Crisis in investment policies - experts calm down
Many Poles have lost some of their savings due to the inappropriate sale of investment policies in recent years. However, it is not the liquidation fees, but the lack of information of clients by advisors and the lack of after-sales service that are the cause of protests and lawsuits against numerous companies, explained the experts.
Investment policies are the only ones that build consistency in regular, long-term savings. To date, no other financial institutions have proposed a more innovative tool for liquid investment and diversification of savings through the investment funds of so many foreign companies. The technological advantage of insurers becomes even more important when the profits from investing on the Polish stock exchange, in Polish treasury securities and finally in Polish investment funds are not competitive enough to foreign funds.
Unfortunately, over the past 17 years, banks, insurance companies and financial intermediaries have been offering investment policies without any support to customers in their decisions. The consequence of this is very often a loss of funds among some clients, resulting from ignorance or lack of ability to react quickly in the face of a crisis or correction in capital markets. This situation led to a protest among people who had not been informed by their advisors and who had filed numerous lawsuits against dishonest companies. In order to be fair, responsibility for these events would have to be borne by everyone, both the government and supervisory institutions such as the Polish Financial Supervision Authority, which for 25 years of capitalism has not introduced higher standards in the financial and insurance consulting market, as well as insurance companies, banks, multiagencies and other intermediaries for failing to inform the client of the details of the contract, lack of education and after-sales service, and thus support in the management of investment policies. However, we should not look for a problem in the construction of investment products, because thanks to it (regular payments, liquidation costs and attractive remuneration for sale) the amount of assets accumulated by Poles reached PLN 55.6 billion. For comparison, Poles gathered only PLN 1.92 billion in IKE and IKZE. By dealing with the consequences, we are taking away capital from society for the future and the ability to save money. It was not without reason that Poles accumulated PLN 141.3 billion in Open Pension Funds (OFEs), where the premium was mandatory and the capital could not be moved.
Liquidation fees, which we could hear about in the media, protect the investor against a momentary inconsistency. He believes that investors impatient with a lack of profit or, worse still, with a loss caused by inadequate investment choices are at the heart of the problem and adds that, contrary to appearances, a high-quality investment policy does not have costs that are somehow unjustified. As a standard, there are three main fees, which are collected from the funds multiplied by the investor on a monthly basis: administrative fee (about 10 PLN/month), management fee (about 1.5-2.5% per year) and insurance risk fee (about 0.01-0.5% per year). These costs, in a standard investment policy, do not exceed 3% on an annual average over the full investment period. Insurance companies too late noticed the real problem, which is the lack of policy management skills. Only recently have they made available a service of support in the selection of insurance capital funds, establishing analysis departments specializing in asset management. Unfortunately, before that, the client had to cope on his own.
What possibilities does the client have when thinking about long-term savings, while at the same time giving up investment policies? Savings account, bank deposit, IKE or IKZE? The first two proposals barely compete with inflation. In addition, they are subject to capital gains tax. Investment banking products are a great tool to store capital in the short term rather than accumulate savings for the future. IKE and IKZE also do not have a consistency mechanism and are most often limited to the competence of one investment fund company and most of the local capital investment on the Polish market. In my opinion, investment policies will not disappear from the offer. Their shape will change in terms of decommissioning costs or insurance risks, but they are needed for people to plan their personal finances. It must be believed that new investment products will be more transparent, clients will ask questions and be more willing to educate themselves, and the financial intermediation market will increase its competences in order to meet the requirements of clients.