Client Finds Solution with JA Group & Co After Being Mis-Sold Offshore Life Insurance Policies
Client: “Kwesi King” (Identity Withheld)
Region: Africa
Industry: Infrastructure
Age: 60+
Client AUM: $35m
Client Since: 2019
Background
Mr. King was introduced to the world of offshore life insurance policies by the London branch of a large Swiss banking group with whom he had an existing private banking relationship. These insurance policies were designed to have both a death benefit (life insurance component) and a cash policy value (investment component). The insurance premiums could be financed up to 90% of the face value, which meant that the client only had to use 10% of his own capital to incept the policy. The investment component of the policy was ostensibly expected to perform better than the cost of financing the premium, which would on paper leave the client with no cash outlays going forward. This appeared to be a “no-brainer” for the client. However, this structure soon turned out to be rather problematic.
Problem:
A classic case of mis-selling. While marketing the product, the Swiss bank conveniently omitted the very critical fact that the investment returns from the insurance product had to be held within the policy itself – i.e.: the returns could not be withdrawn out of the policy to service the loan amount against the premium. Therefore, despite the fact that the investment could be outperforming the cost of the loan, the benefit, at least in the short term, would only be a paper benefit. The client was still expected to fork out tens of thousands of dollars in interest payments a quarter to service the premium financing. Even worse, this problem became more acute when interest rates started rising, rendering the cost of premium financing even more expensive than originally anticipated.
Solution:
Mr King was introduced to JA Group & Co serendipitously through a mutual contact. JA Group assessed the existing policies and with the help of trusted partners, devised a plan to restructure the old policies and novate them into new policies with another provider that were more cost-effective, better performing, and longer lasting. The new policies were 20% cheaper in premium, generated a stronger annual yield, and added more than 15 years to the policy life.
Client Remarks:
“I have known and worked with JA Group for more than four years. A very engaging, transparent, and proactive firm that takes initiative. As a private wealth management firm, they go beyond their mandate and provide a much-needed concierge service without additional cost. They truly care about my well-being. They are quick to respond and ready to help. I know my family will stay with them for a long time as we are getting the services we need and beyond.”
Find out more about our Personal Finance advisory services
