Some Figures on Returns

[This is a news article from Business Times Online. There is a general comparison of the rates of return from various investment tools, as highlighted in the article below. I am not in any way related to CIMB Wealth Advisors Bhd. This article simply serves to illustrate various ways of managing wealth cycle. Read on.]

CIMB Wealth upbeat on 3-in-1 education plan
By Chong Pooi Koon Published: 2008/05/07


CIMB Wealth Advisors Bhd is bullish on its new three-in-one education plan, a package that uses unit trust investment instead of endowment to help parents keep enough money for their children's education.

Chief executive officer Tan Beng Wah said the product comes with insurance coverage to ensure that the fund will continue to grow in the event of the investor's sudden death or total permanent disability.

A trust nomination service is also thrown in to ensure that the money will reach beneficiaries without delay.

"We designed this as we know this is what the customers want, based on years of experience. I'm really excited about it," Tan said in a media briefing in Kuala Lumpur yesterday.

The unique part is, even with the additional features of insurance and trust nomination, the product is still cheaper than an average education plan in the market which uses endowment to grow the fund.

For example, parents planning to raise RM200,000 over 15 years for the study plan of a three-year-old will need to put in an average of RM11,000 to RM12,000 a year.

This compares with a payment of RM27,000 a year for an average endowment plan for the same goal.

Tan said unit trusts may be a more appropriate investment tool to finance long-term needs such as education.

This is because unit trust investments in general return 9-12 per cent a year, much higher than an insurance's annual yield of 5.7 per cent.

The Employees Provident Fund pays 4.7 per cent a year on average, while a fixed deposit gives 3.7 per cent interest per annum. Savings rate is the lowest, at 1.7 per cent.

"This product is not possible at this cost if not for all the necessary business components within the CIMB Group," Tan added.

CIMB Wealth has worked with the insurance division, the trustee service provider and the asset management arms within the group to package this plan, which helps to cut costs.

The education plan targets those with a household income of more than RM5,000 per month.

The company aims to sell 400 plans every month, with an average value of RM200,000 each.

The plan is available in both conventional and Islamic versions. Tenures range from nine years to 20 years.

[This post was first published on May 8, 2009]