from Zurich, I signed up.

Of course, what the advisor failed to mention was that the plan could cost me massive amounts of my retirement money.

How much exactly?

As I later discovered, hidden behind those reassuring promises of security and mobility was a ridiculously complicated fee structure that could cut my portfolio’s returns from 6% to 3%. While the 3% difference may not sound like much, it is a huge drag on performance.

Over a 30 year period, an investor who put $200,000 into this shoddy product could end up with $485,000 at 3% rather than $1,148,000 at 6% – a difference of $663,000 less for retirement.

Worse yet, when I tried to negotiate a way out of the policy, Zurich revealed there would be a massive penalty equal to the hundreds of thousands of dollars I had contributed to the plan to date. In other words, I would lose most of my investment. Neither the exorbitant fees nor surrender penalties were ever made clear to me beforehand. I continue to negotiate with Zurich but the company has been obstinate and made it as difficult as possible.

Zurich’s approach to customers seems to me as cynical as it is short-sighted. Through this ordeal, I’ve come across many unhappy customers who were misled into these policies and are now trying to recoup their retirement money. As the expatriate circle is small, word travels quickly. Zurich’s poor customer service and disingenuous policies will only damage the company as potential customers hear more and more stories of friends and family getting burned and turn elsewhere.

Financial advisers also bear part of the responsibility to be sure. I have seen serious cases of financial advisors mis-selling the Zurich Vista plan, as they earn huge commissions from this product even though it isn’t suitable for many they advise.

I would not recommend this product and only hope my experience can save others the time, hassle and money Zurich has already cost me.